< Back to H.R. 2530 (104th Congress, 1995–1996)

Text of the Common Sense Balanced Budget Act of 1995

This bill was introduced on October 25, 1995, in a previous session of Congress, but was not enacted. The text of the bill below is as of Oct 25, 1995 (Introduced).

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HR 2530 IH

104th CONGRESS

1st Session

H. R. 2530

To provide for deficit reduction and achieve a balanced budget by fiscal year 2002.

IN THE HOUSE OF REPRESENTATIVES

October 25, 1995

Mr. ORTON (for himself, Mr. STENHOLM, Mr. PETERSON of Minnesota, Mr. CONDIT, Mr. PAYNE of Virginia, Mr. BROWDER, Mrs. LINCOLN, Mr. BREWSTER, Mr. TANNER, Mr. BAESLER, Mr. MINGE, Mr. HALL of Texas, Mr. HAYES, Mr. PETE GEREN of Texas, Mr. CRAMER, Mr. ROSE, Mr. SISISKY, Mr. SABO, Mr. POSHARD, and Mr. ROEMER) introduced the following bill; which was referred to the Committee on the Budget, and in addition to the Committees on Agriculture, Banking and Financial Services, Commerce, Economic and Educational Opportunities, Government Reform and Oversight, House Oversight, the Judiciary, National Security, Resources, Rules, Transportation and Infrastructure, Veterans’ Affairs, and Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned


A BILL

To provide for deficit reduction and achieve a balanced budget by fiscal year 2002.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) SHORT TITLE- This Act may be cited as the ‘Common Sense Balanced Budget Act of 1995’.

    (b) Table of Contents-

TITLE I--ENERGY, NATURAL RESOURCES AND ENVIRONMENT

Subtitle A--Energy

      Sec. 1101. Privatization of uranium enrichment.

      Sec. 1102. Making permanent Nuclear Regulatory Commission annual charges.

      Sec. 1103. Cogeneration.

      Sec. 1104. FEMA radiological emergency preparedness fees.

Subtitle B--Central Utah

      Sec. 1121. Prepayment of certain repayment contracts between the United States and the Central Utah Water Conservancy District.

Subtitle C--Army Corps of Engineers

      Sec. 1131. Regulatory Program Fund.

Subtitle D--Helium Reserve

      Sec. 1141. Sale of helium processing and storage facility.

Subtitle E--Territories

      Sec. 1151. Termination of annual direct assistance to Northern Mariana Islands.

TITLE II--AGRICULTURAL PROGRAMS

      Sec. 2001. Short title.

Subtitle A--Extension and Modification of Various Commodity Programs

      Sec. 2101. Extension of loans, payments, and acreage reduction programs for wheat through 2002.

      Sec. 2102. Extension of loans, payments, and acreage reduction programs for feed grains through 2002.

      Sec. 2103. Extension of loans, payments, and acreage reduction programs for cotton through 2002.

      Sec. 2104. Extension of loans, payments, and acreage reduction programs for rice through 2002.

      Sec. 2105. Extension of loans and payments for oilseeds through 2002.

      Sec. 2106. Increase in flex acres.

      Sec. 2107. Reduction in 50/85 and 0/85 programs.

Subtitle B--Sugar

      Sec. 2201. Extension and modification of sugar program.

Subtitle C--Peanuts

      Sec. 2301. Extension of price support program for peanuts and related programs.

      Sec. 2302. National poundage quotas and acreage allotments.

      Sec. 2303. Sale, lease, or transfer of farm poundage quota.

      Sec. 2304. Penalty for reentry of exported peanut products.

      Sec. 2305. Price support program for peanuts.

      Sec. 2306. Referendum regarding poundage quotas.

      Sec. 2307. Regulations.

Subtitle D--Tobacco

      Sec. 2401. Elimination of Federal budgetary outlays for tobacco programs.

      Sec. 2402. Establishment of farm yield for Flue-cured tobacco based on individual farm production history.

      Sec. 2403. Removal of farm reconstitution exception for Burley tobacco.

      Sec. 2404. Reduction in percentage threshold for transfer of Flue-cured tobacco quota in cases of disaster.

      Sec. 2405. Expansion of types of tobacco subject to no net cost assessment.

      Sec. 2406. Repeal of reporting requirements relating to export of tobacco.

      Sec. 2407. Repeal of limitation on reducing national marketing quota for Flue-cured and Burley tobacco.

      Sec. 2408. Application of civil penalties under Tobacco Inspection Act.

      Sec. 2409. Transfers of quota or allotment across county lines in a State.

      Sec. 2410. Calculation of national marketing quota.

      Sec. 2411. Clarification of authority to access civil money penalties.

      Sec. 2412. Lease and transfer of farm marketing quotas for Burley tobacco.

      Sec. 2413. Limitation on transfer of acreage allotments of other tobacco.

      Sec. 2414. Good faith reliance on actions or advice of Department representatives.

      Sec. 2415. Uniform forfeiture dates for Flue-cured and Burley tobacco.

      Sec. 2416. Sale of Burley and Flue-cured tobacco marketing quotas for a farm by recent purchasers.

Subtitle E--Planting Flexibility

      Sec. 2501. Definitions.

      Sec. 2502. Crop and total acreage bases.

      Sec. 2503. Planting flexibility.

      Sec. 2504. Farm program payment yields.

      Sec. 2505. Application of provisions.

Subtitle F--Miscellaneous Provisions

      Sec. 2601. Limitations on amount of deficiency payments and land diversion payments.

      Sec. 2602. Sense of Congress regarding certain Canadian trade practices.

TITLE III--COMMERCE

      Sec. 3101. Spectrum auctions.

      Sec. 3102. Federal Communications Commission fee collections

      Sec. 3103. Auction of recaptured analog licenses.

      Sec. 3104. Patent and trademark fees.

      Sec. 3105. Repeal of authorization of transitional appropriations for the United States Postal Service.

TITLE IV--TRANSPORTATION

      Sec. 4101. Extension of railroad safety fees.

      Sec. 4102. Permanent extension of vessel tonnage duties.

      Sec. 4103. Sale of Governors Island, New York.

      Sec. 4104. Sale of air rights.

TITLE V--HOUSING PROVISIONS

      Sec. 5101. Reduction of section 8 annual adjustment factors for units without tenant turnover.

      Sec. 5102. Maximum mortgage amount floor for single family mortgage insurance.

      Sec. 5103. Foreclosure avoidance and borrower assistance.

TITLE VI--INDEXATION AND MISCELLANEOUS ENTITLEMENT-RELATED PROVISIONS

      Sec. 6101. Consumer Price Index.

      Sec. 6102. Reduction in title XX block grants to States for social services.

      Sec. 6103. Matching rate requirement for title XX block grants to States for social services.

      Sec. 6104. Denial of unemployment insurance to certain high-income individuals.

      Sec. 6105. Denial of unemployment insurance to individuals who voluntarily leave military service.

TITLE VII--MEDICAID REFORM

Subtitle A--Per Capita Spending Limit

      Sec. 7001. Limitation on expenditures recognized for purposes of Federal financial participation.

Subtitle B--Medicaid Managed Care

      Sec. 7101. Permitting greater flexibility for States to enroll beneficiaries in managed care arrangements.

      Sec. 7102. Removal of barriers to provision of medicaid services through managed care.

      Sec. 7103. Additional requirements for medicaid managed care plans.

      Sec. 7104. Preventing fraud in medicaid managed care.

      Sec. 7105. Assuring adequacy of payments to medicaid managed care plans and providers.

      Sec. 7106. Sanctions for noncompliance by eligible managed care providers.

      Sec. 7107. Report on public health services.

      Sec. 7108. Report on payments to hospitals.

      Sec. 7109. Conforming amendments.

      Sec. 7110. Effective date; status of waivers.

Subtitle C--Additional Reforms of Medicaid Acute Care Program

      Sec. 7201. Permitting increased flexibility in medicaid cost-sharing.

      Sec. 7202. Limits on required coverage of additional treatment services under EPSDT.

      Sec. 7203. Delay in application of new requirements.

      Sec. 7204. Deadline on action on waivers.

Subtitle D--National Commission on Medicaid Restructuring

      Sec. 7301. Establishment of commission.

      Sec. 7302. Duties of commission.

      Sec. 7303. Administration.

      Sec. 7304. Authorization of appropriations.

      Sec. 7305. Termination.

Subtitle E--Restrictions on Disproportionate Share Payments

      Sec. 7401. Reforming disproportionate share payments under State medicaid programs.

Subtitle F--Fraud Reduction

      Sec. 7501. Monitoring payments for dual eligibles.

      Sec. 7502. Improved identification systems.

TITLE VIII--MEDICARE

      Sec. 8000. Short title; references in title.

Subtitle A--Medicare Choice Program

Part 1--Increasing Choice Under the Medicare Program

      Sec. 8001. Increasing choice under medicare.

      Sec. 8002. Medicare Choice program.

‘Part C--Provisions Relating to Medicare Choice

‘Sec. 1851. Requirements for Medicare Choice organizations.

‘Sec. 1852. Requirements relating to benefits, provision of services, enrollment, and premiums.

‘Sec. 1853. Patient protection standards.

‘Sec. 1854. Provider-sponsored organizations.

‘Sec. 1855. Payments to Medicare Choice organizations.

‘Sec. 1856. Establishment of standards for Medicare Choice organizations and products.

‘Sec. 1857. Medicare Choice certification.

‘Sec. 1858. Contracts with Medicare Choice organizations.

‘Sec. 1859. Demonstration project for high deductible/medisave products.

      Sec. 8003. Reports.

      Sec. 8004. Transitional rules for current medicare HMO program.

Part 2--Special Rules for Medicare Choice Medical Savings Accounts

      Sec. 8011. Medicare choice MSA’s.

      Sec. 8012. Certain rebates excluded from gross income.

Part 3--Special Antitrust Rule for Provider Service Networks

      Sec. 8021. Application of antitrust rule of reason to provider service networks.

Part 4--Commissions

      Sec. 8031. Medicare Payment Review Commission.

      Sec. 8032. Commission on the Effect of the Baby Boom Generation on the Medicare Program.

Part 5--Preemption of State Anti-Managed Care Laws

      Sec. 8041. Preemption of State law restrictions on managed care arrangements.

      Sec. 8042. Preemption of State laws restricting utilization review programs.

Subtitle B--Provisions Relating to Regulatory Relief

Part 1--Provisions Relating to Physician Financial Relationships

      Sec. 8101. Repeal of prohibitions based on compensation arrangements.

      Sec. 8102. Revision of designated health services subject to prohibition.

      Sec. 8103. Delay in implementation until promulgation of regulations.

      Sec. 8104. Exceptions to prohibition.

      Sec. 8105. Repeal of reporting requirements.

      Sec. 8106. Preemption of State law.

      Sec. 8107. Effective date.

Part 2--Antitrust Reform

      Sec. 8111. Publication of antitrust guidelines on activities of health plans.

      Sec. 8112. Issuance of health care certificates of public advantage.

      Sec. 8113. Study of impact on competition.

      Sec. 8114. Antitrust exemption.

      Sec. 8115. Requirements.

      Sec. 8116. Definition.

Part 3--Malpractice Reform

SUBPART A--UNIFORM STANDARDS FOR MALPRACTICE CLAIMS.

      Sec. 8121. Applicability.

      Sec. 8122. Requirement for initial resolution of action through alternative dispute resolution.

      Sec. 8123. Optional application of practice guidelines.

      Sec. 8124. Treatment of noneconomic and punitive damages.

      Sec. 8125. Periodic payments for future losses.

      Sec. 8126. Treatment of attorney’s fees and other costs.

      Sec. 8127. Uniform statute of limitations.

      Sec. 8128. Special provision for certain obstetric services.

      Sec. 8129. Jurisdiction of Federal courts.

      Sec. 8130. Preemption.

SUBPART B--REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION SYSTEMS (ADR)

      Sec. 8131. Basic requirements.

      Sec. 8132. Certification of State systems; applicability of alternative Federal system.

      Sec. 8133. Reports on implementation and effectiveness of alternative dispute resolution systems.

SUBPART C--DEFINITIONS

      Sec. 8141. Definitions.

Part 4--Payment Areas for Physicians’ Services Under Medicare

      Sec. 8151. Modification of payment areas used to determine payments for physicians’ services under medicare.

Subtitle C--Medicare Payments to Health Care Providers

Part 1--Provisions Affecting All Providers

      Sec. 8201. One-year freeze in payments to providers.

Part 2--Provisions Affecting Doctors

      Sec. 8211. Payments for physicians’ services.

Part 3--Provisions Affecting Hospitals

      Sec. 8221. Reduction in update for inpatient hospital services.

      Sec. 8222. Elimination of formula-driven overpayments for certain outpatient hospital services.

      Sec. 8223. Establishment of prospective payment system for outpatient services.

      Sec. 8224. Reduction in medicare payments to hospitals for inpatient capital-related costs.

      Sec. 8225. Moratorium on PPS exemption for long-term care hospitals.

Part 4--Provisions Affecting Other Providers

      Sec. 8231. Revision of payment methodology for home health services.

      Sec. 8232. Limitation of home health coverage under part A.

      Sec. 8233. Reduction in fee schedule for durable medical equipment.

      Sec. 8234. Nursing home billing.

      Sec. 8235. Freeze in payments for clinical diagnostic laboratory tests.

Part 5--Graduate Medical Education and Teaching Hospitals

      Sec. 8241. Teaching hospital and graduate medical education trust fund.

      Sec. 8242. Reduction in payment adjustments for indirect medical education.

Subtitle D--Provisions Relating to Medicare Beneficiaries

      Sec. 8301. Part B premium.

      Sec. 8302. Full cost of medicare part B coverage payable by high-income individuals.

      Sec. 8303. Expanded coverage of preventive benefits.

Subtitle E--Medicare Fraud Reduction

      Sec. 8401. Increasing beneficiary awareness of fraud and abuse.

      Sec. 8402. Beneficiary incentives to report fraud and abuse.

      Sec. 8403. Elimination of home health overpayments.

      Sec. 8404. Skilled nursing facilities.

      Sec. 8405. Direct spending for anti-fraud activities under medicare.

      Sec. 8406. Fraud reduction demonstration project.

      Sec. 8407. Report on competitive pricing.

Subtitle F--Improving Access to Health Care

Part 1--Assistance for Rural Providers

SUBPART A--RURAL HOSPITALS

      Sec. 8501. Sole community hospitals.

      Sec. 8502. Clarification of treatment of EAC and RPC hospitals.

      Sec. 8503. Establishment of rural emergency access care hospitals.

      Sec. 8504. Classification of rural referral centers.

      Sec. 8505. Floor on area wage index.

      Sec. 8506. Medical education.

SUBPART B--RURAL PHYSICIANS AND OTHER PROVIDERS

      Sec. 8511. Provider incentives.

      Sec. 8512. National Health Service Corps loan repayments excluded from gross income.

      Sec. 8513. Telemedicine payment methodology.

      Sec. 8514. Demonstration project to increase choice in rural areas.

Part 2--Medicare Subvention

      Sec. 8521. Medicare program payments for health care services provided in the military health services system.

Subtitle G--Other Provisions

      Sec. 8601. Extension and expansion of existing secondary payer requirements.

      Sec. 8602. Repeal of medicare and medicaid coverage data bank.

      Sec. 8603. Clarification of medicare coverage of items and services associated with certain medical devices approved for investigational use.

      Sec. 8604. Additional exclusion from coverage.

      Sec. 8605. Extending medicare coverage of, and application of hospital insurance tax to, all State and local government employees.

Subtitle H--Monitoring Achievement of Medicare Reform Goals

      Sec. 8701. Establishment of budgetary and program goals.

      Sec. 8702. Medicare Reform Commission.

Subtitle I--Lock-Box Provisions for Medicare Part B Savings from Growth Reductions

      Sec. 8801. Establishment of Medicare Growth Reduction Trust Fund for part B savings.

Subtitle J--Clinical Laboratories

      Sec. 8901. Exemption of physician office laboratories.

TITLE IX--WELFARE REFORM

      Sec. 9000. Amendment of the Social Security Act.

Subtitle A--Temporary Employment Assistance

      Sec. 9101. State plan.

Subtitle B--Make Work Pay

      Sec. 9201. Transitional medicaid benefits.

      Sec. 9202. Notice of availability required to be provided to applicants and former recipients of temporary family assistance, food stamps, and medicaid.

      Sec. 9203. Notice of availability of earned income tax credit and dependent care tax credit to be included on W-4 form.

      Sec. 9204. Advance payment of earned income tax credit through State demonstration programs.

      Sec. 9205. Funding of child care services.

      Sec. 9206. Certain Federal assistance includible in gross income.

      Sec. 9207. Dependent care credit to be refundable; high-income taxpayers ineligible for credit.

Subtitle C--Work First

      Sec. 9301. Work first program.

      Sec. 9302. Regulations.

      Sec. 9303. Applicability to States.

Subtitle D--Family Responsibility And Improved Child Support Enforcement

Chapter 1--Eligibility and Other Matters Concerning Title IV-D Program Clients

      Sec. 9401. State obligation to provide paternity establishment and child support enforcement services.

      Sec. 9402. Distribution of payments.

      Sec. 9403. Due process rights.

      Sec. 9404. Privacy safeguards.

Chapter 2--Program Administration and Funding

      Sec. 9411. Federal matching payments.

      Sec. 9412. Performance-based incentives and penalties.

      Sec. 9413. Federal and State reviews and audits.

      Sec. 9414. Required reporting procedures.

      Sec. 9415. Automated data processing requirements.

      Sec. 9416. Director of CSE program; staffing study.

      Sec. 9417. Funding for Secretarial assistance to State programs.

      Sec. 9418. Reports and data collection by the Secretary.

Chapter 3--Locate and Case Tracking

      Sec. 9421. Central State and case registry.

      Sec. 9422. Centralized collection and disbursement of support payments.

      Sec. 9423. Amendments concerning income withholding.

      Sec. 9424. Locator information from interstate networks.

      Sec. 9425. Expanded Federal parent locator service.

      Sec. 9426. Use of social security numbers.

Chapter 4--Streamlining and Uniformity of Procedures

      Sec. 9431. Adoption of uniform State laws.

      Sec. 9432. Improvements to full faith and credit for child support orders.

      Sec. 9433. State laws providing expedited procedures.

Chapter 5--Paternity Establishment

      Sec. 9441. Sense of the Congress.

      Sec. 9442. Availability of parenting social services for new fathers.

      Sec. 9443. Cooperation requirement and good cause exception.

      Sec. 9444. Federal matching payments.

      Sec. 9445. State laws concerning paternity establishment.

      Sec. 9446. Outreach for voluntary paternity establishment.

Chapter 6--Establishment and Modification of Support Orders

      Sec. 9451. National Child Support Guidelines Commission.

      Sec. 9452. Simplified process for review and adjustment of child support orders.

Chapter 7--Enforcement of Support Orders

      Sec. 9461. Federal income tax refund offset.

      Sec. 9462. Internal Revenue Service collection of arrears.

      Sec. 9463. Authority to collect support from Federal employees.

      Sec. 9464. Enforcement of child support obligations of members of the Armed Forces.

      Sec. 9465. Motor vehicle liens.

      Sec. 9466. Voiding of fraudulent transfers.

      Sec. 9467. State law authorizing suspension of licenses.

      Sec. 9468. Reporting arrearages to credit bureaus.

      Sec. 9469. Extended statute of limitation for collection of arrearages.

      Sec. 9470. Charges for arrearages.

      Sec. 9471. Denial of passports for nonpayment of child support.

      Sec. 9472. International child support enforcement.

      Sec. 9473. Seizure of lottery winnings, settlements, payouts, awards, and bequests, and sale of forfeited property, to pay child support arrearages.

      Sec. 9474. Liability of grandparents for financial support of children of their minor children.

      Sec. 9475. Sense of the Congress regarding programs for noncustodial parents unable to meet child support obligations.

Chapter 8--Medical Support

      Sec. 9481. Technical correction to ERISA definition of medical child support order.

Chapter 9--Food Stamp Program Requirements

      Sec. 9491. Cooperation with child support agencies.

      Sec. 9492. Disqualification for child support arrears.

Chapter 10--Effect of Enactment

      Sec. 9498. Effective dates.

      Sec. 9499. Severability.

Subtitle E--Teen Pregnancy And Family Stability

      Sec. 9501. State option to deny temporary employment assistance for additional children.

      Sec. 9502. Supervised living arrangements for minors.

      Sec. 9503. National clearinghouse on adolescent pregnancy.

      Sec. 9504. Required completion of high school or other training for teenage parents.

      Sec. 9505. Denial of Federal housing benefits to minors who bear children out-of-wedlock.

      Sec. 9506. State option to deny temporary employment assistance to minor parents.

Subtitle F--SSI Reform

      Sec. 9601. Definition and eligibility rules.

      Sec. 9602. Eligibility redeterminations and continuing disability reviews.

      Sec. 9603. Additional accountability requirements.

      Sec. 9604. Denial of SSI benefits by reason of disability to drug addicts and alcoholics.

      Sec. 9605. Denial of SSI benefits for 10 years to individuals found to have fraudulently misrepresented residence in order to obtain benefits simultaneously in 2 or more States.

      Sec. 9606. Denial of SSI benefits for fugitive felons and probation and parole violators.

      Sec. 9607. Reapplication requirements for adults receiving SSI benefits by reason of disability.

      Sec. 9608. Reduction in unearned income exclusion.

Subtitle G--Food Assistance

Chapter 1--Food Stamp Program

      Sec. 9701. Application of amendments.

      Sec. 9702. Amendments to the Food Stamp Act of 1977.

      Sec. 9703. Authority to establish authorization periods.

      Sec. 9704. Specific period for prohibiting participation of stores based on lack of business integrity.

      Sec. 9705. Information for verifying eligibility for authorization.

      Sec. 9706. Waiting period for stores that initially fail to meet authorization criteria.

      Sec. 9707. Bases for suspensions and disqualifications.

      Sec. 9708. Authority to suspend stores violating program requirements pending administrative and judicial review.

      Sec. 9709. Disqualification of retailers who are disqualified from the WIC program.

      Sec. 9710. Permanent debarment of retailers who intentionally submit falsified applications.

      Sec. 9711. Expanded civil and criminal forfeiture for violations of the food Stamp Act.

      Sec. 9712. Expanded authority for sharing information provided by retailers.

      Sec. 9713. Expanded definition of ‘coupon’.

      Sec. 9714. Doubled penalties for violating food stamp program requirements.

      Sec. 9715. Mandatory claims collection methods.

      Sec. 9716. Promoting expansion of electronic benefits transfer.

      Sec. 9717. Reduction of basic benefit level.

      Sec. 9718. 2-year freeze of standard deduction.

      Sec. 9719. Pro-rating benefits after interruptions in participation.

      Sec. 9720. Disqualification for participating in 2 or more States.

      Sec. 9721. Disqualification relating to child support arrears.

      Sec. 9722. State authorization to assist law enforcement officers in locating fugitive felons.

      Sec. 9723. Work requirement for able-bodied recipients.

      Sec. 9724. Coordination of employment and training programs.

      Sec. 9725. Extending current claims retention rates.

      Sec. 9726. Nutrition assistance for Puerto Rico.

      Sec. 9727. Treatment of children living at home.

Chapter 2--Commodity Distribution

      Sec. 9751. Short title.

      Sec. 9752. Availability of commodities.

      Sec. 9753. State, local and private supplementation of commodities.

      Sec. 9754. State plan.

      Sec. 9755. Allocation of commodities to States.

      Sec. 9756. Priority system for State distribution of commodities.

      Sec. 9757. Initial processing costs.

      Sec. 9758. Assurances; anticipated use.

      Sec. 9759. Authorization of appropriations.

      Sec. 9760. Commodity supplemental food program.

      Sec. 9761. Commodities not income.

      Sec. 9762. Prohibition against certain State charges.

      Sec. 9763. Definitions.

      Sec. 9764. Regulations.

      Sec. 9765. Finality of determinations.

      Sec. 9766. Relationship to other programs.

      Sec. 9767. Settlement and adjustment of claims.

      Sec. 9768. Repealers; amendments.

Chapter 3--Other Programs

      Sec. 9781. Child and adult care food program.

      Sec. 9782. Resumption of discretionary funding for nutrition education and training program.

Subtitle H--Treatment of Aliens

      Sec. 9801. Extension of deeming of income and resources under TEA, SSI, and food stamp programs.

      Sec. 9802. Requirements for sponsor’s affidavits of support.

      Sec. 9803. Extending requirement for affidavits of support to family-related and diversity immigrants.

Subtitle I--Earned Income Tax Credit

      Sec. 9901. Earned income tax credit denied to individuals not authorized to be employed in the United States.

TITLE X--REDUCTIONS IN CORPORATE TAX SUBSIDIES AND OTHER REFORMS

      Sec. 10001. Short title.

Subtitle A--Tax Treatment of Expatriation

      Sec. 10101. Revision of tax rules on expatriation.

      Sec. 10102. Basis of assets of nonresident alien individuals becoming citizens or residents.

Subtitle B--Modification to Earned Income Credit

      Sec. 10201. Earned income tax credit denied to individuals with substantial capital gain net income.

Subtitle C--Alternative Minimum Tax on Corporations Importing Products into the United States at Artificially Inflated Prices

      Sec. 10301. Alternative minimum tax on corporations importing products into the United States at artificially inflated prices.

Subtitle D--Tax Treatment of Certain Extraordinary Dividends

      Sec. 10401. Tax treatment of certain extraordinary dividends.

Subtitle E--Foreign Trust Tax Compliance

      Sec. 10501. Improved information reporting on foreign trusts.

      Sec. 10502. Modifications of rules relating to foreign trusts having one or more United States beneficiaries.

      Sec. 10503. Foreign persons not to be treated as owners under grantor trust rules.

      Sec. 10504. Information reporting regarding foreign gifts.

      Sec. 10505. Modification of rules relating to foreign trusts which are not grantor trusts.

      Sec. 10506. Residence of estates and trusts, etc.

Subtitle F--Limitation on Section 936 Credit

      Sec. 10601. Limitation on section 936 credit.

TITLE XI--VETERANS’ AFFAIRS

      Sec. 11001. Short title.

Subtitle A--Permanent Extension of Temporary Authorities

      Sec. 11011. Authority to require that certain veterans agree to make copayments in exchange for receiving health-care benefits.

      Sec. 11012. Medical care cost recovery authority.

      Sec. 11013. Income verification authority.

      Sec. 11014. Limitation on pension for certain recipients of medicaid-covered nursing home care.

      Sec. 11015. Home loan fees.

      Sec. 11016. Procedures applicable to liquidation sales on defaulted home loans guaranteed by the Department of Veterans Affairs.

Subtitle B--Other Matters

      Sec. 11021. Revised standard for liability for injuries resulting from Department of Veterans Affairs treatment.

      Sec. 11022. Enhanced loan asset sale authority.

      Sec. 11023. Withholding of payments and benefits.

Subtitle C--Health Care Eligibility Reform

      Sec. 11031. Hospital care and medical services.

      Sec. 11032. Extension of authority to priority health care for Persian Gulf veterans.

      Sec. 11033. Prosthetics.

      Sec. 11034. Management of health care.

      Sec. 11035. Improved efficiency in health care resource management.

      Sec. 11036. Sharing agreements for specialized medical resources.

      Sec. 11037. Personnel furnishing shared resources.

TITLE XII--LEGISLATIVE BRANCH

      Sec. 12101. Requirement that excess funds provided for official allowances of Members of the House of Representatives be dedicated to deficit reduction.

TITLE XIII--MISCELLANEOUS PROVISIONS

      Sec. 13101. Elimination of disparity between effective dates for military and civilian retiree cost-of-living adjustments for fiscal years 1996, 1997, and 1998.

      Sec. 13102. Disposal of certain materials in National Defense Stockpile for deficit reduction.

      Sec. 13103. Requirement that certain agencies prefund Government health benefits contributions for their annuitants.

      Sec. 13104. Application of OMB Circular a-129.

      Sec. 13105. 7-year extension of Hazardous Substance Superfund excise taxes.

TITLE XIV--BUDGET PROCESS PROVISIONS

Chapter 1--Short Title; Purpose

      Sec. 14001. Short title.

      Sec. 14002. Purpose.

Chapter 2--Budget Estimates

      Sec. 14051. Board of Estimates.

Subtitle B--Discretionary Spending Limits

      Sec. 14101. Discretionary spending limits.

      Sec. 14102. Technical and conforming changes.

      Sec. 14103. Elimination of certain adjustments to discretionary spending limits.

Subtitle C--Pay-As-You-Go Procedures

      Sec. 14201. Permanent extension of pay-as-you-go procedures; ten-year scorekeeping.

      Sec. 14202. Elimination of emergency exception.

Subtitle D--Miscellaneous

      Sec. 14301. Technical correction.

      Sec. 14302. Repeal of expiration date.

Subtitle E--Deficit Control

      Sec. 14401. Deficit control.

      Sec. 14402. Sequestration process.

Subtitle F--Line Item Veto

      Sec. 14501. Line item veto authority.

      Sec. 14502. Line item veto effective unless disapproved.

      Sec. 14503. Definitions.

      Sec. 14504. Congressional consideration of line item vetoes.

      Sec. 14505. Report of the General Accounting Office.

      Sec. 14506. Judicial review.

Subtitle G--Enforcing Points of Order

      Sec. 14601. Points of order in the Senate.

      Sec. 14602. Points of order in the House of Representatives.

Subtitle H--Deficit Reduction Lock-box

      Sec. 14701. Deficit reduction lock-box provisions of appropriation measures.

      Sec. 14702. Downward adjustments.

      Sec. 14703. CBO tracking.

Subtitle I--Emergency Spending; Baseline Reform; Continuing Resolutions Reform

Chapter 1--Emergency Spending

      Sec. 14801. Establishment of budget reserve account.

      Sec. 14802. Congressional budget process changes.

      Sec. 14803. Reporting.

Chapter 2--Baseline Reform

      Sec. 14851. The baseline.

      Sec. 14852. The President’s budget.

      Sec. 14853. The congressional budget.

      Sec. 14854. Congressional Budget Office reports to committees.

Chapter 3--Restricted Uses of Continuing Resolutions

      Sec. 14871. Restrictions respecting continuing resolutions.

Subtitle J--Technical and Conforming Amendments

      Sec. 14901. Amendments to the Congressional Budget and Impoundment Control Act of 1974.

      Sec. 14902. Technical and conforming amendments to the Rules of the House of representatives.

      Sec. 14903. President’s budget.

Subtitle K--Truth in Legislating

      Sec. 14951. Identity, sponsor, and cost of certain provisions required to be reported.

TITLE I--ENERGY, NATURAL RESOURCES AND ENVIRONMENT

Subtitle A--Energy

Title I, Subtitle A

SEC. 1101. PRIVATIZATION OF URANIUM ENRICHMENT.

    (a) REFERENCE- Except as otherwise expressly provided, whenever in this section an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Atomic Energy Act of 1954 (42 U.S.C. 2011 et seq.).

    (b) PRODUCTION FACILITY- Paragraph v. of section 11 (42 U.S.C. 2014 v.) is amended by striking ‘or the construction and operation of a uranium enrichment production facility using Atomic Vapor Laser Isotope Separation technology’.

    (c) DEFINITIONS- Section 1201 (42 U.S.C. 2297) is amended--

      (1) in paragraph (4), by inserting before the period the following: ‘and any successor corporation established through privatization of the Corporation’;

      (2) by redesignating paragraphs (10) through (13) as paragraphs (14) through (17), respectively, and by inserting after paragraph (9) the following new paragraphs:

      ‘(10) The term ‘low-level radioactive waste’ has the meaning given such term in section 102(9) of the Low-Level Radioactive Waste Policy Amendments Act of 1985 (42 U.S.C. 2021b(9)).

      ‘(11) The term ‘mixed waste’ has the meaning given such term in section 1004(41) of the Solid Waste Disposal Act (42 U.S.C. 6903(41)).

      ‘(12) The term ‘privatization’ means the transfer of ownership of the Corporation to private investors pursuant to chapter 25.

      ‘(13) The term ‘privatization date’ means the date on which 100 percent of ownership of the Corporation has been transferred to private investors.’;

      (3) by inserting after paragraph (17) (as redesignated) the following new paragraph:

      ‘(18) The term ‘transition date’ means July 1, 1993.’; and

      (4) by redesignating the unredesignated paragraph (14) as paragraph (19).

    (d) Employees of the Corporation-

      (1) PARAGRAPH (2)- Paragraphs (1) and (2) of section 1305(e) (42 U.S.C. 2297b-4(e)(1)(2)) are amended to read as follows:

        ‘(A) IN GENERAL- It is the purpose of this subsection to ensure that the privatization of the Corporation shall not result in any adverse effects on the pension benefits of employees at facilities that are operated, directly or under contract, in the performance of the functions vested in the Corporation.

        ‘(B) APPLICABILITY OF EXISTING COLLECTIVE BARGAINING AGREEMENT- The Corporation shall abide by the terms of the collective bargaining agreement in effect on the privatization date at each individual facility.’.

      (2) PARAGRAPH (4)- Paragraph (4) of section 1305(e) (42 U.S.C. 2297b-4(e)(4)) is amended--

        (A) by striking ‘AND DETAILEES’ in the heading;

        (B) by striking the first sentence;

        (C) in the second sentence, by inserting ‘from other Federal employment’ after ‘transfer to the Corporation’; and

        (D) by striking the last sentence.

    (e) MARKETING AND CONTRACTING AUTHORITY-

      (1) MARKETING AUTHORITY- Section 1401(a) (42 U.S.C. 2297c(a)) is amended effective on the privatization date (as defined in section 1201(13) of the Atomic Energy Act of 1954)--

        (A) by amending the subsection heading to read ‘MARKETING AUTHORITY- ’; and

        (B) by striking the first sentence.

      (2) TRANSFER OF CONTRACTS- Section 1401(b) (42 U.S.C. 2297c(b)) is amended--

        (A) in paragraph (2)(B), by adding at the end the following: ‘The privatization of the Corporation shall not affect the terms of, or the rights or obligations of the parties to, any such power purchase contract.’; and

        (B) by adding at the end the following:

      ‘(3) EFFECT OF TRANSFER-

        ‘(A) As a result of the transfer pursuant to paragraph (1), all rights, privileges, and benefits under such contracts, agreements, and leases, including the right to amend, modify, extend, revise, or terminate any of such contracts, agreements, or leases were irrevocably assigned to the Corporation for its exclusive benefit.

        ‘(B) Notwithstanding the transfer pursuant to paragraph (1), the United States shall remain obligated to the parties to the contracts, agreements, and leases transferred pursuant to paragraph (1) for the performance of the obligations of the United States thereunder during the term thereof. The Corporation shall reimburse the United States for any amount paid by the United States in respect of such obligations arising after the privatization date to the extent such amount is a legal and valid obligation of the Corporation then due.

        ‘(C) After the privatization date, upon any material amendment, modification, extension, revision, replacement, or termination of any contract, agreement, or lease transferred under paragraph (1), the United States shall be released from further obligation under such contract, agreement, or lease, except that such action shall not release the United States from obligations arising under such contract, agreement, or lease prior to such time.’.

      (3) PRICING- Section 1402 (42 U.S.C. 2297c-1) is amended to read as follows:

‘SEC. 1402. PRICING.

    ‘The Corporation shall establish prices for its products, materials, and services provided to customers on a basis that will allow it to attain the normal business objectives of a profitmaking corporation.’.

      (4) LEASING OF GASEOUS DIFFUSION FACILITIES OF DEPARTMENT- Effective on the privatization date (as defined in section 1201(13) of the Atomic Energy Act of 1954), section 1403 (42 U.S.C. 2297c-2) is amended by adding at the end the following:

    ‘(h) LOW-LEVEL RADIOACTIVE WASTE AND MIXED WASTE-

      ‘(1) RESPONSIBILITY OF THE DEPARTMENT; COSTS-

        ‘(A) With respect to low-level radioactive waste and mixed waste generated by the Corporation as a result of the operation of

the facilities and related property leased by the Corporation pursuant to subsection (a) or as a result of treatment of such wastes at a location other than the facilities and related property leased by the Corporation pursuant to subsection (a) the Department, at the request of the Corporation, shall--

          ‘(i) accept for treatment or disposal of all such wastes for which treatment or disposal technologies and capacities exist, whether within the Department or elsewhere; and

          ‘(ii) accept for storage (or ultimately treatment or disposal) all such wastes for which treatment and disposal technologies or capacities do not exist, pending development of such technologies or availability of such capacities for such wastes.

        ‘(B) All low-level wastes and mixed wastes that the Department accepts for treatment, storage, or disposal pursuant to subparagraph (A) shall, for the purpose of any permits, licenses, authorizations, agreements, or orders involving the Department and other Federal agencies or State or local governments, be deemed to be generated by the Department and the Department shall handle such wastes in accordance with any such permits, licenses, authorizations, agreements, or orders. The Department shall obtain any additional permits, licenses, or authorizations necessary to handle such wastes, shall amend any such agreements or orders as necessary to handle such wastes, and shall handle such wastes in accordance therewith.

        ‘(C) The Corporation shall reimburse the Department for the treatment, storage, or disposal of low-level radioactive waste or mixed waste pursuant to subparagraph (A) in an amount equal to the Department’s costs but in no event greater than an amount equal to that which would be charged by commercial, State, regional, or interstate compact entities for treatment, storage, or disposal of such waste.

      ‘(2) AGREEMENTS WITH OTHER PERSONS- The Corporation may also enter into agreements for the treatment, storage, or disposal of low-level radioactive waste and mixed waste generated by the Corporation as a result of the operation of the facilities and related property leased by the Corporation pursuant to subsection (a) with any person other than the Department that is authorized by applicable laws and regulations to treat, store, or dispose of such wastes.’.

      (5) LIABILITIES-

        (A) Subsection (a) of section 1406 (42 U.S.C. 2297c-5(a)) is amended--

          (i) by inserting ‘AND PRIVATIZATION’ after ‘TRANSITION’ in the heading; and

          (ii) by adding at the end the following: ‘As of the privatization date, all liabilities attributable to the operation of the Corporation from the transition date to the privatization date shall be direct liabilities of the United States.’.

        (B) Subsection (b) of section 1406 (42 U.S.C. 2297c-5(b)) is amended--

          (i) by inserting ‘AND PRIVATIZATION’ after ‘TRANSITION’ in the heading; and

          (ii) by adding at the end the following: ‘As of the privatization date, any judgment entered against the Corporation imposing liability arising out of the operation of the Corporation from the transition date to the privatization date shall be considered a judgment against the United States.’.

        (C) Subsection (d) of section 1406 (42 U.S.C. 2297c-5(d)) is amended--

          (i) by inserting ‘AND PRIVATIZATION’ after ‘TRANSITION’ in the heading; and

          (ii) by striking ‘the transition date’ and inserting ‘the privatization date (or, in the event the privatization date does not occur, the transition date)’.

      (6) TRANSFER OF URANIUM- Title II (42 U.S.C. 2297 et seq.) is amended by redesignating section 1408 as section 1409 and by inserting after section 1407 the following:

‘SEC. 1408. TRANSFER OF URANIUM.

    ‘The Secretary may, before the privatization date, transfer to the Corporation without charge raw uranium, low-enriched uranium, and highly enriched uranium.’.

    (f) Privatization of the Corporation-

      (1) ESTABLISHMENT OF PRIVATE CORPORATION- Chapter 25 (42 U.S.C. 2297d et seq.) is amended by adding at the end the following new section:

‘SEC. 1503. ESTABLISHMENT OF PRIVATE CORPORATION.

    ‘(a) ESTABLISHMENT-

      ‘(1) IN GENERAL- In order to facilitate privatization, the Corporation may provide for the establishment of a private corporation organized under the laws of any of the several States. Such corporation shall have among its purposes the following:

        ‘(A) To help maintain a reliable and economical domestic source of uranium enrichment services.

        ‘(B) To undertake any and all activities as provided in its corporate charter.

      ‘(2) AUTHORITIES- The corporation established pursuant to paragraph (1) shall be authorized to--

        ‘(A) enrich uranium, provide for uranium to be enriched by others, or acquire enriched uranium (including low-enriched uranium derived from highly enriched uranium);

        ‘(B) conduct, or provide for conducting, those research and development activities related to uranium enrichment and related processes and activities the corporation considers necessary or advisable to maintain itself as a commercial enterprise operating on a profitable and efficient basis;

        ‘(C) enter into transactions regarding uranium, enriched uranium, or depleted uranium with--

          ‘(i) persons licensed under section 53, 63, 103, or 104 in accordance with the licenses held by those persons;

          ‘(ii) persons in accordance with, and within the period of, an agreement for cooperation arranged under section 123; or

          ‘(iii) persons otherwise authorized by law to enter into such transactions;

        ‘(D) enter into contracts with persons licensed under section 53, 63, 103, or 104, for as long as the corporation considers necessary or desirable, to provide uranium or uranium enrichment and related services;

        ‘(E) enter into contracts to provide uranium or uranium enrichment and related services in accordance with, and within the period of, an agreement for cooperation arranged under section 123 or as otherwise authorized by law; and

        ‘(F) take any and all such other actions as are permitted by the law of the jurisdiction of incorporation of the corporation.

      ‘(3) TRANSFER OF ASSETS- For purposes of implementing the privatization, the Corporation may transfer some or all of its assets and obligations to the corporation established pursuant to this section, including--

        ‘(A) all of the Corporation’s assets, including all contracts, agreements, and leases, including all uranium enrichment contracts and power purchase contracts;

        ‘(B) all funds in accounts of the Corporation held by the Treasury or on deposit with any bank or other financial institution;

        ‘(C) all of the Corporation’s rights, duties, and obligations, accruing subsequent to the privatization date, under the power purchase contracts covered by section 1401(b)(2)(B); and

        ‘(D) all of the Corporation’s rights, duties, and obligations, accruing subsequent to the privatization date, under the lease agreement between the Department and the Corporation executed by the Department and the Corporation pursuant to section 1403.

      ‘(4) MERGER OR CONSOLIDATION- For purposes of implementing the privatization, the Corporation may merge or consolidate with the corporation established pursuant to subsection (a)(1) if such action is contemplated by the plan for privatization approved by the President under section 1502(b). The Board shall have exclusive authority to approve such merger or consolidation and to take all further actions necessary to consummate such merger or consolidation, and no action by or in respect of shareholders shall be required. The merger or consolidation shall be effected in accordance with, and have the effects of a merger or consolidation under, the laws of the jurisdiction of incorporation of the surviving corporation, and all rights and benefits provided under this title to the Corporation shall apply to the surviving corporation as if it were the Corporation.

      ‘(5) TAX TREATMENT OF PRIVATIZATION-

        ‘(A) TRANSFER OF ASSETS OR MERGER- No income, gain, or loss shall be recognized by any person by reason of the transfer of the Corporation’s assets to, or the Corporation’s merger with, the corporation established pursuant to subsection (a)(1) in connection with the privatization.

        ‘(B) CANCELLATION OF DEBT AND COMMON STOCK- No income, gain, or loss shall be recognized by any person by reason of any cancellation of any obligation or common stock of the Corporation in connection with the privatization.

    ‘(b) OSHA REQUIREMENTS- For purposes of the regulation of radiological and nonradiological hazards under the Occupational Safety and Health Act of 1970, the corporation established pursuant to subsection (a)(1) shall be treated in the same manner as other employers licensed by the Nuclear Regulatory Commission. Any interagency agreement entered into between the Nuclear Regulatory Commission and the Occupational Safety and Health Administration governing the scope of their respective regulatory authorities shall apply to the corporation as if the corporation were a Nuclear Regulatory Commission licensee.

    ‘(c) Legal Status of Private Corporation-

      ‘(1) NOT FEDERAL AGENCY- The corporation established pursuant to subsection (a)(1) shall not be an agency, instrumentality, or establishment of the United States Government and shall not be a Government corporation or Government-controlled corporation.

      ‘(2) NO RECOURSE AGAINST UNITED STATES- Obligations of the corporation established pursuant to subsection (a)(1) shall not be obligations of, or guaranteed as to principal or interest by, the Corporation or the United States, and the obligations shall so plainly state.

      ‘(3) NO CLAIMS COURT JURISDICTION- No action under section 1491 of title 28, United States Code, shall be allowable against the United States based on the actions of the corporation established pursuant to subsection (a)(1).

    ‘(d) BOARD OF DIRECTOR’S ELECTION AFTER PUBLIC OFFERING- In the event that the privatization is implemented by means of a public offering, an election of the members of the board of directors of the Corporation by the shareholders shall be conducted before the end of the 1-year period beginning the date shares are first offered to the public pursuant to such public offering.

    ‘(e) ADEQUATE PROCEEDS- The Secretary of Energy shall not allow the privatization of the Corporation unless before the sale date the Secretary determines that the estimated sum of the gross proceeds from the sale of the Corporation will be an adequate amount.’.

      (2) OWNERSHIP LIMITATIONS- Chapter 25 (as amended by paragraph (1)) is amended by adding at the end the following new section:

‘SEC. 1504. OWNERSHIP LIMITATIONS.

    ‘(a) SECURITIES LIMITATION- In the event that the privatization is implemented by means of a public offering, during a period of 3 years beginning on the privatization date, no person, directly or indirectly, may acquire or hold securities representing more than 10 percent of the total votes of all outstanding voting securities of the Corporation.

    ‘(b) APPLICATION- Subsection (a) shall not apply--

      ‘(1) to any employee stock ownership plan of the Corporation,

      ‘(2) to underwriting syndicates holding shares for resale, or

      ‘(3) in the case of shares beneficially held for others, to commercial banks, broker-dealers, clearing corporations, or other nominees.

    ‘(c) No director, officer, or employee of the Corporation may acquire any securities, or any right to acquire securities, of the Corporation--

      ‘(1) in the public offering of securities of the Corporation in the implementation of the privatization,

      ‘(2) pursuant to any agreement, arrangement, or understanding entered into before the privatization date, or

      ‘(3) before the election of directors of the Corporation under section 1503(d) on any terms more favorable than those offered to the general public.’.

      (3) EXEMPTION FROM LIABILITY- Chapter 25 (as amended by paragraph (2)) is amended by adding at the end the following new section:

‘SEC. 1505. EXEMPTION FROM LIABILITY.

    ‘(a) IN GENERAL- No director, officer, employee, or agent of the Corporation shall be liable, for money damages or otherwise, to any party if, with respect to the subject matter of the action, suit, or proceeding, such person was fulfilling a duty, in connection with any action taken in connection with the privatization, which such person in good faith reasonably believed to be required by law or vested in such person.

    ‘(b) EXCEPTION- The privatization shall be subject to the Securities Act of 1933 and the Securities Exchange Act of 1934. The exemption set forth in subsection (a) shall not apply to claims arising under such Acts or under the Constitution or laws of any State, territory, or possession of the United States relating to transactions in securities, which claims are in connection with a public offering implementing the privatization.’.

      (4) RESOLUTION OF CERTAIN ISSUES- Chapter 25 (as amended by paragraph (3)) is amended by adding at the end the following new section:

‘SEC. 1506. RESOLUTION OF CERTAIN ISSUES.

    ‘(a) CORPORATION ACTIONS- Notwithstanding any provision of any agreement to which the Corporation is a party, the Corporation shall not be considered to be in breach, default, or violation of any such agreement because of any provision of this chapter or any action the Corporation is required to take under this chapter.

    ‘(b) RIGHT TO SUE WITHDRAWN- The United States hereby withdraws any stated or implied consent for the United States, or any agent or officer of the United States, to be sued by any person for any legal, equitable, or other relief with respect to any claim arising out of, or resulting from, acts or omissions under this chapter.’.

      (5) APPLICATION OF PRIVATIZATION PROCEEDS- Chapter 25 (as amended by paragraph (4)) is amended by adding at the end the following new section:

‘SEC. 1507. APPLICATION OF PRIVATIZATION PROCEEDS.

    ‘The proceeds from the privatization shall be included in the budget baseline required by the Balanced Budget and Emergency Deficit Control Act of 1985 and shall be counted as an offset to direct spending for purposes of section 252 of such Act, notwithstanding section 257(e) of such Act.’.

      (6) CONFORMING AMENDMENT- The table of contents for chapter 25 is amended by inserting after the item for section 1502 the following:

      ‘Sec. 1503. Establishment of private corporation.

      ‘Sec. 1504. Ownership limitations.

      ‘Sec. 1505. Exemption from liability.

      ‘Sec. 1506. Resolution of certain issues.

      ‘Sec. 1507. Application of privatization proceeds.’.

      (7) Section 193 (42 U.S.C. 2243) is amended by adding at the end the following:

    ‘(f) LIMITATION- If the privatization of the United States Enrichment Corporation results in the Corporation being--

      ‘(1) owned, controlled, or dominated by a foreign corporation or a foreign government, or

      ‘(2) otherwise inimical to the common defense or security of the United States,

    any license held by the Corporation under sections 53 and 63 shall be terminated.’.

      (8) PERIOD FOR CONGRESSIONAL REVIEW- Section 1502(d) (42 U.S.C. 2297d-1(d)) is amended by striking ‘less than 60 days after notification of the Congress’ and inserting ‘less than 60 days after the date of the report to Congress by the Comptroller General under subsection (c)’.

    (g) PERIODIC CERTIFICATION OF COMPLIANCE- Section 1701(c)(2) (42 U.S.C. 2297f(c)(2)) is amended by striking ‘ANNUAL APPLICATION FOR CERTIFICATE OF COMPLIANCE- The Corporation shall apply at least annually to the Nuclear Regulatory Commission for a certificate of compliance under paragraph (1).’ and inserting ‘PERIODIC APPLICATION FOR CERTIFICATE OF COMPLIANCE- The Corporation shall apply to the Nuclear Regulatory Commission for a certificate of compliance under paragraph (1) periodically, as determined by the Nuclear Regulatory Commission, but not less than every 5 years.’.

    (h) LICENSING OF OTHER TECHNOLOGIES- Subsection (a) of section 1702 (42 U.S.C. 2297f-1(a)) is amended by striking ‘other than’ and inserting ‘including’.

    (i) CONFORMING AMENDMENTS-

      (1) REPEALS IN ATOMIC ENERGY ACT OF 1954 AS OF THE PRIVATIZATION DATE-

        (A) REPEALS- As of the privatization date (as defined in section 1201(13) of the Atomic Energy Act of 1954), the following sections (as in effect on such privatization date) of the Atomic Energy Act of 1954 are repealed:

          (i) Section 1202.

          (ii) Sections 1301 through 1304.

          (iii) Sections 1306 through 1316.

          (iv) Sections 1404 and 1405.

          (v) Section 1601.

          (vi) Sections 1603 through 1607.

        (B) CONFORMING AMENDMENT- The table of contents of such Act is amended by repealing the items referring to sections repealed by paragraph (1).

      (2) STATUTORY MODIFICATIONS- As of such privatization date, the following shall take effect:

        (A) For purposes of title I of the Atomic Energy Act of 1954, all references in such Act to the ‘United States Enrichment Corporation’ shall be deemed to be references to the corporation established pursuant to section 1503 of the Atomic Energy Act of 1954 (as added by subsection (f)(1)).

        (B) Section 1018(1) of the Energy Policy Act of 1992 (42 U.S.C. 2296b-7(1)) is amended by striking ‘the United States’ and all that follows through the period and inserting ‘the corporation referred to in section 1201(4) of the Atomic Energy Act of 1954.’.

        (C) Section 9101(3) of title 31, United States Code, is amended by striking subparagraph (N), as added by section 902(b) of Public Law 102-486.

      (3) REVISION OF SECTION 1305- As of such privatization date, section 1305 of the Atomic Energy Act of 1954 (42 U.S.C 2297b-4) is amended--

        (A) by repealing subsections (a), (b), (c), and (d), and

        (B) in subsection (e)--

          (i) by striking the subsection designation and heading,

          (ii) by redesignating paragraphs (1) and (2) (as added by subsection (d)(1)) as subsections (a) and (b) and by moving the margins 2-ems to the left,

          (iii) by striking paragraph (3), and

          (iv) by redesignating paragraph (4) (as amended by subsection (d)(2)) as subsection (c), and by moving the margins 2-ems to the left.

SEC. 1102. MAKING PERMANENT NUCLEAR REGULATORY COMMISSION ANNUAL CHARGES.

    Paragraph (3) of section 6101(a)(3) of the Omnibus Budget Reconciliation Act of 1990 (42 U.S.C. 2214(a)(3)) is repealed.

SEC. 1103. COGENERATION.

    Section 804(2)(B) of the National Energy Conservation Policy Act (42 U.S.C. 8287c(2)(B)) is amended by striking ‘, excluding any cogeneration process for other than a federally owned building or buildings or other federally owned facilities’.

SEC. 1104. FEMA RADIOLOGICAL EMERGENCY PREPAREDNESS FEES.

    (a) IN GENERAL- The Director of the Federal Emergency Management Agency may assess and collect fees applicable to persons subject to radiological emergency preparedness regulations issued by the Director.

    (b) REQUIREMENTS- The assessment and collection of fees by the Director under subsection (a) shall be fair and equitable and shall reflect the full amount of costs to the Agency of providing radiological emergency planning, preparedness, response, and associated services. Such fees shall be assessed by the Director in a manner which reflects the use of resources of the Agency for classes of regulated persons and the administrative costs of collecting such fees.

    (c) AMOUNT OF FEES- The aggregate amount of fees assessed under subsection (a) in a fiscal year shall approximate, but not be less than, 100 percent of the amounts anticipated by the Director to be obligated for the radiological emergency preparedness program of the Agency for such fiscal year.

    (d) DEPOSIT OF FEES IN TREASURY- Fees received pursuant to subsection (a) shall be deposited in the general fund of the Treasury as offsetting receipts.

Subtitle B--Central Utah

Title I, Subtitle B

SEC. 1121. PREPAYMENT OF CERTAIN REPAYMENT CONTRACTS BETWEEN THE UNITED STATES AND THE CENTRAL UTAH WATER CONSERVANCY DISTRICT.

    The second sentence of section 210 of the Central Utah Project Completion Act (106 Stat. 4624) is amended to read as follows: ‘The Secretary of the Interior shall allow for prepayment of the repayment contract between the United States and the Central Utah Water Conservancy District dated December 28, 1965, and supplemented on November 26, 1985, providing for repayment of the municipal and industrial water delivery facilities for which repayment is provided pursuant to such contract, under such terms and conditions as the Secretary deems appropriate to protect the interest of the United States, which shall be similar to the terms and conditions contained in the supplemental contract that provided for the prepayment of the Jordan Aqueduct dated October 28, 1993. The District shall exercise its right to prepayment pursuant to this section by the end of fiscal year 2002.’.

Subtitle C--Army Corps of Engineers

Title I, Subtitle C

SEC. 1131. REGULATORY PROGRAM FUND.

    (a) ESTABLISHMENT- There is established in the Treasury of the United States the ‘Army Civil Works Regulatory Program Fund’ (hereinafter in this section referred to as the ‘Regulatory Program Fund’) into which shall be deposited fees collected by the Secretary of the Army pursuant to subsection (b). Amounts deposited into the Regulatory Program Fund are authorized to be appropriated to the Secretary of the Army to cover a portion of the expenses incurred by the Department of the Army in administering laws pertaining to the regulation of the navigable waters of the United States, including wetlands.

    (b) REGULATORY FEES-

      (1) COLLECTION- Not later than 60 days after the date of the enactment of this Act, the Secretary of the Army shall establish fees for the evaluation of commercial permit applications, for the recovery of costs associated with the preparation of environmental impact statements required by the National Environmental Policy Act of 1969, and for the recovery of costs associated with wetlands delineations for major developments affecting wetlands. The Secretary shall collect such fees and deposit amounts collected pursuant to this paragraph into the Regulatory Program Fund.

      (2) FEES- The fees described in paragraph (1) shall be established by the Secretary of the Army at rates that will allow for the recovery of receipts at amounts sufficient to cover the costs for which the fees are established under paragraph (1).

Subtitle D--Helium Reserve

Title I, Subtitle D

SEC. 1141. SALE OF HELIUM PROCESSING AND STORAGE FACILITY.

    (a) SHORT TITLE- This section may be cited as the ‘Helium Act of 1995’.

    (b) REFERENCES- Except as otherwise expressly provided, whenever in this section an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Helium Act (50 U.S.C. 167 to 167n).

    (c) AUTHORITY OF SECRETARY- Sections 3, 4, and 5 are amended to read as follows:

‘SEC. 3. AUTHORITY OF SECRETARY.

    ‘(a) EXTRACTION AND DISPOSAL OF HELIUM ON FEDERAL LANDS- (1) The Secretary may enter into agreements with private parties for the recovery and disposal of helium on Federal lands upon such terms and conditions as he deems fair, reasonable and necessary. The Secretary may grant leasehold rights to any such helium. The Secretary may not enter into any agreement by which the Secretary sells such helium other than to a private party with whom the Secretary has an agreement for recovery and disposal of helium. Such agreements may be subject to such rules and regulations as may be prescribed by the Secretary.

    ‘(2) Any agreement under this subsection shall be subject to the existing rights of any affected Federal oil and gas lessee. Each such agreement (and any extension or renewal thereof) shall contain such terms and conditions as deemed appropriate by the Secretary.

    ‘(3) This subsection shall not in any manner affect or diminish the rights and obligations of the Secretary and private parties under agreements to dispose of helium produced from Federal lands in existence at the enactment of the Helium Act of 1995 except to the extent that such agreements are renewed or extended after such date.

    ‘(b) STORAGE, TRANSPORTATION, AND SALE- The Secretary is authorized to store, transport, and sell helium only in accordance with this Act.

    ‘(c) MONITORING AND REPORTING- The Secretary is authorized to monitor helium production and helium reserves in the United States and to periodically prepare reports regarding the amounts of helium produced and the quantity of crude helium in storage in the United States.

‘SEC. 4. STORAGE AND TRANSPORTATION OF CRUDE HELIUM.

    ‘(a) STORAGE AND TRANSPORTATION- The Secretary is authorized to store and transport crude helium and to maintain and operate existing crude helium storage at the Bureau of Mines Cliffside Field, together with related helium transportation and withdrawal facilities.

    ‘(b) CESSATION OF PRODUCTION, REFINING, AND MARKETING- Effective one year after the date of enactment of the Helium Act of 1995, the Secretary shall cease producing, refining, and marketing refined helium and shall cease carrying out all other activities relating to helium which the Secretary was authorized to carry out under this Act before the date of enactment of the Helium Act of 1995, except those activities described in subsection (a).

    ‘(c) DISPOSAL OF FACILITIES- (1) Within one year after the date of enactment of the Helium Act of 1995, the Secretary shall dispose of all facilities, equipment, and other real and personal property, together with all interests therein, held by the United States for the purpose of producing, refining, and marketing refined helium. The disposal of such property shall be in accordance with the provisions of law governing the disposal of excess or surplus properties of the United States.

    ‘(2) All proceeds accruing to the United States by reason of the sale or other disposal of such property shall be treated as moneys received under this chapter for purposes of section 6(f). All costs associated with such sale and disposal (including costs associated with termination of personnel) and with the cessation of activities under subsection (b) shall be paid from amounts available in the helium production fund established under section 6(f).

    ‘(3) Paragraph (1) shall not apply to any facilities, equipment, or other real or personal property, or any interest therein, necessary for the storage and transportation of crude helium.

    ‘(d) EXISTING CONTRACTS- All contracts which were entered into by any person with the Secretary for the purchase by such person from the Secretary of refined helium and which are in effect on the date of the enactment of the Helium Act of 1995 shall remain in force and effect until the date on which the facilities referred to in subsection (c) are disposed of. Any costs associated with the termination of such contracts shall be paid from the helium production fund established under section 6(f).

‘SEC. 5. FEES FOR STORAGE, TRANSPORTATION AND WITHDRAWAL.

    ‘Whenever the Secretary provides helium storage, withdrawal, or transportation services to any person, the Secretary is authorized and directed to impose fees on such person to reimburse the Secretary for the full costs of providing such storage, transportation, and withdrawal. All such fees received by the Secretary shall be treated as moneys received under this Act for purposes of section 6(f).’.

    (d) SALE OF CRUDE HELIUM- Section 6 is amended as follows:

      (1) Subsection (a) is amended by striking out ‘from the Secretary’ and inserting ‘from persons who have entered into enforceable contracts to purchase an equivalent amount of crude helium from the Secretary’.

      (2) Subsection (b) is amended by inserting ‘crude’ before ‘helium’ and by adding the following at the end thereof: ‘Except as may be required by reason of subsection (a), the Secretary shall not make sales of crude helium under this section in such amounts as will disrupt the market price of crude helium.’.

      (3) Subsection (c) is amended by inserting ‘crude’ before ‘helium’ after the words ‘Sales of’ and by striking ‘together with interest as provided in this subsection’ and all that follows down through the period at the end of such subsection and inserting the following: ‘all funds required to be repaid to the United States as of October 1, 1994 under this section (hereinafter referred to as ‘repayable amounts’). The price at which crude helium is sold by the Secretary shall not be less than the amount determined by the Secretary as follows:

      ‘(1) Divide the outstanding amount of such repayable amounts by the volume (in mcf) of crude helium owned by the United States and stored in the Bureau of Mines Cliffside Field at the time of the sale concerned.

      ‘(2) Adjust the amount determined under paragraph (1) by the Consumer Price Index for years beginning after December 31, 1994.’.

      (4) Subsection (d) is amended to read as follows:

    ‘(d) EXTRACTION OF HELIUM FROM DEPOSITS ON FEDERAL LANDS- All moneys received by the Secretary from the sale or disposition of helium on Federal lands shall be paid to the Treasury and credited against the amounts required to be repaid to the Treasury under subsection (c) of this section.’.

      (5) Subsection (e) is repealed.

      (6) Subsection (f) is amended by inserting ‘(1)’ after ‘(f)’ and by adding the following at the end thereof:

    ‘(2) Within 7 days after the commencement of each fiscal year after the disposal of the facilities referred to in section 4(c), all amounts in such fund in excess of $2,000,000 (or such lesser sum as the Secretary deems necessary to carry out this Act during such fiscal year) shall be paid to the Treasury and credited as provided in paragraph (1). Upon repayment of all amounts referred to in subsection (c), the fund established under this section shall be terminated and all moneys received under this Act shall be deposited in the Treasury as General Revenues.’.

    (e) ELIMINATION OF STOCKPILE- Section 8 is amended to read as follows:

‘SEC. 8. ELIMINATION OF STOCKPILE.

    ‘(a) REVIEW OF RESERVES- Not later than January 1, 2014 the Secretary shall review the known helium reserves in the United States and make a determination as to the expected life of the domestic helium reserves (other than federally owned helium stored at the Cliffside Reservoir) at that time.

    ‘(b) RESERVES BELOW 1 BCF IN 2014- Not later than January 1, 2014, if the Secretary determines that domestic helium reserves (other than federally owned helium stored at the Cliffside Reservoir) are less than 1 billion cubic feet (bcf), the Secretary shall commence making sales of crude helium from helium reserves owned by the United States in such amounts as may be necessary to dispose of all such helium reserves in excess of 600 million cubic feet (mcf) by January 1, 2019. The sales shall be at such times and in such lots as the Secretary determines, in consultation with the helium industry, necessary to carry out this subsection. The price for all such sales, as determined by the Secretary in consultation with the helium industry, shall be such as will ensure repayment of the amounts required to be repaid to the Treasury under section 6(c) by the year 2019 with minimum market disruption. The date specified in this subsection for completion of such sales and for repayment of debt may be extended by the Secretary for a period of not to exceed 5 additional years if necessary in order to assure repayment of such debt with minimum market disruption.

    ‘(c) RESERVES ABOVE 1 BCF IN 2014- Not later than January 1, 2014, if the Secretary determines that domestic helium reserves (other than federally owned helium stored at the Cliffside Reservoir) are more than 1 billion cubic feet (bcf), the Secretary shall commence making sales of crude helium from helium reserves owned by the United States in such amounts as may be necessary to dispose of all such helium reserves in excess of 600 million cubic feet (mcf) by January 1, 2024. The sales shall be at such times and in such lots as the Secretary determines, in consultation with the helium industry, necessary to carry out this subsection with minimum disruption of the market for crude helium.

    ‘(d) DISCOVERY OF ADDITIONAL RESERVES- The discovery of additional helium reserves after the year 2014 shall not affect the duty of the Secretary to make sales of helium as provided in subsection (b) or (c), as the case may be.’.

    (f) REPEAL OF AUTHORITY TO BORROW- Sections 12 and 15 are repealed.

Subtitle E--Territories

Title I, Subtitle E

SEC. 1151. TERMINATION OF ANNUAL DIRECT ASSISTANCE TO NORTHERN MARIANA ISLANDS.

    (a) IN GENERAL- No annual payment may be made under section 701, 702, or 704 of the Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (48 U.S.C. 1681 note), for any fiscal year beginning after September 30, 1995.

    (b) ELIMINATION OF 7-YEAR EXTENSIONS-

      (1) IN GENERAL- The Act of March 24, 1976 (90 Stat. 263; 16 U.S.C. 1681 note), is amended by striking sections 3 and 4.

      (2) CONFORMING CHANGES- (A) Section 5 of the Act of March 24, 1976 (90 Stat. 263; 16 U.S.C. 1681 note) is redesignated as section 3.

      (B) Section 3 of such Act, as redesignated by subparagraph (A) of this paragraph, is amended--

        (i) by striking ‘agreement identified in section 3 of this Act’ and inserting ‘Agreement of the Special Representatives on Future United States Financial Assistance for the Government of the Northern Mariana Islands, executed June 10, 1985, between the special representative of the President of the United States and the special representatives of the Governor of the Northern Mariana Islands’; and

        (ii) by striking ‘Interior and Insular Affairs’ and inserting ‘Resources’.

TITLE II--AGRICULTURAL PROGRAMS

SEC. 2001. SHORT TITLE.

    This title may be cited as the ‘Agricultural Reconciliation Act of 1995’.

Title II, Subtitle A

Subtitle A--Extension and Modification of Various Commodity Programs

SEC. 2101. EXTENSION OF LOANS, PAYMENTS, AND ACREAGE REDUCTION PROGRAMS FOR WHEAT THROUGH 2002.

    (a) AGRICULTURAL ACT OF 1949- Section 107B of the Agricultural Act of 1949 (7 U.S.C. 1445b-3a) is amended--

      (1) in the section heading by striking ‘1995’ and inserting ‘2002’;

      (2) in subsections (a)(1), (a)(4)(C), (b)(1), (c)(1)(A), (c)(1)(B)(iii), (e)(1)(G), (e)(3)(A), (e)(3)(C)(iii), (f)(1), (q), by striking ‘1995’ each place it appears and inserting ‘2002’;

      (3) in the heading of subsection (c)(1)(B)(ii), by striking ‘AND 1995’ and inserting ‘THROUGH 2002’;

      (4) in subsection (c)(1)(B)(ii), by striking ‘and 1995’ and inserting ‘through 2002’;

      (5) in subsection (c)(1)(E)(vii), by striking ‘1997’ and inserting ‘2002’;

      (6) in the heading of subsection (e)(1)(G), by striking ‘1995’ and inserting ‘2002’; and

      (7) in subsection (g)(1), by striking ‘and 1995’ and inserting ‘through 2002’.

    (b) FOOD SECURITY WHEAT RESERVE- Section 302(i) of the Food Security Wheat Reserve Act of 1980 (7 U.S.C. 1736f-1(i)) is amended by striking ‘1995’ both places it appears and inserting ‘2002’.

    (c) NONAPPLICABILITY OF CERTIFICATE REQUIREMENTS- Sections 379d through 379j of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1379d-1379j) shall not be applicable to wheat processors or exporters during the period June 1, 1996, through May 31, 2003.

    (d) SUSPENSION OF LAND USE, WHEAT MARKETING ALLOCATION, AND PRODUCER CERTIFICATE PROVISIONS- Sections 331 through 339, 379b, and 379c of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1331 through 1339, 1379b, and 1379c) shall not be applicable to the 1996 through 2002 crops of wheat.

    (e) SUSPENSION OF CERTAIN QUOTA PROVISIONS- The joint resolution entitled ‘A joint resolution relating to corn and wheat marketing quotas under the Agricultural Adjustment Act of 1938, as amended’, approved May 26, 1941 (7 U.S.C. 1330 and 1340), shall not be applicable to the crops of wheat planted for harvest in the calendar years 1996 through 2002.

    (f) NONAPPLICABILITY OF SECTION 107 OF AGRICULTURAL ACT OF 1949- Section 107 of the Agricultural Act of 1949 (7 U.S.C. 1445a) shall not be applicable to the 1996 through 2002 crops of wheat.

SEC. 2102. EXTENSION OF LOANS, PAYMENTS, AND ACREAGE REDUCTION PROGRAMS FOR FEED GRAINS THROUGH 2002.

    (a) AGRICULTURAL ACT OF 1949- Section 105B of the Agricultural Act of 1949 (7 U.S.C. 1444f) is amended--

      (1) in the section heading, by striking ‘1995’ and inserting ‘2002’;

      (2) in subsections (a)(1), (a)(4)(C), (a)(6), (b)(1), (c)(1)(A), (c)(1)(B)(iii), (e)(1)(G), (e)(1)(H), (e)(2)(H), (e)(3)(A), (e)(3)(C)(iii), (f)(1), (p)(1), (q)(1), and (r), by striking ‘1995’ each place it appears and inserting ‘2002’;

      (3) in the heading of subsection (c)(1)(B)(ii), by striking ‘AND 1995’ and inserting ‘THROUGH 2002’;

      (4) in subsection (c)(1)(B)(ii), by striking ‘and 1995’ and inserting ‘through 2002’;

      (5) in subsection (c)(1)(E)(vii), by striking ‘1997’ and inserting ‘2002’;

      (6) in the headings of subsections (e)(1)(G) and (e)(1)(H), by striking ‘1995’ both places it appears and inserting ‘2002’; and

      (7) in subsection (g)(1), by striking ‘and 1995’ and inserting ‘through 2002’.

    (b) RECOURSE LOAN PROGRAM FOR SILAGE- Section 403 of the Food Security Act of 1985 (7 U.S.C. 1444e-1) is amended by striking ‘1996’ and inserting ‘2002’.

    (c) NONAPPLICABILITY OF SECTION 105 OF AGRICULTURAL ACT OF 1949- Section 105 of the Agricultural Act of 1949 (7 U.S.C. 1444b) shall not be applicable to the 1996 through 2002 crops of feed grains.

SEC. 2103. EXTENSION OF LOANS, PAYMENTS, AND ACREAGE REDUCTION PROGRAMS FOR COTTON THROUGH 2002.

    (a) EXTRA LONG STAPLE COTTON- Section 103(h)(16) of the Agricultural Act of 1949 (7 U.S.C. 1444(h)(16)) is amended by striking ‘1996’ and inserting ‘2003’.

    (b) UPLAND COTTON- Section 103B of the Agricultural Act of 1949 (7 U.S.C. 1444-2) is amended--

      (1) in the section heading, by striking ‘1997’ and inserting ‘2002’;

      (2) in subsections (a)(1), (b)(1), (c)(1)(A), (c)(1)(B)(ii), (c)(1)(D)(v)(II), and (o), by striking ‘1997’ each place it appears and inserting ‘2002’;

      (3) in the heading of subsection (c)(1)(D)(v)(II), by striking ‘1997 CROPS’ and inserting ‘2002 CROPS’;

      (4) in subsection (e)(1)(D), by striking ‘the 1997 crop’ and inserting ‘each of the 1997 through 2002 crops’;

      (5) in subsections (e)(3)(A) and (f)(1), by striking ‘1995’ each place it appears and inserting ‘2002’; and

      (6) in subparagraphs (B)(i), (D)(i), (E)(i), and (F)(i) of subsection (a)(5), by striking ‘1998’ each place it appears and inserting ‘2003’.

    (c) COTTONSEED AND COTTONSEED OIL- Section 203(b) of the Agricultural Act of 1949 (7 U.S.C. 1446d(b)) is amended by striking ‘1995’ and inserting ‘2002’.

    (d) AGRICULTURAL ADJUSTMENT ACT OF 1938- Section 374(a) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1374(a)) is amended by striking ‘1995’ each place it appears and inserting ‘2002’.

    (e) SUSPENSION OF BASE ACREAGE ALLOTMENTS, MARKETING QUOTAS, AND RELATED PROVISIONS- Sections 342, 343, 344, 345, 346, and 377 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1342-1346 and 1377) shall not be applicable to any of the 1996 through 2002 crops of upland cotton.

    (f) SUSPENSION OF MISCELLANEOUS COTTON PROVISIONS- Section 103(a) of the Agricultural Act of 1949 (7 U.S.C. 1444(a)) shall not be applicable to the 1996 through 2002 crops.

    (g) PRELIMINARY ALLOTMENTS FOR 2003 CROP OF UPLAND COTTON- Notwithstanding any other provision of law, the permanent State, county, and farm base acreage allotments for the 1977 crop of upland cotton, adjusted for any underplantings in 1977 and reconstituted as provided in section 379 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1379), shall be the preliminary allotments for the 2003 crop.

    (h) COTTON CLASSIFICATION SERVICES- The first sentence of section 3a of the Act of March 3, 1927 (commonly known as the ‘Cotton Statistics and Estimates Act’) (chapter 337; 7 U.S.C. 473a), is amended by striking ‘1996’ and inserting ‘2002’.

SEC. 2104. EXTENSION OF LOANS, PAYMENTS, AND ACREAGE REDUCTION PROGRAMS FOR RICE THROUGH 2002.

    Section 101B of the Agricultural Act of 1949 (7 U.S.C. 1441-2) is amended--

      (1) in the section heading, by striking ‘1995’ and inserting ‘2002’;

      (2) in subsections (a)(1), (a)(3), (b)(1), (c)(1)(A), (c)(1)(B)(iii), (e)(3)(A), (f)(1), and (n), by striking ‘1995’ each place it appears and inserting ‘2002’;

      (3) in subsection (a)(5)(D)(i), by striking ‘1996’ and inserting ‘2001’;

      (4) in the heading of subsection (c)(1)(B)(ii), by striking ‘AND 1995’ and inserting ‘THROUGH 2002’;

      (5) in subsection (c)(1)(B)(ii), by striking ‘and 1995’ and inserting ‘through 2002’;

      (6) in subsection (c)(1)(D)(v)(II), by striking ‘1997’ and inserting ‘2002’; and

      (7) in the heading of subsection (c)(1)(D)(v)(II), by striking ‘1997 CROPS’ and inserting ‘2002 CROPS’.

SEC. 2105. EXTENSION OF LOANS AND PAYMENTS FOR OILSEEDS THROUGH 2002.

    Section 205 of the Agricultural Act of 1949 (7 U.S.C. 1446f) is amended--

      (1) in the section heading, by striking ‘1995’ and inserting ‘2002’;

      (2) in subsections (b), (c), (e)(1), and (n), by striking ‘1995’ each place it appears and inserting ‘2002’; and

      (3) in subsections (c) and (h)(2), by striking ‘1997’ each places it appears and inserting ‘2002’.

SEC. 2106. INCREASE IN FLEX ACRES.

    (a) WHEAT- Subsection (c)(1)(C)(ii) of section 107B of the Agricultural Act of 1949 (7 U.S.C. 1445b-3a) is amended by striking ‘85 percent’ and inserting ‘85 percent (through the 1995 crop of wheat) and 77 percent (for the 1996 through 2002 crops)’.

    (b) FEED GRAINS- Subsection (c)(1)(C)(ii) of section 105B of such Act (7 U.S.C. 1444f) is amended by striking ‘85 percent’ and inserting ‘85 percent (through the 1995 crop) and 77 percent (for the 1996 through 2002 crops)’.

    (c) UPLAND COTTON- Subsection (c)(1)(C)(ii) of section 103B of such Act (7 U.S.C. 1444-2) is amended by striking ‘85 percent’ and inserting ‘85 percent (through the 1995 crop of upland cotton) and 77 percent (for the 1996 through 2002 crops)’.

    (d) RICE- Subsection (c)(1)(C)(ii) of section 101B of such Act (7 U.S.C. 1441-2) is amended by striking ‘85 percent’ and inserting ‘85 percent (through the 1995 crop of rice) and 77 percent (for the 1996 through 2002 crops)’.

SEC. 2107. REDUCTION IN 50/85 AND 0/85 PROGRAMS.

    (a) RICE- Section 101B(c)(1)(D) of the Agricultural Act of 1949 (7 U.S.C. 1441-2(c)(1)(D)) is amended--

      (1) in the subparagraph heading, by striking ‘50/85 PROGRAM’ and inserting ‘50/80 PROGRAM’; and

      (2) in clause (i), by striking ‘8 percent for each of the 1991 through 1993 crops, and 15 percent for each of the 1994 through 1997 crops’ both places it appears and inserting ‘20 percent for each of the 1996 through 2002 crops’.

    (b) COTTON- Section 103B(c)(1)(D) of such Act (7 U.S.C. 1444-2(c)(1)(D)) is amended--

      (1) in the subparagraph heading, by striking ‘50/85 PROGRAM’ and inserting ‘50/80 PROGRAM’; and

      (2) in clause (i), by striking ‘8 percent for each of the 1991 through 1993 crops, and 15 percent for each of the 1994 through 1997 crops’ both places it appears and inserting ‘20 percent for each of the 1996 through 2002 crops’.

    (c) FEED GRAINS- Section 105B(c)(1)(E) of such Act (7 U.S.C. 1444f(c)(1)(E)) is amended--

      (1) in the subparagraph heading, by striking ‘0/85 PROGRAM’ and inserting ‘0/80 PROGRAM’; and

      (2) in clause (i), by striking ‘8 percent for each of the 1991 through 1993 crops, and 15 percent for each of the 1994 through 1997 crops’ both places it appears and inserting ‘20 percent for each of the 1996 through 2002 crops’.

    (d) WHEAT- Section 107B(c)(1)(E) of such Act (7 U.S.C. 1445-3a(c)(1)(E)) is amended--

      (1) in the subparagraph heading, by striking ‘0/85 PROGRAM’ and inserting ‘0/80 PROGRAM’; and

      (2) in clause (i), by striking ‘8 percent for each of the 1991 through 1993 crops, and 15 percent for each of the 1994 through 1997 crops’ both places it appears and inserting ‘20 percent for each of the 1996 through 2002 crops’.

    (e) EFFECT OF AMENDMENTS ON PRIOR CROP YEARS- Sections 101B(c)(1)(D), 103B(c)(1)(D), 105B(c)(1)(E), and 107B(c)(1)(E) of the Agricultural Act of 1949, as in effect on the day before the date of the enactment of this Act, shall continue to apply with respect to the 1991 through 1995 crops covered by such sections.

Subtitle B--Sugar

Title II, Subtitle B

SEC. 2201. EXTENSION AND MODIFICATION OF SUGAR PROGRAM.

    (a) ASSURANCE OF SUGAR SUPPLY- Section 206 of the Agricultural Act of 1949 (7 U.S.C. 1446g, et seq.) is amended to read as follows:

‘SEC. 206. ASSURANCE OF SUGAR SUPPLY.

    ‘(a) IN GENERAL- The price of each crop of sugar beets and sugarcane, respectively, shall be supported in accordance with this section.

    ‘(b) SUGARCANE- Subject to subsection (d), the Secretary shall support the price of domestically grown sugarcane through loans at 18 cents per pound for raw cane sugar.

    ‘(c) SUGAR BEETS- Subject to subsection (d), the Secretary shall support the price of each crop of domestically grown sugar beets through loans at the level provided for refined beet sugar produced from the 1995 crop of domestically grown sugar beets.

    ‘(d) ADJUSTMENT IN SUPPORT LEVEL-

      ‘(1) DOWNWARD ADJUSTMENT IN SUPPORT LEVEL-

        ‘(A) IN GENERAL- The Secretary shall decrease the support price of domestically grown sugarcane and sugar beets from the price determined for the preceding crop, as established under this section, if negotiated reductions in export subsidies and domestic subsidies provided for sugar of the European Union and other major sugar growing, producing, and exporting countries (‘major countries’) in the aggregate exceed the commitments made as part of the Uruguay Round Agreements.

        ‘(B) EXTENT OF REDUCTION- The Secretary shall not reduce the support price under this section below a level that provides an equal measure of support to that provided by any other major country or customs union based on an examination of both domestic and export subsidies subject to reduction in the Agreement on Agriculture referenced in 19 U.S.C. 3511(d)(2).

        ‘(C) MAJOR COUNTRIES- For purposes of this subsection, the term ‘major countries’ includes all countries allocated a share of the tariff rate quota for imported sugars and syrups by the United States Trade Representative pursuant to additional U.S. note 5 of chapter 17 of the Harmonized Tariff Schedule, all countries of the European Union, and the People’s Republic of China.

      ‘(2) INCREASES IN SUPPORT LEVEL- The Secretary may increase the support level for each crop of domestically grown sugarcane and sugar beets from the level determined for the preceding crop based on such factors as the Secretary determines appropriate, including changes (during the 2 crop years immediately preceding the crop year for which the determination is made) in the cost of sugar products, the cost of domestic sugar production, the amount of any applicable assessments, and other factors or circumstances that may adversely affect domestic sugar production.

    ‘(e) LOAN TYPE; PROCESSOR ASSURANCES-

      ‘(1) IN GENERAL- Subject to paragraph (2), the Secretary shall carry out this section through the use of recourse loans.

      ‘(2) MODIFICATION- During any fiscal year in which the tariff rate quota for imports of sugar into the United States is set at, or is increased to, a level that exceeds the minimum level for such imports committed to by the United States under the Agreement on Agriculture contained in the Uruguay Round of Agreements of the General Agreement on Tariffs and Trade, the Secretary shall carry out this section by making available nonrecourse loans. Any recourse loan previously made available by the Secretary under this section during such fiscal year shall be modified by the Secretary into a nonrecourse loan.

      ‘(3) PROCESSOR ASSURANCES- In order to effectively support the prices of sugar beets and sugarcane received by the producer, the Secretary shall obtain from each processor that receives a loan under this section such assurances as the Secretary considers adequate that, if the Secretary is required under paragraph (2) to make nonrecourse loans available, or modify recourse loans into nonrecourse loans, each producer served by the processor will receive the appropriate minimum payment for sugar beets and sugarcane delivered by the producer, as determined by the Secretary.

    ‘(f) ANNOUNCEMENTS- In order to ensure the efficient administration of the program under this section and the effective support of the price of sugar, the Secretary shall announce the type of loans available and the loan rates for beet sugar and cane sugar for any fiscal year under this section as far in advance as is practicable.

    ‘(g) LOAN TERM-

      ‘(1) IN GENERAL- Except as provided in paragraph (2) and subsection (h), loans under this section during any fiscal year shall be made available not earlier than the beginning of the fiscal year and shall mature at the end of 3 months.

      ‘(2) EXTENSION- The maturity of a loan under this section may be extended for up to 2 additional 3-month periods, at the option of the borrower, upon written request to the Commodity Credit Corporation. The maturity of a loan may not be extended under this paragraph beyond the end of the fiscal year.

    ‘(h) SUPPLEMENTARY LOANS- Subject to subsection (d), the Secretary shall make available to eligible processors price support loans with respect to sugar processed from sugar beets and sugarcane harvested in the last 3 months of a fiscal year. Such loans shall mature at the end of the fiscal year. The processor may repledge the sugar as collateral for a price support loan in the subsequent fiscal year, except that the second loan shall--

      ‘(1) be made at the loan rate in effect at the time the second loan is made; and

      ‘(2) mature in not more than 9 months less the quantity of time that the first loan was in effect.

    ‘(i) USE OF COMMODITY CREDIT CORPORATION- The Secretary shall use the funds, facilities, and authorities of the Commodity Credit Corporation to carry out this section.

    ‘(j) MARKETING ASSESSMENTS- The following assessments shall be collected with respect to all sugar marketed within the United States during the 1996 through 2003 fiscal years:

      ‘(1) BEET SUGAR- The first seller of beet sugar produced from sugar beets or sugar beet molasses, or refined sugar refined outside of the United States, shall remit to the Commodity Credit Corporation a nonrefundable marketing assessment in an amount equal to 1.1794 percent of the loan level established under subsection (b) per pound of sugar marketed.

      ‘(2) CANE SUGAR- The first seller of raw cane sugar produced from sugarcane or sugarcane molasses, shall remit to the Commodity Credit Corporation a nonrefundable marketing assessment in an amount equal to 1.1 percent of the loan level established under subsection (b) per pound of sugar marketed (including the transfer or delivery of the sugar to a refinery for further processing or marketing).

      ‘(3) COLLECTION-

        ‘(A) TIMING- Marketing assessments required under this subsection shall be collected and remitted to the Commodity Credit Corporation within 30 days of the date that the sugar is marketed.

        ‘(B) MANNER- Subject to subparagraph (A), marketing assessments shall be collected under this subsection in the manner prescribed by the Secretary and shall be nonrefundable.

      ‘(4) PENALTIES- If any person fails to remit an assessment required by this subsection or fails to comply with such requirements for recordkeeping or otherwise as are required by the Secretary to carry out this subsection, the person shall be liable to the Secretary for a civil penalty up to an amount determined by multiplying--

        ‘(A) the quantity of sugar involved in the violation; by

        ‘(B) the loan level for the applicable crop of sugarcane or sugar beets from which the sugar is produced.

    For the purposes of this paragraph, refined sugar shall be treated as produced from sugar beets.

      ‘(5) ENFORCEMENT- The Secretary may enforce this subsection in the courts of the United States.

      ‘(6) REGULATIONS- The Secretary shall promulgate regulations to carry out this subsection.

    ‘(k) INFORMATION REPORTING-

      ‘(1) DUTY OF PROCESSORS AND REFINERS TO REPORT- All sugarcane processors, cane sugar refiners, and sugar beet processors shall furnish the Secretary, on a monthly basis, such information as the Secretary may require to administer sugar programs, including the quantity of purchases of sugarcane, sugar beets, and sugar, and production, importation, distribution, and stock levels of sugar.

      ‘(2) DUTY OF PRODUCERS TO REPORT- In order to efficiently and effectively carry out the program under this section, the Secretary may require a producer of sugarcane or sugar beets to report, in the manner prescribed by the Secretary, the producer’s sugarcane or sugar beet yields and acres planted to sugarcane or sugar beets, respectively.

      ‘(3) PENALTY- Any person willfully failing or refusing to furnish the information, or furnishing willfully any false information, shall be subject to a civil penalty of not more than $10,000 for each such violation.

      ‘(4) MONTHLY REPORTS- Taking into consideration the information received under paragraph (1), the Secretary shall publish on a monthly basis composite data on production, imports, distribution, and stock levels of sugar.

    ‘(l) SUGAR ESTIMATES-

      ‘(1) DOMESTIC REQUIREMENT- Before the beginning of each fiscal year, the Secretary shall estimate the domestic sugar requirement of the United States equal to Total Estimated Disappearance minus the quantity of sugar that will be available from carry-in stocks.

      ‘(2) TOTAL DISAPPEARANCE- For the purposes of this subsection, the term ‘Total Estimated Disappearance’ means the quantity of sugar, as estimated by the Secretary, that will be consumed in the United States during the fiscal year (other than sugar imported for the production of polyhydric alcohol or to be refined and reexported in refined form or in sugar containing products) plus the quantity of sugar that would provide for adequate carryover stocks.

      ‘(3) QUARTERLY REESTIMATES- The Secretary shall make quarterly reestimates of sugar consumption, stocks, production, and imports for a fiscal year no later than the beginning of each of the second through fourth quarters of the fiscal year.

    ‘(m) DEFINITION OF MARKET- For purposes of this section, the term ‘market’ means to sell or otherwise dispose of in commerce in

the United States (including, with respect to any integrated processor and refiner, the movement of raw cane sugar into the refining process) and deliver to a buyer.

    ‘(n) CROPS- This section shall be effective only for the 1996 through 2002 crops of sugar beets and sugarcane.’.

    (b) CONFORMING AMENDMENT- Part VII of subtitle B of title III of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1359aa et seq.) is repealed.

Subtitle C--Peanuts

Title II, Subtitle C

SEC. 2301. EXTENSION OF PRICE SUPPORT PROGRAM FOR PEANUTS AND RELATED PROGRAMS.

    (a) AGRICULTURAL ACT OF 1949- Section 108B of the Agricultural Act of 1949 (7 U.S.C. 1445c-3) is amended--

      (1) in the section heading, by striking ‘1997’ and inserting ‘2002’;

      (2) in subsection (a)(1), (a)(2), (b)(1), and (h), by striking ‘1997’ each place it appears and inserting ‘2002’; and

      (3) in subsection (g)(1), by striking ‘1997 crops’ the first place it appears and inserting ‘2002 crops’.

    (b) AGRICULTURAL ADJUSTMENT ACT OF 1938- Part VI of subtitle B of title III of the Agricultural Adjustment Act of 1938 is amended--

      (1) in section 358-1 (7 U.S.C. 1358-1)--

        (A) in the section heading, by striking ‘1997’ and inserting ‘2002’;

        (B) in subsection (a)(3), by striking ‘1990’ and inserting ‘1990, for the 1991 through 1995 marketing years, and 1995, for the 1996 through 2002 marketing years’;

        (C) in subsection (b)(1)(A)--

          (i) by striking ‘1997’ and inserting ‘2002’; and

          (ii) in clause (i), by inserting before the semicolon the following: ‘, for the 1991 through 1995 marketing years, and the 1995 marketing year, for the 1996 through 2002 marketing years’; and

        (D) in subsections (b)(1)(B), (b)(2)(A), (b)(2)(C), (b)(3)(A), and (f), by striking ‘1997’ each place it appears and inserting ‘2002’;

      (2) in section 358b (7 U.S.C. 1358b)--

        (A) in the section heading, by striking ‘1995’ and inserting ‘2002’; and

        (B) in subsection (c), by striking ‘1995’ and inserting ‘2002’;

      (3) in section 358c(d) (7 U.S.C. 1358c(d)), by striking ‘1995’ and inserting ‘2002’; and

      (4) in section 358e (7 U.S.C. 1359a)--

        (A) in the section heading, by striking ‘1997’ and inserting ‘2002’; and

        (B) in subsection (i), by striking ‘1997’ and inserting ‘2002’.

    (c) FOOD, AGRICULTURE, CONSERVATION, AND TRADE ACT OF 1990- Title VIII of the Food, Agriculture, Conservation, and Trade Act of 1990 (Public Law 101-624; 104 Stat. 3459) is amended--

      (1) in section 801 (104 Stat. 3459), by striking ‘1995’ and inserting ‘2002’;

      (2) in section 807 (104 Stat. 3478), by striking ‘1995’ and inserting ‘2002’; and

      (3) in section 808 (7 U.S.C. 1441 note), by striking ‘1995’ and inserting ‘2002’.

SEC. 2302. NATIONAL POUNDAGE QUOTAS AND ACREAGE ALLOTMENTS.

    (a) ESTABLISHMENT- Subsection (a)(1) of section 358-1 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1358-1) is amended to read as follows:

      ‘(1) ESTABLISHMENT- The national poundage quota for peanuts for each of the 1991 through 2002 marketing years shall be established by the Secretary at a level that is equal to the quantity of peanuts (in tons) that the Secretary estimates will be devoted in each such marketing year to domestic edible and related uses. Beginning with the 1996 marketing year, the Secretary shall exclude seed uses from the estimate of domestic edible and related uses, but shall include the estimated quantity of peanuts and peanut products to be imported into the United States for the marketing year for which the quota is being established.’.

    (b) EXCLUSIONS FROM FARM POUNDAGE QUOTA- Subsection (b) of such section is amended--

      (1) in paragraph (1)(B), by striking clauses (i) and (ii) and inserting the following new clauses:

          ‘(i) through the 1995 marketing year, any increases for undermarketings from previous years; or

          ‘(ii) through the 2002 marketing year, any increases resulting from the allocation of quotas voluntarily released for 1 year under paragraph (7).’; and

      (2) in paragraph (3)(B), by striking clauses (i) and (ii) and inserting the following new clauses:

          ‘(i) through the 1995 marketing year, any increases for undermarketings of quota peanuts from previous years; or

          ‘(ii) through the 2002 marketing year, any increase resulting from the allocation of quotas voluntarily released for 1 year under paragraph (7).’.

    (c) TEMPORARY QUOTA ALLOCATION- Subsection (b)(2) of such section is amended--

      (1) in subparagraph (A), by striking ‘subparagraph (B) and subject to’; and

      (2) by striking subparagraph (B) and inserting the following new subparagraph:

        ‘(B) TEMPORARY QUOTA ALLOCATION-

          ‘(i) ALLOCATION RELATED TO SEED PEANUTS- Temporary allocation of quota pounds for the marketing year only in which the crop is planted shall be made to producers for each of the 1996 through 2002 marketing years as provided in this subparagraph. The temporary quota allocation shall be equal to the pounds of seed peanuts planted on the farm, as may be adjusted under regulations prescribed by the Secretary. The temporary allocation of quota pounds under this paragraph shall be in addition to the farm poundage quota otherwise established under this subsection and shall be credited for the applicable marketing year only, in total to the producer of the peanuts on the farm in a manner prescribed by the Secretary.

          ‘(ii) CONDITION ON ALLOCATION- The allocation of quota pounds to producers under this subparagraph shall be performed in such a manner so that such allocation will not result in a net decrease in the farm poundage quota for a farm in excess of 3 percent, after temporary seed quota is added, from the basic farm quota in 1996. Such decrease shall occur one time only and shall be applicable to the 1996 marketing year only.

          ‘(iii) TERM OF PROVISION- Application of this subparagraph may continue so long as doing so does not result in increased cost to the Commodity Credit Corporation by displacement of quota peanuts by additional peanuts in the domestic market, increased losses in the Association loan pools, or other such increases in cost.

          ‘(iv) EFFECT OF OTHER REQUIREMENTS- Nothing in this section shall alter or change in any way the requirements regarding the use of quota and additional peanuts established by section 359a(b) of the Agricultural Act of 1949 (7 U.S.C. 1359a(b)), as added by section 804 of the Food, Agriculture, Conservation, and Trade Act of 1990.’.

    (d) QUOTA CONSIDERED PRODUCED- Subsection (b)(4) of such section is amended to read as follows:

      ‘(4) QUOTA CONSIDERED PRODUCED-

        ‘(A) NATURAL DISASTER- For purposes of this subsection, the farm poundage quota shall be considered produced on a farm if the farm poundage quota was not produced on the farm because of drought, flood, or any other natural disaster, or any other condition beyond the control of the producer, as determined by the Secretary.

        ‘(B) LEASE OR RELEASE OF QUOTA- Such farm poundage quota shall also be considered produced on a farm if the farm poundage quota was either leased to another owner or operator of a farm within the same county for transfer to such farm for only 1 of the 3 marketing years immediately preceding the marketing year for which the determination is being made or the farm poundage quota was released voluntarily under paragraph (7) for only 1 of the 3 marketing years immediately preceding the marketing year for which the determination is being made. The farm poundage quota leased or released under this subparagraph shall be considered produced for only 1 of the 3 marketing years immediately preceding the marketing year for which the determination is being made. The farm shall not receive considered produced credit for more than 1 marketing year out of the 3 immediately preceding marketing years under the options in this subparagraph.’.

    (e) ALLOCATION OF QUOTAS REDUCED OR RELEASED TO FARMS WITHOUT QUOTAS- Subsection (b)(6) of such section is amended to read as follows:

      ‘(6) ALLOCATION OF QUOTAS REDUCED OR RELEASED-

        ‘(A) IN GENERAL- The total quantity of the farm poundage quotas reduced or voluntarily released from farms in a State for any marketing year under paragraphs 3 and (5) shall be allocated under subparagraph (B), as the Secretary may by regulation prescribe, to other farms in the State on which peanuts were produced in at least 2 of the 3 crop years immediately preceding the year for which the allocation is being made.

        ‘(B) SET-ASIDE FOR FARMS WITH NO QUOTA- The total amount of farm poundage quota to be allocated in the State under subparagraph (A) shall be allocated to farms in the State for which no farm poundage quota was established for the immediately preceding year’s crop. The allocation to any such farm shall not exceed the average farm production of peanuts for the 3 immediately preceding years during which peanuts were produced on the farm. Any farm quota pounds remaining after allocation to farms under this subparagraph shall be allocated to farms in the State on which poundage quotas were established for the immediately preceding crop year.’.

    (f) TRANSFER OF ADDITIONAL PEANUTS- Subsection (b) of such section is amended by striking paragraphs (8) and (9) and inserting the following new paragraph:

      ‘(8) TRANSFER OF ADDITIONAL PEANUTS- Additional peanuts on a farm from which the quota poundage was not harvested and marketed may be transferred to the quota loan pool for pricing purposes on such basis as the Secretary shall by regulation provide, except that the poundage of such peanuts so transferred shall not exceed the difference in the total peanuts meeting quality requirements for domestic edible use as determined by the Secretary marketed from the farm and the total farm poundage quota, excluding quota pounds transferred to the farm in the fall. Peanuts transferred under this paragraph shall be supported at a total of not less than 70 percent of the quota support rate for the marketing years in which such transfers occur and such transfers for a farm shall not exceed 25 percent of the total farm quota pounds, excluding pounds transferred in the fall.’.

SEC. 2303. SALE, LEASE, OR TRANSFER OF FARM POUNDAGE QUOTA.

    (a) TRANSFERS AUTHORIZED UNDER CERTAIN CIRCUMSTANCES- Subsection (a) of section 358b of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1358b) is amended--

      (1) in paragraph (1)--

        (A) by striking ‘(including any applicable under marketings)’ both places it appears;

        (B) in subparagraph (A), by striking ‘undermarketings and’; and

        (C) by adding at the end the following new sentences: ‘In the case of a fall transfer only, poundage quota from a farm may be leased to another owner or operator of a farm within the same county or to another owner or operator of a farm in any other county within the State. Fall transfers of quota pounds shall not affect the farm quota history for the transferring or receiving farm and shall not result in reducing the farm poundage quota on the transferring farm.’;

      (2) by striking paragraph (2) and inserting the following new paragraph:

      ‘(2) TRANSFERS TO OTHER SELF-OWNED FARMS- The owner or operator of a farm may transfer all or any part of the farm poundage quota for the farm to any other farm owned or controlled by the owner or operator that is in the same county or any other county within the same State and that had a farm poundage quota for the preceding crop year, if both the transferring and the receiving farms were under the control of the owner or operator for at least 3 crop years prior to the crop year in which the farm poundage quota is transferred. Any farm poundage quota transferred under this paragraph shall not result in any reduction in the farm poundage quota for the transferring farm if sufficient acreage is planted on the receiving farm to produce the quota pounds transferred.’;

      (3) in paragraph (3), by striking ‘(including any applicable undermarketings)’; and

      (4) by adding at the end the following new paragraph:

      ‘(4) TRANSFERS BY SALE IN STATES HAVING QUOTAS OF 10,000 TONS OR MORE- Subject to such terms and conditions as the Secretary may prescribe, the owner, or operator with permission of the owner, of any farm for which a farm quota has been established and which is located in a State having a quota of 10,000 tons or more may sell poundage quota to any other eligible owner or operator of a farm within the same State. The Secretary shall ensure that no more than 15 percent of the total poundage quota within a county as of January 1, 1996, is sold and transferred in 1996 under this paragraph and that no more than 5 percent of the quota pounds remaining in a county as of January 1 in each of the next 4 years are sold and transferred in any such year. Notwithstanding any other provision of this paragraph, no more than 30 percent of the total poundage quota within a county may be sold and transferred. Quota pounds sold and transferred under this paragraph may not be leased or sold from the farm to which transferred to another farm owner or operator within the same State for a period of 5 years following the original transfer to the farm.’.

    (b) CONDITIONS- Subsection (b) of such section is amended--

      (1) in paragraph (1), by inserting before the period at the end the following: ‘, except that no such agreement shall be necessary in the event of fall lease, if the operator had the lienholder’s agreement for a previous spring cash lease’; and

      (2) by striking paragraph (3) and inserting the following new paragraph:

      ‘(3) RECORD- No transfer of the farm poundage quota shall be effective until a record thereof is filed with the county committees of the counties from which transferred and to which transferred and the committees determine that the transfer complies with this section.’.

SEC. 2304. PENALTY FOR REENTRY OF EXPORTED PEANUT PRODUCTS.

    Section 358e(d)(6)(A) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1359a(d)(6)(A)) is amended by inserting ‘or peanut products manufactured from additional peanuts’ after ‘any additional peanuts’.

SEC. 2305. PRICE SUPPORT PROGRAM FOR PEANUTS.

    (a) SUPPORT RATES- Subsection (a)(2) Section 108B of the Agricultural Act of 1949 (7 U.S.C. 1445c-3) is amended--

      (1) by striking ‘any increase’ and inserting ‘any increase or decrease’; and

      (2) by striking ‘, except that’ and all that follows through ‘preceding crop’ and inserting the following: ‘In no event shall the national average quota support rate be increased by more than 5 percent of the national average quota support rate for the preceding crop. In no event shall the national average quota support rate be decreased by more than 5 percent of the national average quota support rate for the preceding crop.’.

    (b) SPECIAL RULE REGARDING NEW MEXICO POOLS- Subsection (c)(2)(A) of such section is amended by inserting after the first sentence the following new sentence: ‘Peanuts physically produced outside the State of New Mexico shall not be eligible for entry into or participation in the New Mexico pools even though the farm on which the peanuts are produced is considered to be a New Mexican farm for administrative purposes.’.

    (c) LOSSES IN AREA QUOTA POOLS- Subsection (d)(2) of such section is amended--

      (1) by redesignating subparagraph (B) as subparagraph (D);

      (2) by inserting after subparagraph (A) the following new paragraphs:

        ‘(B) REDUCTION OF GAINS OF OTHER PRODUCERS IN SAME POOL- If use of the authority provided in subparagraph (A) is not sufficient to cover losses in an area quota pool, the additional losses shall be offset by reducing the gain of any producer in such pool by the amount of pool gains attributed to the same producer from the sale of additional peanuts for domestic and export edible use.

        ‘(C) USE OF MARKETING ASSESSMENTS- If use of the authority provided in subparagraphs (A) and (B) is not sufficient to cover losses in area quota pools, the Secretary shall use funds collected under subsection (g) to offset such losses. At the end of each year, the Secretary shall deposit in the Treasury those funds collected under subsection (g) that the Secretary determines are not required to cover losses in area quota pools for that year.’; and

      (3) in subparagraph (D), as redesignated by paragraph (1), by adding at the end the following new sentence: ‘This subparagraph shall apply only to the extent that use of the authority provided in subparagraphs (A), (B), and (C) is not sufficient to cover losses in an area quota pool.’.

    (d) COMPLIANCE WITH QUALITY STANDARDS- Subsection (f)(2) of such section is amended to read as follows:

      ‘(2) EXPORTS AND OTHER PEANUTS- The Secretary shall require that all peanuts in the domestic market, including peanuts imported into the United States, meet all United States quality standards under Marketing Agreement No. 146 and that importers of such peanuts fully comply with inspection, handling, storage, and processing requirements implemented under Marketing Agreement No. 146. The Secretary shall ensure that peanuts produced for the export market meet quality, inspection, handling, storage, and processing requirements under Marketing Agreement No. 146.’.

    (e) ASSESSMENT RATES- Subsection (g) of such section is amended--

      (1) in paragraph (1), by striking ‘1.15 percent’ the first place it appears and all that follows through the period at the end of such paragraph and inserting ‘and 1.2 percent for the 1996 through 2002 crops, of the applicable support rate under this subsection.’;

      (2) in paragraph (2)(A)(i)--

        (A) by inserting ‘and’ at the end of subclause (II); and

        (B) by striking subclauses (III) and (IV) and inserting the following new subclause:

            ‘(III) in the case of each of the 1996 through 2002 crops, .6 percent of the applicable national average support rate;’; and

      (3) in paragraph (2)(A)(ii)--

        (A) by striking ‘and’ at the end of subclause (I);

        (B) in subclause (II), by striking ‘through 1997 crops’ and inserting ‘and 1995 crops’; and

        (C) by adding at the end the following new subclause:

            ‘(III) in the case of each of the 1996 through 2002 crops, .6 percent of the applicable national average support rate; and’.

    (f) ASSESSMENT ON IMPORTS- Subsection (g) of such section is further amended--

      (1) by redesignating paragraphs (3), (4), (5), and (6) as paragraphs (4), (5), (6), and (7), respectively; and

      (2) by inserting after paragraph (2) the following new paragraph:

      ‘(3) IMPORTS- Each importer of peanuts produced outside of the United States and imported into the United States after the date of the enactment of this paragraph shall remit to the Commodity Credit Corporation a nonrefundable marketing assessment in an amount equal to the product obtained by multiplying the number of pounds of peanuts imported by the importer by 1.2 percent of the national average support rate for additional peanuts.’.

SEC. 2306. REFERENDUM REGARDING POUNDAGE QUOTAS.

    Section 358-1(d) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 13581(d)) is amended by striking paragraph (1) and inserting the following new paragraph:

      ‘(1) IN GENERAL- Each calendar year, the Secretary shall conduct a referendum of producers engaged in the production of quota peanuts in the calendar year in which the referendum is held to determine whether the producers are in favor of or opposed to poundage quotas with respect to the crops of peanuts produced in the seven calendar years immediately following the year in which the referendum is held, except that, if as many as two-thirds of the producers voting in any referendum vote in favor of poundage quotas, no referendum shall be held with respect to quotas for the next six years of the period. In the case of the referendum required in 1995, the Secretary shall conduct the referendum as soon as practicable after the date of the enactment of the Agricultural Reconciliation Act of 1995. In the case of any referendum required in calendar years 1996 through 2002, the Secretary shall conduct the referendum not later than December 15 of the calendar year in which the referendum is required.’.

SEC. 2307. REGULATIONS.

    The Secretary of Agriculture shall issue such regulations as are necessary to carry out this title and the amendments made by this title. In issuing the regulations, the Secretary--

      (1) is encouraged to comply with subchapter II of chapter 5 of title 5, United States Code;

      (2) shall provide public notice through the Federal Register of any such proposed regulations; and

      (3) shall allow adequate time for written public comment prior to the formulation and issuance of any final regulations.

Subtitle D--Tobacco

Title II, Subtitle D

SEC. 2401. ELIMINATION OF FEDERAL BUDGETARY OUTLAYS FOR TOBACCO PROGRAMS.

    Section 106(g)(1) of the Agricultural Act of 1949 (7 U.S.C. 1445(g)(1)) is amended--

      (1) by striking ‘1998’ and inserting ‘2002’; and

      (2) by inserting after ‘equal to’ the following: ‘a pro rata share of the total amount of the costs of other Department of Agriculture programs related to tobacco production or processing that are not required to be covered by user fees or by contributions or assessments under section 106A(d)(1) or 106B(d)(1), but in no event less than’.

SEC. 2402. ESTABLISHMENT OF FARM YIELD FOR FLUE-CURED TOBACCO BASED ON INDIVIDUAL FARM PRODUCTION HISTORY.

    (a) METHOD OF DETERMINING FARM ACREAGE ALLOTMENTS- Subsection (a) of section 317 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314c) is amended by striking paragraphs (2) through (8) and inserting the following new paragraphs:

      ‘(2) FARM ACREAGE ALLOTMENTS- The term ‘farm acreage allotment’ for a tobacco farm, other than a new tobacco farm, means the acreage allotment determined by dividing the farm marketing quota by the farm yield.

      ‘(3) FARM YIELD- The term ‘farm yield’ means the yield per acre for a farm determined according to regulations issued by the Secretary and which would be expected to result in a quality of tobacco acceptable to the tobacco trade.

      ‘(4) FARM MARKETING QUOTA-

        ‘(A) IN GENERAL- The term ‘farm marketing quota’ for a farm for a marketing year means a number that is equal to the number of pounds of tobacco determined by multiplying--

          ‘(i) the farm marketing quota for the farm for the previous marketing year (prior to any adjustment for undermarketing or overmarketing); by

          ‘(ii) the national factor.

        ‘(B) ADJUSTMENT- The farm marketing quota determined under subparagraph (A) for a marketing year shall be increased for undermarketing or decreased for overmarketing by the number of pounds by which marketings of tobacco from the farm during the immediate preceding marketing year (if marketing quotas were in effect for that year under the program established by this section) is less than or exceeds the farm marketing quota for such year. Notwithstanding the preceding sentence, the farm marketing quota for a marketing year shall not be increased under this subparagraph for undermarketing by an amount in excess of the farm marketing quota determined for the farm for the immediately preceding year prior to any increase for undermarketing or decrease for overmarketing. If due to excess marketing in the preceding marketing year, the farm marketing quota for the marketing year is reduced to zero pounds without reflecting the entire reduction required, the additional reduction shall be made for the subsequent marketing year or years.

      ‘(5) NATIONAL FACTOR- The term ‘national factor’ for a marketing year means a number obtained by dividing--

        ‘(A) the national marketing quota (less the reserve provided for under subsection (e)); by

        ‘(B) the sum of the farm marketing quotas (prior to any adjustments for undermarketing or overmarketing) for the immediate preceding marketing year for all farms for which marketing quotas for the kind of tobacco involved will be determined for such succeeding marketing year.’.

    (b) CONFORMING AMENDMENTS- Such section is further amended--

      (1) in the first sentence of subsection (b), by striking ‘and the national acreage allotment and national average yield goal for the 1965 crop of Flue-cured tobacco,’;

      (2) in the first sentence of subsection (c), by striking ‘and at the same time announce the national acreage allotment and national average yield goal’;

      (3) in subsection (d)--

        (A) in the sixth sentence, by striking ‘, national acreage allotment, and national average yield goal’;

        (B) in the eighth sentence, by striking ‘, national acreage allotment and national average yield goal’; and

        (C) in the ninth sentence, by striking ‘, national acreage allotment, and national average goal are’ and inserting ‘is’;

      (4) in subsection (e)--

        (A) in the first sentence, by striking ‘No farm acreage allotment or farm yield shall be established’ and inserting ‘A farm marketing quota and farm yield shall not be established’;

        (B) in the second sentence, by striking ‘acreage allotment’ both places it appears and inserting ‘marketing quota’;

        (C) in the second sentence, by striking ‘acreage allotments’ both places it appears and inserting ‘marketing quotas’; and

        (D) in the last sentence, by striking ‘acreage allotment’ and inserting ‘marketing quota’; and

      (5) in subsection (g)--

        (A) in paragraph (1), by striking ‘paragraph (a)(8)’ and inserting ‘subsection (a)(4)’; and

        (B) in paragraph (3), by striking ‘subsection (a)(8)’ and inserting ‘subsection (a)(4)’.

    (c) FARM MARKETING QUOTA REDUCTIONS- Subsection (f) of such section is amended to read as follows:

    ‘(f) CAUSES FOR FARM MARKETING QUOTA REDUCTION- (1) When an acreage-poundage program is in effect for any kind of tobacco under this section, the farm marketing quota next established for a farm shall be reduced by the amount of such kind of tobacco produced on the farm--

      ‘(A) which was marketed as having been produced on a different farm;

      ‘(B) for which proof of disposition is not furnished as required by the Secretary;

      ‘(C) on acreage equal to the difference between the acreage reported by the farm operator or a duly authorized representative and the determined acreage for the farm; and

      ‘(D) as to which any producer on the farm filed, or aids, or acquiesces, in the filing of any false report with respect to the production or marketing of tobacco.

    ‘(2) If the Secretary, through the local committee, find that no person connected with a farm caused, aided, or acquiesced in any irregularity described in paragraph (1), the next established farm marketing quota shall not be reduced under this subsection.

    ‘(3) The reduction required under this subsection shall be in addition to any other adjustments made pursuant to this section.

    ‘(4) In establishing farm marketing quotas for other farms owned by the owner displaced by acquisition of the owner’s land by any agency, as provided in section 378 of this Act, increases or decreases in such farm marketing quotas as provided in this section shall be made on account of marketings below or in excess of the farm marketing quotas for the farm acquired by the agency.

    ‘(5) Acreage allotments and farm marketing quotas determined under this section may (except in the case of kinds of tobacco not subject to section 316) be leased and sold under the terms and conditions in section 316 of this Act, except that any credit for undermarketing or charge for overmarketing shall be attributed to the farm to which transferred.’.

    (d) EFFECT OF AMENDMENTS ON CURRENT TOBACCO CROP- Section 317 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314c), as in effect on the day before the date of the enactment of this Act, shall continue to apply with respect to the 1995 crop of Flue-cured tobacco.

SEC. 2403. REMOVAL OF FARM RECONSTITUTION EXCEPTION FOR BURLEY TOBACCO.

    Section 379(a)(6) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1379(a)(6)) is amended by striking ‘, but this clause (6) shall not be applicable in the case of burley tobacco’.

SEC. 2404. REDUCTION IN PERCENTAGE THRESHOLD FOR TRANSFER OF FLUE-CURED TOBACCO QUOTA IN CASES OF DISASTER.

    The second subsection (h) in section 316 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314b) is amended by striking ‘90 percent’ in paragraph (1)(A) and inserting ‘80 percent’.

SEC. 2405. EXPANSION OF TYPES OF TOBACCO SUBJECT TO NO NET COST ASSESSMENT.

    (a) NO NET COST TOBACCO FUND- Section 106A(d)(1)(A) of the Agricultural Act of 1949 (7 U.S.C. 1445-1(d)(1)(A)) is amended--

      (1) in clause (ii), by inserting after ‘Burley quota tobacco’ the following: ‘and cigar-type quota tobacco’; and

      (2) in clause (iii)--

        (A) in the matter preceding the subclauses, by striking ‘Flue-cured or Burley tobacco’ and inserting ‘each kind of tobacco for which price support is made available under this Act, and each kind of like tobacco,’; and

        (B) by striking subclause (II) and inserting the following new subclause:

          ‘(II) the sum of the amount of the per pound producer contribution and purchaser assessment (if any) for such kind of tobacco payable under clauses (i) and (ii); and’.

    (b) NO NET COST TOBACCO ACCOUNT- Section 106B(d)(1) of the Agricultural Act of 1949 (7 U.S.C. 1445-2(d)(1)) is amended--

      (1) in subparagraph (B), by inserting after ‘Burley quota tobacco’ the following: ‘and cigar-type quota tobacco’; and

      (2) in subparagraph (C), by striking ‘Flue-cured and Burley tobacco’ and inserting ‘each kind of tobacco for which price support is made available under this Act, and each kind of like tobacco,’.

    (c) EFFECTIVE DATE- The amendments made by this section shall take effect 60 days after the date of the enactment of this Act.

SEC. 2406. REPEAL OF REPORTING REQUIREMENTS RELATING TO EXPORT OF TOBACCO.

    Section 214 of the Tobacco Adjustment Act of 1983 (7 U.S.C. 509) is repealed.

SEC. 2407. REPEAL OF LIMITATION ON REDUCING NATIONAL MARKETING QUOTA FOR FLUE-CURED AND BURLEY TOBACCO.

    (a) FLUE-CURED TOBACCO- Section 317(a)(1) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314c(a)(1)) is amended by striking subparagraph (C).

    (b) BURLEY TOBACCO- Section 319(c)(3) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314e(c)(3)) is amended by striking subparagraph (C).

SEC. 2408. APPLICATION OF CIVIL PENALTIES UNDER TOBACCO INSPECTION ACT.

    Section 12 of the Tobacco Inspection Act (7 U.S.C. 511k) is amended--

      (1) by inserting ‘(a) FINE FOR VIOLA-TIONS- ’ after ‘That any person’; and

      (2) by adding at the end the following new subsections:

    ‘(b) JURISDICTION- The district courts of the United States are vested with jurisdiction specifically to enforce, and to prevent and restrain any person from violating, any rule or regulation issued under this Act.

    ‘(c) REFERRAL TO ATTORNEY GENERAL- A civil action authorized to be commenced under this section shall be referred to the Attorney General for appropriate action, except that the Secretary shall not be required to refer to the Attorney General a violation of this Act, if the Secretary believes that the administration and enforcement of this Act would be adequately served by providing a suitable written notice or warning to the person who committed such violation or administrative action.

    ‘(d) CIVIL PENALTIES AND ORDERS-

      ‘(1) CIVIL PENALTIES- Any person who willfully violates any provision of this Act or any of the regulations issued by the Secretary under this Act may be assessed a civil penalty by the Secretary of not less than $500 or more than $5,000 for each such violation. Each violation shall be a separate offense.

      ‘(2) CEASE AND DESIST ORDERS- In addition to, or in lieu of, a civil penalty under paragraph (1), the Secretary may issue an order requiring a person to cease and desist from continuing any such violation.

      ‘(3) NOTICE AND HEARING- No penalty shall be assessed or cease-and-desist order issued by the Secretary under this subsection unless the person against whom the penalty is assessed or the order is issued is given notice and opportunity for a hearing before the Secretary with respect to such violation.

      ‘(4) FINALITY- The order of the Secretary assessing a penalty or imposing a cease-and-desist order under this subsection shall be final and conclusive unless the affected person files an appeal of the Secretary’s order with the appropriate district court of the United States, in accordance with subsection (e).

    ‘(e) REVIEW BY DISTRICT COURT-

      ‘(1) COMMENCEMENT OF ACTION- Any person who has been determined to be in violation of this Act, or against whom a civil penalty has been assessed or a cease-and-desist order issued under subsection (d), may obtain review of the penalty or order--

        ‘(A) by filing, within the 30-day period beginning on the date the penalty is assessed or order issued, a notice of appeal in--

          ‘(i) the district court of the United States for the district in which the person resides or conducts business; or

          ‘(ii) the United States District Court for the District of Columbia; and

        ‘(B) by sending, within the same period, a copy of such notice by certified mail to the Secretary.

      ‘(2) RECORD- The Secretary shall file promptly in the appropriate court referred to in paragraph (1), a certified copy of the record on which the Secretary has determined that the person had committed a violation.

      ‘(3) STANDARD OF REVIEW- A finding of the Secretary under this section shall be set aside only if such finding is found to be unsupported by substantial evidence.

    ‘(f) FAILURE TO OBEY ORDERS- Any person who fails to obey a cease-and-desist order under this section after such order has become final and unappealable, or after the appropriate United States district court has entered a final judgment in favor of the Secretary, shall be subject to a civil penalty assessed by the Secretary, after opportunity for hearing and for a judicial review under the procedures specified in subsection (e), of not more than $500 for each offense. Each day during which such failure continues shall be considered as a separate violation of such order.

    ‘(g) FAILURE TO PAY PENALTIES- If any person fails to pay an assessment of a civil penalty under this section after it has become a final and unappealable order, or after the appropriate United States district court has entered final judgment in favor of the Secretary, the Secretary shall refer the matter to the Attorney General for recovery of the amount assessed in the district court of the United States for the district in which the person resides or conducts business. In such action, the validity and appropriateness of the final order imposing the civil penalty shall not be subject to review.

    ‘(h) ADDITIONAL REMEDIES- The remedies provided in this section shall be in addition to, and not exclusive of, other remedies that may be available.’.

SEC. 2409. TRANSFERS OF QUOTA OR ALLOTMENT ACROSS COUNTY LINES IN A STATE.

    (a) TRANSFERS ALLOWED BY REFERENDUM-

      (1) FLUE-CURED TOBACCO- Section 316(g) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314b(g)) is amended by adding at the end the following:

    ‘(3) Notwithstanding paragraph (1), the Secretary may permit the sale of a Flue-cured tobacco allotment or quota from one farm in a State to any other farm in the State if a majority of active Flue-cured tobacco producers within the State approve of such sales by a state-wide referendum to be conducted by the Secretary.’.

      (2) OTHER TOBACCO- Section 318(b) of such Act (7 U.S.C. 1314d(b)) is amended in the proviso by inserting after ‘same State’ the following: ‘and, in the case of other kinds of tobacco, any such transfer may be made to a farm in another county in the same State if transfers of such type are approved by a majority of the active producers of that kind of tobacco in the State who vote in a referendum held on the subject’.

      (3) BURLEY TOBACCO- Section 319(l) of such Act (7 U.S.C. 1314e(l)) is amended by striking the last sentence.

    (b) SAME GROWER IN CONTIGUOUS COUNTIES- Section 379(b) of such Act (7 U.S.C. 1379(b)) is amended by striking ‘Burley tobacco poundage quota’ and inserting ‘tobacco quota or allotment’.

SEC. 2410. CALCULATION OF NATIONAL MARKETING QUOTA.

    (a) FLUE-CURED TOBACCO- Section 317(a)(1)(B)(ii) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314c(a)(1)(B)(ii)) is amended by inserting before the semicolon the following: ‘, but excluding any exports of unmanufactured tobacco counted under clause (i)’.

    (b) BURLEY TOBACCO- Section 319(c)(3)(A)(ii) of such Act (7 U.S.C. 1314e(l)) is amended by inserting before the semicolon the following: ‘, but excluding any exports of unmanufactured tobacco counted under clause (i)’.

    (c) APPLICATION OF AMENDMENTS- The amendments made by this section shall apply with respect to the 1996 and subsequent crops of Flue-cured and Burley tobacco.

SEC. 2411. CLARIFICATION OF AUTHORITY TO ACCESS CIVIL MONEY PENALTIES.

    Section 314 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314) is amended--

      (1) by redesignating subsection (c) as subsection (d); and

      (2) by inserting after subsection (b) the following new subsection:

    ‘(c) The failure by a person to comply with regulations issued by the Secretary governing the marketing, disposition, or handling of tobacco under this part shall subject the person to a penalty at the rate provided in subsection (a).’.

SEC. 2412. LEASE AND TRANSFER OF FARM MARKETING QUOTAS FOR BURLEY TOBACCO.

    Section 319(g) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314e(g)) is amended--

      (1) in paragraph (1), by striking ‘July 1’ each place it appears and inserting ‘September 1’; and

      (2) in paragraph (3)--

        (A) by striking ‘within the three immediately preceding crop years’ in the first sentence and inserting ‘during the current crop year or either of the two immediately preceding crop years’; and

        (B) by striking ‘July 1’ in the second sentence and inserting ‘September 1’.

SEC. 2413. LIMITATION ON TRANSFER OF ACREAGE ALLOTMENTS OF OTHER TOBACCO.

    Section 318(g) of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314d(g)) is amended by striking ‘ten acres’ and inserting ‘20 acres’.

SEC. 2414. GOOD FAITH RELIANCE ON ACTIONS OR ADVICE OF DEPARTMENT REPRESENTATIVES.

    The Agricultural Adjustment Act of 1938 is amended by inserting after section 314A (7 U.S.C. 1314-1) the following new section:

‘SEC. 315. GOOD FAITH RELIANCE ON ACTIONS OR ADVICE OF DEPARTMENT REPRESENTATIVES.

    ‘Notwithstanding any other provision of law, the performance rendered in good faith by a person in good faith in reliance upon action or advice of an authorized representative of the Secretary may be accepted as meeting the requirements of this part.’.

SEC. 2415. UNIFORM FORFEITURE DATES FOR FLUE-CURED AND BURLEY TOBACCO.

    (a) SALE OR FORFEITURE OF FLUE-CURED TOBACCO ALLOTMENT OR QUOTA- The first subsection (h) of section 316 of the Agricultural Adjustment Act of 1938 (7 U.S.C. 1314b) is amended--

      (1) in paragraph (1), by striking ‘before the expiration of the eighteen month period beginning on July 1 of the year in which such crop is planted’ and inserting ‘before February 15 of the year after the end of the marketing year for the planted crop’; and

      (2) in paragraph (2), by striking ‘July 1’ and inserting ‘February 15’.

    (b) MANDATORY SALE OF FLUE-CURED TOBACCO ALLOTMENT OR QUOTA- Section 316A of such Act (7 U.S.C. 1314b-1) is amended--

      (1) in subsection (a), by striking ‘December 1 of the year’ and inserting ‘February 15 of the year’; and

      (2) in subsection (b), by striking ‘July 1’ and inserting ‘February 15’.

    (c) MANDATORY SALE OF BURLEY TOBACCO ALLOTMENT OR QUOTA- Section 316B of such Act (7 U.S.C. 1314b-2) is amended--

      (1) in subsection (a), by striking ‘December 1 of the year’ and inserting ‘February 15 of the year’; and

      (2) in subsection (c)(1), by striking ‘before the expiration of the eighteen month period beginning on July 1 of the year in which such crop is planted’ and inserting ‘before February 15 of the year after the end of the marketing year for the planted crop’.

SEC. 2416. SALE OF BURLEY AND FLUE-CURED TOBACCO MARKETING QUOTAS FOR A FARM BY RECENT PURCHASERS.

    The Agricultural Adjustment Act of 1938 is amended by inserting after section 316B (7 U.S.C. 1314b-2) the following new section:

‘SEC. 316C. AUTHORITY FOR RECENT PURCHASER OF A FARM TO SELL BURLEY TOBACCO OR FLUE-CURED TOBACCO MARKETING QUOTAS FOR THE FARM.

    ‘A new owner of a farm that has purchase history of Burley tobacco or Flue-cured tobacco may sell the purchased tobacco quota notwithstanding any limitations on such a sale contained in this part if the sale is completed not later than one year after the purchase date of the farm.’.

Subtitle E--Planting Flexibility

Title II, Subtitle E

SEC. 2501. DEFINITIONS.

    Section 502 of the Agricultural Act of 1949 (7 U.S.C. 1462) is amended by adding at the end the following:

      ‘(4) ACREAGE CONSERVATION RESERVE, REDUCED ACREAGE- The terms ‘acreage conservation reserve’ and ‘reduced acreage’ mean the number of acres on a farm to be devoted to conservation uses on the farm, which must be protected from weeds and erosion. Such number shall be determined by multiplying the specific crop acreage base for a crop on the farm by the percentage acreage reduction required by the Secretary.

      ‘(5) PERMITTED ACREAGE- The term ‘permitted acreage’ means the crop acreage base for a program crop for the farm less the acreage conservation reserve. If an acreage reduction program is not in effect for a program crop, for purposes of administering this title, the permitted acreage of such a crop on a farm shall be equal to the crop acreage base for the crop for the farm.

      ‘(6) PAYMENT ACREAGE- The term ‘payment acreage’ means the lesser of--

        ‘(A) the number of acres planted and considered planted to an eligible crop, as determined in sections 503(c) and 504(b)(1), for harvest within the permitted acreage; or

        ‘(B) 77 percent of the crop acreage base for the crop for the farm less the acreage conservation reserve.

      ‘(7) RESOURCE-CONSERVING CROP- The term ‘resource-conserving crop’ means legumes, legume-grass mixtures, legume-small grain mixtures, legume-grass-small grain mixtures, and experimental and industrial crops, crops planted for special conservation practices, biomass production, intensive rotational grazing, and non-legume crops, as determined by the Secretary, to satisfy program objectives.

      ‘(8) RESOURCE-CONSERVING CROP ROTATION- The term ‘resource-conserving crop rotation’ means a crop rotation that includes at least one resource-conserving crop and that reduces erosion, maintains or improves soil fertility and tilth, interrupts pest cycles, or conserves water.

      ‘(9) FARMING OPERATIONS AND PRACTICES- The term ‘farming operations and practices’ means practices which include the integration of crops and crop-plant variety selection, rotation practices, tillage systems, soil conserving and soil building practices, nutrient management strategies, biological control and integrated pest management strategies, livestock production and management systems, animal waste management systems, water and energy conservation measures, and health and safety considerations.

      ‘(10) INTEGRATED FARM MANAGEMENT PLAN- The term ‘integrated farm management plan’ means a comprehensive, multiyear, site-specific plan that meets the requirements of section 1451 of the Food, Agriculture, Conservation, and Trade Act of 1990 (7 U.S.C. 5822).

      ‘(11) GRASS- The term ‘grass’ means any perennial grasses commonly used for haying or grazing.

      ‘(12) LEGUME- The term ‘legume’ means any forage legumes (such as alfalfa or clover) or any legume grown for use as a forage or green manure, but not including any bean crop from which the seeds are harvested.

      ‘(13) SMALL GRAIN- The term ‘small grain’ does not include malting barley or wheat, except for wheat interplanted with other small grain crops for nonhuman consumption.’.

SEC. 2502. CROP AND TOTAL ACREAGE BASES.

    Section 503 of the Agricultural Act of 1949 (7 U.S.C. 1463) is amended--

      (1) in the section heading, by inserting ‘and total’ after ‘crop’;

      (2) at the end of subsection (a), by adding the following new paragraph:

      ‘(4) TOTAL ACREAGE BASE- The total acreage base for a farm shall equal the sum of the crop acreage bases established for program crops on the farm that are enrolled in the acreage reduction programs established by the Secretary.’;

      (3) in the heading for subsection (b) by adding ‘OF CROP ACREAGE BASES’ after ‘CALCULATION’;

      (4) in subsection (b)(2)--

        (A) by striking ‘(A) IN GENERAL’;

        (B) by striking ‘except as provided in subparagraph (B),’; and

        (C) by striking subparagraph (B); and

      (5) in subsection (c)(1), by striking ‘reduced acreage’ and inserting ‘acreage conservation reserve’.

SEC. 2503. PLANTING FLEXIBILITY.

    (a) SPECIFIED COMMODITIES- Subsection (b) of section 504 of the Agricultural Act of 1949 (7 U.S.C. 1464) is amended--

      (1) in paragraph (1)--

        (A) by striking ‘and’ at the end of subparagraph (D);

        (B) by redesignating subparagraph (E) as subparagraph (F); and

        (C) by inserting the following new subparagraph after subparagraph (D):

        ‘(E) any cover crop (including maintenance of native cover) and summer fallow which, as determined by the Secretary, will protect the land from weeds and erosion; and’;

      (2) by striking paragraph (2) and inserting the following new paragraph:

      ‘(2) LIMITATIONS ON CROPS-

        ‘(A) IN GENERAL- For purposes of this section, the Secretary may restrict the planting on a crop acreage base of any crop specified in paragraph (1).

        ‘(B) EFFECT OF ACREAGE REDUCTION PROGRAM- If an acreage reduction program is in effect for any specific program crop, the Secretary may limit the plantings of the specific program crop for which there is an acreage reduction program in effect to no more than the sum of--

          ‘(i) the permitted acreage for the specific program crop for which there is an acreage reduction program in effect; plus

          ‘(ii) 23 percent of other crop acreage bases which are included in the total acreage base for a farm.

        ‘(C) MINIMUM PLANTING- The Secretary may require that, as a condition for eligibility for loans, deficiency payments and any other program benefits authorized by this Act, a minimum percentage not to exceed 50 percent of a specific permitted acreage, be planted to the specific program crop.’; and

      (3) in paragraph (3) by striking ‘make a determination in each crop year of’ and inserting ‘determine’.

    (b) LIMITATION ON PLANTINGS- Subsection (c) of such section is amended by striking paragraphs (1) and (2) and inserting the following:

    ‘The quantity of the total acreage base that may be planted to program crops enrolled in an acreage reduction program shall not

exceed 100 percent of the total acreage base, less the acreage conservation reserve for the farm.’.

    (c) PLANTINGS IN EXCESS OF PERMITTED ACREAGE- Subsection (d) of such section is amended to read as follows:

    ‘(d) PLANTINGS IN EXCESS OF PERMITTED ACREAGE- Notwithstanding any other provision of this Act, except as provided in section 504(b)(2)(B), producers of a program crop who are participating in the acreage reduction program for that crop shall be allowed to plant that program crop in a quantity that exceeds the permitted acreage for that crop without losing their eligibility for loans or payments with respect to that crop if--

      ‘(1) the acreage planted to that program crop on the farm in excess of the permitted acreage for that crop does not exceed the permitted acreage of other program crops on the farm; and

      ‘(2) the producer agrees to a reduction in permitted acreage for the other program crops produced on the farm by a quantity equal to the overplanting.’.

    (d) LOAN ELIGIBILITY- Subsection (e) of such section is amended to read as follows:

    ‘(e) LOAN ELIGIBILITY- Producers of a specific program crop (referred to in this subsection as the ‘original program crop’) who plant for harvest on the crop acreage base established for such original program crop another program crop in accordance with this section and who are participants in the program established for such other program crop shall be eligible to receive loans or loan deficiency payments for such other program crop on the same terms and conditions as are provided to participants in a acreage reduction program established for such other program crop if the producers--

      ‘(1) plant such other program crop in an amount that does not exceed 100 percent of the permitted acreage established for the original program crop; and

      ‘(2) agree to a reduction in the permitted acreage for the original program crop for the particular crop year.’.

SEC. 2504. FARM PROGRAM PAYMENT YIELDS.

    Section 505 of the Agricultural Act of 1949 (7 U.S.C. 1465) is amended to read as follows:

‘SEC. 505. FARM PROGRAM PAYMENT YIELDS.

    ‘(a) ESTABLISHMENT- The Secretary shall provide for the establishment of a farm program payment yield for each farm for each program crop for each crop year in accordance with subsection (b) or (c).

    ‘(b) FARM PROGRAM PAYMENT YIELDS BASED ON 1995 CROP YEAR-

      ‘(1) IN GENERAL- If the Secretary determines that farm program payment yields shall be established in accordance with this subsection, except as provided in paragraph (2), the farm program payment yield for each of the 1996 through 2002 crop years shall be the farm program payment yield for the 1995 crop year for the farm.

      ‘(2) ADDITIONAL YIELD PAYMENTS- In the case of each of the 1991 through 2002 crop years for a commodity, if the farm program payment yield for a farm is reduced more than 10 percent below the farm program payment yield for the 1985 crop year, the Secretary shall make available to producers established price payments for the commodity in such amount as the Secretary determines is necessary to provide the same total return to producers as if the farm program payment yield had not been reduced more than 10 percent below the farm program payment yield for the 1985 crop year. The payments shall be made available not later than the time final deficiency payments are made.

      ‘(3) NO YIELD AVAILABLE- If no farm program payment yield was established for the farm for 1995 crop, the farm program payment yield shall be established on the basis of the average farm program payment yield for the crop years for similar farms in the area.

      ‘(4) NATIONAL, STATE, OR COUNTY YIELDS- If the Secretary determines the action is necessary, the Secretary may establish national, State, or county program payment yields on the basis of--

        ‘(A) historical yields, as adjusted by the Secretary to correct for abnormal factors affecting the yields in the historical period; or

        ‘(B) the Secretary’s estimate of actual yields for the crop year involved if historical yield data is not available.

      ‘(5) BALANCING YIELDS- If national, State, or county program payment yields are established, the farm program payment yields shall balance to the national, State, or county program payment yields.

    ‘(c) DETERMINATION OF YIELDS-

      ‘(1) ACTUAL YIELDS- With respect to the 1996 and subsequent crop years, the Secretary may--

        ‘(A) establish the farm program payment yield as provided in subsection (a); or

        ‘(B) establish a farm program payment yield for any program crop for any farm on the basis of the average of the yield per harvested acre for the crop for the farm for each of the 5 crop years immediately preceding the crop year, excluding the crop year with the highest yield per harvested acre, the crop year with the lowest yield per harvested acre, and any crop year in which such crop was not planted on the farm.

      ‘(2) PRIOR YIELDS- For purposes of the preceding sentence, the farm program payment yield for the 1996 crop year and the actual yield per harvested acre with respect to the 1997 and subsequent crop years shall be used in determining farm program payment yields.

      ‘(3) REDUCTION LIMITATION- Notwithstanding any other provision of this subsection, for purposes of establishing a farm program payment yield for any program crop for any farm for the 1991 and subsequent crop years, the farm program payment yield for the 1986 crop year may not be reduced more than 10 percent below the farm program payment yield for the farm for the 1985 crop year.

      ‘(4) ADJUSTMENT OF YIELDS- The county committee, in accordance with regulations prescribed by the Secretary, may adjust any farm program payment yield for any program crop for any farm if the farm program payment yield for the crop on the farm does not accurately reflect the productive potential of the farm.

    ‘(d) ASSIGNMENT OF YIELDS- In the case of any farm for which the actual yield per harvested acre for any program crop referred to in subsection (c) for any crop year is not available, the county committee may assign the farm a yield for the crop for the crop year on the basis of actual yields for the crop for the crop year on similar farms in the area.

    ‘(e) ACTUAL YIELD DATA-

      ‘(1) PROVISION- The Secretary shall, under such terms and conditions as the Secretary may prescribe, allow producers to provide to county committees data with respect to the actual yield for each farm for each program crop.

      ‘(2) MAINTENANCE- The Secretary shall maintain the data for at least 5 crop years after receipt in a manner that will permit the data to be used, if necessary, in the administration of the commodity programs.’.

SEC. 2505. APPLICATION OF PROVISIONS.

    Section 509 of the Agricultural Act of 1949 (7 U.S.C. 1469) is amended to read as follows:

‘SEC. 509. APPLICATION OF TITLE.

    ‘Except as provided in section 406, this title shall apply only with respect to the 1996 through 2002 crops.’.

Subtitle F--Miscellaneous Provisions

Title II, Subtitle F

SEC. 2601. LIMITATIONS ON AMOUNT OF DEFICIENCY PAYMENTS AND LAND DIVERSION PAYMENTS.

    Section 1001(1)(A) of the Food Security Act of 1985 (7 U.S.C. 1308(1)(A)) is amended by striking ‘$50,000’ and inserting ‘$47,000’.

SEC. 2602. SENSE OF CONGRESS REGARDING CERTAIN CANADIAN TRADE PRACTICES.

    (a) FINDINGS- The Congress finds the following:

      (1) On October 15, 1993, in response to a request from the National Potato Council, the Foreign Agricultural Service of the Department of Agriculture listed several Canadian nontariff barriers that violate the national treatment principle of the General Agreement on Tariffs and Trade, including the prohibition on bulk shipments, container size limitations on processed products, and prohibitions on consignment sales.

      (2) Current Government-to-Government and direct grower-to-grower discussions with Canada have failed to result in changes in Canadian trade practices.

    (b) SENSE OF CONGRESS- It is the sense of the Congress that the Secretary of Agriculture and the United States Trade Representative should intensify efforts to resolve the Canadian potato trade concerns and begin to consider formal action under the dispute resolution procedures of the North American Free Trade Agreement or the General Agreement on Tariffs and Trade.

TITLE III--COMMERCE

Title III

SEC. 3101. SPECTRUM AUCTIONS.

    (a) EXTENSION AND EXPANSION OF AUCTION AUTHORITY-

      (1) AMENDMENTS- Section 309(j) of the Communications Act of 1934 (47 U.S.C. 309(j)) is amended--

        (A) by striking paragraphs (1) and (2) and inserting in lieu thereof the following:

      ‘(1) GENERAL AUTHORITY- If, consistent with the obligations described in paragraph (6)(E), mutually exclusive applications are accepted for any initial license or construction permit which will involve an exclusive use of the electromagnetic spectrum, then the Commission shall grant such license or permit to a qualified applicant through a system of competitive bidding that meets the requirements of this subsection.

      ‘(2) EXEMPTIONS- The competitive bidding authority granted by this subsection shall not apply to licenses or construction permits issued by the Commission--

        ‘(A) that, as the result of the Commission carrying out the obligations described in paragraph (6)(E), are not mutually exclusive;

        ‘(B) for public safety radio services, including non-Government uses that protect the safety of life, health, and property and that are not made commercially available to the public; or

        ‘(C) for initial licenses or construction permits for new terrestrial digital television services assigned by the Commission to existing terrestrial broadcast licensees to replace their current television licenses.’; and

        (B) by striking ‘1998’ in paragraph (11) and inserting ‘2002’.

      (2) CONFORMING AMENDMENT- Subsection (i) of section 309 of such Act is repealed.

      (3) EFFECTIVE DATE- The amendment made by paragraph (1)(A) shall not apply with respect to any license or permit for which the Federal Communications Commission has accepted mutually exclusive applications on or before the date of enactment of this Act.

    (b) COMMISSION OBLIGATION TO MAKE ADDITIONAL SPECTRUM AVAILABLE BY AUCTION-

      (1) IN GENERAL- The Federal Communications Commission shall complete all actions necessary to permit the assignment, by September 30, 2002, by competitive bidding pursuant to section 309(j) of the Communications Act of 1934 (47 U.S.C. 309(j)) of licenses for the use of bands of frequencies that--

        (A) individually span not less than 25 megahertz, unless a combination of smaller bands can, notwithstanding the provisions of paragraph (7) of such section, reasonably be expected to produce greater receipts;

        (B) in the aggregate span not less than 100 megahertz;

        (C) are located below 3 gigahertz; and

        (D) have not, as of the date of enactment of this Act--

          (i) been designated by Commission regulation for assignment pursuant to such section; or

          (ii) been identified by the Secretary of Commerce pursuant to section 113 of the National Telecommunications and Information Administration Organization Act.

        The Commission shall conduct the competitive bidding for not less than one-half of such aggregate spectrum by September 30, 2001.

      (2) CRITERIA FOR REASSIGNMENT- In making available bands of frequencies for competitive bidding pursuant to paragraph (1), the Commission shall--

        (A) seek to promote the most efficient use of the spectrum;

        (B) take into account the cost to incumbent licensees of relocating existing uses to other bands of frequencies or other means of communication;

        (C) take into account the needs of public safety radio services; and

        (D) comply with the requirements of international agreements concerning spectrum allocations.

      (3) NOTIFICATION TO NTIA- The Commission shall notify the Secretary of Commerce if--

        (A) the Commission is not able to provide for the effective relocation of incumbent licensees to bands of frequencies that are available to the Commission for assignment; and

        (B) the Commission has identified bands of frequencies that are--

          (i) suitable for the relocation of such licensees; and

          (ii) allocated for Federal Government use, but that could be reallocated pursuant to part B of the National Telecommunications and Information Administration Organization Act (as amended by this Act).

    (c) IDENTIFICATION AND REALLOCATION OF FREQUENCIES- The National Telecommunications and Information Administration Organization Act (47 U.S.C. 901 et seq.) is amended--

      (1) in section 113, by adding at the end the following new subsection:

    ‘(f) ADDITIONAL REALLOCATION REPORT- If the Secretary receives a notice from the Commission pursuant to section 3001(b)(3) of the Seven-Year Balanced Budget Reconciliation Act of 1995, the Secretary shall prepare and submit to the President and the Congress a report recommending for reallocation for use other than by Federal Government stations under section 305 of the 1934 Act (47 U.S.C. 305), bands of frequencies that are suitable for the uses identified in the Commission’s notice.’;

      (2) in section 114(a)(1), by striking ‘(a) or (d)(1)’ and inserting ‘(a), (d)(1), or (f)’.

    (d) COMPLETION OF C-BLOCK PCS AUCTION- The Federal Communications Commission shall commence the Broadband Personal Communications Services C-Block auction described in the Commission’s Sixth Report and Order in DP Docket 93-253 (FCC 93-510, released July 18, 1995) not later than December 4, 1995. The Commission’s competitive bidding rules governing such auction, as set forth in such Sixth Report and Order, are hereby ratified and adopted as a matter of Federal law.

    (e) MODIFICATION OF AUCTION POLICY TO PRESERVE AUCTION VALUE OF SPECTRUM- The voluntary negotiation period for relocating fixed microwave licensees to frequency bands other than those allocated for licensed emerging technology services (including licensed personal communications services), established by the Commission’s Third Report and Order in ET Docket No. 92-9, shall expire one year after the date of acceptance by the Commission of applications for such licensed emerging technology services. The mandatory negotiation period for relocating fixed microwave licensees to frequency bands other than those allocated for licensed emerging technology services (including licensed personal communications services), established in such Third Report and Order, shall expire two years after the date of acceptance by the Commission of applications for such licensed emerging technology services.

    (f) IDENTIFICATION AND REALLOCATION OF AUCTIONABLE FREQUENCIES- The National Telecommunications and Information Administration Organization Act (47 U.S.C. 901 et seq.) is amended--

      (1) in section 113(b)--

        (A) by striking the heading of paragraph (1) and inserting ‘INITIAL REALLOCATION REPORT’;

        (B) by inserting ‘in the first report required by subsection (a)’ after ‘recommend for reallocation’ in paragraph (1);

        (C) by inserting ‘or (3)’ after ‘paragraph (1)’ each place it appears in paragraph (2); and

        (D) by inserting after paragraph (2) the following new paragraph:

      ‘(3) SECOND REALLOCATION REPORT- In accordance with the provisions of this section, the Secretary shall recommend for reallocation in the second report required by subsection (a), for use other than by Federal Government stations under section 305 of the 1934 Act (47 U.S.C. 305), a single frequency band that spans not less than an additional 20 megahertz, that is located below 3 gigahertz, and that meets the criteria specified in paragraphs (1) through (5) of subsection (a).’; and

      (2) in section 115--

        (A) in subsection (b), by striking ‘the report required by section 113(a)’ and inserting ‘the initial reallocation report required by section 113(a)’; and

        (B) by adding at the end the following new subsection:

    ‘(c) ALLOCATION AND ASSIGNMENT OF FREQUENCIES IDENTIFIED IN THE SECOND REALLOCATION REPORT- With respect to the frequencies made available for reallocation pursuant to section 113(b)(3), the Commission shall, not later than 1 year after receipt of the second reallocation report required by such section, prepare, submit to the President and the Congress, and implement, a plan for the allocation and assignment under the 1934 Act of such frequencies. Such plan shall propose the immediate allocation and assignment of all such frequencies in accordance with section 309(j).’.

SEC. 3102. FEDERAL COMMUNICATIONS COMMISSION FEE COLLECTIONS

    (a) APPLICATION FEES-

      (1) ADJUSTMENT OF APPLICATION FEE SCHEDULE- Section 8(b) of the Communications Act of 1934 (47 U.S.C. 158(b)) is amended to read as follows:

    ‘(b)(1) For fiscal year 1996 and each fiscal year thereafter, the Commission shall, by regulation, modify the application fees by proportionate increases or decreases so as to result in estimated total collections for the fiscal year equal to--

      ‘(A) $40,000,000; plus

      ‘(B) an additional amount, specified in an appropriation Act for the Commission for that fiscal year to be collected and credited to such appropriation, not to exceed the amount by which the necessary expenses for the costs described in paragraph (5) exceeds $40,000,000.

    ‘(2) In making adjustments pursuant to this paragraph the Commission may round such fees to the nearest $5.00 in the case of fees under $100, or to the nearest $20 in the case of fees of $100 or more. The Commission shall transmit to the Congress notification of any adjustment made pursuant to this paragraph immediately upon the adoption of such adjustment.

    ‘(3) The Commission is authorized to continue to collect fees at the prior year’s rate until the effective date of fee adjustments or amendments made pursuant to paragraphs (1) and (4).

    ‘(4) The Commission shall, by regulation, add, delete, or reclassify services, categories, applications, or other filings subject to application fees to reflect additions, deletions, or changes in the nature of its services or authorization of service processes as a consequence of Commission rulemaking proceedings or changes in law.

    ‘(5) Any modified fees established under paragraph (4) shall be derived by determining the full-time equivalent number of employees performing application activities, adjusted to take into account other expenses that are reasonably related to the cost of processing the application or filing, including all executive and legal costs incurred by the Commission in the discharge of these functions, and other factors that the Commission determines are necessary in the public interest. The Commission shall--

      ‘(A) transmit to the Congress notification of any proposed modification made pursuant to this paragraph immediately upon adoption of such proposal; and

      ‘(B) transmit to the Congress notification of any modification made pursuant to this paragraph immediately upon adoption of such modification.

    ‘(6) Increases or decreases in application fees made pursuant to this subsection shall not be subject to judicial review.’.

      (2) TREATMENT OF ADDITIONAL COLLECTIONS- Section 8(e) of such Act is amended to read as follows:

    ‘(e) Of the moneys received from fees authorized under this section--

      ‘(1) $40,000,000 shall be deposited in the general fund of the Treasury to reimburse the United States for amounts appropriated for use by the Commission in carrying out its functions under this Act; and

      ‘(2) the remainder shall be deposited as an offsetting collection in, and credited to, the account providing appropriations to carry out the functions of the Commission.’.

      (3) SCHEDULE OF APPLICATION FEES FOR PCS- The schedule of application fees in section 8(g) of such Act is amended by adding, at the end of the portion under the heading ‘COMMON CARRIER SERVICES’, the following new item:

‘23. Personal communications services

‘a. Initial or new application

--230

‘b. Amendment to pending application

--35

‘c. Application for assignment or transfer of control

--230

‘d. Application for renewal of license

--35

‘e. Request for special temporary authority

--200

‘f. Notification of completion of construction

--35

‘g. Request to combine service areas

--50’.

      (4) VANITY CALL SIGNS-

        (A) LIFETIME LICENSE FEES-

          (i) AMENDMENT- The schedule of application fees in section 8(g) of such Act is further amended by adding, at the end of the portion under the heading ‘PRIVATE RADIO SERVICES’, the following new item:

        ‘11. Amateur vanity call signs

--150.00’.

          (ii) TREATMENT OF RECEIPTS- Moneys received from fees established under the amendment made by this subsection shall be deposited as an offsetting collection in, and credited to, the account providing appropriations to carry out the functions of the Commission.

        (B) TERMINATION OF ANNUAL REGULATORY FEES- The schedule of regulatory fees in section 9(g) of such Act (47 U.S.C. 159(g)) is amended by striking the following item from the fees applicable to the Private Radio Bureau:

‘Amateur vanity call-signs

--7’.

    (b) Regulatory Fees-

      (1) EXECUTIVE AND LEGAL COSTS- Section 9(a)(1) of the Communications Act of 1934 (47 U.S.C. 159(a)(1)) is amended by inserting before the period at the end the following: ‘, and all executive and legal costs incurred by the Commission in the discharge of these functions’.

      (2) ESTABLISHMENT AND ADJUSTMENT- Section 9(b) of such Act is amended--

        (A) in paragraph (4)(B), by striking ‘90 days’ and inserting ‘45 days’; and

        (B) by adding at the end the following new paragraph:

      ‘(5) EFFECTIVE DATE OF ADJUSTMENTS- The Commission is authorized to continue to collect fees at the prior year’s rate until the effective date of fee adjustments or amendments made pursuant to paragraph (2) or (3).’.

      (3) REGULATORY FEES FOR SATELLITE TV OPERATIONS- The schedule of regulatory fees in section 9(g) of such Act is amended, in the fees applicable to the Mass Media Bureau, by inserting after each of the items pertaining to construction permits in the fees applicable to VHF commercial and UHF commercial TV the following new item:

‘Terrestrial television satellite operations

--500’.

      (4) GOVERNMENTAL ENTITIES USE FOR COMMON CARRIER PURPOSES- Section 9(h) of such Act is amended by adding at the end the following new sentence: ‘The exceptions provided by this subsection for governmental entities shall not be applicable to any services that are provided on a commercial basis in competition with another carrier.’.

      (5) INFORMATION REQUIRED IN CONNECTION WITH ADJUSTMENT OF REGULATORY FEES- Title I of such Act is amended--

        (A) in section 9, by striking subsection (i); and

        (B) by inserting after section 9 the following new section:

‘SEC. 10. ACCOUNTING SYSTEM AND ADJUSTMENT INFORMATION.

    ‘(a) ACCOUNTING SYSTEM REQUIRED- The Commission shall develop accounting systems for the purposes of making the adjustments authorized by sections 8 and 9. The Commission shall annually prepare and submit to the Congress an analysis of such systems and shall annually afford interested persons the opportunity to submit comments concerning the allocation of the costs of performing the functions described in section 8(a)(5) and 9(a)(1) in

making such adjustments in the schedules required by sections 8 and 9.

    ‘(b) INFORMATION REQUIRED IN CONNECTION WITH ADJUSTMENT OF APPLICATION AND REGULATORY FEES-

      ‘(1) SCHEDULE OF REQUESTED AMOUNTS- No later than May 1 of each calendar year, the Commission shall prepare and transmit to the Committees of Congress responsible for the Commission’s authorization and appropriations a detailed schedule of the amounts requested by the President’s budget to be appropriated for the ensuing fiscal year for the activities described in sections 8(a)(5) and 9(a)(1), allocated by bureaus, divisions, and offices of the Commission.

      ‘(2) EXPLANATORY STATEMENT- If the Commission anticipates increases in the application fees or regulatory fees applicable to any applicant, licensee, or unit subject to payment of fees, the Commission shall submit to the Congress by May 1 of such calendar year a statement explaining the relationship between any such increases and either (A) increases in the amounts requested to be appropriated for Commission activities in connection with such applicants, licensees, or units subject to payment of fees, or (B) additional activities to be performed with respect to such applicants, licensees, or units.

      ‘(3) DEFINITION- For purposes of this subsection, the term ‘amount requested by the President’s budget’ shall include any adjustments to such requests that are made by May 1 of such calendar year. If any such adjustment is made after May 1, the Commission shall provide such Committees with updated schedules and statements containing the information required by this subsection within 10 days after the date of any such adjustment.’.

SEC. 3103. AUCTION OF RECAPTURED ANALOG LICENSES.

    (a) LIMITATIONS ON TERMS OF ANALOG TELEVISION LICENSES (‘REVERSION DATE’)- The Commission shall not renew any analog television license for a period that extends beyond the earlier of December 31, 2005, or one year after the date the Commission finds, based on annual surveys conducted pursuant to subsection (b), that at least 95 percent of households in the United States have the capability to receive and display video signals, other than video signals transmitted pursuant to an analog television license. After such date, the Commission shall not issue any television licenses other than advanced television licenses.

    (b) ANNUAL SURVEY- The Secretary of Commerce shall, each calendar year from 1998 to 2005, conduct a survey to estimate the percentage of households in the United States that have the capability to receive and display video signals other than signals transmitted pursuant to an analog television license.

    (c) SPECTRUM REVERSION- The Commission shall ensure that, as analog television licenses expire pursuant to subsection (a), spectrum previously used for the broadcast of analog television signals is reclaimed and reallocated in such manner as to maximize the deployment of new services. Licensees for new services shall be selected by competitive bidding. The Commission shall complete the competitive bidding procedure by May 1, 2002.

    (d) MINIMUM SERVICE OBLIGATION-

      (1) PROVISION OF CAPABILITY TO RECEIVE ADVANCED SERVICES- The Commission shall, by regulation, establish procedures to ensure that, within the year prior to the reversion date defined in subsection (a), the advanced television licensees shall provide each household with the capability to receive and display video signals for advanced television services if such household requests such capability.

      (2) PROVISION OF NONSUBSCRIPTION SERVICES- Each advanced television service licensee shall provide, for at least a minimum of 5 years from the date identified in subsection (a), at least one nonsubscription video service that meets or exceeds minimum technical standards established by the Commission. In setting such minimum technical standards, the Commission shall, to the extent technically feasible, ensure that picture and audio quality are at least as good as that provided to recipients within the Grade B contour of an analog television license. The Commission shall revoke the license of any advanced television licensee who fails to meet this condition of the license.

    (e) DEFINITIONS- As used in this section:

      (1) The term ‘Commission’ means the Federal Communications Commission.

      (2) The term ‘advanced television services’ means television services provided using digital or other advanced technology to enhance audio quality and video resolution, as further defined in the Opinion, Report, and Order of the Commission entitled ‘Advanced Television Systems and Their Impact Upon the Existing Television Service,’ MM Docket No. 87-268.

      (3) The term ‘analog television licenses’ means licenses issued pursuant to 47 C.F.R. 73.682 et seq.

SEC. 3104. PATENT AND TRADEMARK FEES.

    Section 10101 of the Omnibus Budget Reconciliation Act of 1990 (35 U.S.C. 41 note) is amended--

      (1) in subsection (a) by striking ‘1998’ and inserting ‘2002’;

      (2) in subsection (b)(2) by striking ‘1998’ and inserting ‘2002’; and

      (3) in subsection (c)--

        (A) by striking ‘through 1998’ and inserting ‘through 2002’; and

        (B) by adding at the end the following:

      ‘(9) $119,000,000 in fiscal year 1999.

      ‘(10) $119,000,000 in fiscal year 2000.

      ‘(11) $119,000,000 in fiscal year 2001.

      ‘(12) $119,000,000 in fiscal year 2002.’.

SEC. 3105. REPEAL OF AUTHORIZATION OF TRANSITIONAL APPROPRIATIONS FOR THE UNITED STATES POSTAL SERVICE.

    (a) IN GENERAL- (1) Section 2004 of title 39, United States Code, is repealed.

    (2)(A) The table of sections for chapter 20 of such title is amended by repealing the item relating to section 2004.

    (B) Section 2003(e)(2) of such title is amended by striking ‘sections 2401 and 2004’ each place it appears and inserting ‘section 2401’.

    (b) CLARIFICATION THAT LIABILITIES FORMERLY PAID PURSUANT TO SECTION 2004 REMAIN LIABILITIES PAYABLE BY THE POSTAL SERVICE- Section 2003 of title 39, United States Code, is amended by adding at the end the following:

    ‘(h) Liabilities of the former Post Office Department to the Employees’ Compensation Fund (appropriations for which were authorized by former section 2004, as in effect before the effective date of this subsection) shall be liabilities of the Postal Service payable out of the Fund.’.

TITLE IV--TRANSPORTATION

Title IV

SEC. 4101. EXTENSION OF RAILROAD SAFETY FEES.

    Subsection (e) of section 20115 of title 49, United States Code, is repealed.

SEC. 4102. PERMANENT EXTENSION OF VESSEL TONNAGE DUTIES.

    (a) EXTENSION OF DUTIES- Section 36 of the Act of August 5, 1909 (36 Stat. 111; 46 App. U.S.C. 121), is amended--

      (1) by striking ‘for fiscal years 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, and 2 cents per ton not to exceed in the aggregate 10 cents per tone in any one year, for each fiscal year thereafter’; and

      (2) by striking ‘for fiscal years 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, and 6 cents per ton, not to exceed 30 cents per ton for each fiscal year thereafter’.

    (b) CONFORMING AMENDMENT- The Act entitled ‘An Act concerning tonnage duties on vessels entering otherwise than by sea’, approved March 8, 1910 (36 Stat. 234; 46 App. U.S.C. 132), is amended by striking ‘for fiscal years 1991, 1992, 1993, 1994, 1995, 1996, 1997, and 1998, and 2 cents per ton, not to exceed in the aggregate 10 cents per ton in any 1 year, for each fiscal year thereafter,’.

SEC. 4103. SALE OF GOVERNORS ISLAND, NEW YORK.

    (a) IN GENERAL- Notwithstanding any other provision of law, the Administrator of General Services shall dispose of by sale at fair market value all rights, title, and interests of the United States in and to the land of, and improvements to, Governors Island, New York.

    (b) RIGHT OF FIRST REFUSAL- Before a sale is made under subsection (a) to any other parties, the State of New York and the city of New York shall be given the right of first refusal to purchase all or part of Governors Island. Such right may be exercised by either the State of New York or the city of New York or by both parties acting jointly.

    (c) PROCEEDS- Proceeds from the disposal of Governors Island under subsection (a) shall be deposited in the general fund of the Treasury and credited as miscellaneous receipts.

SEC. 4104. SALE OF AIR RIGHTS.

    (a) IN GENERAL- Notwithstanding any other provision of law, the Administrator of General Services shall sell, at fair market value and in a manner to be determined by the Administrator, the air rights adjacent to Washington Union Station described in subsection (b), including air rights conveyed to the Administrator under subsection (d). The Administrator shall complete the sale by such date as is necessary to ensure that the proceeds from the sale will be deposited in accordance with subsection (c).

    (b) DESCRIPTION- The air rights referred to in subsection (a) total approximately 16.5 acres and are depicted on the plat map of the District of Columbia as follows:

      (1) Part of lot 172, square 720.

      (2) Part of lots 172 and 823, square 720.

      (3) Part of lot 811, square 717.

    (c) PROCEEDS- Before September 30, 1996, proceeds from the sale of air rights under subsection (a) shall be deposited in the general fund of the Treasury and credited as miscellaneous receipts.

    (d) CONVEYANCE OF AMTRAK AIR RIGHTS-

      (1) GENERAL RULE- As a condition of future Federal financial assistance, Amtrak shall convey to the Administrator of General Services on or before December 31, 1995, at no charge, all of the air rights of Amtrak described in subsection (b).

      (2) FAILURE TO COMPLY- If Amtrak does not meet the condition established by paragraph (1), Amtrak shall be prohibited from obligating Federal funds after March 1, 1996.

Title V

TITLE V--HOUSING PROVISIONS

SEC. 5101. REDUCTION OF SECTION 8 ANNUAL ADJUSTMENT FACTORS FOR UNITS WITHOUT TENANT TURNOVER.

    Paragraph (2)(A) of section 8(c) of the United States Housing Act of 1937 (42 U.S.C. 1437f(c)(2)(A)) is amended by striking the last sentence.

SEC. 5102. MAXIMUM MORTGAGE AMOUNT FLOOR FOR SINGLE FAMILY MORTGAGE INSURANCE.

    Subparagraph (A) of the first sentence of section 203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)(A)) is amended by striking ‘the greater of’ and all that follows through ‘applicable size’ and inserting the following: ‘50 percent of the dollar amount limitation determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (as adjusted annually under such section) for a residence of the applicable size’.

SEC. 5103. FORECLOSURE AVOIDANCE AND BORROWER ASSISTANCE.

    (a) FORECLOSURE AVOIDANCE- The last sentence of section 204(a) of the National Housing Act (12 U.S.C. 1710(a)) is amended by inserting before the period the following: ‘: And provided further, That the Secretary may pay insurance benefits to the mortgagee to recompense the mortgagee for its actions to provide an alternative to foreclosure of a mortgage that is in default, which actions may include such actions as special forbearance, loan modification, and deeds in lieu of foreclosure, all upon such terms and conditions as the mortgagee shall determine in the mortgagee’s sole discretion within guidelines provided by the Secretary, but which may not include assignment of a mortgage to the Secretary: And provided further, That for purposes of the preceding proviso, no action authorized by the Secretary and no action taken, nor any failure to act, by the Secretary or the mortgagee shall be subject to judicial review’.

    (b) AUTHORITY TO ASSIST MORTGAGORS IN DEFAULT- Section 230 of the National Housing Act (12 U.S.C. 1715u) is amended to read as follows:

‘AUTHORITY TO ASSIST MORTGAGORS IN DEFAULT

    ‘SEC. 230. (a) PAYMENT OF PARTIAL CLAIM- The Secretary may establish a program for payment of a partial insurance claim to a mortgagee that agrees to apply the claim amount to payment of a mortgage on a 1- to 4-family residence that is in default. Any such payment under such program to the mortgagee shall be made in the Secretary’s sole discretion and on terms and conditions acceptable to the Secretary, except that--

      ‘(1) the amount of the payment shall be in an amount determined by the Secretary, which shall not exceed an amount equivalent to 12 monthly mortgage payments and any costs related to the default that are approved by the Secretary; and

      ‘(2) the mortgagor shall agree to repay the amount of the insurance claim to the Secretary upon terms and conditions acceptable to the Secretary.

    The Secretary may pay the mortgagee, from the appropriate insurance fund, in connection with any activities that the mortgagee is required to undertake concerning repayment by the mortgagor of the amount owed to the Secretary.

    ‘(b) ASSIGNMENT-

      ‘(1) PROGRAM AUTHORITY- The Secretary may establish a program for assignment to the Secretary, upon request of the mortgagee, of a mortgage on a 1- to 4-family residence insured under this Act.

      ‘(2) PROGRAM REQUIREMENTS- The Secretary may accept assignment of a mortgage under a program under this subsection only if--

        ‘(A) the mortgage was in default;

        ‘(B) the mortgagee has modified the mortgage to cure the default and provide for mortgage payments within the reasonable ability of the mortgagor to pay at interest rates not exceeding current market interest rates; and

        ‘(C) the Secretary arranges for servicing of the assigned mortgage by a mortgagee (which may include the assigning mortgagee) through procedures that the Secretary has determined to be in the best interests of the appropriate insurance fund.

      ‘(3) PAYMENT OF INSURANCE BENEFITS- Upon accepting assignment of a mortgage under the program under this subsection, the Secretary may pay insurance benefits to the mortgagee from the appropriate insurance fund in an amount that the Secretary determines to be appropriate, but which may not exceed the amount necessary to compensate the mortgagee for

the assignment and any losses resulting from the mortgage modification.

    ‘(c) PROHIBITION OF JUDICIAL REVIEW- No decision by the Secretary to exercise or forego exercising any authority under this section shall be subject to judicial review.’.

    (c) SAVINGS PROVISION- Any mortgage for which the mortgagor has applied to the Secretary of Housing and Urban Development, before the date of the enactment of this Act, for assignment pursuant to section 230(b) of the National Housing Act shall continue to be governed by the provisions of such section, as in effect immediately before such date of enactment.

    (d) APPLICABILITY OF OTHER LAWS- No provision of the National Housing Act or any other law shall be construed to require the Secretary of Housing and Urban Development to provide an alternative to foreclosure for mortgagees with mortgages on 1- to 4-family residences insured by the Secretary under the National Housing Act, or to accept assignments of such mortgages.

TITLE VI--INDEXATION AND MISCELLANEOUS ENTITLEMENT-RELATED PROVISIONS

Title VI

SEC. 6101. CONSUMER PRICE INDEX.

    (a) ADJUSTMENTS APPLICABLE TO INTERNAL REVENUE CODE PROVISIONS-

      (1) IN GENERAL- Paragraph (3) of section 1(f) of the Internal Revenue Code of 1986 (defining cost-of-living adjustment) is amended by striking the period at the end and inserting a comma and by inserting at the end the following flush material:

        ‘reduced by the number of percentage points determined under paragraph (8) for the calendar year for which such adjustment is being determined.’

      (2) LIMITATION ON INCREASES- Subsection (f) of section 1 of such Code is amended by adding at the end the following new paragraph:

      ‘(8) LIMITATION ON INCREASES IN CPI-

        ‘(A) IN GENERAL- The number of percentage points determined under this paragraph for any calendar year is--

          ‘(i) in the case of calendar years 1996, 1997, and 1998, 0.5 percentage point, and

          ‘(ii) in the case of calendar years 1999, 2000, 2001, and 2002, 0.3 percentage point.

        ‘(B) COMPUTATION OF BASE TO REFLECT LIMITATION- The Secretary shall adjust the number taken into account under paragraph (3)(B) so that any increase which is not taken into account by reason of subparagraph (A) shall not be taken into account at any time so as to allow such increase for any period.’

    (b) ADJUSTMENTS APPLICABLE TO CERTAIN ENTITLEMENT PROGRAMS-

      (1) IN GENERAL- For purposes of determining the amount of any cost-of-living adjustment which takes effect for benefits payable after December 31, 1995, with respect to any benefit described in paragraph (5)--

        (A) any increase in the relevant index (determined without regard to this subsection) shall be reduced by the number of percentage points determined under paragraph (2), and

        (B) the amount of the increase in such benefit shall be equal to the product of--

          (i) the increase in the relevant index (as reduced under subparagraph (A)), and

          (ii) the average such benefit for the preceding calendar year under the program described in paragraph (5) which provides such benefit.

      (2) LIMITATION ON INCREASES-

        (A) IN GENERAL- The number of percentage points determined under this paragraph for any calendar year is--

          (i) in the case of calendar years 1996, 1997, and 1998, 0.5 percentage point, and

          (ii) in the case of calendar years 1999, 2000, 2001, and 2002, 0.3 percentage point.

        (B) COMPUTATION OF BASE TO REFLECT LIMITATION- Any increase which is not taken into account by reason of subparagraph (A) shall not be taken into account at any time so as to allow such increase for any period.

      (3) PARAGRAPH (1) TO APPLY ONLY TO COMPUTATION OF BENEFIT AMOUNTS- Paragraph (1) shall apply only for purposes of determining the amount of benefits and not for purposes of determining--

        (A) whether a threshold increase in the relevant index has been met, or

        (B) increases in amounts under other provisions of law not described in paragraph (5) which operate by reference to increases in such benefits.

      (4) DEFINITIONS- For purposes of this subsection--

        (A) COST-OF-LIVING ADJUSTMENT- The term ‘cost-of-living adjustment’ means any adjustment in the amount of benefits described in paragraph (5) which is determined by reference to changes in an index.

        (B) INDEX-

          (i) INDEX- The term ‘index’ means the Consumer Price Index and any other index of price or wages.

          (ii) RELEVANT INDEX- The term ‘relevant index’ means the index on the basis of which the amount of the cost-of-living adjustment is determined.

      (5) BENEFITS TO WHICH SUBSECTION APPLIES- For purposes of this subsection, the benefits described in this paragraph are--

        (A) old age, survivors, and disability insurance benefits subject to adjustment under section 215(i) of the Social Security Act (but the limitation under paragraph (1) shall not apply to supplemental security income benefits under title XVI of such Act);

        (B) retired and retainer pay subject to adjustment under section 1401a of title 10, United States Code;

        (C) civil service retirement benefits under section 8340 of title 5, United States Code, foreign service retirement benefits under section 826 of the Foreign Service Act of 1980, Central Intelligence Agency retirement benefits under part J of the Central Intelligence Agency Retirement Act of 1964 for certain employees, and any other benefits under any similar provision under any retirement system for employees of the government of the United States;

        (D) Federal workers’ compensation under section 8146a of title 5, United States Code;

        (E) benefits under section 3(a), 4(a), or 4(f) of the Railroad Retirement Act of 1974; and

        (F) benefits and expenditure limits under title XVIII or XIX of the Social Security Act.

      (6) BENEFIT- For purposes of this section, the term ‘benefit’ includes a payment.

SEC. 6102. REDUCTION IN TITLE XX BLOCK GRANTS TO STATES FOR SOCIAL SERVICES.

    Section 2003(c) of the Social Security Act (42 U.S.C. 1397b(c)) is amended--

      (1) by striking ‘and’ at the end of paragraph (4);

      (2) in paragraph (5), by striking ‘fiscal year after fiscal year 1989.’ and inserting ‘of fiscal years 1990 through 1995; and’; and

      (3) by adding at the end the following:

      ‘(6) $2,520,000,000 for fiscal year 1996 and each succeeding fiscal year.’.

SEC. 6103. MATCHING RATE REQUIREMENT FOR TITLE XX BLOCK GRANTS TO STATES FOR SOCIAL SERVICES.

    Section 2002(a)(1) of the Social Security Act (42 U.S.C. 1397a(a)(1)) is amended by striking ‘Each State’ and all that follows through the period and inserting the following: ‘(A) Each State shall be entitled to payment under this title for each fiscal year in an amount equal to the lesser of--

      ‘(i) 80 percent of the total amount expended by the State during the fiscal year for services referred to in subparagraph (B); or

      ‘(ii) the allotment of the State for the fiscal year.

    ‘(B) A State to which a payment is made under this title shall use the payment for services directed at the goals set forth in section 2001, subject to the requirements of this title.’.

SEC. 6104. DENIAL OF UNEMPLOYMENT INSURANCE TO CERTAIN HIGH-INCOME INDIVIDUALS.

    (a) GENERAL RULE- Subsection (a) of section 3304 of the Internal Revenue Code of 1986, as amended by section 10101, is further amended by striking ‘and’ at the end of paragraph (18), by redesignating paragraph (19) as paragraph (20), and by inserting after paragraph (18) the following new paragraph:

      ‘(19) compensation shall not be payable to any individual for any benefit year if the taxable income of such individual for such individual’s most recent taxable year ending before the beginning of such benefit year exceeded $120,000; and’.

    (b) EFFECTIVE DATE-

      (1) IN GENERAL- Except as provided in paragraph (2), the amendment made by this section shall apply to benefit years beginning after December 31, 1995.

      (2) SPECIAL RULE- In the case of any State the legislature of which has not been in session for at least 30 calendar days (whether or not successive) between the date of the enactment of this Act and December 31, 1995, the amendments made by this section shall apply to benefit years beginning after the day 30 calendar days after the first day on which such legislature is in session on or after December 31, 1995.

SEC. 6105. DENIAL OF UNEMPLOYMENT INSURANCE TO INDIVIDUALS WHO VOLUNTARILY LEAVE MILITARY SERVICE.

    (a) GENERAL RULE- Paragraph (1) of section 8521(a) of title 5, United States Code, is amended to read as follows:

      ‘(1) ‘Federal service’ means active service (not including active duty in a reserve status unless for a continuous period of 45 days or more) in the armed forces or the commissioned corps of the National Oceanic and Atmospheric Administration if with respect to that service the individual--

        ‘(A) was discharged or released under honorable conditions,

        ‘(B) did not resign or voluntarily leave the service, and

        ‘(C) was not discharged or released for cause as defined by the Secretary of Defense;’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply in the case of a discharge or release after the date of the enactment of this Act.

TITLE VII--MEDICAID REFORM

Subtitle A--Per Capita Spending Limit

Title VII, Subtitle A

SEC. 7001. LIMITATION ON EXPENDITURES RECOGNIZED FOR PURPOSES OF FEDERAL FINANCIAL PARTICIPATION.

    (a) IN GENERAL- Title XIX of the Social Security Act is amended--

      (1) in section 1903(a), by striking ‘From’ and inserting ‘Subject to section 1931, from’;

      (2) by redesignating section 1931 as section 1932; and

      (3) by inserting after section 1930 the following new section:

‘LIMITATION ON FEDERAL FINANCIAL PARTICIPATION BASED ON PER BENEFICIARY SPENDING

    ‘SEC. 1931. (a) IN GENERAL- Subject to subsection (e), the total amount of State expenditures for medical assistance for which Federal financial participation may be made under section 1903(a) for quarters in a fiscal year (beginning with fiscal year 1997) may not exceed the sum of the following:

      ‘(1) NONDISABLED MEDICAID CHILDREN- The product of--

        ‘(A) the number of full-year equivalent nondisabled medicaid children (described in subsection (b)(1)) in the State in the fiscal year, and

        ‘(B) the per capita medical assistance limit established under subsection (c)(1) for such category of individuals for the fiscal year.

      ‘(2) NONDISABLED MEDICAID ADULTS- The product of--

        ‘(A) the number of full-year equivalent nondisabled medicaid adults (described in subsection (b)(2)) in the State in the fiscal year, and

        ‘(B) the per capita medical assistance limit established under subsection (c)(1) for such category individuals for the fiscal year.

      ‘(3) NONDISABLED ELDERLY MEDICAID BENEFICIARIES- The product of--

        ‘(A) the number of full-year equivalent nondisabled elderly medicaid beneficiaries (described in subsection (b)(3)) in the State in the fiscal year, and

        ‘(B) the per capita medical assistance limit established under subsection (c)(1) for such category of individuals for the fiscal year.

      ‘(4) DISABLED MEDICAID BENEFICIARIES- The product of--

        ‘(A) the number of full-year equivalent disabled medicaid beneficiaries (described in subsection (b)(4)) in the State in the fiscal year, and

        ‘(B) the per capita medical assistance limit established under subsection (c)(1) for such category individuals for the fiscal year.

      ‘(5) ADMINISTRATIVE EXPENDITURES- The product of--

        ‘(A) the number of full-year equivalent medicaid beneficiaries who are in any category of beneficiaries in the State in the fiscal year, and

        ‘(B) the per capita limit established under subsection (c)(1) for administrative expenditures for the fiscal year.

    This section shall not apply to expenditures for which no Federal financial participation is available under this title.

    ‘(b) DEFINITIONS RELATING TO CATEGORIES OF INDIVIDUALS- In this section:

      ‘(1) NONDISABLED MEDICAID CHILDREN- The term ‘nondisabled medicaid child’ means an individual entitled to medical assistance under the State plan under this title who is not disabled (as such term is used under paragraph (4)) and is under 21 years of age.

      ‘(2) NONDISABLED MEDICAID ADULTS- The term ‘nondisabled medicaid adult’ means an individual entitled to medical assistance under the State plan under this title who is not disabled (as such term is used under paragraph (4)) and is at least 21 years of age but under 65 years of age.

      ‘(3) NONDISABLED ELDERLY MEDICAID BENEFICIARY- The term ‘nondisabled medicaid adult’ means an individual entitled to medical assistance under the State plan under this title who is not disabled (as such term is used under paragraph (4)) and is at least 65 years of age.

      ‘(4) DISABLED MEDICAID BENEFICIARIES- The term ‘disabled medicaid beneficiary’ means an individual entitled to medical assistance under the State plan under this title who is entitled to such assistance solely on the basis of blindness or disability.

    For purposes of this section, nondisabled medicaid children, nondisabled medicaid adults, nondisabled elderly medicaid beneficiaries, and disabled medicaid beneficiaries each constitutes a separate category of medicaid beneficiaries.

    ‘(c) ESTABLISHMENT OF PER CAPITA LIMITS-

      ‘(1) IN GENERAL- The Secretary shall establish for each State a per capita medical assistance limit for each category of medicaid beneficiaries described in subsection (b) and for administrative expenditures for a fiscal year equal to the product of the following:

        ‘(A) PREVIOUS EXPENDITURES- The average of the amount of the per capita matchable medical assistance expenditures (determined under paragraph (2)(A)) for such category (or the per capita matchable adminstrative expenditures determined under paragraph (2)(B)) for such State for each of the 3 previous fiscal years.

        ‘(B) INFLATION FACTOR- The rolling 2-year CPI increase factor (determined under paragraph (3)(A)) for the fiscal year involved.

        ‘(C) TRANSITIONAL ALLOWANCE- The transitional allowance factor (if any) applicable under paragraph (3)(B) to such limit for the previous fiscal year and for the fiscal year involved.

      ‘(2) PER CAPITA MATCHABLE MEDICAL ASSISTANCE EXPENDITURES- For purposes of this section--

        ‘(A) MEDICAL ASSISTANCE EXPENDITURES- The ‘per capita matchable medical assistance expenditures’, for a category of medicaid beneficiaries for a State for a fiscal year, is equal to--

          ‘(i) the amount of expenditures for which Federal financial participation is (or may be) provided (consistent with this section) to the State under paragraphs (1) and (5) of section 1903(a) (other than expenditures excluded under subsection (e)) with respect to medical assistance furnished with respect to individuals in such category during the fiscal year, divided by

          ‘(ii) the number of full-year equivalent individuals in such category in the State in such fiscal year.

        ‘(B) PER CAPITA MATCHABLE ADMINISTRATIVE EXPENDITURES- The ‘per capita matchable administrative expenditures’, for a State for a fiscal year, is equal to--

          ‘(i) the amount of expenditures for which Federal financial participation is (or may be) provided (consistent with this section) to the State under section 1903(a) (under paragraphs (1) and (5) of such section) during the fiscal year, divided by

          ‘(ii) the number of full-year equivalent individuals in any category of medicaid beneficiary in the State in such fiscal year.

      ‘(3) INCREASE FACTORS- In this subsection--

        ‘(A) ROLLING 2-YEAR CPI INCREASE FACTOR- The ‘rolling 2-year CPI increase factor’ for a fiscal year is 1 plus the percentage by which--

          ‘(i) the Secretary’s estimate of the average value of the consumer price index for all urban consumers (all items, U.S. city average) for months in the particular fiscal year, exceeds

          ‘(ii) the average value of such index for months in the 3 previous fiscal years.

        ‘(B) TRANSITIONAL ALLOWANCE FACTORS-

          ‘(i) FISCAL YEAR 1996- The ‘transitional allowance factor’ for fiscal year 1996--

            ‘(I) for the category of nondisabled medicaid children, is 1.051;

            ‘(II) for the category of nondisabled medicaid adults, is 1.067;

            ‘(III) for the category of nondisabled elderly medicaid beneficiaries is 1.031;

            ‘(IV) for the category of disabled medicaid beneficiaries is 1.015; and

            ‘(V) for administrative expenditures is 1.046.

          ‘(ii) SUBSEQUENT FISCAL YEARS FOR NONDISABLED CHILDREN AND ADULTS AND FOR DISABLED CATEGORIES- The ‘transitional allowance factor’ for the categories of nondisabled medicaid children, nondisabled medicaid adults, and disabled medicaid beneficiaries--

            ‘(I) for fiscal year 1997 is 1.01, and

            ‘(II) for each subsequent fiscal year is 1.0.

          ‘(iii) SUBSEQUENT FISCAL YEARS FOR THE ELDERLY AND ADMINISTRATIVE EXPENDITURES- The ‘transitional allowance factor’ for the category of nondisabled elderly medicaid beneficiaries and for administrative expenditures for fiscal years after fiscal year 1996 is 1.0.

      ‘(4) NOTICE- The Secretary shall notify each State before the beginning of each fiscal year of the per capita limits established under this subsection for the State for the fiscal year.

    ‘(d) SPECIAL RULES AND EXCEPTIONS- For purposes of this section, expenditures attributable to any of the following shall not be subject to the limits established under this section and shall not be taken into account in establishing per capita medical assistance limits under subsection (c)(1):

      ‘(1) DSH- Payment adjustments under section 1923.

      ‘(2) MEDICARE COST-SHARING- Payments for medical assistance for medicare cost-sharing (as defined in section 1905(p)(3)).

      ‘(3) SERVICES THROUGH IHS AND TRIBAL PROVIDERS- Payments for medical assistance for services described in the last sentence of section 1905(b).

    Nothing in this section shall be construed as applying any limitation to expenditures for the purchase and delivery of qualified pediatric vaccines under section 1928.

    ‘(e) DEFINITIONS- In this section, the term ‘medicaid beneficiary’ means an individual entitled to medical assistance under the State plan under this title.

    ‘(f) ESTIMATIONS AND NOTICE-

      ‘(1) IN GENERAL- The Secretary shall--

        ‘(A) establish a process for estimating the limits established under subsection (a) for each State at the beginning of each fiscal year and adjusting such estimate during such year; and

        ‘(B) notifying each State of the estimations and adjustments referred to in subparagraph (A).

      ‘(2) DETERMINATION OF NUMBER OF FULL-YEAR EQUIVALENT INDIVIDUALS- For purposes of this section, the number of full-year equivalent individuals in each category described in subsection (b) for a State for a year shall be determined based on actual reports submitted by the State to the Secretary. In the case of individuals who were not entitled to benefits under a State plan for the entire fiscal year (or are within a group of individuals for only part of a fiscal year), the number shall take into account only the portion of the year in which they were so entitled or within such group. The Secretary may audit such reports.

    ‘(g) ANTI-GAMING ADJUSTMENT TO REFLECT CHANGES IN ELIGIBILITY-

      ‘(1) REPORT ON PER CAPITA EXPENDITURES- If a State makes a change (on or after October 15, 1995) relating to eligibility for medical assistance in its State plan that results in the addition or deletion of individuals eligible for such assistance, the State shall submit to the Secretary with such change such information as the Secretary may require in order to carry out paragraph (2).

      ‘(2) ADJUSTMENT FOR CERTAIN ADDITIONS- If a State makes a change described in paragraph (1) that the Secretary believes will result in making medical assistance available for additional individuals (within a category described in subsection (b)) with respect to whom the Secretary estimates the per capita average medical assistance expenditures will be less the applicable per capita limit established under subsection (c)(1) for such category, the Secretary shall apply the per capita limits under such subsection separately with respect to individuals who are eligible for medical assistance without regard to such addition and with respect to the individuals so added.

      ‘(3) ADJUSTMENT FOR CERTAIN DELETIONS- If a State makes a change described in paragraph (1) that the Secretary believes will result in denial of medical assistance for individuals (within a category described in subsection (b)) with respect to whom the Secretary estimates the per capita average medical assistance expenditures is greater than the applicable per capita limit established under subsection (c)(1) for such catetory, the Secretary shall adjust the payment limits under subsection (a) to reflect any decrease in average per beneficiary expenditures that would result from such change.

    ‘(h) TREATMENT OF STATES OPERATING UNDER WAIVERS- The Secretary shall provide for such adjustments to the per capita limits under subsection (c) for a fiscal year as may be appropriate to take into account the case of States which either--

      ‘(1) during any of the 3 previous fiscal years was providing medical assistance to its residents under a waiver granted under section 1115, section 1915, or other provision of law, and, in the fiscal year involved is no longer providing such medical assistance under such waiver; or

      ‘(2) during any of the 3 previous fiscal years was not providing medical assistance to its residents under a waiver granted under section 1115, section 1915, or other provision of law, and, in the fiscal year involved is providing such medical assistance under such a waiver.’.

    (b) ENFORCEMENT-RELATED PROVISIONS-

      (1) ASSURING ACTUAL PAYMENTS TO STATES CONSISTENT WITH LIMITATION- Section 1903(d) of such Act (42 U.S.C. 1396b(d)) is amended--

        (A) in paragraph (2)(A), by striking ‘The Secretary’ and inserting ‘Subject to paragraph (7), the Secretary’, and

        (B) by adding at the end the following new paragraph:

    ‘(7)(A) The Secretary shall take such steps as are necessary to assure that payments under this subsection for quarters in a fiscal year are consistent with the payment limits established under section 1931 for the fiscal year. Such steps may include limiting such payments for one or more quarters in a fiscal year based on--

      ‘(i) an appropriate proportion of the payment limits for the fiscal year involved, and

      ‘(ii) numbers of individuals within each category, as reported under subparagraph (B) for a recent previous quarter.

    ‘(B) Each State shall include, in its report filed under paragraph (1)(A) for a calendar quarter--

      ‘(i) the actual number of individuals within each category described in section 1931(b) for the second previous calendar quarter and (based on the data available) for the previous calendar quarter, and

      ‘(ii) an estimate of such numbers for the calendar quarter involved.’.

      (2) RESTRICTION ON AUTHORITY OF STATES TO APPLY LESS RESTRICTIVE INCOME AND RESOURCE METHODOLOGIES- Section 1902(r)(2) of such Act (42 U.S.C. 1396a(r)(2)) is amended by adding at the end the following new subparagraph:

    ‘(C) Subparagraph (A) shall not apply to plan amendments made on or after October 15, 1995.’.

    (c) CONFORMING AMENDMENT- Section 1903(i) of such Act (42 U.S.C. 1396b(i)) is amended--

      (1) by striking ‘or’ at the end of paragraph (14),

      (2) by striking the period at the end of paragraph (15) and inserting ‘; or’, and

      (3) by inserting after paragraph (15) the following:

      ‘(16) in accordance with section 1931, with respect to amounts expended to the extent they exceed applicable limits established under section 1931(a).’.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to payments for calendar quarters beginning on or after October 1, 1996.

Subtitle B--Medicaid Managed Care

Title VII, Subtitle B

SEC. 7101. PERMITTING GREATER FLEXIBILITY FOR STATES TO ENROLL BENEFICIARIES IN MANAGED CARE ARRANGEMENTS.

    (a) IN GENERAL- Title XIX of the Social Security Act (42 U.S.C. 1396 et seq.), as amended by section 7001(a), is amended--

      (1) by redesignating section 1932 as section 1933; and

      (2) by inserting after section 1931 the following new section:

‘STATE OPTIONS FOR ENROLLMENT OF BENEFICIARIES IN MANAGED CARE ARRANGEMENTS

    ‘SEC. 1932. (a) MANDATORY ENROLLMENT-

      ‘(1) IN GENERAL- Subject to the succeeding provisions of this section and notwithstanding paragraphs (1), (10)(B), and (23) of section 1902(a), a State may require an individual eligible for medical assistance under the State plan under this title to enroll with an eligible managed care provider as a condition of receiving such assistance and, with respect to assistance furnished by or under arrangements with such provider, to receive such assistance through the provider, if the following provisions are met:

        ‘(A) The provider meets the requirements of section 1933.

        ‘(B) The provider enters into a contract with the State to provide services for the benefit of individuals eligible for benefits under this title under which prepaid payments to such provider are made on an actuarially sound basis.

        ‘(C) There is sufficient capacity among all providers meeting such requirements to enroll and serve the individuals required to enroll with such providers.

        ‘(D) The individual is not a special needs individual (as defined in subsection (c)).

        ‘(E) The State--

          ‘(i) permits an individual to choose an eligible managed care provider--

            ‘(I) from among not less than 2 medicaid managed care plans; or

            ‘(II) between a medicaid managed care plan and a primary care case management provider;

          ‘(ii) provides the individual with the opportunity to change enrollment among eligible managed care providers not less than once annually and notifies the individual of such opportunity not later than 60 days prior to the first date on which the individual may change enrollment;

          ‘(iii) establishes a method for establishing enrollment priorities in the case of an eligible managed care provider that does not have sufficient capacity to enroll all such individuals seeking enrollment under which individuals already enrolled with the provider are given priority in continuing enrollment with the provider;

          ‘(iv) establishes a default enrollment process which meets the requirements described in paragraph (2) and under which any such individual who does not enroll with an eligible managed care provider during the enrollment period specified by the State shall be enrolled by the State with such a provider in accordance with such process; and

          ‘(v) establishes the sanctions provided for in section 1934.

      ‘(2) DEFAULT ENROLLMENT PROCESS REQUIREMENTS- The default enrollment process established by a State under paragraph (1)(E)(iv) shall--

        ‘(A) provide that the State may not enroll individuals with an eligible managed care provider which is not in compliance with the requirements of section 1933; and

        ‘(B) provide for an equitable distribution of individuals among all eligible managed care providers available to enroll individuals through such default enrollment process, consistent with the enrollment capacities of such providers.

    ‘(b) REENROLLMENT OF INDIVIDUALS WHO REGAIN ELIGIBILITY-

      ‘(1) IN GENERAL- If an individual eligible for medical assistance under a State plan under this title and enrolled with an eligible managed care provider with a contract under subsection (a)(1)(B) ceases to be eligible for such assistance for a period of not greater than 2 months, the State may provide for the automatic reenrollment of the individual with the provider as of the first day of the month in which the individual is again eligible for such assistance.

      ‘(2) CONDITIONS- Paragraph (1) shall only apply if--

        ‘(A) the month for which the individual is to be reenrolled occurs during the enrollment period covered by the individual’s original enrollment with the eligible managed care provider;

        ‘(B) the eligible managed care provider continues to have a contract with the State agency under subsection (a)(1)(B) as of the first day of such month; and

        ‘(C) the eligible managed care provider complies with the requirements of section 1933.

      ‘(3) NOTICE OF REENROLLMENT- The State shall provide timely notice to an eligible managed care provider of any reenrollment of an individual under this subsection.

    ‘(c) SPECIAL NEEDS INDIVIDUALS DESCRIBED- In this section, a ‘special needs individual’ means any of the following:

      ‘(1) SPECIAL NEEDS CHILD- An individual who is under 19 years of age who --

        ‘(A) is eligible for supplemental security income under title XVI;

        ‘(B) is described under section 501(a)(1)(D);

        ‘(C) is a child described in section 1902(e)(3); or

        ‘(D) is in foster care or is otherwise in an out-of-home placement.

      ‘(2) HOMELESS INDIVIDUALS- An individual who is homeless (without regard to whether the individual is a member of a family), including--

        ‘(A) an individual whose primary residence during the night is a supervised public or private facility that provides temporary living accommodations; or

        ‘(B) an individual who is a resident in transitional housing.

      ‘(3) MIGRANT AGRICULTURAL WORKERS- A migratory agricultural worker or a seasonal agricultural worker (as such terms are defined in section 329 of the Public Health Service Act), or the spouse or dependent of such a worker.

      ‘(4) INDIANS- An Indian (as defined in section 4(c) of the Indian Health Care Improvement Act (25 U.S.C. 1603(c))).’.

    (b) CONFORMING AMENDMENT- Section 1902(a)(23) of such Act (42 U.S.C. 1396a(a)(23)) is amended--

      (1) in the matter preceding subparagraph (A), by striking ‘subsection (g) and in section 1915’ and inserting ‘subsection (g), section 1915, and section 1931,’; and

      (2) in subparagraph (B)--

        (A) by striking ‘a health maintenance organization, or a’ and inserting ‘or with an eligible managed care provider, as defined in section 1933(g)(1), or’.

SEC. 7102. REMOVAL OF BARRIERS TO PROVISION OF MEDICAID SERVICES THROUGH MANAGED CARE.

    (a) REPEAL OF CURRENT BARRIERS- Except as provided in subsection (b), section 1903(m) of the Social Security Act (42 U.S.C. 1396b(m)) is repealed on the date of the enactment of this Act.

    (b) EXISTING CONTRACTS- In the case of any contract under section 1903(m) of such Act which is in effect on the day before the date of the enactment of this Act, the provisions of such section shall apply to such contract until the earlier of--

      (1) the day after the date of the expiration of the contract; or

      (2) the date which is 1 year after the date of the enactment of this Act.

    (c) ELIGIBLE MANAGED CARE PROVIDERS DESCRIBED- Title XIX of such Act (42 U.S.C. 1396 et seq.), as amended by sections 7001(a) and 7101(a), is amended--

      (1) by redesignating section 1933 as section 1934; and

      (2) by inserting after section 1932 the following new section:

‘ELIGIBLE MANAGED CARE PROVIDERS

    ‘SEC. 1933. (a) DEFINITIONS- In this section, the following definitions shall apply:

      ‘(1) ELIGIBLE MANAGED CARE PROVIDER- The term ‘eligible managed care provider’ means--

        ‘(A) a medicaid managed care plan; or

        ‘(B) a primary care case management provider.

      ‘(2) MEDICAID MANAGED CARE PLAN- The term ‘medicaid managed care plan’ means a health maintenance organization, an eligible organization with a contract under Section 1876, a provider sponsored network or any other plan which provides or arranges for the provision of one or more items and services to individuals eligible for medical assistance under the State plan under this title in accordance with a contract with the State under section 1932(a)(1)(B).

      ‘(3) PRIMARY CARE CASE MANAGEMENT PROVIDER-

        ‘(A) IN GENERAL- The term ‘primary care case management provider’ means a health care provider that--

          ‘(i) is a physician, group of physicians, a Federally-qualified health center, a rural health clinic, or an entity employing or having other arrangements with physicians that provides or arranges for the provision of one or more items and services to individuals eligible for medical assistance under the State plan under this title in accordance with a contract with the State under section 1932(a)(1)(B);

          ‘(ii) receives payment on a fee-for-service basis (or, in the case of a Federally-qualified health center or a rural health clinic, on a reasonable cost per encounter basis) for the provision of health care items and services specified in such contract to enrolled individuals;

          ‘(iii) receives an additional fixed fee per enrollee for a period specified in such contract for providing case management services (including approving and arranging for the provision of health care items and services specified in such contract on a referral basis) to enrolled individuals; and

          ‘(iv) is not an entity that is at risk.

        ‘(B) AT RISK- In subparagraph (A)(iv), the term ‘at risk’ means an entity that--

          ‘(i) has a contract with the State under which such entity is paid a fixed amount for providing or arranging for the provision of health care items or services specified in such contract to an individual eligible for medical assistance under the State plan and enrolled with such entity, regardless of whether such items or services are furnished to such individual; and

          ‘(ii) is liable for all or part of the cost of furnishing such items or services, regardless of whether such cost exceeds such fixed payment.

    ‘(b) ENROLLMENT-

      ‘(1) NONDISCRIMINATION- An eligible managed care provider may not discriminate on the basis of health status or anticipated need for services in the enrollment, reenrollment, or disenrollment of individuals eligible to receive medical assistance under a State plan under this title or by discouraging enrollment (except as permitted by this section) by eligible individuals.

      ‘(2) TERMINATION OF ENROLLMENT-

        ‘(A) IN GENERAL- An eligible managed care provider shall permit an individual eligible for medical assistance under the State plan under this title who is enrolled with the provider to terminate such enrollment for cause at any time, and without cause during the 60-day period beginning on the date the individual receives notice of enrollment, and shall notify each such individual of the opportunity to terminate enrollment under these conditions.

        ‘(B) FRAUDULENT INDUCEMENT OR COERCION AS GROUNDS FOR CAUSE- For purposes of subparagraph (A), an individual terminating enrollment with an eligible managed care provider on the grounds that the enrollment was based on fraudulent inducement or was obtained through coercion shall be considered to terminate such enrollment for cause.

        ‘(C) NOTICE OF TERMINATION-

          ‘(i) NOTICE TO STATE-

            ‘(I) BY INDIVIDUALS- Each individual terminating enrollment with an eligible managed care provider under subparagraph (A) shall do so by providing notice of the termination to an office of the State agency administering the State plan

under this title, the State or local welfare agency, or an office of an eligible managed care provider.

            ‘(II) BY PLANS- Any eligible managed care provider which receives notice of an individual’s termination of enrollment with such provider through receipt of such notice at an office of an eligible managed care provider shall provide timely notice of the termination to the State agency administering the State plan under this title.

          ‘(ii) NOTICE TO PLAN- The State agency administering the State plan under this title or the State or local welfare agency which receives notice of an individual’s termination of enrollment with an eligible managed care provider under clause (i) shall provide timely notice of the termination to such provider.

        ‘(D) REENROLLMENT- Each State shall establish a process under which an individual terminating enrollment under this paragraph shall be promptly enrolled with another eligible managed care provider and notified of such enrollment.

      ‘(3) PROVISION OF ENROLLMENT MATERIALS IN UNDERSTANDABLE FORM- Each eligible managed care provider shall provide all enrollment materials in a manner and form which may be easily understood by a typical adult enrollee of the provider who is eligible for medical assistance under the State plan under this title.

    ‘(c) QUALITY ASSURANCE-

      ‘(1) ACCESS TO SERVICES- Each eligible managed care provider shall provide or arrange for the provision of all medically necessary medical assistance under this title which is specified in the contract entered into between such provider and the State under section 1932(a)(1)(B) for enrollees who are eligible for medical assistance under the State plan under this title.

      ‘(2) TIMELY DELIVERY OF SERVICES- Each eligible managed care provider shall respond to requests from enrollees for the delivery of medical assistance in a manner which --

        ‘(A) makes such assistance --

          ‘(i) available and accessible to each such individual, within the area served by the provider, with reasonable promptness and in a manner which assures continuity; and

          ‘(ii) when medically necessary, available and accessible 24 hours a day and 7 days a week; and

        ‘(B) with respect to assistance provided to such an individual other than through the provider, or without prior authorization, in the case of a primary care case management provider, provides for reimbursement to the individual (if applicable under the contract between the State and the provider) if --

          ‘(i) the services were medically necessary and immediately required because of an unforeseen illness, injury, or condition; and

          ‘(ii) it was not reasonable given the circumstances to obtain the services through the provider, or, in the case of a primary care case management provider, with prior authorization.

      ‘(3) EXTERNAL INDEPENDENT REVIEW OF ELIGIBLE MANAGED CARE PROVIDER ACTIVITIES-

        ‘(A) REVIEW OF MEDICAID MANAGED CARE PLAN CONTRACT-

          ‘(i) IN GENERAL- Except as provided in subparagraph (B), each medicaid managed care plan shall be subject to an annual external independent review of the quality and timeliness of, and access to, the items and services specified in such plan’s contract with the State under section 1932(a)(1)(B). Such review shall specifically evaluate the extent to which the medicaid managed care plan provides such services in a timely manner.

          ‘(ii) CONTENTS OF REVIEW- An external independent review conducted under this paragraph shall include the following:

            ‘(I) a review of the entity’s medical care, through sampling of medical records or other appropriate methods, for indications of quality of care and inappropriate utilization (including overutilization) and treatment,

            ‘(II) a review of enrollee inpatient and ambulatory data, through sampling of medical records or other appropriate methods, to determine trends in quality and appropriateness of care,

            ‘(III) notification of the entity and the State when the review under this paragraph indicates inappropriate care, treatment, or utilization of services (including overutilization), and

            ‘(IV) other activities as prescribed by the Secretary or the State.

          ‘(iii) AVAILABILITY OF RESULTS- The results of each external independent review conducted under this subparagraph shall be available to participating health care providers, enrollees, and potential enrollees of the medicaid managed care plan, except that the results may not be made available in a manner that discloses the identity of any individual patient.

        ‘(B) DEEMED COMPLIANCE-

          ‘(i) MEDICARE PLANS- The requirements of subparagraph (A) shall not apply with respect to a medicaid managed care plan if the plan is an eligible organization with a contract in effect under section 1876.

          ‘(ii) PRIVATE ACCREDITATION-

            ‘(I) IN GENERAL- The requirements of subparagraph (A) shall not apply with respect to a medicaid managed care plan if --

‘(aa) the plan is accredited by an organization meeting the requirements described in clause (iii); and

‘(bb) the standards and process under which the plan is accredited meet such requirements as are established under subclause (II), without regard to whether or not the time requirement of such subclause is satisfied.

            ‘(II) STANDARDS AND PROCESS- Not later than 180 days after the date of the enactment of this Act, the Secretary shall specify requirements for the standards and process under which a medicaid managed care plan is accredited by an organization meeting the requirements of clause (iii).

          ‘(iii) ACCREDITING ORGANIZATION- An accrediting organization meets the requirements of this clause if the organization --

            ‘(I) is a private, nonprofit organization;

            ‘(II) exists for the primary purpose of accrediting managed care plans or health care providers; and

            ‘(III) is independent of health care providers or associations of health care providers.

        ‘(C) REVIEW OF PRIMARY CARE CASE MANAGEMENT PROVIDER CONTRACT- Each primary care case management provider shall be subject to an annual external independent review of the quality and timeliness of, and access to, the items and services specified in the contract entered into between the State and the primary care case management provider under section 1932(a)(1)(B).

      ‘(4) FEDERAL MONITORING RESPONSIBILITIES- The Secretary shall review the external independent reviews conducted pursuant to paragraph (3) and shall monitor the effectiveness of the State’s monitoring and followup activities required under subparagraph (A) of paragraph (2). If the Secretary determines that a State’s monitoring and followup activities are not adequate to ensure that the requirements of paragraph (2) are met, the Secretary shall undertake appropriate followup activities to ensure that the State improves its monitoring and followup activities.

      ‘(5) PROVIDING INFORMATION ON SERVICES-

        ‘(A) REQUIREMENTS FOR MEDICAID MANAGED CARE PLANS-

          ‘(i) INFORMATION TO THE STATE- Each medicaid managed care plan shall provide to the State (at such frequency as the Secretary may require), complete and timely information concerning the following:

            ‘(I) The services that the plan provides to (or arranges to be provided to) individuals eligible for medical assistance under the State plan under this title.

            ‘(II) The identity, locations, qualifications, and availability of participating health care providers.

            ‘(III) The rights and responsibilities of enrollees.

            ‘(IV) The services provided by the plan which are subject to prior authorization by the plan as a condition of coverage (in accordance with paragraph (6)(A)).

            ‘(V) The procedures available to an enrollee and a health care provider to appeal the failure of the plan to cover a service.

            ‘(VI) The performance of the plan in serving individuals eligible for medical assistance under the State plan under this title.

          ‘(ii) INFORMATION TO HEALTH CARE PROVIDERS, ENROLLEES, AND POTENTIAL ENROLLEES- Each medicaid managed care plan shall--

            ‘(I) upon request, make the information described in clause (i) available to participating health care providers, enrollees, and potential enrollees in the plan’s service area; and

            ‘(II) provide to enrollees and potential enrollees information regarding all items and services that are available to enrollees under the contract between the State and the plan that are covered either directly or through a method of referral and prior authorization.

        ‘(B) REQUIREMENTS FOR PRIMARY CARE CASE MANAGEMENT PROVIDERS- Each primary care case management provider shall--

          ‘(i) provide to the State (at such frequency as the Secretary may require), complete and timely information concerning the services that the primary care case management provider provides to (or arranges to be provided to) individuals eligible for medical assistance under the State plan under this title;

          ‘(ii) make available to enrollees and potential enrollees information concerning services available to the enrollee for which prior authorization by the primary care case management provider is required; and

          ‘(iii) provide enrollees and potential enrollees information regarding all items and services that are available to enrollees under the contract between the State and the primary care case management provider that are covered either directly or through a method of referral and prior authorization.

          ‘(iv) provide assurances that such entities and their professional personnel are licensed as required by State law and qualified to provide case management services, through methods such as ongoing monitoring of compliance with applicable requirements and providing information and technical assistance.

        ‘(C) REQUIREMENTS FOR BOTH MEDICAID MANAGED CARE PLANS AND PRIMARY CARE CASE MANAGEMENT PROVIDERS- Each eligible managed care provider shall provide the State with aggregate encounter data for early and periodic screening, diagnostic, and treatment services under section 1905(r) furnished to individuals under 21 years of age. Any such data provided may be audited by the State and the Secretary.

      ‘(6) TIMELINESS OF PAYMENT- An eligible managed care provider shall make payment to health care providers for items and services which are subject to the contract under section 1931(a)(1)(B) and which are furnished to individuals eligible for medical assistance under the State plan under this title who are enrolled with the provider on a timely basis and under the claims payment procedures described in section 1902(a)(37)(A), unless the health care provider and the eligible managed care provider agree to an alternate payment schedule.

      ‘(7) ADDITIONAL QUALITY ASSURANCE REQUIREMENTS FOR MEDICAID MANAGED CARE PLANS-

        ‘(A) CONDITIONS FOR PRIOR AUTHORIZATION- A medicaid managed care plan may require the approval of medical assistance for nonemergency services before the assistance is furnished to an enrollee only if the system providing for such approval--

          ‘(i) provides that such decisions are made in a timely manner, depending upon the urgency of the situation; and

          ‘(ii) permits coverage of medically necessary medical assistance provided to an enrollee without prior authorization in the event of an emergency.

        ‘(B) INTERNAL GRIEVANCE PROCEDURE- Each medicaid managed care plan shall establish an internal grievance procedure under which a plan enrollee or a provider on behalf of such an enrollee who is eligible for medical assistance under the State plan under this title may challenge the denial of coverage of or payment for such assistance.

        ‘(C) USE OF UNIQUE PHYSICIAN IDENTIFIER FOR PARTICIPATING PHYSICIANS- Each medicaid managed care plan shall require each physician providing services to enrollees eligible for medical assistance under the State plan under this title to have a unique identifier in accordance with the system established under section 1902(x).

        ‘(D) PATIENT ENCOUNTER DATA-

          ‘(i) IN GENERAL- Each medicaid managed care plan shall maintain sufficient patient encounter data to identify the health care provider who delivers services to patients and to otherwise enable the State plan to meet the requirements of section 1902(a)(27). The plan shall incorporate such information in the maintenance of patient encounter data with respect to such health care provider.

          ‘(ii) COMPLIANCE- A medicaid managed care plan shall--

            ‘(I) submit the data maintained under clause (i) to the State; or

            ‘(II) demonstrate to the State that the data complies with managed care quality assurance

guidelines established by the Secretary in accordance with clause (iii).

          ‘(iii) STANDARDS- In establishing managed care quality assurance guidelines under clause (ii)(II), the Secretary shall consider--

            ‘(I) managed care industry standards for--

‘(aa) internal quality assurance; and

‘(bb) performance measures; and

            ‘(II) any managed care quality standards established by the National Association of Insurance Commissioners.

        (E) PAYMENTS TO HOSPITALS- A medicaid managed care plan shall--

          ‘(i) provide the State with assurances that payments for hospital services are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide such services to individuals enrolled with the plan under this title in conformity with applicable State and Federal laws, regulations, and quality and safety standards;

          ‘(ii) report to the State at least annually--

            ‘(I) the rates paid to hospitals by the plan for items and services furnished to such individuals,

            ‘(II) an explanation of the methodology used to compute such rates, and

            ‘(III) a comparison of such rates with the rates used by the State to pay for hospital services furnished to individuals who are eligible for benefits under the program established by the State under this title but are not enrolled in a medicaid managed care plan; and

          ‘(iii) if the rates paid by the plan are lower than the rates paid by the State (as described in clause (ii)(III)), an explanation of why the rates paid by the plan nonetheless meet the standard described in clause (i).

    ‘(d) DUE PROCESS REQUIREMENTS FOR ELIGIBLE MANAGED CARE PROVIDERS-

      ‘(1) DENIAL OF OR UNREASONABLE DELAY IN DETERMINING COVERAGE AS GROUNDS FOR HEARING- If an eligible managed care provider--

        ‘(A) denies coverage of or payment for medical assistance with respect to an enrollee who is eligible for such assistance under the State plan under this title; or

        ‘(B) fails to make any eligibility or coverage determination sought by an enrollee or, in the case of a medicaid managed care plan, by a participating health care provider or enrollee, in a timely manner, depending upon the urgency of the situation, the enrollee or the health care provider furnishing such assistance to the enrollee (as applicable) may obtain a hearing before the State agency administering the State plan under this title in accordance with section 1902(a)(3), but only, with respect to a medicaid managed care plan, after completion of the internal grievance procedure established by the plan under subsection (c)(6)(B).

      ‘(2) COMPLETION OF INTERNAL GRIEVANCE PROCEDURE- Nothing in this subsection shall require completion of an internal grievance procedure if such procedure does not exist or if the procedure does not provide for timely review of health needs considered by the enrollee’s health care provider to be of an urgent nature.

    ‘(e) MISCELLANEOUS-

      ‘(1) PROTECTING ENROLLEES AGAINST THE INSOLVENCY OF ELIGIBLE MANAGED CARE PROVIDERS AND AGAINST THE FAILURE OF THE STATE TO PAY SUCH PROVIDERS- Each eligible managed care provider shall provide that an individual eligible for medical assistance under the State plan under this title who is enrolled with the provider may not be held liable--

        ‘(A) for the debts of the eligible managed care provider, in the event of the provider’s insolvency;

        ‘(B) for services provided to the individ-ual--

          ‘(i) in the event of the provider failing to receive payment from the State for such services; or

          ‘(ii) in the event of a health care provider with a contractual or other arrangement with the eligible managed care provider failing to receive payment from the State or the eligible managed care provider for such services; or

        ‘(C) for the debts of any health care provider with a contractual or other arrangement with the provider to provide services to the individual, in the event of the insolvency of the health care provider.

      ‘(2) TREATMENT OF CHILDREN WITH SPECIAL HEALTH CARE NEEDS-

        ‘(A) IN GENERAL- In the case of an enrollee of an eligible managed care provider who is a child with special health care needs--

          ‘(i) if any medical assistance specified in the contract with the State is identified in a treatment plan prepared for the enrollee by a program described in subparagraph (C), the eligible managed care provider shall provide (or arrange to be provided) such assistance in accordance with the treatment plan either--

            ‘(I) by referring the enrollee to a pediatric health care provider who is trained and experienced in the provision of such assistance and who has a contract with the eligible managed care provider to provide such assistance; or

            ‘(II) if appropriate services are not available through the eligible managed care provider, permitting such enrollee to seek appropriate specialty services from pediatric health care providers outside of or apart from the eligible managed care provider; and

          ‘(ii) the eligible managed care provider shall require each health care provider with whom the eligible managed care provider has entered into an agreement to provide medical assistance to enrollees to furnish the medical assistance specified in such enrollee’s treatment plan to the extent the health care provider is able to carry out such treatment plan.

        ‘(B) PRIOR AUTHORIZATION- An enrollee referred for treatment under subparagraph (A)(i)(I), or permitted to seek treatment outside of or apart from the eligible managed care provider under subparagraph (A)(i)(II) shall be deemed to have obtained any prior authorization required by the provider.

        ‘(C) CHILD WITH SPECIAL HEALTH CARE NEEDS- For purposes of subparagraph (A), a child with special health care needs is a child who is receiving services under--

          ‘(i) a program administered under part B or part H of the Individuals with Disabilities Education Act;

          ‘(ii) a program for children with special health care needs under title V;

          ‘(iii) a program under part B or part D of title IV; or

          ‘(iv) any other program for children with special health care needs identified by the Secretary.

      ‘(3) PHYSICIAN INCENTIVE PLANS- Each medicaid managed care plan shall require that any physician incentive plan covering

physicians who are participating in the medicaid managed care plan shall meet the requirements of section 1876(i)(8).

      ‘(4) INCENTIVES FOR HIGH QUALITY ELIGIBLE MANAGED CARE PROVIDERS- The Secretary and the State may establish a program to reward, through public recognition, incentive payments, or enrollment of additional individuals (or combinations of such rewards), eligible managed care providers that provide the highest quality care to individuals eligible for medical assistance under the State plan under this title who are enrolled with such providers. For purposes of section 1903(a)(7), proper expenses incurred by a State in carrying out such a program shall be considered to be expenses necessary for the proper and efficient administration of the State plan under this title.’.

    (d) CLARIFICATION OF APPLICATION OF FFP DENIAL RULES TO PAYMENTS MADE PURSUANT TO MEDICAID MANAGED CARE PLANS- Section 1903(i) of such Act (42 U.S.C. 1396b(i)) is amended by adding at the end the following sentence: ‘Paragraphs (1)(A), (1)(B), (2), (5), and (12) shall apply with respect to items or services furnished and amounts expended by or through an eligible managed care provider (as defined in section 1933(a)(1)) in the same manner as such paragraphs apply to items or services furnished and amounts expended directly by the State.’.

    (e) CLARIFICATION OF CERTIFICATION REQUIREMENTS FOR PHYSICIANS PROVIDING SERVICES TO CHILDREN AND PREGNANT WOMEN- Section 1903(i)(12) of such Act (42 U.S.C. 1396b(i)(12)) is amended --

      (1) in subparagraph (A)(i), to read as follows:

          ‘(i) is certified in family practice or pediatrics by the medical specialty board recognized by the American Board of Medical Specialties for family practice or pediatrics or is certified in general practice or pediatrics by the medical specialty board recognized by the American Osteopathic Association,’;

      (2) in subparagraph (B)(i), to read as follows:

          ‘(i) is certified in family practice or obstetrics by the medical specialty board recognized by the American Board of Medical Specialties for family practice or obstetrics or is certified in family practice or obstetrics by the medical specialty board recognized by the American Osteopathic Association,’; and

      (3) in both subparagraphs (A) and (B) --

        (A) by striking ‘or’ at the end of clause (v);

        (B) by redesignating clause (vi) as clause (vii); and

        (C) by inserting after clause (v) the following new clause:

          ‘(vi) delivers such services in the emergency department of a hospital participating in the State plan approved under this title, or’.

SEC. 7103. ADDITIONAL REQUIREMENTS FOR MEDICAID MANAGED CARE PLANS.

    Section 1933 of the Social Security Act, as added by section 7102(c)(2), is amended --

      (1) by redesignating subsections (d) and (e) as subsections (e) and (f), respectively; and

      (2) by inserting after subsection (c) the following new subsection:

    ‘(d) ADDITIONAL REQUIREMENTS FOR MEDICAID MANAGED CARE PLANS-

      ‘(1) DEMONSTRATION OF ADEQUATE CAPACITY AND SERVICES-

        ‘(A) IN GENERAL- Subject to subparagraph (C), each medicaid managed care plan shall provide the State and the Secretary with adequate assurances (as determined by the Secretary) that the plan, with respect to a service area --

          ‘(i) has the capacity to serve the expected enrollment in such service area;

          ‘(ii) offers an appropriate range of services for the population expected to be enrolled in such service area, including transportation services and translation services consisting of the principal languages spoken in the service area;

          ‘(iii) maintains sufficient numbers of providers of services included in the contract with the State to ensure that services are available to individuals receiving medical assistance and enrolled in the plan to the same extent that such services are available to individuals enrolled in the plan who are not recipients of medical assistance under the State plan under this title;

          ‘(iv) maintains extended hours of operation with respect to primary care services that are beyond those maintained during a normal business day;

          ‘(v) provides preventive and primary care services in locations that are readily accessible to members of the community; and

          ‘(vi) provides information concerning educational, social, health, and nutritional services offered by other programs for which enrollees may be eligible.

          ‘(vii) complies with such other requirements relating to access to care as the Secretary or the State may impose.

        ‘(B) PROOF OF ADEQUATE PRIMARY CARE CAPACITY AND SERVICES- Subject to subparagraph (C), a medicaid managed care plan that contracts with a reasonable number of primary care providers (as determined by the Secretary) and whose primary care membership includes a reasonable number (as so determined) of the following providers will be deemed to have satisfied the requirements of subparagraph (A):

          ‘(i) Rural health clinics, as defined in section 1905(l)(1).

          ‘(ii) Federally-qualified health centers, as defined in section 1905(l)(2)(B).

          ‘(iii) Clinics which are eligible to receive payment for services provided under title X of the Public Health Service Act.

        ‘(C) SUFFICIENT PROVIDERS OF SPECIALIZED SERVICES- Notwithstanding subparagraphs (A) and (B), a medicaid managed care plan may not be considered to have satisfied the requirements of subparagraph (A) if the plan does not have a sufficient number (as determined by the Secretary) of providers of specialized services, including perinatal and pediatric specialty care, to ensure that such services are available and accessible.

      ‘(2) WRITTEN PROVIDER PARTICIPATION AGREEMENTS FOR CERTAIN PROVIDERS- Each medicaid managed care plan that enters into a written provider participation agreement with a provider described in paragraph (1)(B) shall --

        ‘(A) include terms and conditions that are no more restrictive than the terms and conditions that the medicaid managed care plan includes in its agreements with other participating providers with respect to --

          ‘(i) the scope of covered services for which payment is made to the provider;

          ‘(ii) the assignment of enrollees by the plan to the provider;

          ‘(iii) the limitation on financial risk or availability of financial incentives to the provider;

          ‘(iv) accessibility of care;

          ‘(v) professional credentialing and recredentialing;

          ‘(vi) licensure;

          ‘(vii) quality and utilization management;

          ‘(viii) confidentiality of patient records;

          ‘(ix) grievance procedures; and

          ‘(x) indemnification arrangements between the plans and providers; and

        ‘(B) provide for payment to the provider on a basis that is comparable to the basis on which other providers are paid.’.

SEC. 7104. PREVENTING FRAUD IN MEDICAID MANAGED CARE.

    (a) IN GENERAL- Section 1933 of the Social Security Act, as added by section 7102(c)(2) and amended by section 7103, is amended--

      (1) by redesignating subsection (f) as subsection (g); and

      (2) by inserting after subsection (e) the following new subsection:

    ‘(f) ANTI-FRAUD PROVISIONS-

      ‘(1) PROVISIONS APPLICABLE TO ELIGIBLE MANAGED CARE PROVIDERS-

        ‘(A) PROHIBITING AFFILIATIONS WITH INDIVIDUALS DEBARRED BY FEDERAL AGENCIES-

          ‘(i) IN GENERAL- An eligible managed care provider may not knowingly--

            ‘(I) have a person described in clause (iii) as a director, officer, partner, or person with beneficial ownership of more than 5 percent of the plan’s equity; or

            ‘(II) have an employment, consulting, or other agreement with a person described in clause (iii) for the provision of items and services that are significant and material to the organization’s obligations under its contract with the State.

          ‘(ii) EFFECT OF NONCOMPLIANCE- If a State finds that an eligible managed care provider is not in compliance with subclause (I) or (II) of clause (i), the State--

            ‘(I) shall notify the Secretary of such noncompliance;

            ‘(II) may continue an existing agreement with the provider unless the Secretary (in consultation with the Inspector General of the Department of Health and Human Services) directs otherwise; and

            ‘(III) may not renew or otherwise extend the duration of an existing agreement with the provider unless the Secretary (in consultation with the Inspector General of the Department of Health and Human Services) provides to the State and to the Congress a written statement describing compelling reasons that exist for renewing or extending the agreement.

          ‘(iii) PERSONS DESCRIBED- A person is described in this clause if such person--

            ‘(I) is debarred or suspended by the Federal Government, pursuant to the Federal acquisition regulation, from Government contracting and subcontracting;

            ‘(II) is an affiliate (within the meaning of the Federal acquisition regulation) of a person described in clause (i); or

            ‘(III) is excluded from participation in any program under title XVIII or any State health care program, as defined in section 1128(h).

        ‘(B) RESTRICTIONS ON MARKETING-

          ‘(i) DISTRIBUTION OF MATERIALS-

            ‘(I) IN GENERAL- An eligible managed care provider may not distribute marketing materials within any State--

‘(aa) without the prior approval of the State; and

‘(bb) that contain false or materially misleading information.

            ‘(II) PROHIBITION- The State may not enter into or renew a contract with an eligible managed care provider for the provision of services to individuals enrolled under the State plan under this title if the State determines that the provider intentionally distributed false or materially misleading information in violation of subclause (I)(bb).

          ‘(ii) SERVICE MARKET- An eligible managed care provider shall distribute marketing materials to the entire service area of such provider.

          ‘(iii) PROHIBITION OF TIE-INS- An eligible managed care provider, or any agency of such provider, may not seek to influence an individual’s enrollment with the provider in conjunction with the sale of any other insurance.

          ‘(iv) PROHIBITING MARKETING FRAUD- Each eligible managed care provider shall comply with such procedures and conditions as the Secretary prescribes in order to ensure that, before an individual is enrolled with the provider, the individual is provided accurate and sufficient information to make an informed decision whether or not to enroll.

      ‘(2) PROVISIONS APPLICABLE ONLY TO MEDICAID MANAGED CARE PLANS-

        ‘(A) STATE CONFLICT-OF-INTEREST SAFEGUARDS IN MEDICAID RISK CONTRACTING- A medicaid managed care plan may not enter into a contract with any State under section 1932(a)(1)(B) unless the State has in effect conflict-of-interest safeguards with respect to officers and employees of the State with responsibilities relating to contracts with such plans or to the default enrollment process described in section 1932(a)(1)(D)(iv) that are at least as effective as the Federal safeguards provided under section 27 of the Office of Federal Procurement Policy Act (41 U.S.C. 423), against conflicts of interest that apply with respect to Federal procurement officials with comparable responsibilities with respect to such contracts.

        ‘(B) REQUIRING DISCLOSURE OF FINANCIAL INFORMATION- In addition to any requirements applicable under section 1902(a)(27) or 1902(a)(35), a medicaid managed care plan shall--

          ‘(i) report to the State (and to the Secretary upon the Secretary’s request) such financial information as the State or the Secretary may require to demonstrate that--

            ‘(I) the plan has the ability to bear the risk of potential financial losses and otherwise has a fiscally sound operation;

            ‘(II) the plan uses the funds paid to it by the State and the Secretary for activities consistent with the requirements of this title and the contract between the State and plan; and

            ‘(III) the plan does not place an individual physician, physician group, or other health care provider at substantial risk (as determined by the Secretary) for services not provided by such physician, group, or health care provider, by providing adequate protection (as determined by the Secretary) to limit the liability of such physician, group, or health care provider, through measures

such as stop loss insurance or appropriate risk corridors;

          ‘(ii) agree that the Secretary and the State (or any person or organization designated by either) shall have the right to audit and inspect any books and records of the plan (and of any subcontractor) relating to the information reported pursuant to clause (i) and any information required to be furnished under section paragraphs (27) or (35) of section 1902(a);

          ‘(iii) make available to the Secretary and the State a description of each transaction described in subparagraphs (A) through (C) of section 1318(a)(3) of the Public Health Service Act between the plan and a party in interest (as defined in section 1318(b) of such Act); and

          ‘(iv) agree to make available to its enrollees upon reasonable request --

            ‘(I) the information reported pursuant to clause (i); and

            ‘(II) the information required to be disclosed under sections 1124 and 1126.

        ‘(C) ADEQUATE PROVISION AGAINST RISK OF INSOLVENCY-

          ‘(i) ESTABLISHMENT OF STANDARDS- The Secretary shall establish standards, including appropriate equity standards, under which each medicaid managed care plan shall make adequate provision against the risk of insolvency.

          ‘(ii) CONSIDERATION OF OTHER STANDARDS- In establishing the standards described in clause (i), the Secretary shall consider solvency standards applicable to eligible organizations with a risk-sharing contract under section 1876.

          (iii) MODEL CONTRACT ON SOLVENCY- At the earliest practicable time after the date of enactment of this section, the Secretary shall issue guidelines and regulations concerning solvency standards for risk contracting entities and subcontractors of such risk contracting entities. Such guidelines and regulations shall take into account characteristics that may differ among risk contracting entities including whether such an entity is at risk for inpatient hospital services.

        ‘(D) REQUIRING REPORT ON NET EARNINGS AND ADDITIONAL BENEFITS- Each medicaid managed care plan shall submit a report to the State and the Secretary not later than 12 months after the close of a contract year containing --

          ‘(i) the most recent audited financial statement of the plan’s net earnings, in accordance with guidelines established by the Secretary in consultation with the States, and consistent with generally accepted accounting principles; and

          ‘(ii) a description of any benefits that are in addition to the benefits required to be provided under the contract that were provided during the contract year to members enrolled with the plan and entitled to medical assistance under the State plan under this title.’.

SEC. 7105. ASSURING ADEQUACY OF PAYMENTS TO MEDICAID MANAGED CARE PLANS AND PROVIDERS.

    Title XIX of the Social Security Act, as amended by sections 7001, 7101(a), and 7102(c), is further amended--

      (1) by redesignating section 1934 as section 1935; and

      (2) by inserting after section 1933 the following new section:

‘ASSURING ADEQUACY OF PAYMENTS TO MEDICAID MANAGED CARE PLANS AND PROVIDERS

    ‘SEC. 1934. As a condition of approval of a State plan under this title, a State shall--

      ‘(1) find, determine, and make assurances satisfactory to the Secretary that--

        ‘(A) the rates it pays medicaid managed care plans for individuals eligible under the State plan are reasonable and adequate to assure access to services meeting professionally recognized quality standards, taking into account--

          ‘(i) the items and services to which the rate applies,

          ‘(ii) the eligible population, and

          ‘(iii) the rate the State pays providers for such items and services; and

        ‘(B) the methodology used to adjust the rate adequately reflects the varying risks associated with individuals actually enrolling in each medicaid managed care plan; and

      ‘(2) report to the Secretary, at least annually, on--

        ‘(A) the rates the States pays to medicaid managed care plans, and

        ‘(B) the rates medicaid managed care plans pay for hospital services (and such other information as medicaid managed care plans are required to submit to the State pursuant to section 1933(c)(5)(E).’.

SEC. 7106. SANCTIONS FOR NONCOMPLIANCE BY ELIGIBLE MANAGED CARE PROVIDERS.

    (a) SANCTIONS DESCRIBED- Title XIX of such Act (42 U.S.C. 1396 et seq.), as previously amended, is further amended --

      (1) by redesignating section 1934 as section 1935; and

      (2) by inserting after section 1934 the following new section:

‘SANCTIONS FOR NONCOMPLIANCE BY ELIGIBLE MANAGED CARE PROVIDERS

    ‘SEC. 1935. (a) USE OF INTERMEDIATE SANCTIONS BY THE STATE TO ENFORCE REQUIREMENTS- Each State shall establish intermediate sanctions, which may include any of the types described in subsection (b) other than the termination of a contract with an eligible managed care provider, which the State may impose against an eligible managed care provider with a contract under section 1932(a)(1)(B) if the provider --

      ‘(1) fails substantially to provide medically necessary items and services that are required (under law or under such provider’s contract with the State) to be provided to an enrollee covered under the contract, if the failure has adversely affected (or has a substantial likelihood of adversely affecting) the enrollee;

      ‘(2) imposes premiums on enrollees in excess of the premiums permitted under this title;

      ‘(3) acts to discriminate among enrollees on the basis of their health status or requirements for health care services, including expulsion or refusal to reenroll an individual, except as permitted by sections 1932 and 1933, or engaging in any practice that would reasonably be expected to have the effect of denying or discouraging enrollment with the provider by eligible individuals whose medical condition or history indicates a need for substantial future medical services;

      ‘(4) misrepresents or falsifies information that is furnished

        ‘(A) to the Secretary or the State under section 1932 or 1933; or

        ‘(B) to an enrollee, potential enrollee, or a health care provider under such sections; or

      ‘(5) fails to comply with the requirements of section 1876(i)(8).

    ‘(b) INTERMEDIATE SANCTIONS- The sanctions described in this subsection are as follows:

      ‘(1) Civil money penalties as follows:

        ‘(A) Except as provided in subparagraph (B), (C), or (D), not more than $25,000 for each determination under subsection (a).

        ‘(B) With respect to a determination under paragraph (3) or (4)(A) of subsection (a), not more than $100,000 for each such determination.

        ‘(C) With respect to a determination under subsection (a)(2), double the excess amount charged in violation of such subsection (and the excess amount charged shall be deducted from the penalty and returned to the individual concerned).

        ‘(D) Subject to subparagraph (B), with respect to a determination under subsection (a)(3), $15,000 for each individual not enrolled as a result of a practice described in such subsection.

      ‘(2) The appointment of temporary management to oversee the operation of the eligible managed care provider and to assure the health of the provider’s enrollees, if there is a need for temporary management while--

        ‘(A) there is an orderly termination or reorganization of the eligible managed care provider; or

        ‘(B) improvements are made to remedy the violations found under subsection (a), except that temporary management under this paragraph may not be terminated until the State has determined that the eligible managed care provider has the capability to ensure that the violations shall not recur.

      ‘(3) Permitting individuals enrolled with the eligible managed care provider to terminate enrollment without cause, and notifying such individuals of such right to terminate enrollment.

    ‘(c) TREATMENT OF CHRONIC SUBSTANDARD PROVIDERS- In the case of an eligible managed care provider which has repeatedly failed to meet the requirements of section 1932 or 1933, the State shall (regardless of what other sanctions are provided) impose the sanctions described in paragraphs (2) and (3) of subsection (b).

    ‘(d) AUTHORITY TO TERMINATE CONTRACT- In the case of an eligible managed care provider which has failed to meet the requirements of section 1932 or 1933, the State shall have the authority to terminate its contract with such provider under section 1932(a)(1)(B) and to enroll such provider’s enrollees with other eligible managed care providers (or to permit such enrollees to receive medical assistance under the State plan under this title other than through an eligible managed care provider).

    ‘(e) AVAILABILITY OF SANCTIONS TO THE SECRETARY-

      ‘(1) INTERMEDIATE SANCTIONS- In addition to the sanctions described in paragraph (2) and any other sanctions available under law, the Secretary may provide for any of the sanctions described in subsection (b) if the Secretary determines that--

        ‘(A) an eligible managed care provider with a contract under section 1932(a)(1)(B) fails to meet any of the requirements of section 1932 or 1933; and

        ‘(B) the State has failed to act appropriately to address such failure.

      ‘(2) DENIAL OF PAYMENTS TO THE STATE- The Secretary may deny payments to the State for medical assistance furnished under the contract under section 1932(a)(1)(B) for individuals enrolled after the date the Secretary notifies an eligible managed care provider of a determination under subsection (a) and until the Secretary is satisfied that the basis for such determination has been corrected and is not likely to recur.

    ‘(f) DUE PROCESS FOR ELIGIBLE MANAGED CARE PROVIDERS-

      ‘(1) AVAILABILITY OF HEARING PRIOR TO TERMINATION OF CONTRACT- A State may not terminate a contract with an eligible managed care provider under section 1932(a)(1)(B) unless the provider is provided with a hearing prior to the termination.

      ‘(2) NOTICE TO ENROLLEES OF TERMINATION HEARING- A State shall notify all individuals enrolled with an eligible managed care provider which is the subject of a hearing to terminate the provider’s contract with the State of the hearing and that the enrollees may immediately disenroll with the provider for cause.

      ‘(3) OTHER PROTECTIONS FOR ELIGIBLE MANAGED CARE PROVIDERS AGAINST SANCTIONS IMPOSED BY STATE- Before imposing any sanction against an eligible managed care provider other than termination of the provider’s contract, the State shall provide the provider with notice and such other due process protections as the State may provide, except that a State may not provide an eligible managed care provider with a pretermination hearing before imposing the sanction described in subsection (b)(2).

      ‘(4) IMPOSITION OF CIVIL MONETARY PENALTIES BY SECRETARY- The provisions of section 1128A (other than subsections (a) and (b)) shall apply with respect to a civil money penalty imposed by the Secretary under subsection (b)(1) in the same manner as such provisions apply to a penalty or proceeding under section 1128A.’.

    (b) CONFORMING AMENDMENT RELATING TO TERMINATION OF ENROLLMENT FOR CAUSE- Section 1933(b)(2)(B) of the Social Security Act, as added by this part, is amended by inserting after ‘coercion’ the following: ‘, or pursuant to the imposition against the eligible managed care provider of the sanction described in section 1935(b)(3),’.

SEC. 7107. REPORT ON PUBLIC HEALTH SERVICES.

    (a) IN GENERAL- Not later than January 1, 1994, the Secretary of Health and Human Services (in this subtitle referred to as the ‘Secretary’) shall report to the Committee on Finance of the Senate and the Committee on Commerce of the House of Representatives on the effect of risk contracting entities (as defined in section 1932(a)(3) of the Social Security Act) and primary care case management entities (as defined in section 1932(a)(1) of such Act) on the delivery of and payment for the services listed in subsection (f)(2)(C)(ii) of section 1932 of such Act.

    (b) CONTENTS OF REPORT- The report referred to in subsection (a) shall include--

      (1) information on the extent to which enrollees with risk contracting entities and primary care case management programs seek services at local health departments, public hospitals, and other facilities that provide care without regard to a patient’s ability to pay;

      (2) information on the extent to which the facilities described in paragraph (1) provide services to enrollees with risk contracting entities and primary care case management programs without receiving payment;

      (3) information on the effectiveness of systems implemented by facilities described in paragraph (1) for educating such enrollees on services that are available through the risk contracting entities or primary care case management programs with which such enrollees are enrolled;

      (4) to the extent possible, identification of the types of services most frequently sought by such enrollees at such facilities; and

      (5) recommendations about how to ensure the timely delivery of the services listed in subsection (f)(2)(C)(ii) of section

1931 of the Social Security Act to enrollees of risk contracting entities and primary care case management entities and how to ensure that local health departments, public hospitals, and other facilities are adequately compensated for the provision of such services to such enrollees.

SEC. 7108. REPORT ON PAYMENTS TO HOSPITALS.

    (a) IN GENERAL- Not later than October 1 of each year, beginning with October 1, 1996, the Secretary and the Comptroller General shall analyze and submit a report to the Committee on Finance of the Senate and the Committee on Commerce of the House of Representatives on rates paid for hospital services under coordinated care programs described in section 1932 of the Social Security Act.

    (b) CONTENTS OF REPORT- The information in the report described in subsection (a) shall--

      (1) be organized by State, type of hospital, type of service, and

      (2) include a comparison of rates paid for hospital services under coordinated care programs with rates paid for hospital services furnished to individuals who are entitled to benefits under a State plan under title XIX of the Social Security Act and are not enrolled in such coordinated care programs.

    (c) REPORTS BY STATES- Each State shall transmit to the Secretary, at such time and in such manner as the Secretary determines appropriate, the information on hospital rates submitted to such State under section 1932(b)(3)(P) of such Act.

SEC. 7109. CONFORMING AMENDMENTS.

    (a) EXCLUSION OF CERTAIN INDIVIDUALS AND ENTITIES FROM PARTICIPATION IN PROGRAM- Section 1128(b)(6)(C) of the Social Security Act (42 U.S.C. 1320a-7(b)(6)(C)) is amended--

      (1) in clause (i), by striking ‘a health maintenance organization (as defined in section 1903(m))’ and inserting ‘an eligible managed care provider, as defined in section 1933(a)(1),’; and

      (2) in clause (ii), by inserting ‘section 1115 or’ after ‘approved under’.

    (b) STATE PLAN REQUIREMENTS- Section 1902 of such Act (42 U.S.C. 1396a) is amended--

      (1) in subsection (a)(30)(C), by striking ‘section 1903(m)’ and inserting ‘section 1932(a)(1)(B)’; and

      (2) in subsection (a)(57), by striking ‘hospice program, or health maintenance organization (as defined in section 1903(m)(1)(A))’ and inserting ‘or hospice program’;

      (3) in subsection (e)(2)(A), by striking ‘or with an entity described in paragraph (2)(B)(iii), (2)(E), (2)(G), or

      (6) of section 1903(m) under a contract described in section 1903(m)(2)(A);

      (4) in subsection (p)(2)--

        (A) by striking ‘a health maintenance organization (as defined in section 1903(m))’ and inserting ‘an eligible managed care provider, as defined in section 1933(a)(1),’;

        (B) by striking ‘an organization’ and inserting ‘a provider’; and

        (C) by striking ‘any organization’ and inserting ‘any provider’; and

      (5) in subsection (w)(1), by striking ‘sections 1903(m)(1)(A) and’ and inserting ‘section’.

    (c) PAYMENT TO STATES- Section 1903(w)(7)(A)(viii) of such Act (42 U.S.C. 1396b(w)(7)(A)(viii)) is amended to read as follows:

          ‘(viii) Services of an eligible managed care provider with a contract under section 1932(a)(1)(B).’.

    (d) USE OF ENROLLMENT FEES AND OTHER CHARGES- Section 1916 of such Act (42 U.S.C. 1396o) is amended in subsections (a)(2)(D) and (b)(2)(D) by striking ‘a health maintenance organization (as defined in section 1903(m))’ and inserting ‘an eligible managed care provider, as defined in section 1933(a)(1),’ each place it appears.

    (e) EXTENSION OF ELIGIBILITY FOR MEDICAL ASSISTANCE- Section 1925(b)(4)(D)(iv) of such Act (42 U.S.C. 1396r-6(b)(4)(D)(iv)) is amended to read as follows:

          ‘(iv) ENROLLMENT WITH ELIGIBLE MANAGED CARE PROVIDER- Enrollment of the caretaker relative and dependent children with an eligible managed care provider, as defined in section 1933(a)(1), less than 50 percent of the membership (enrolled on a prepaid basis) of which consists of individuals who are eligible to receive benefits under this title (other than because of the option offered under this clause). The option of enrollment under this clause is in addition to, and not in lieu of, any enrollment option that the State might offer under subparagraph (A)(i) with respect to receiving services through an eligible managed care provider in accordance with sections 1932, 1933, and 1934.’.

    (f) ASSURING ADEQUATE PAYMENT LEVELS FOR OBSTETRICAL AND PEDIATRIC SERVICES- Section 1926(a) of such Act (42 U.S.C. 1396r-7(a)) is amended in paragraphs (1) and (2) by striking ‘health maintenance organizations under section 1903(m)’ and inserting ‘eligible managed care providers under contracts entered into under section 1932(a)(1)(B)’ each place it appears.

    (g) PAYMENT FOR COVERED OUTPATIENT DRUGS- Section 1927(j)(1) of such Act (42 U.S.C. 1396r-8(j)(1)) is amended by striking ‘***Health Maintenance Organizations, including those organizations that contract under section 1903(m),’ and inserting ‘health maintenance organizations and medicaid managed care plans, as defined in section 1933(a)(2),’.

    (h) DEMONSTRATION PROJECTS TO STUDY EFFECT OF ALLOWING STATES TO EXTEND MEDICAID COVERAGE FOR CERTAIN FAMILIES- Section 4745(a)(5)(A) of the Omnibus Budget Reconciliation Act of 1990 (42 U.S.C. 1396a note) is amended by striking ‘(except section 1903(m)’ and inserting ‘(except sections 1932, 1933, and 1934)’.

SEC. 7110. EFFECTIVE DATE; STATUS OF WAIVERS.

    (a) EFFECTIVE DATE- Except as provided in subsection (b), the amendments made by this subtitle shall apply to medical assistance furnished--

      (1) during quarters beginning on or after October 1, 1996; or

      (2) in the case of assistance furnished under a contract described in section 7102(b), during quarters beginning after the earlier of--

        (A) the date of the expiration of the contract; or

        (B) the expiration of the 1-year period which begins on the date of the enactment of this Act.

    (b) APPLICATION TO WAIVERS-

      (1) EXISTING WAIVERS- If any waiver granted to a State under section 1115 or 1915 of the Social Security Act (42 U.S.C. 1315, 1396n) or otherwise which relates to the provision of medical assistance under a State plan under title XIX of the such Act (42 U.S.C. 1396 et seq.), is in effect or approved by the Secretary of Health and Human Services as of the applicable effective date described in subsection (a), the amendments made by this subtitle shall not apply with respect to the State before the expiration (determined without regard to any extensions) of the waiver to the extent such amendments are inconsistent with the terms of the waiver.

      (2) SECRETARIAL EVALUATION AND REPORT FOR EXISTING WAIVERS AND EXTENSIONS-

        (A) PRIOR TO APPROVAL- On and after the applicable effective date described in subsection (a), the Secretary, prior to extending any waiver granted under section 1115 or 1915 of the Social Security Act (42 U.S.C. 1315, 1396n) or otherwise which relates to the provision of medical

assistance under a State plan under title XIX of the such Act (42 U.S.C. 1396 et seq.), shall--

          (i) conduct an evaluation of--

            (I) the waivers existing under such sections or other provision of law as of the date of the enactment of this Act; and

            (II) any applications pending, as of the date of the enactment of this Act, for extensions of waivers under such sections or other provision of law; and

          (ii) submit a report to the Congress recommending whether the extension of a waiver under such sections or provision of law should be conditioned on the State submitting the request for an extension complying with the provisions of sections 1932, 1933, and 1934 of the Social Security Act (as added by this subtitle).

        (B) DEEMED APPROVAL- If the Congress has not enacted legislation based on a report submitted under subparagraph (A)(ii) within 120 days after the date such report is submitted to the Congress, the recommendations contained in such report shall be deemed to be approved by the Congress.

Subtitle C--Additional Reforms of Medicaid Acute Care Program

Title VII, Subtitle C

SEC. 7201. PERMITTING INCREASED FLEXIBILITY IN MEDICAID COST-SHARING.

    (a) IN GENERAL- Subsections (a)(3) and (b)(3) of section 1916 of the Social Security Act (42 U.S.C. 1396o) are amended by striking everything that follows ‘other care and services’ and inserting the following: ‘will be established pursuant to a public schedule of charges and will be adjusted to reflect the income, resources, and family size of the individual provided the item or service.’.

    (b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to items and services furnished on or after the first day of the first calendar quarter beginning after the date of the enactment of this Act.

SEC. 7202. LIMITS ON REQUIRED COVERAGE OF ADDITIONAL TREATMENT SERVICES UNDER EPSDT.

    (a) REGULATIONS- The Secretary of Health and Human Services shall define, by regulation promulgated after consultation with States and organizations representing health care providers, those treatment services (in addition to those otherwise covered under a State plan under title XIX of the Social Security Act) that must be covered under section 1905(r)(5) of such Act.

    (b) CONSTRUCTION- Nothing in subsection (a) shall be construed as limiting the scope of such treatment services a State may cover under such section.

SEC. 7203. DELAY IN APPLICATION OF NEW REQUIREMENTS.

    (a) Delay in Implementation-

      (1) IN GENERAL- Notwithstanding any other provision of law, no change in law--

        (A) which has the effect of imposing a requirement on a State under a State plan under title XIX of the Social Security Act, and

        (B) with respect to the Secretary of Health and Human Services is required to issue regulations to carry out such requirement,

      shall take effect until the date the Secretary promulgates such regulation as a final regulation.

      (2) STATE OPTION- Except as otherwise provided by the Secretary, a State may elect to have a change in a law described in paragraph (1) apply with respect to the State during the period (or portion thereof) in which the change would have taken effect but for paragraph (1).

    (b) Prohibition of Changes in Final Regulations During a Fiscal Year-

      (1) IN GENERAL- Except as provided in paragraph (2), any change in a regulation of the Secretary of Health and Human Services relating to the medicaid program under title XIX of the Social Security Act shall not become effective until the beginning of the fiscal year following the fiscal year in which the change was promulgated.

      (2) STATE OPTION- Except as otherwise provided by the Secretary, a State may elect to have a change in a regulation described in paragraph (1) apply with respect to the State during the period (or portion thereof) in which the change would have taken effect but for paragraph (1).

    (c) SENSE OF CONGRESS REGARDING FEDERAL PAYMENT FOR NEW MEDICAID MANDATES- It is the sense of Congress that if a State is required by future legislation to provide for additional services, eligible individuals, or otherwise incur additional costs under its medicaid program under title XIX of the Social Security Act, the Federal Government shall provide for full payment of any such additional costs for at least the first two years in which such requirement applies.

SEC. 7204. DEADLINE ON ACTION ON WAIVERS.

    (a) IN GENERAL- In considering applications for medicaid waivers--

      (1) the application shall be deemed granted unless the Secretary of Health and Human Services, within ninety days after the date of the submission of the application of the Secretary, either denies the application in writing or informs the applicant in writing with respect to any additional information which is needed in order to make a final determination with respect to the application, and

      (2) after the date the Secretary receives such additional information, the application shall be deemed granted unless the Secretary within ninety days of such date, denies such application.

    (b) MEDICAID WAIVERS- In this section, the term ‘medicaid waiver’ means the request of a State for a waiver of a provision of title XIX of the Social Security Act (or of another provision of law that applies to State plans under such title), and includes such a waiver under the authority of section 1115 or section 1915 of the Social Security Act or under section 222 of the Social Security Amendments of 1972 and section 402(a) of the Social Security Amendments of 1967.

Subtitle D--National Commission on Medicaid Restructuring

Title VII, Subtitle D

SEC. 7301. ESTABLISHMENT OF COMMISSION.

    (a) IN GENERAL- There is hereby established the National Commission on Medicaid Restructuring (in this subtitle referred to as the ‘Commission’).

    (b) COMPOSITION- The Commission shall be composed as follows:

      (1) 2 FEDERAL OFFICIALS- The President shall appoint 2 Federal officials, one of whom the President shall designate as chairperson of the Commission.

      (2) 4 MEMBERS OF CONGRESS- (A) The Speaker of the House of Representatives shall appoint one Member of the House as a member.

      (B) The minority leader of the House of Representatives shall appoint one Member of the House as a member.

      (C) The majority leader of the Senate shall appoint one Member of the Senate as a member.

      (D) The minority leader of the Senate shall appoint one Member of the Senate as a member.

      (3) 6 STATE GOVERNMENT REPRESENTATIVES- (A) The majority leaders of the House of Representatives and the Senate shall jointly appoint 3 individuals who are governors, State legislators, or State medicaid officials.

      (B) The minority leaders of the House of Representatives and the Senate shall jointly appoint 3 individuals who are governors, State legislators, or State medicaid officials.

      (4) 6 EXPERTS- (A) The majority leaders of the House of Representatives and the Senate shall jointly appoint 4 individuals who are not officials of the Federal or State governments and who have expertise in a health-related field, such as medicine, public health, or delivery and financing of health care services.

      (B) The President shall appoint 2 individuals who are not officials of the Federal or State governments and who have expertise in a health-related field, such as medicine, public health, or delivery and financing of health care services.

    (c) INITIAL APPOINTMENT- Members of the Commission shall first be appointed by not later than February 1, 1996.

    (d) COMPENSATION AND EXPENSES-

      (1) COMPENSATION- Each member of the Commission shall serve without compensation.

      (2) TRAVEL EXPENSES- Members of the Commission shall be allowed travel expenses, including per diem in lieu of subsistence, at rates authorized for employees of agencies under subchapter I of chapter 57 of title 5, United States Code, while away from their homes or regular places of business in the performance of services for the Commission.

SEC. 7302. DUTIES OF COMMISSION.

    (a) STUDY OF MEDICAID PROGRAM-

      (1) IN GENERAL- The Commission shall study and make recommendations to the Congress, the President, and the Secretary regarding the need for changes (in addition to the changes effected under this title) in the laws and regulations regarding the medicaid program under title XIX of the Social Security Act.

      (2) SPECIFIC CONCERNS- The Commission shall specifically address each of the following:

        (A) Changes needed to ensure adequate access to health care for low-income individuals.

        (B) Promotion of quality care.

        (C) Deterrence of fraud and abuse.

        (D) Providing States with additional flexibility in implementing their medicaid plans.

        (E) Methods of containing Federal and State costs.

    (b) REPORTS-

      (1) FIRST REPORT- The Commission shall issue a first report to Congress by not later than December 31, 1996.

      (2) SUBSEQUENT REPORTS- The Commission shall issue subsequent reports to Congress by not later than December 31, 1997, and December 31, 1998.

SEC. 7303. ADMINISTRATION.

    (a) APPOINTMENT OF STAFF-

      (1) EXECUTIVE DIRECTOR- The Commission shall have an Executive Director who shall be appointed by the Chairperson with the approval of the Commission. The Executive Director shall be paid at a rate not to exceed the rate of basic pay payable for level III of the Executive Schedule.

      (2) STAFF- With the approval of the Commission, the Executive Director may appoint and determine the compensation of such staff as may be necessary to carry out the duties of the Commission. Such appointments and compensation may be made without regard to the provisions of title 5, United States Code, that govern appointments in the competitive services, and the provisions of chapter 51 and subchapter III of chapter 53 of such title that relate to classifications and the General Schedule pay rates.

      (3) CONSULTANTS- The Commission may procure such temporary and intermittent services of consultants under section 3109(b) of title 5, United States Code, as the Commission determines to be necessary to carry out the duties of the Commission.

    (b) PROVISION OF ADMINISTRATIVE SUPPORT SERVICES BY HHS- Upon the request of the Commission, the Secretary of Health and Human Services shall provide to the Commission on a reimbursable basis such administrative support services as the Commission may request.

SEC. 7304. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated to carry out this subtitle $3,000,000 for fiscal year 1996, $4,000,000 for each of fiscal years 1997 and 1998, and $2,000,000 for fiscal year 1999.

SEC. 7305. TERMINATION.

    The Commission shall terminate on December 31, 1998.

Subtitle E--Restrictions on Disproportionate Share Payments

SEC. 7401. REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER STATE MEDICAID PROGRAMS.

    (a) TARGETING PAYMENTS- Section 1923 of the Social Security Act (42 U.S.C.1396r-3) is amended--

      (1) in subsection (a)(1)--

Title VII, Subtitle E

        (A) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii),

        (B) by striking ‘(1)’ and inserting ‘(1)(A)’,

        (C) in clause (i) (as so redesignated) by striking ‘(b)(1)’ and inserting ‘(b)(1)(A)’, and

        (D) by adding at the end the following:

    ‘(B) A State plan under this title shall not be considered to meet the requirement of section 1902(a)(13)(A) (insofar as it requires payments to hospitals to take into account the situation of hospitals that serve a disproportionate number of low-income patients with special needs), as of July 1, 1996, unless the State has submitted to the Secretary, by not later than such date, an amendment to such plan that utilizes the definition of such hospitals specified in subsection (b)(1)(B) in lieu of the definition established by the State under subparagraph (a)(i).’;

      (2) in subsection (a)(2)(A)--

        (A) by inserting ‘(i)’ after ‘(2)(A)’,

        (B) by striking ‘paragraph (1)’ and inserting ‘paragraph (1)(A)(i)’, and

        (C) by adding at the end the following:

    ‘(ii) In order to be considered to have met such requirement of section 1902(a)(13)(A) as of July 1, 1996, the State must submit to the Secretary by not later than April 1, 1996, the State plan amendment described in paragraph (1)(B), consistent with subsection (c), effective for inpatient hospital services furnished on or after July 1, 1996.’;

      (3) in subsection (b)--

        (A) in the heading, by striking ‘HOSPITALS DEEMED DISPROPORTIONATE SHARE’ and inserting ‘DISPROPORTIONATE SHARE HOSPITALS’,

        (B) in paragraph (1)--

          (i) by redesignating subparagraphs (A) and (B) as clauses (i) and (ii),

          (ii) by striking ‘(1) For purposes of subsection (a)(1)’ and inserting ‘(1)(A) For purposes of subsection (a)(1)(A)’, and

          (iii) by adding at the end the following:

    ‘(B) For purposes of subsection (a)(1)(B), a hospital that meets the requirements of subsection (d) is a disproportionate share hospital only if--

      ‘(i) in the case of a hospital that is not described in subsection (d)(2)(A)(i), the hospital’s low-income utilization rate (as defined in paragraph (3)) exceeds 25 percent; or

      ‘(ii) in the case of a hospital that is described in subsection (d)(2)(A)(i)--

        ‘(I) the hospital meets the requirement of clause (i), or

        ‘(II) the hospital’s medicaid inpatient utilization rate (as defined in paragraph (2)) exceeds 20 percent.’;

        (C) in paragraph (2) by striking ‘(1)(A)’ and inserting ‘(1)’,

        (D) in paragraph (3) by striking ‘(1)(B)’ and inserting ‘(1)’, and

        (E) by striking paragraph (4);

      (4) in subsection (c)--

        (A) in paragraph (2), by striking ‘subparagraph (A) or (B) of subsection (b)(1)’ and inserting ‘clause (i) or (ii) of subsection (b)(1)(A)’,

        (B) by striking paragraph (3), and

        (C) in the matter following paragraph (3)--

          (i) by striking ‘(1)(B)’ each place it appears and inserting ‘(1)(A)(ii)’, and

          (ii) by striking ‘(2)(A)’ each place it appears and inserting ‘(2)(A)(i)’ ; and

      (5) in subsection (e)--

        (A) in paragraph (1)(C), by striking ‘meets the requirement of subsection (d)(3)’ and inserting ‘makes payments under this section only to hospitals described in subsection (b)(1)(B)’, and

        (B) in paragraph (2)--

          (i) by inserting ‘and’ at the end of subparagraph (B), and

          (ii) by striking subparagraph (C).

    (b) DIRECT PAYMENT BY STATE- Section 1923(a) of such Act (42 U.S.C. 1396r-4(a)), as amended by subsection (a), is further amended--

      (1) in paragraph (1), by adding at the end the following

    ‘(C) A State plan under this title shall not be considered to meet the requirement of section 1902(a)(13)(A) (insofar as it requires payments to hospitals to take into account the situation of hospitals that serve a disproportionate number of low-income patients with special needs), as of July 1, 1996, unless the State provides that any payments made under this section with respect to individuals who are--

      ‘(i) entitled to benefits under the State plan, and

      ‘(ii) enrolled with a health maintenance organization or other managed care plan,

    are, at the option of the hospital, made directly to such hospital by the State.’; and

      (2) in paragraph (2)(A)(ii), by striking ‘amendment described in paragraph (1)(B)’ and inserting ‘amendments described in subparagraphs (B) and (C) of paragraph (1)’.

    (c) ADJUSTMENT TO NATIONAL DSH LIMIT; STATE ALLOCATIONS-

      (1) IN GENERAL- Section 1923(f) (42 U.S.C. 1396r-4(f)) is amended--

        (A) in paragraph (1)(B), by striking ‘for a fiscal year’ and all that follows and inserting the following: ‘for--

          ‘(i) each of fiscal years 1997 and 1998, is $6.5 billion,

          ‘(ii) each of fiscal years 1999 and 2000, is $5.5 billion,

          ‘(iii) each succeeding fiscal year is $5.0 billion.’;

        (B) by striking subparagraphs (D) and (E) of paragraph (1); and

        (C) by amending paragraph (2) to read as follows:

      ‘(2) DETERMINATION OF STATE DSH ALLOTMENTS-

        ‘(A) IN GENERAL- The State DSH allotment for a fiscal year is equal to the State’s share (as determined under subparagraph (B)) of the national DSH limit for the fiscal year established under paragraph (1)(B).

        ‘(B) STATE SHARE- For purposes of subparagraph (A), the ‘State share’ is equal to the ratio of--

          ‘(i) the total number low-income patient days (as defined in subparagraph (C)) for all hospitals described in subsection (b)(1)(B) in the State for the fiscal year, to

          ‘(ii) the total number of such low-income patient days for all such hospitals for all States for the fiscal year.

        The Secretary shall determine the State share based on the Secretary’s best estimate of patient days and hospitals.

        ‘(C) LOW-INCOME PATIENT DAY-

          ‘(i) IN GENERAL- For purposes of this paragraph, the term ‘low-income patient day’ means, for a hospital, a patient day (as defined in clause (ii)) attributable to an individual who either is eligible for medical assistance under the State plan or has no health insurance (or other source of third party coverage) for services furnished by the hospital.

          ‘(ii) PATIENT DAYS DEFINED- For purposes of this subparagraph, the term ‘patient day’ includes each day in which--

            ‘(I) an individual (including a new-born) is an inpatient in the hospital, whether or not the individual is in a specialized ward and whether or not the individual remains in the hospital for lack of suitable placement elsewhere, and

            ‘(II) an individual makes one or more outpatient visits to the hospital.’.

      (2) EFFECTIVE DATE- The amendments made by paragraph (1) shall apply to fiscal years beginning with fiscal year 1997.

    (d) EFFECTIVE DATE- Except as provided in subsection (c)(2), the amendments made by this section shall apply to payments to States under section 1903(a) of the Social Security Act for payments to hospitals made under State plans after--

      (1) July 1, 1996, or

      (2) in the case of a State with a State legislature that is not scheduled to have a regular legislative session in 1996, July 1, 1997.

Subtitle F--Fraud Reduction

Title VII, Subtitle F

SEC. 7501. MONITORING PAYMENTS FOR DUAL ELIGIBLES.

    The Administrator of the Health Care Financing Administration shall develop mechanisms to better monitor and prevent inappropriate payments under the medicaid program in the case of individuals who are dually eligible for benefits under such program and under the medicare program.

SEC. 7502. IMPROVED IDENTIFICATION SYSTEMS.

    The Administrator of the Health Care Financing Administration shall develop improved mechanisms, such as picture identification documents and smart documents, to provide methods of improved identification and tracking of beneficiaries and providers that perpetrate fraud against the medicaid program.

TITLE VIII--MEDICARE

Title VIII

SEC. 8000. SHORT TITLE; REFERENCES IN TITLE.

    (a) SHORT TITLE OF TITLE- This title may be cited as the ‘Medicare Preservation Act of 1995’.

    (b) AMENDMENTS TO SOCIAL SECURITY ACT- Except as otherwise specifically provided, whenever in this title an amendment is expressed in terms of an amendment to or repeal of a section or other provision, the reference shall be considered to be made to that section or other provision of the Social Security Act.

    (c) REFERENCES TO OBRA- In this title, the terms ‘OBRA-1986’, ‘OBRA-1987’, ‘OBRA-1989’, ‘OBRA-1990’, and ‘OBRA-1993’ refer to the Omnibus Budget Reconciliation Act of 1986 (Public Law 99-509), the Omnibus Budget Reconciliation Act of 1987 (Public Law 100-203), the Omnibus Budget Reconciliation Act of 1989 (Public Law 101-239), the Omnibus Budget Reconciliation Act of 1990 (Public Law 101-508), and the Omnibus Budget Reconciliation Act of 1993 (Public Law 103-66), respectively.

Subtitle A--Medicare Choice Program

Title VIII, Subtitle A

PART 1--INCREASING CHOICE UNDER THE MEDICARE PROGRAM

SEC. 8001. INCREASING CHOICE UNDER MEDICARE.

    (a) IN GENERAL- Title XVIII is amended by inserting after section 1804 the following new section:

‘PROVIDING FOR CHOICE OF COVERAGE

    ‘SEC. 1805. (a) CHOICE OF COVERAGE-

      ‘(1) IN GENERAL- Subject to the provisions of this section, every individual who is entitled to benefits under part A and enrolled under part B shall elect to receive benefits under this title through one of the following:

        ‘(A) THROUGH FEE-FOR-SERVICE SYSTEM- Through the provisions of parts A and B.

        ‘(B) THROUGH A MEDICARE CHOICE PRODUCT- Through a Medicare Choice product (as defined in paragraph (2)), which may be--

          ‘(i) a product offered by a provider-sponsored organization,

          ‘(ii) a product offered by an organization that is a union, Taft-Hartley plan, or association, or

          ‘(iii) a product providing for benefits on a fee-for-service or other basis.

        Such a product may be a high deductible/medisave product (and a contribution into a Medicare Choice medical savings account (MSA)) under the demonstration project provided under section 1859.

      ‘(2) MEDICARE CHOICE PRODUCT DEFINED- For purposes of this section and part C, the term ‘Medicare Choice product’ means health benefits coverage offered under a policy, contract, or plan by a Medicare Choice organization (as defined in section 1851(a)) pursuant to and in accordance with a contract under section 1858.

      ‘(3) TERMINOLOGY RELATING TO OPTIONS- For purposes of this section and part C--

        ‘(A) NON-MEDICARE-CHOICE OPTION- An individual who has made the election described in paragraph (1)(A) is considered to have elected the ‘Non-Medicare Choice option’.

        ‘(B) MEDICARE CHOICE OPTION- An individual who has made the election described in paragraph (1)(B) to obtain coverage through a Medicare Choice product is considered to have elected the ‘Medicare Choice option’ for that product.

    ‘(b) SPECIAL RULES-

      ‘(1) RESIDENCE REQUIREMENT- Except as the Secretary may otherwise provide, an individual is eligible to elect a Medicare Choice product offered by a Medicare Choice organization only if the organization in relation to the product serves the geographic area in which the individual resides.

      ‘(2) AFFILIATION REQUIREMENTS FOR CERTAIN PRODUCTS-

        ‘(A) IN GENERAL- Subject to subparagraph (B), an individual is eligible to elect a Medicare Choice product offered by a limited enrollment Medicare Choice organization (as defined in section 1852(c)(4)(D)) only if--

          ‘(i) the individual is eligible under section 1852(c)(4) to make such election, and

          ‘(ii) in the case of a Medicare Choice organization that is a union sponsor or Taft-Hartley sponsor (as defined in section 1852(c)(4)), the individual elected under this section a Medicare Choice product offered by the sponsor during the first enrollment period in which the individual was eligible to make such election with respect to such sponsor.

        ‘(B) NO REELECTION AFTER DISENROLLMENT FOR CERTAIN PRODUCTS- An individual is not eligible to elect a Medicare Choice product offered by a Medicare Choice organization that is a union sponsor or Taft-Hartley sponsor if the individual previously had elected a Medicare Choice product offered by the organization and had subsequently discontinued to elect such a product offered by the organization.

    ‘(c) PROCESS FOR EXERCISING CHOICE-

      ‘(1) IN GENERAL- The Secretary shall establish a process through which elections described in subsection (a) are made and changed, including the form and manner in which such elections are made and changed. Such elections shall be made or changed only during coverage election periods specified under subsection (e) and shall become effective as provided in subsection (f).

      ‘(2) EXPEDITED IMPLEMENTATION- The Secretary shall establish the process of electing coverage under this section during the transition period (as defined in subsection (e)(1)(B)) in such an expedited manner as will permit such an election for Medicare Choice products in an area as soon as such products become available in that area.

      ‘(3) COORDINATION THROUGH MEDICARE CHOICE ORGANIZATIONS-

        ‘(A) ENROLLMENT- Such process shall permit an individual who wishes to elect a Medicare Choice product offered by a Medicare Choice organization to make such election through the filing of an appropriate election form with the organization.

        ‘(B) DISENROLLMENT- Such process shall permit an individual, who has elected a Medicare Choice product offered by a Medicare Choice organization and who wishes to terminate such election, to terminate such election through the filing of an appropriate election form with the organization.

      ‘(4) DEFAULT-

        ‘(A) INITIAL ELECTION-

          ‘(i) IN GENERAL- Subject to clause (ii), an individual who fails to make an election during an initial election period under subsection (e)(1) is deemed to have chosen the Non-Medicare Choice option.

          ‘(ii) SEAMLESS CONTINUATION OF COVERAGE- The Secretary shall establish procedures under which individuals who are enrolled with a Medicare Choice

organization at the time of the initial election period and who fail to elect to receive coverage other than through the organization are deemed to have elected an appropriate Medicare Choice product offered by the organization.

        ‘(B) CONTINUING PERIODS- An individual who has made (or deemed to have made) an election under this section is considered to have continued to make such election until such time as--

          ‘(i) the individual changes the election under this section, or

          ‘(ii) a Medicare Choice product is discontinued, if the individual had elected such product at the time of the discontinuation.

      ‘(5) AGREEMENTS WITH COMMISSIONER OF SOCIAL SECURITY TO PROMOTE EFFICIENT ADMINISTRATION- In order to promote the efficient administration of this section and the Medicare Choice program under part C, the Secretary may enter into an agreement with the Commissioner of Social Security under which the Commissioner performs administrative responsibilities relating to enrollment and disenrollment in Medicare Choice products under this section.

    ‘(d) PROVISION OF BENEFICIARY INFORMATION TO PROMOTE INFORMED CHOICE-

      ‘(1) IN GENERAL- The Secretary shall provide for activities under this subsection to disseminate broadly information to medicare beneficiaries (and prospective medicare beneficiaries) on the coverage options provided under this section in order to promote an active, informed selection among such options. Such information shall be made available on such a timely basis (such as 6 months before the date an individual would first attain eligibility for medicare on the basis of age) as to permit individuals to elect the Medicare Choice option during the initial election period described in subsection (e)(1).

      ‘(2) USE OF NONFEDERAL ENTITIES- The Secretary shall, to the maximum extent feasible, enter into contracts with appropriate non-Federal entities to carry out activities under this subsection.

      ‘(3) SPECIFIC ACTIVITIES- In carrying out this subsection, the Secretary shall provide for at least the following activities in all areas in which Medicare Choice products are offered:

        ‘(A) INFORMATION BOOKLET-

          ‘(i) IN GENERAL- The Secretary shall publish an information booklet and disseminate the booklet to all individuals eligible to elect the Medicare Choice option under this section during coverage election periods.

          ‘(ii) INFORMATION INCLUDED- The booklet shall include information presented in plain English and in a standardized format regarding--

            ‘(I) the benefits (including cost-sharing) and premiums for the various Medicare Choice products in the areas involved;

            ‘(II) the quality of such products, including consumer satisfaction information; and

            ‘(III) rights and responsibilities of medicare beneficiaries under such products.

          ‘(iii) PERIODIC UPDATING- The booklet shall be updated on a regular basis (not less often than once every 12 months) to reflect changes in the availability of Medicare Choice products and the benefits and premiums for such products.

        ‘(B) TOLL-FREE NUMBER- The Secretary shall maintain a toll-free number for inquiries regarding Medicare Choice options and the operation of part C.

        ‘(C) GENERAL INFORMATION IN MEDICARE HANDBOOK- The Secretary shall include information about the Medicare Choice option provided under this section in the annual notice of medicare benefits under section 1804.

    ‘(e) COVERAGE ELECTION PERIODS-

      ‘(1) INITIAL CHOICE UPON ELIGIBILITY TO MAKE ELECTION-

        ‘(A) IN GENERAL- In the case of an individual who first becomes entitled to benefits under part A and enrolled under part B after the beginning of the transition period (as defined in subparagraph (B)), the individual shall make the election under this section during a period (of a duration and beginning at a time specified by the Secretary) at the first time the individual both is entitled to benefits under part A and enrolled under part B. Such period shall be specified in a manner so that, in the case of an individual who elects a Medicare Choice product during the period, coverage under the product becomes effective as of the first date on which the individual may receive such coverage.

        ‘(B) TRANSITION PERIOD DEFINED- In this subsection, the term ‘transition period’ means, with respect to an individual in an area, the period beginning on the first day of the first month in which a Medicare Choice product is first made available to individuals in the area and ending with the month preceding the beginning of the first annual, coordinated election period under paragraph (3).

      ‘(2) DURING TRANSITION PERIOD- Subject to paragraph (6)--

        ‘(A) CONTINUOUS OPEN ENROLLMENT INTO A MEDICARE CHOICE OPTION- During the transition period, an individual who is eligible to make an election under this section and who has elected the non-Medicare Choice option may change such election to a Medicare Choice option at any time.

        ‘(B) OPEN DISENROLLMENT BEFORE END OF TRANSITION PERIOD- During the transition period, an individual who has elected a Medicare Choice option for a Medicare Choice product may change such election to another Medicare Choice product or to the non-Medicare Choice option.

      ‘(3) ANNUAL, COORDINATED ELECTION PERIOD-

        ‘(A) IN GENERAL- Subject to paragraph (5), each individual who is eligible to make an election under this section may change such election during annual, coordinated election periods.

        ‘(B) ANNUAL, COORDINATED ELECTION PERIOD- For purposes of this section, the term ‘annual, coordinated election period’ means, with respect to a calendar year (beginning with 1998), the month of October before such year.

        ‘(C) MEDICARE CHOICE HEALTH FAIR DURING OCTOBER, 1996- In the month of October, 1996, the Secretary shall provide for a nationally coordinated educational and publicity campaign to inform individuals, who are eligible to elect Medicare Choice products, about such products and the election process provided under this section (including the annual, coordinated election periods that occur in subsequent years).

      ‘(4) SPECIAL 90-DAY DISENROLLMENT OPTION-

        ‘(A) IN GENERAL- In the case of the first time an individual elects a Medicare Choice option under this section, the individual may discontinue such election through the filing of an appropriate notice during the 90-day period beginning on the first day on which the individual’s coverage under the Medicare Choice product under such option becomes effective.

        ‘(B) EFFECT OF DISCONTINUATION OF ELECTION- An individual who discontinues an election under this paragraph shall be deemed at the time of such discontinuation to have elected the Non-Medicare Choice option.

      ‘(5) SPECIAL ELECTION PERIODS- An individual may discontinue an election of a Medicare Choice product offered by a Medicare Choice organization other than during an annual, coordinated election period and make a new election under this section if--

        ‘(A) the organization’s or product’s certification under part C has been terminated or the organization has terminated or otherwise discontinued providing the product;

        ‘(B) in the case of an individual who has elected a Medicare Choice product offered by a Medicare Choice organization, the individual is no longer eligible to elect the product because of a change in the individual’s place of residence or other change in circumstances (specified by the Secretary, but not including termination of membership in a qualified association in the case of a product offered by a qualified association or termination of the individual’s enrollment on the basis described in clause (i) or (ii) section 1852(c)(3)(B));

        ‘(C) the individual demonstrates (in accordance with guidelines established by the Secretary) that--

          ‘(i) the organization offering the product substantially violated a material provision of the organization’s contract under part C in relation to the individual and the product; or

          ‘(ii) the organization (or an agent or other entity acting on the organization’s behalf) materially misrepresented the product’s provisions in marketing the product to the individual; or

        ‘(D) the individual meets such other conditions as the Secretary may provide.

    ‘(f) EFFECTIVENESS OF ELECTIONS-

      ‘(1) DURING INITIAL COVERAGE ELECTION PERIOD- An election of coverage made during the initial coverage election period under subsection (e)(1)(A) shall take effect upon the date the individual becomes entitled to benefits under part A and enrolled under part B, except as the Secretary may provide (consistent with section 1838) in order to prevent retroactive coverage.

      ‘(2) DURING TRANSITION; 90-DAY DISENROLLMENT OPTION- An election of coverage made under subsection (e)(2) and an election to discontinue a Medicare Choice option under subsection (e)(4) at any time shall take effect with the first calendar month following the date on which the election is made.

      ‘(3) ANNUAL, COORDINATED ELECTION PERIOD AND MEDISAVE ELECTION- An election of coverage made during an annual, coordinated election period (as defined in subsection (e)(3)(B)) in a year shall take effect as of the first day of the following year.

      ‘(4) OTHER PERIODS- An election of coverage made during any other period under subsection (e)(5) shall take effect in such manner as the Secretary provides in a manner consistent (to the extent practicable) with protecting continuity of health benefit coverage.

    ‘(g) EFFECT OF ELECTION OF MEDICARE CHOICE OPTION- Subject to the provisions of section 1855(f), payments under a contract with a Medicare Choice organization under section 1858(a) with respect to an individual electing a Medicare Choice product offered by the organization shall be instead of the amounts which (in the absence of the contract) would otherwise be payable under parts A and B for items and services furnished to the individual.

    ‘(h) DEMONSTRATION PROJECTS- The Secretary shall conduct demonstration projects to test alternative approaches to coordinated open enrollments in different markets, including different annual enrollment periods and models of rolling open enrollment periods. The Secretary may waive previous provisions of this section in order to carry out such projects.’.

SEC. 8002. MEDICARE CHOICE PROGRAM.

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

‘Part C--Provisions Relating to Medicare Choice

‘REQUIREMENTS FOR MEDICARE CHOICE ORGANIZATIONS

    ‘SEC. 1851. (a) MEDICARE CHOICE ORGANIZATION DEFINED- In this part, subject to the succeeding provisions of this section, the term ‘Medicare Choice organization’ means a public or private entity that is certified under section 1857 as meeting the requirements and standards of this part for such an organization.

    ‘(b) ORGANIZED AND LICENSED UNDER STATE LAW-

      ‘(1) IN GENERAL- A Medicare Choice organization shall be organized and licensed under State law to offer health insurance or health benefits coverage in each State in which it offers a Medicare Choice product.

      ‘(2) EXCEPTION FOR UNION AND TAFT-HARTLEY SPONSORS- Paragraph (1) shall not apply to an Medicare Choice organization that is a union sponsor or Taft-Hartley sponsor (as defined in section 1852(c)(4)).

      ‘(3) EXCEPTION FOR PROVIDER-SPONSORED ORGANIZATIONS- Subject to paragraph (5), paragraph (1) shall not apply to a Medicare Choice organization that is a provider-sponsored organization (as defined in section 1854(a)).

      ‘(4) EXCEPTION FOR QUALIFIED ASSOCIATIONS- Paragraph (1) shall not apply to a Medicare Choice organization that is a qualified association (as defined in section 1852(c)(4)(B)).

      ‘(5) LIMITATION- Effective on and after January 1, 2000, paragraph (1) shall only apply (and paragraph (3) shall no longer apply) to a Medicare Choice organization in a State if the standards for licensure of the organization under the law of the State are identical to the standards established under section 1856(b).

    ‘(c) PREPAID PAYMENT- A Medicare Choice organization shall be compensated (except for deductibles, coinsurance, and copayments) for the provision of health care services to enrolled members by a payment which is paid on a periodic basis without regard to the date the health care services are provided and which is fixed without regard to the frequency, extent, or kind of health care service actually provided to a member.

    ‘(d) ASSUMPTION OF FULL FINANCIAL RISK- The Medicare Choice organization shall assume full financial risk on a prospective basis for the provision of the health care services (other than hospice care) for which benefits are required to be provided under section 1852(a)(1), except that the organization--

      ‘(1) may obtain insurance or make other arrangements for the cost of providing to any enrolled member such services the aggregate value of which exceeds $5,000 in any year,

      ‘(2) may obtain insurance or make other arrangements for the cost of such services provided to its enrolled members other than through the organization because medical necessity required their provision before they could be secured through the organization,

      ‘(3) may obtain insurance or make other arrangements for not more than 90 percent of the amount by which its costs for any of its fiscal years exceed 115 percent of its income for such fiscal year, and

      ‘(4) may make arrangements with physicians or other health professionals, health care institutions, or any combination of such individuals or institutions to assume all or part of the financial risk on a prospective basis for the provision of basic health services by the physicians or other health professionals or through the institutions.

    In the case of a Medicare Choice organization that is a union sponsor or Taft-Hartley sponsor (as defined in section 1852(c)(4)) or a

qualified association (as defined in section 1852(c)(4)(B)), this subsection shall not apply with respect to Medicare Choice products offered by such organization and issued by an organization to which subsection (b)(1) applies or by a provider-sponsored organization (as defined in section 1854(a)).

    ‘(e) PROVISION AGAINST RISK OF INSOLVENCY-

      ‘(1) IN GENERAL- Each Medicare Choice organization shall meet standards under section 1856 relating to the financial solvency and capital adequacy of the organization. Such standards shall take into account the nature and type of Medicare Choice products offered by the organization.

      ‘(2) TREATMENT OF TAFT-HARTLEY SPONSORS- An entity that is a Taft-Hartley sponsor is deemed to meet the requirement of paragraph (1).

      ‘(3) TREATMENT OF CERTAIN QUALIFIED ASSOCIATIONS- An entity that is a qualified association is deemed to meet the requirement of paragraph (1) with respect to Medicare Choice products offered by such association and issued by an organization to which subsection (b)(1) applies or by a provider-sponsored organization.

    ‘(f) ORGANIZATIONS TREATED AS MEDICAREPLUS ORGANIZATIONS DURING TRANSITION- Any of the following organizations shall be considered to qualify as a MedicarePlus organization for contract years beginning before January 1, 1997:

      ‘(1) HEALTH MAINTENANCE ORGANIZATIONS- An organization that is organized under the laws of any State and that is a qualified health maintenance organization (as defined in section 1310(d) of the Public Health Service Act), an organization recognized under State law as a health maintenance organization, or a similar organization regulated under State law for solvency in the same manner and to the same extent as such a health maintenance organization.

      ‘(2) LICENSED INSURERS- An organization that is organized under the laws of any State and--

        ‘(A) is licensed by a State agency as an insurer for the offering of health benefit coverage, or

        ‘(B) is licensed by a State agency as a service benefit plan,

      but only for individuals residing in an area in which the organization is licensed to offer health insurance coverage.

      ‘(3) CURRENT RISK-CONTRACTORS- An organization that is an eligible organization (as defined in section 1876(b)) and that has a risk-sharing contract in effect under section 1876 as of the date of the enactment of this section.

‘REQUIREMENTS RELATING TO BENEFITS, PROVISION OF SERVICES, ENROLLMENT, AND PREMIUMS

    ‘SEC. 1852. (a) BENEFITS COVERED-

      ‘(1) IN GENERAL- Each Medicare Choice product offered under this part shall provide benefits for at least the items and services for which benefits are available under parts A and B consistent with the standards for coverage of such items and services applicable under this title.

      ‘(2) ORGANIZATION AS SECONDARY PAYER- Notwithstanding any other provision of law, a Medicare Choice organization may (in the case of the provision of items and services to an individual under this part under circumstances in which payment under this title is made secondary pursuant to section 1862(b)(2)) charge or authorize the provider of such services to charge, in accordance with the charges allowed under such law or policy--

        ‘(A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or

        ‘(B) such individual to the extent that the individual has been paid under such law, plan, or policy for such services.

      ‘(3) SATISFACTION OF REQUIREMENT- A Medicare Choice product offered by a Medicare Choice organization satisfies paragraph (1) with respect to benefits for items and services if the following requirements are met:

        ‘(A) FEE FOR SERVICE PROVIDERS- In the case of benefits furnished through a provider that does not have a contract with the organization, the product provides for at least the dollar amount of payment for such items and services as would otherwise be provided under parts A and B.

        ‘(B) PARTICIPATING PROVIDERS- In the case of benefits furnished through a provider that has such a contract, the individual’s liability for payment for such items and services does not exceed (after taking into account any deductible, which does not exceed any deductible under parts A and B) the lesser of the following:

          ‘(i) NON-MEDICARE CHOICE LIABILITY- The amount of the liability that the individual would have had (based on the provider being a participating provider) if the individual had elected the non-Medicare Choice option.

          ‘(ii) MEDICARE COINSURANCE APPLIED TO PRODUCT PAYMENT RATES- The applicable coinsurance or copayment rate (that would have applied under the non-Medicare Choice option) of the payment rate provided under the contract.

    ‘(b) ANTIDISCRIMINATION- A Medicare Choice organization may not deny, limit, or condition the coverage or provision of benefits under this part based on the health status, claims experience, receipt of health care, medical history, or lack of evidence of insurability, of an individual.

    ‘(c) GUARANTEED ISSUE AND RENEWAL-

      ‘(1) IN GENERAL- Except as provided in this subsection, a Medicare Choice organization shall provide that at any time during which elections are accepted under section 1805 with respect to a Medicare Choice product offered by the organization, the organization will accept without restrictions individuals who are eligible to make such election.

      ‘(2) PRIORITY- If the Secretary determines that a Medicare Choice organization, in relation to a Medicare Choice product it offers, has a capacity limit and the number of eligible individuals who elect the product under section 1805 exceeds the capacity limit, the organization may limit the election of individuals of the product under such section but only if priority in election is provided--

        ‘(A) first to such individuals as have elected the product at the time of the determination, and

        ‘(B) then to other such individuals in such a manner that does not discriminate among the individuals (who seek to elect the product) on a basis described in subsection (b).

      ‘(3) LIMITATION ON TERMINATION OF ELECTION-

        ‘(A) IN GENERAL- Subject to subparagraph (B), a Medicare Choice organization may not for any reason terminate the election of any individual under section 1805 for a Medicare Choice product it offers.

        ‘(B) BASIS FOR TERMINATION OF ELECTION- A Medicare Choice organization may terminate an individual’s election under section 1805 with respect to a Medicare Choice product it offers if--

          ‘(i) any premiums required with respect to such product are not paid on a timely basis (consistent with standards under section 1856 that provide for a grace period for late payment of premiums),

          ‘(ii) the individual has engaged in disruptive behavior (as specified in such standards), or

          ‘(iii) the product is terminated with respect to all individuals under this part.

        Any individual whose election is so terminated is deemed to have elected the Non-Medicare Choice option (as defined in section 1805(a)(3)(A)).

        ‘(C) ORGANIZATION OBLIGATION WITH RESPECT TO ELECTION FORMS- Pursuant to a contract under section 1858, each Medicare Choice organization receiving an election form under section 1805(c)(2) shall transmit to the Secretary (at such time and in such manner as the Secretary may specify) a copy of such form or such other information respecting the election as the Secretary may specify.

      ‘(4) SPECIAL RULES FOR LIMITED ENROLLMENT MEDICARE CHOICE ORGANIZATIONS-

        ‘(A) TAFT-HARTLEY SPONSORS-

          ‘(i) IN GENERAL- Subject to subparagraph (D), a Medicare Choice organization that is a Taft-Hartley sponsor (as defined in clause (ii)) shall limit eligibility of enrollees under this part for Medicare Choice products it offers to individuals who are entitled to obtain benefits through such products under the terms of an applicable collective bargaining agreement.

          ‘(ii) TAFT-HARTLEY SPONSOR- In this part and section 1805, the term ‘Taft-Hartley sponsor’ means, in relation to a group health plan that is established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of parties who establish or maintain the plan.

        ‘(B) QUALIFIED ASSOCIATIONS-

          ‘(i) IN GENERAL- Subject to subparagraph (D), a Medicare Choice organization that is a qualified association (as defined in clause (iii)) shall limit eligibility of individuals under this part for products it offers to individuals who are members of the association (or who are spouses of such individuals).

          ‘(ii) LIMITATION ON TERMINATION OF COVERAGE- Such a qualifying association offering a Medicare Choice product to an individual may not terminate coverage of the individual on the basis that the individual is no longer a member of the association except pursuant to a change of election during an open election period occurring on or after the date of the termination of membership.

          ‘(iii) QUALIFIED ASSOCIATION- In this part and section 1805, the term ‘qualified association’ means an association, religious fraternal organization, or other organization (which may be a trade, industry, or professional association, a chamber of commerce, or a public entity association) that the Secretary finds--

            ‘(I) has been formed for purposes other than the sale of any health insurance and does not restrict membership based on the health status, claims experience, receipt of health care, medical history, or lack of evidence of insurability, of an individual,

            ‘(II) does not exist solely or principally for the purpose of selling insurance, and

            ‘(III) has at least 1,000 individual members or 200 employer members.

          Such term includes a subsidiary or corporation that is wholly owned by one or more qualified organizations.

        ‘(C) UNIONS-

          ‘(i) IN GENERAL- Subject to subparagraph (D), a union sponsor (as defined in clause (ii)) shall limit eligibility of enrollees under this part for Medicare Choice products it offers to individuals who are members of the sponsor and affiliated with the sponsor through an employment relationship with any employer or are the spouses of such members.

          ‘(ii) UNION SPONSOR- In this part and section 1805, the term ‘union sponsor’ means an employee organization in relation to a group health plan that is established or maintained by the organization other than pursuant to a collective bargaining agreement.

        ‘(D) LIMITATION- Rules of eligibility to carry out the previous subparagraphs of this paragraph shall not have the effect of denying eligibility to individuals on the basis of health status, claims experience, receipt of health care, medical history, or lack of evidence of insurability.

        ‘(E) LIMITED ENROLLMENT MEDICARE CHOICE ORGANIZATION- In this part and section 1805, the term ‘limited enrollment Medicare Choice organization’ means a Medicare Choice organization that is a union sponsor, a Taft-Hartley sponsor, or a qualified association.

        ‘(F) EMPLOYER, ETC- In this paragraph, the terms ‘employer’, ‘employee organization’, and ‘group health plan’ have the meanings given such terms for purposes of part 6 of subtitle B of title I of the Employee Retirement Income Security Act of 1974.

    ‘(d) SUBMISSION AND CHARGING OF PREMIUMS-

      ‘(1) IN GENERAL- Each Medicare Choice organization shall file with the Secretary each year, in a form and manner and at a time specified by the Secretary--

        ‘(A) the amount of the monthly premiums for coverage under each Medicare Choice product it offers under this part in each payment area (as determined for purposes of section 1855) in which the product is being offered; and

        ‘(B) the enrollment capacity in relation to the product in each such area.

      ‘(2) AMOUNTS OF PREMIUMS CHARGED- The amount of the monthly premium charged by a Medicare Choice organization for a Medicare Choice product offered in a payment area to an individual under this part shall be equal to the amount (if any) by which--

        ‘(A) the amount of the monthly premium for the product for the period involved, as established under paragraph (3) and submitted under paragraph (1), exceeds

        ‘(B) 1/12 of the annual Medicare Choice capitation rate specified in section 1855(b)(2) for the area and period involved.

      ‘(3) UNIFORM PREMIUM- The premiums charged by a Medicare Choice organization under this part may not vary among individuals who reside in the same payment area.

      ‘(4) TERMS AND CONDITIONS OF IMPOSING PREMIUMS- Each Medicare Choice organization shall permit the payment of monthly premiums on a monthly basis and may terminate election of individuals for a Medicare Choice product for failure to make premium payments only in accordance with subsection (c)(3)(B).

      ‘(5) RELATION OF PREMIUMS AND COST-SHARING TO BENEFITS- In no case may the portion of a Medicare Choice organization’s premium rate and the actuarial value of its deductibles, coinsurance, and copayments charged (to the extent attributable to the minimum benefits described in subsection (a)(1) and not counting any amount attributable to balance billing) to individuals who are enrolled under this part with the organization exceed the actuarial value of the coinsurance and deductibles that would be applicable on the average to individuals enrolled under this part with the organization (or, if the Secretary finds that adequate data are not available

to determine that actuarial value, the actuarial value of the coinsurance and deductibles applicable on the average to individuals in the area, in the State, or in the United States, eligible to enroll under this part with the organization, or other appropriate data) and entitled to benefits under part A and enrolled under part B if they were not members of a Medicare Choice organization.

    ‘(e) REQUIREMENT FOR ADDITIONAL BENEFITS, PART B PREMIUM DISCOUNT REBATES, OR BOTH-

      ‘(1) REQUIREMENT-

        ‘(A) IN GENERAL- Each Medicare Choice organization (in relation to a Medicare Choice product it offers) shall provide that if there is an excess amount (as defined in subparagraph (B)) for the product for a contract year, subject to the succeeding provisions of this subsection, the organization shall provide to individuals such additional benefits (as the organization may specify), a monetary rebate (paid on a monthly basis) of the part B monthly premium, or a combination thereof, in an total value which is at least equal to the adjusted excess amount (as defined in subparagraph (C)).

        ‘(B) EXCESS AMOUNT- For purposes of this paragraph, the ‘excess amount’, for an organization for a product, is the amount (if any) by which--

          ‘(i) the average of the capitation payments made to the organization under this part for the product at the beginning of contract year, exceeds

          ‘(ii) the actuarial value of the minimum benefits described in subsection (a)(1) under the product for individuals under this part, as determined based upon an adjusted community rate described in paragraph (5) (as reduced for the actuarial value of the coinsurance and deductibles under parts A and B).

        ‘(C) ADJUSTED EXCESS AMOUNT- For purposes of this paragraph, the ‘adjusted excess amount’, for an organization for a product, is the excess amount reduced to reflect any amount withheld and reserved for the organization for the year under paragraph (3).

        ‘(D) UNIFORM APPLICATION- This paragraph shall be applied uniformly for all enrollees for a product in a service area.

        ‘(E) CONSTRUCTION- Nothing in this subsection shall be construed as preventing a Medicare Choice organization from providing health care benefits that are in addition to the benefits otherwise required to be provided under this paragraph and from imposing a premium for such additional benefits.

      ‘(2) LIMITATION ON AMOUNT OF PART B PREMIUM DISCOUNT REBATE- In no case shall the amount of a part B premium discount rebate under paragraph (1)(A) exceed, with respect to a month, the amount of premiums imposed under part B (not taking into account section 1839(b) (relating to penalty for late enrollment) or 1839(h) (relating to affluence testing)), for the individual for the month. Except as provided in the previous sentence, a Medicare Choice organization is not authorized to provide for cash or other monetary rebates as an inducement for enrollment or otherwise.

      ‘(3) STABILIZATION FUND- A Medicare Choice organization may provide that a part of the value of an excess actuarial amount described in paragraph (1) be withheld and reserved in the Federal Hospital Insurance Trust Fund and in the Federal Supplementary Medical Insurance Trust Fund (in such proportions as the Secretary determines to be appropriate) by the Secretary for subsequent annual contract periods, to the extent required to stabilize and prevent undue fluctuations in the additional benefits and rebates offered in those subsequent periods by the organization in accordance with such paragraph. Any of such value of amount reserved which is not provided as additional benefits described in paragraph (1)(A) to individuals electing the Medicare Choice product in accordance with such paragraph prior to the end of such periods, shall revert for the use of such trust funds.

      ‘(4) DETERMINATION BASED ON INSUFFICIENT DATA- For purposes of this subsection, if the Secretary finds that there is insufficient enrollment experience (including no enrollment experience in the case of a provider-sponsored organization) to determine an average of the capitation payments to be made under this part at the beginning of a contract period, the Secretary may determine such an average based on the enrollment experience of other contracts entered into under this part.

      ‘(5) ADJUSTED COMMUNITY RATE-

        ‘(A) IN GENERAL- For purposes of this subsection, subject to subparagraph (B), the term ‘adjusted community rate’ for a service or services means, at the election of a Medicare Choice organization, either--

          ‘(i) the rate of payment for that service or services which the Secretary annually determines would apply to an individual electing a Medicare Choice product under this part if the rate of payment were determined under a ‘community rating system’ (as defined in section 1302(8) of the Public Health Service Act, other than subparagraph (C)), or

          ‘(ii) such portion of the weighted aggregate premium, which the Secretary annually estimates would apply to such an individual, as the Secretary annually estimates is attributable to that service or services,

        but adjusted for differences between the utilization characteristics of the individuals electing coverage under this part and the utilization characteristics of the other enrollees with the organization (or, if the Secretary finds that adequate data are not available to adjust for those differences, the differences between the utilization characteristics of individuals selecting other Medicare Choice coverage, or individuals in the area, in the State, or in the United States, eligible to elect Medicare Choice coverage under this part and the utilization characteristics of the rest of the population in the area, in the State, or in the United States, respectively).

        ‘(B) SPECIAL RULE FOR PROVIDER-SPONSORED ORGANIZATIONS- In the case of a Medicare Choice organization that is a provider-sponsored organization, the adjusted community rate under subparagraph (A) for a Medicare Choice product may be computed (in a manner specified by the Secretary) using data in the general commercial marketplace or (during a transition period) based on the costs incurred by the organization in providing such a product.

    ‘(f) RULES REGARDING PHYSICIAN PARTICIPATION-

      ‘(1) PROCEDURES- Each Medicare Choice organization shall establish reasonable procedures relating to the participation (under an agreement between a physician and the organization) of physicians under Medicare Choice products offered by the organization under this part. Such procedures shall include--

        ‘(A) providing notice of the rules regarding participation,

        ‘(B) providing written notice of participation decisions that are adverse to physicians, and

        ‘(C) providing a process within the organization for appealing adverse decisions, including the presentation of information and views of the physician regarding such decision.

      ‘(2) CONSULTATION IN MEDICAL POLICIES- A Medicare Choice organization shall consult with physicians who have entered into participation agreements with the organization regarding the organization’s medical policy, quality, and medical management procedures.

      ‘(3) LIMITATIONS ON PHYSICIAN INCENTIVE PLANS-

        ‘(A) IN GENERAL- Each Medicare Choice organization may not operate any physician incentive plan (as defined in subparagraph (B)) unless the following requirements are met:

          ‘(i) No specific payment is made directly or indirectly under the plan to a physician or physician group as an inducement to reduce or limit medically necessary services provided with respect to a specific individual enrolled with the organization.

          ‘(ii) If the plan places a physician or physician group at substantial financial risk (as determined by the Secretary) for services not provided by the physician or physician group, the organization--

            ‘(I) provides stop-loss protection for the physician or group that is adequate and appropriate, based on standards developed by the Secretary that take into account the number of physicians placed at such substantial financial risk in the group or under the plan and the number of individuals enrolled with the organization who receive services from the physician or the physician group, and

            ‘(II) conducts periodic surveys of both individuals enrolled and individuals previously enrolled with the organization to determine the degree of access of such individuals to services provided by the organization and satisfaction with the quality of such services.

          ‘(iii) The organization provides the Secretary with descriptive information regarding the plan, sufficient to permit the Secretary to determine whether the plan is in compliance with the requirements of this subparagraph.

        ‘(B) PHYSICIAN INCENTIVE PLAN DEFINED- In this paragraph, the term ‘physician incentive plan’ means any compensation arrangement between a Medicare Choice organization and a physician or physician group that may directly or indirectly have the effect of reducing or limiting services provided with respect to individuals enrolled with the organization under this part.

      ‘(4) EXCEPTION FOR CERTAIN FEE-FOR-SERVICE PLANS- The previous provisions of this subsection shall not apply in the case of a Medicare Choice organization in relation to a Medicare Choice product if the organization does not have agreements between physicians and the organization for the provision of benefits under the product.

    ‘(g) PROVISION OF INFORMATION- A Medicare Choice organization shall provide the Secretary with such information on the organization and each Medicare Choice product it offers as may be required for the preparation of the information booklet described in section 1805(d)(3)(A).

    ‘(h) COORDINATED ACUTE AND LONG-TERM CARE BENEFITS UNDER A MEDICARE CHOICE PRODUCT- Nothing in this part shall be construed as preventing a State from coordinating benefits under its medicaid program under title XIX with those provided under a Medicare Choice product in a manner that assures continuity of a full-range of acute care and long-term care services to poor elderly or disabled individuals eligible for benefits under this title and under such program.

‘PATIENT PROTECTION STANDARDS

    ‘SEC. 1853. (a) DISCLOSURE TO ENROLLEES- A Medicare Choice organization shall disclose in clear, accurate, and standardized form, information regarding all of the following for each Medicare Choice product it offers:

      ‘(1) Benefits under the Medicare Choice product offered, including exclusions from coverage.

      ‘(2) Rules regarding prior authorization or other review requirements that could result in nonpayment.

      ‘(3) Potential liability for cost-sharing for out-of-network services.

      ‘(4) The number, mix, and distribution of participating providers.

      ‘(5) The financial obligations of the enrollee, including premiums, deductibles, co-payments, and maximum limits on out-of-pocket losses for items and services (both in and out of network).

      ‘(6) Statistics on enrollee satisfaction with the product and organization, including rates of reenrollment.

      ‘(7) Enrollee rights and responsibilities, including the grievance process provided under subsection (f).

      ‘(8) A statement that the use of the 911 emergency telephone number is appropriate in emergency situations and an explanation of what constitutes an emergency situation.

      ‘(9) A description of the organization’s quality assurance program under subsection (d).

    Such information shall be disclosed to each enrollee under this part at the time of enrollment and at least annually thereafter.

    ‘(b) ACCESS TO SERVICES-

      ‘(1) IN GENERAL- A Medicare Choice organization offering a Medicare Choice product may restrict the providers from whom the benefits under the product are provided so long as--

        ‘(A) the organization makes such benefits available and accessible to each individual electing the product within the product service area with reasonable promptness and in a manner which assures continuity in the provision of benefits;

        ‘(B) when medically necessary the organization makes such benefits available and accessible 24 hours a day and 7 days a week;

        ‘(C) the product provides for reimbursement with respect to services which are covered under subparagraphs (A) and (B) and which are provided to such an individual other than through the organization, if--

          ‘(i) the services were medically necessary and immediately required because of an unforeseen illness, injury, or condition, and

          ‘(ii) it was not reasonable given the circumstances to obtain the services through the organization; and

        ‘(D) coverage is provided for emergency services (as defined in paragraph (5)) without regard to prior authorization or the emergency care provider’s contractual relationship with the organization.

      ‘(2) MINIMUM PAYMENT LEVELS WHERE PROVIDING POINT-OF-SERVICE COVERAGE- If a Medicare Choice product provides benefits for items and services (not described in paragraph (1)(C)) through a network of providers and also permits payment to be made under the product for such items and services not provided through such a network, the payment level under the product with respect to such items and services furnished outside the network shall be at least 70 percent (or, if the effective cost-sharing rate is 50 percent, at least 35 percent) of the lesser of--

        ‘(A) the payment basis (determined without regard to deductibles and cost-sharing) that would have applied for such items and services under parts A and B, or

        ‘(B) the amount charged by the entity furnishing such items and services.

      ‘(3) PROTECTION OF ENROLLEES FOR CERTAIN OUT-OF-NETWORK SERVICES-

        ‘(A) PARTICIPATING PROVIDERS- In the case of physicians’ services or renal dialysis services described in subparagraph (C) which are furnished by a participating physician or provider of services or renal dialysis facility to an individual enrolled with a Medicare Choice organization under this section, the applicable participation agreement is deemed to provide that the physician or provider of services or renal dialysis facility will accept as payment in full from the organization the amount that would be payable to the physician or provider of services or renal dialysis facility under part B and from the individual under such part, if the individual were not enrolled with such an organization under this part.

        ‘(B) NONPARTICIPATING PROVIDERS- In the case of physicians’ services described in subparagraph (C) which are furnished by a nonparticipating physician, the limitations on actual charges for such services otherwise applicable under part B (to services furnished by individuals not enrolled with a Medicare Choice organization under this section) shall apply in the same manner as such limitations apply to services furnished to individuals not enrolled with such an organization.

        ‘(C) SERVICES DESCRIBED- The physicians’ services or renal dialysis services described in this subparagraph are physicians’ services or renal dialysis services which are furnished to an enrollee of a Medicare Choice organization under this part by a physician, provider of services, or renal dialysis facility who is not under a contract with the organization.

      ‘(4) PROTECTION FOR NEEDED SERVICES- A Medicare Choice organization that provides covered services through a network of providers shall provide coverage of services provided by a provider that is not part of the network if the service cannot be provided by a provider that is part of the network and the organization authorized the service directly or through referral by the primary care physician who is designated by the organization for the individual involved.

      ‘(5) EMERGENCY SERVICES- In this subsection, the term ‘emergency services’ means--

        ‘(A) health care items and services furnished in the emergency department of a hospital, and

        ‘(B) ancillary services routinely available to such department,

      to the extent they are required to evaluate and treat an emergency medical condition (as defined in paragraph (6)) until the condition is stabilized.

      ‘(6) EMERGENCY MEDICAL CONDITION- In paragraph (5), the term ‘emergency medical condition’ means a medical condition, the onset of which is sudden, that manifests itself by symptoms of sufficient severity, including severe pain, that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in--

        ‘(A) placing the person’s health in serious jeopardy,

        ‘(B) serious impairment to bodily functions, or

        ‘(C) serious dysfunction of any bodily organ or part.

      ‘(7) PROTECTION AGAINST BALANCE BILLING- The limitations on billing that apply to a provider (including a physician) under parts A and B in the case of an individual electing the non-Medicare Choice option shall apply to an individual who elects the Medicare Choice option in the case of any provider that (under the Medicare Choice option) may bill the enrollee directly for services.

    ‘(c) CONFIDENTIALITY AND ACCURACY OF ENROLLEE RECORDS- Each Medicare Choice organization shall establish procedures--

      ‘(1) to safeguard the privacy of individually identifiable enrollee information, and

      ‘(2) to maintain accurate and timely medical records for enrollees.

    ‘(d) QUALITY ASSURANCE PROGRAM-

      ‘(1) IN GENERAL- Each Medicare Choice organization must have arrangements, established in accordance with regulations of the Secretary, for an ongoing quality assurance program for health care services it provides to such individuals.

      ‘(2) ELEMENTS OF PROGRAM- The quality assurance program shall--

        ‘(A) stress health outcomes;

        ‘(B) provide for the establishment of written protocols for utilization review, based on current standards of medical practice;

        ‘(C) provide review by physicians and other health care professionals of the process followed in the provision of such health care services;

        ‘(D) monitors and evaluates high volume and high risk services and the care of acute and chronic conditions;

        ‘(E) evaluates the continuity and coordination of care that enrollees receive;

        ‘(F) has mechanisms to detect both underutilization and overutilization of services;

        ‘(G) after identifying areas for improvement, establishes or alters practice parameters;

        ‘(H) takes action to improve quality and assesses the effectiveness of such action through systematic follow-up;

        ‘(I) makes available information on quality and outcomes measures to facilitate beneficiary comparison and choice of health coverage options (in such form and on such quality and outcomes measures as the Secretary determines to be appropriate);

        ‘(J) is evaluated on an ongoing basis as to its effectiveness; and

        ‘(K) provide for external accreditation or review, by a utilization and quality control peer review organization under part B of title XI or other qualified independent review organization, of the quality of services furnished by the organization meets professionally recognized standards of health care (including providing adequate access of enrollees to services).

      ‘(3) EXCEPTION FOR CERTAIN FEE-FOR-SERVICE PLANS- Paragraph (1) and subsection (c)(2) shall not apply in the case of a Medicare Choice organization in relation to a Medicare Choice product to the extent the organization provides for coverage of benefits without restrictions relating to utilization and without regard to whether the provider has a contract or other arrangement with the plan for the provision of such benefits.

      ‘(4) TREATMENT OF ACCREDITATION- The Secretary shall provide that a Medicare Choice organization is deemed to meet the requirements of paragraphs (1) and (2) of this subsection and subsection (c) if the organization is accredited (and periodically reaccredited) by a private organization under a process that the Secretary has determined assures that the organization meets standards that are no less stringent than the standards established under section 1856 to carry out this subsection and subsection (c).

    ‘(e) COVERAGE DETERMINATIONS-

      ‘(1) DECISIONS ON NONEMERGENCY CARE- A Medicare Choice organization shall make determinations regarding

authorization requests for nonemergency care on a timely basis, depending on the urgency of the situation.

      ‘(2) APPEALS-

        ‘(A) IN GENERAL- Appeals from a determination of an organization denying coverage shall be decided within 30 days of the date of receipt of medical information, but not later than 60 days after the date of the decision.

        ‘(B) PHYSICIAN DECISION ON CERTAIN APPEALS- Appeal decisions relating to a determination to deny coverage based on a lack of medical necessity shall be made only by a physician.

        ‘(C) EMERGENCY CASES- Appeals from such a determination involving a life-threatening or emergency situation shall be decided on an expedited basis.

    ‘(f) GRIEVANCES AND APPEALS-

      ‘(1) GRIEVANCE MECHANISM- Each Medicare Choice organization must provide meaningful procedures for hearing and resolving grievances between the organization (including any entity or individual through which the organization provides health care services) and enrollees under this part.

      ‘(2) APPEALS- An enrollee with an organization under this part who is dissatisfied by reason of the enrollee’s failure to receive any health service to which the enrollee believes the enrollee is entitled and at no greater charge than the enrollee believes the enrollee is required to pay is entitled, if the amount in controversy is $100 or more, to a hearing before the Secretary to the same extent as is provided in section 205(b), and in any such hearing the Secretary shall make the organization a party. If the amount in controversy is $1,000 or more, the individual or organization shall, upon notifying the other party, be entitled to judicial review of the Secretary’s final decision as provided in section 205(g), and both the individual and the organization shall be entitled to be parties to that judicial review. In applying sections 205(b) and 205(g) as provided in this subparagraph, and in applying section 205(l) thereto, any reference therein to the Commissioner of Social Security or the Social Security Administration shall be considered a reference to the Secretary or the Department of Health and Human Services, respectively.

      ‘(3) COORDINATION WITH SECRETARY OF LABOR- The Secretary shall consult with the Secretary of Labor so as to ensure that the requirements of this subsection, as they apply in the case of grievances referred to in paragraph (1) to which section 503 of the Employee Retirement Income Security Act of 1974 applies, are applied in a manner consistent with the requirements of such section 503.

    ‘(g) INFORMATION ON ADVANCE DIRECTIVES- Each Medicare Choice organization shall meet the requirement of section 1866(f) (relating to maintaining written policies and procedures respecting advance directives).

    ‘(h) APPROVAL OF MARKETING MATERIALS-

      ‘(1) SUBMISSION- Each Medicare Choice organization may not distribute marketing materials unless--

        ‘(A) at least 45 days before the date of distribution the organization has submitted the material to the Secretary for review, and

        ‘(B) the Secretary has not disapproved the distribution of such material.

      ‘(2) REVIEW- The standards established under section 1856 shall include guidelines for the review of all such material submitted and under such guidelines the Secretary shall disapprove such material if the material is materially inaccurate or misleading or otherwise makes a material misrepresentation.

      ‘(3) DEEMED APPROVAL (1-STOP SHOPPING)- In the case of material that is submitted under paragraph (1)(A) to the Secretary or a regional office of the Department of Health and Human Services and the Secretary or the office has not disapproved the distribution of marketing materials under paragraph (1)(B) with respect to a Medicare Choice product in an area, the Secretary is deemed not to have disapproved such distribution in all other areas covered by the product and organization.

      ‘(4) PROHIBITION OF CERTAIN MARKETING PRACTICES- Each Medicare Choice organization shall conform to fair marketing standards in relation to Medicare Choice products offered under this part, included in the standards established under section 1856. Such standards shall include a prohibition against an organization (or agent of such an organization) completing any portion of any election form under section 1805 on behalf of any individual.

    ‘(i) ADDITIONAL STANDARDIZED INFORMATION ON QUALITY, OUTCOMES, AND OTHER FACTORS-

      ‘(1) IN GENERAL- In addition to any other information required to be provided under this part, each Medicare Choice organization shall provide the Secretary (at a time, not less frequently than annually, and in an electronic, standardized form and manner specified by the Secretary) such information as the Secretary determines to be necessary, consistent with this part, to evaluate the performance of the organization in providing benefits to enrollees.

      ‘(2) INFORMATION TO BE INCLUDED- Subject to paragraph (3), information to be provided under this subsection shall include at least the following:

        ‘(A) Information on the characteristics of enrollees that may affect their need for or use of health services and the determination of risk-adjusted payments under section 1855.

        ‘(B) Information on the types of treatments and outcomes of treatments with respect to the clinical health, functional status, and well-being of enrollees.

        ‘(C) Information on health care expenditures and the volume and prices of procedures.

        ‘(D) Information on the flexibility permitted by plans to enrollees in their selection of providers.

      ‘(3) SPECIAL TREATMENT- The Secretary may waive the provision of such information under paragraph (2), or require such other information, as the Secretary finds appropriate in the case of a newly established Medicare Choice organization for which such information is not available.

    ‘(j) DEMONSTRATION PROJECTS- The Secretary shall provide for demonstration projects to determine the effectiveness, cost, and impact of alternative methods of providing comparative information about the performance of Medicare Choice organizations and products and the performance of medicare supplemental policies in relation to such products. Such projects shall include information about health care outcomes resulting from coverage under different products and policies.

‘PROVIDER-SPONSORED ORGANIZATIONS

    ‘SEC. 1854. (a) PROVIDER-SPONSORED ORGANIZATION DEFINED-

      ‘(1) IN GENERAL- In this part, the term ‘provider-sponsored organization’ means a public or private entity that (in accordance with standards established under subsection (b)) is a provider, or group of affiliated providers, that provides a substantial proportion (as defined by the Secretary under such standards) of the health care items and services under the contract under this part directly through the provider or affiliated group of providers.

      ‘(2) SUBSTANTIAL PROPORTION- In defining what is a ‘substantial proportion’ for purposes of paragraph (1), the Secretary--

        ‘(A) shall take into account the need for such an organization to assume responsibility for a substantial proportion of services in order to assure financial stability and the practical difficulties in such an organization integrating a very wide range of service providers; and

        ‘(B) may vary such proportion based upon relevant differences among organizations, such as their location in an urban or rural area.

      ‘(3) AFFILIATION- For purposes of this subsection, a provider is ‘affiliated’ with another provider if, through contract, ownership, or otherwise--

        ‘(A) one provider, directly or indirectly, controls, is controlled by, or is under common control with the other,

        ‘(B) each provider is a participant in a lawful combination under which each provider shares, directly or indirectly, substantial financial risk in connection with their operations,

        ‘(C) both providers are part of a controlled group of corporations under section 1563 of the Internal Revenue Code of 1986, or

        ‘(D) both providers are part of an affiliated service group under section 414 of such Code.

      ‘(4) CONTROL- For purposes of paragraph (3), control is presumed to exist if one party, directly or indirectly, owns, controls, or holds the power to vote, or proxies for, not less than 51 percent of the voting rights or governance rights of another.

    ‘(b) PREEMPTION OF STATE INSURANCE LICENSING REQUIREMENTS-

      ‘(1) IN GENERAL- This section supersedes any State law which--

        ‘(A) requires that a provider-sponsored organization meet requirements for insurers of health services or health maintenance organizations doing business in the State with respect to initial capitalization and establishment of financial reserves against insolvency, or

        ‘(B) imposes requirements that would have the effect of prohibiting the organization from complying with the applicable requirements of this part,

      insofar as such the law applies to individuals enrolled with the organization under this part.

      ‘(2) EXCEPTION FOR IDENTICAL STANDARDS- Paragraph (1) shall not apply with respect to any State law to the extent that such law provides the application of standards that are identical to the standards established for provider-sponsored organizations under this part.

      ‘(3) CONSTRUCTION- Nothing in this subsection shall be construed as affecting the operation of section 514 of the Employee Retirement Income Security Act of 1974.

‘PAYMENTS TO MEDICARE CHOICE ORGANIZATIONS

    ‘SEC. 1855. (a) PAYMENTS-

      ‘(1) IN GENERAL- Under a contract under section 1858 the Secretary shall pay to each Medicare Choice organization, with respect to coverage of an individual under this part in a payment area for a month, an amount equal to the monthly adjusted Medicare Choice capitation rate (as provided under subsection (b)) with respect to that individual for that area.

      ‘(2) ANNUAL ANNOUNCEMENT- The Secretary shall annually determine, and shall announce (in a manner intended to provide notice to interested parties) not later than September 7 before the calendar year concerned--

        ‘(A) the annual Medicare Choice capitation rate for each payment area for the year, and

        ‘(B) the factors to be used in adjusting such rates under subsection (b) for payments for months in that year.

      ‘(3) ADVANCE NOTICE OF METHODOLOGICAL CHANGES- At least 45 days before making the announcement under paragraph (2) for a year, the Secretary shall provide for notice to Medicare Choice organizations of proposed changes to be made in the methodology or benefit coverage assumptions from the methodology and assumptions used in the previous announcement and shall provide such organizations an opportunity to comment on such proposed changes.

      ‘(4) EXPLANATION OF ASSUMPTIONS- In each announcement made under paragraph (2) for a year, the Secretary shall include an explanation of the assumptions (including any benefit coverage assumptions) and changes in methodology used in the announcement in sufficient detail so that Medicare Choice organizations can compute monthly adjusted Medicare Choice capitation rates for classes of individuals located in each payment area which is in whole or in part within the service area of such an organization.

    ‘(b) MONTHLY ADJUSTED MEDICARE CHOICE CAPITATION RATE-

      ‘(1) IN GENERAL- For purposes of this section, the ‘monthly adjusted Medicare Choice capitation rate’ under this subsection, for a month in a year for an individual in a payment area (specified under paragraph (3)) and in a class (established under paragraph (4)), is 1/12 of the annual Medicare Choice capitation rate specified in paragraph (2) for that area for the year, adjusted to reflect the actuarial value of benefits under this title with respect to individuals in such class compared to the national average for individuals in all classes.

      ‘(2) ANNUAL MEDICARE CHOICE CAPITATION RATES-

        ‘(A) IN GENERAL- For purposes of this section, the annual Medicare Choice capitation rate for a payment area for a year is equal to the annual Medicare Choice capitation rate for the area for the previous year (or, in the case of 1996, the average annual per capita rate of payment described in section 1876(a)(1)(C) for the area for 1995) increased by the per capita growth rate for that area and year (as determined under subsection (c)).

        ‘(B) SPECIAL RULES FOR 1996-

          ‘(i) FLOOR AT 85 PERCENT OF NATIONAL AVERAGE- In no case shall the annual Medicare Choice capitation rate for a payment area for 1996 be less than 85 percent of the national average of such rates for such year for all payment areas (weighted to reflect the number of medicare beneficiaries in each such area).

          ‘(ii) REMOVAL OF MEDICAL EDUCATION AND DISPROPORTIONATE SHARE HOSPITAL PAYMENTS FROM CALCULATION OF ADJUSTED AVERAGE PER CAPITA COST- In determining the annual Medicare Choice capitation rate for 1996, the average annual per capita rate of payment described in section 1876(a)(1)(C) for 1995 shall be determined as though the Secretary had excluded from such rate any amounts which the Secretary estimated would have been payable under this title during the year for--

            ‘(I) payment adjustments under section 1886(d)(5)(F) for hospitals serving a disproportionate share of low-income patients; and

            ‘(II) the indirect costs of medical education under section 1886(d)(5)(B) or for direct graduate medical education costs under section 1886(h).

      ‘(3) PAYMENT AREA DEFINED-

        ‘(A) IN GENERAL- In this section, the term ‘payment area’ means--

        ‘(i) a metropolitan statistical area, or

        ‘(ii) all areas of a State outside of such an area.

        ‘(B) SPECIAL RULE FOR ESRD BENEFICIARIES- Such term means, in the case of the population group described in paragraph (5)(C), each State.

      ‘(4) CLASSES-

        ‘(A) IN GENERAL- For purposes of this section, the Secretary shall define appropriate classes of enrollees, consistent with paragraph (5), based on age, gender, welfare status, institutionalization, and such other factors as the Secretary determines to be appropriate, so as to ensure actuarial equivalence. The Secretary may add to, modify, or substitute for such classes, if such changes will improve the determination of actuarial equivalence.

        ‘(B) RESEARCH- The Secretary shall conduct such research as may be necessary to provide for greater accuracy in the adjustment of capitation rates under this subsection. Such research may include research into the addition or modification of classes under subparagraph (A). The Secretary shall submit to Congress a report on such research by not later than January 1, 1997.

      ‘(5) DIVISION OF MEDICARE POPULATION- In carrying out paragraph (4) and this section, the Secretary shall recognize the following separate population groups:

        ‘(A) AGED- Individuals 65 years of age or older who are not described in subparagraph (C).

        ‘(B) DISABLED- Disabled individuals who are under 65 years of age and not described in subparagraph (C).

        ‘(C) INDIVIDUALS WITH END STAGE RENAL DISEASE- Individuals who are determined to have end stage renal disease.

    ‘(c) PER CAPITA GROWTH RATES-

      ‘(1) FOR 1996-

        ‘(A) IN GENERAL- For purposes of this section and subject to subparagraph (B), the per capita growth rates for 1996, for a payment area assigned to a service utilization cohort under subsection (d), shall be the following:

          ‘(i) BELOW AVERAGE SERVICE UTILIZATION COHORT- For areas assigned to the below average service utilization cohort, 9.6 percent.

          ‘(ii) ABOVE AVERAGE SERVICE UTILIZATION COHORT- For areas assigned to the above average service utilization cohort, 4.8 percent.

          ‘(iii) HIGHEST SERVICE UTILIZATION COHORT- For areas assigned to the highest service utilization cohort, 2.1 percent.

        ‘(B) BUDGET NEUTRAL ADJUSTMENT- The Secretary shall adjust the per capita growth rates specified in subparagraph (A) for all the areas by such uniform factor as may be necessary to assure that the total capitation payments under this section during 1996 are the same as the amount such payments would have been if the per capita growth rate for all such areas for 1996 were equal to the national average per capita growth rate, specified in paragraph (3) for 1996.

      ‘(2) FOR SUBSEQUENT YEARS-

        ‘(A) IN GENERAL- For purposes of this section and subject to subparagraph (B), the Secretary shall compute a per capita growth rate for each year after 1996, for each payment area as assigned to a service utilization cohort under subsection (d), consistent with the following rules:

          ‘(i) BELOW AVERAGE SERVICE UTILIZATION COHORT SET AT 143 PERCENT OF NATIONAL AVERAGE PER CAPITA GROWTH RATE- The per capita growth rate for areas assigned to the below average service utilization cohort for the year shall be 160 percent of the national average per capita growth rate for the year (as specified under paragraph (3)).

          ‘(ii) ABOVE AVERAGE SERVICE UTILIZATION COHORT SET AT 80 PERCENT OF NATIONAL AVERAGE PER CAPITA GROWTH RATE- The per capita growth rate for areas assigned to the above average service utilization cohort for the year shall be 80 percent of the national average per capita growth rate for the year.

          ‘(iii) HIGHEST SERVICE UTILIZATION COHORT SET AT 40 PERCENT OF NATIONAL AVERAGE PER CAPITA GROWTH RATE- The per capita growth rate for areas assigned to the highest service utilization cohort for the year shall be 35 percent of the national average per capita growth rate for the year.

        ‘(B) AVERAGE PER CAPITA GROWTH RATE AT NATIONAL AVERAGE TO ASSURE BUDGET NEUTRALITY- The Secretary shall compute per capita growth rates for a year under subparagraph (A) in a manner so that the weighted average per capita growth rate for all areas for the year (weighted to reflect the number of medicare beneficiaries in each area) is equal to the national average per capita growth rate under paragraph (3) for the year.

      ‘(3) NATIONAL AVERAGE PER CAPITA GROWTH RATES- In this subsection, the ‘national average per capita growth rate’ for--

        ‘(A) 1996 is 6.0 percent,

        ‘(B) 1997 is 6.0 percent,

        ‘(C) 1998 is 6.0 percent,

        ‘(D) 1999 is 5.5 percent,

        ‘(E) 2000 is 5.5 percent,

        ‘(F) 2001 is 5.5 percent,

        ‘(G) 2002 is 5.5 percent, and

        ‘(H) each subsequent year is 5.5 percent.

    ‘(d) ASSIGNMENT OF PAYMENT AREAS TO SERVICE UTILIZATION COHORTS-

      ‘(1) IN GENERAL- For purposes of determining per capita growth rates under subsection (c) for areas for a year, the Secretary shall assign each payment area to a service utilization cohort (based on the service utilization index value for that area determined under paragraph (2)) as follows:

        ‘(A) BELOW AVERAGE SERVICE UTILIZATION COHORT- Areas with a service utilization index value of less than 1.00 shall be assigned to the below average service utilization cohort.

        ‘(B) ABOVE AVERAGE SERVICE UTILIZATION COHORT- Areas with a service utilization index value of at least 1.00 but less than 1.20 shall be assigned to the above average service utilization cohort.

        ‘(C) HIGHEST SERVICE UTILIZATION COHORT- Areas with a service utilization index value of at least 1.20 shall be assigned to the highest service utilization cohort.

      ‘(2) DETERMINATION OF SERVICE UTILIZATION INDEX VALUES- In order to determine the per capita growth rate for a payment area for each year (beginning with 1996), the Secretary shall determine for such area and year a service utilization index value, which is equal to--

        ‘(A) the annual Medicare Choice capitation rate under this section for the area for the year in which the determination is made (or, in the case of 1996, the average annual per capita rate of payment (described in section 1876(a)(1)(C)) for the area for 1995); divided by

        ‘(B) the input-price-adjusted annual national Medicare Choice capitation rate (as determined under paragraph (3)) for that area for the year in which the determination is made.

      ‘(3) DETERMINATION OF INPUT-PRICE-ADJUSTED RATES-

        ‘(A) IN GENERAL- For purposes of paragraph (2), the ‘input-price-adjusted annual national Medicare Choice capitation rate’ for a payment area for a year is equal to the sum, for all the types of medicare services (as classified by the Secretary), of the product (for each such type) of--

          ‘(i) the national standardized Medicare Choice capitation rate (determined under subparagraph (B)) for the year,

          ‘(ii) the proportion of such rate for the year which is attributable to such type of services, and

          ‘(iii) an index that reflects (for that year and that type of services) the relative input price of such services in the area compared to the national average input price of such services.

        In applying clause (iii), the Secretary shall, subject to subparagraph (C), apply those indices under this title that are used in applying (or updating) national payment rates for specific areas and localities.

        ‘(B) NATIONAL STANDARDIZED MEDICARE CHOICE CAPITATION RATE- In this paragraph, the ‘national standardized Medicare Choice capitation rate’ for a year is equal to--

          ‘(i) the sum (for all payment areas) of the product of (I) the annual Medicare Choice capitation rate for that year for the area under subsection (b)(2), and (II) the average number of medicare beneficiaries residing in that area in the year; divided by

          ‘(ii) the total average number of medicare beneficiaries residing in all the payment areas for that year.

        ‘(C) SPECIAL RULES FOR 1996- In applying this paragraph for 1996--

          ‘(i) medicare services shall be divided into 2 types of services: part A services and part B services;

          ‘(ii) the proportions described in subparagraph (A)(ii) for such types of services shall be--

            ‘(I) for part A services, the ratio (expressed as a percentage) of the average annual per capita rate of payment for the area for part A for 1995 to the total average annual per capita rate of payment for the area for parts A and B for 1995, and

            ‘(II) for part B services, 100 percent minus the ratio described in subclause (I);

          ‘(iii) for the part A services, 70 percent of payments attributable to such services shall be adjusted by the index used under section 1886(d)(3)(E) to adjust payment rates for relative hospital wage levels for hospitals located in the payment area involved;

          ‘(iv) for part B services--

            ‘(I) 66 percent of payments attributable to such services shall be adjusted by the index of the geographic area factors under section 1848(e) used to adjust payment rates for physicians’ services furnished in the payment area, and

            ‘(II) of the remaining 34 percent of the amount of such payments, 70 percent shall be adjusted by the index described in clause (iii);

          ‘(v) the index values shall be computed based only on the beneficiary population described in subsection (b)(5)(A).

        The Secretary may continue to apply the rules described in this subparagraph (or similar rules) for 1997.

    ‘(e) PAYMENT PROCESS-

      ‘(1) IN GENERAL- Subject to section 1859(f), the Secretary shall make monthly payments under this section in advance and in accordance with the rate determined under subsection (a) to the plan for each individual enrolled with a Medicare Choice organization under this part.

      ‘(2) ADJUSTMENT TO REFLECT NUMBER OF ENROLLEES-

        ‘(A) IN GENERAL- The amount of payment under this subsection may be retroactively adjusted to take into account any difference between the actual number of individuals enrolled with an organization under this part and the number of such individuals estimated to be so enrolled in determining the amount of the advance payment.

        ‘(B) SPECIAL RULE FOR CERTAIN ENROLLEES-

          ‘(i) IN GENERAL- Subject to clause (ii), the Secretary may make retroactive adjustments under subparagraph (A) to take into account individuals enrolled during the period beginning on the date on which the individual enrolls with a Medicare Choice organization under a product operated, sponsored, or contributed to by the individual’s employer or former employer (or the employer or former employer of the individual’s spouse) and ending on the date on which the individual is enrolled in the organization under this part, except that for purposes of making such retroactive adjustments under this subparagraph, such period may not exceed 90 days.

          ‘(ii) EXCEPTION- No adjustment may be made under clause (i) with respect to any individual who does not certify that the organization provided the individual with the disclosure statement described in section 1853(a) at the time the individual enrolled with the organization.

    ‘(f) PAYMENTS FROM TRUST FUND- The payment to a Medicare Choice organization under this section for individuals enrolled under this part with the organization, and payments to a Medicare Choice MSA under subsection (f)(1)(B), shall be made from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund in such proportion as the Secretary determines reflects the relative weight that benefits under part A and under part B represents of the actuarial value of the total benefits under this title.

    ‘(g) SPECIAL RULE FOR CERTAIN INPATIENT HOSPITAL STAYS- In the case of an individual who is receiving inpatient hospital services from a subsection (d) hospital (as defined in section 1886(d)(1)(B)) as of the effective date of the individual’s--

      ‘(1) election under this part of a Medicare Choice product offered by a Medicare Choice organization--

        ‘(A) payment for such services until the date of the individual’s discharge shall be made under this title through the Medicare Choice product or Non-Medicare Choice option (as the case may be) elected before the election with such organization,

        ‘(B) the elected organization shall not be financially responsible for payment for such services until the date after the date of the individual’s discharge, and

        ‘(C) the organization shall nonetheless be paid the full amount otherwise payable to the organization under this part; or

      ‘(2) termination of election with respect to a Medicare Choice organization under this part--

        ‘(A) the organization shall be financially responsible for payment for such services after such date and until the date of the individual’s discharge,

        ‘(B) payment for such services during the stay shall not be made under section 1886(d) or by any succeeding Medicare Choice organization, and

        ‘(C) the terminated organization shall not receive any payment with respect to the individual under this part during the period the individual is not enrolled.

‘ESTABLISHMENT OF STANDARDS FOR MEDICARE CHOICE ORGANIZATIONS AND PRODUCTS

    ‘SEC. 1856. (a) INTERIM STANDARDS-

      ‘(1) IN GENERAL- The Secretary shall issue regulations regarding standards for Medicare Choice organizations and products within 180 days after the date of the enactment of this section. Such regulations shall be issued on an interim basis, but shall become effective upon publication and shall be effective through the end of 1999.

      ‘(2) SOLICITATION OF VIEWS- In developing standards under this subsection relating to solvency of Medicare Choice organizations, the Secretary shall solicit the views of the American Academy of Actuaries.

      ‘(3) EFFECT ON STATE REGULATIONS- Regulations under this subsection shall not preempt State regulations for Medicare Choice organizations for products not offered under this part.

    ‘(b) PERMANENT STANDARDS-

      ‘(1) IN GENERAL- The Secretary shall develop permanent standards under this subsection.

      ‘(2) CONSULTATION- In developing standards under this subsection, the Secretary shall consult with the National Association of Insurance Commissioners, associations representing the various types of Medicare Choice organizations, and medicare beneficiaries.

      ‘(3) EFFECTIVENESS- The standards under this subsection shall take effect for periods beginning on or after January 1, 2000.

    ‘(c) SOLVENCY- In establishing interim and permanent standards under this section relating to solvency of organizations, the Secretary shall recognize the multiple means of demonstrating solvency, including--

      ‘(1) reinsurance purchased through a recognized commerce company or through a capitive company owned directly or indirectly by 3 or more provider-sponsored organizations,

      ‘(2) unrestricted surplus,

      ‘(3) guarantees, and

      ‘(4) letters of credit.

    In such standards, the Secretary may treat as admitted assets the assets used by a provider-sponsored organization in delivering covered services.

    ‘(d) APPLICATION OF NEW STANDARDS TO ENTITIES WITH A CONTRACT- In the case of a Medicare Choice organization with a contract in effect under this part at the time standards applicable to the organization under this section are changed, the organization may elect not to have such changes apply to the organization until the end of the current contract year (or, if there is less than 6 months remaining in the contract year, until 1 year after the end of the current contract year).

    ‘(e) RELATION TO STATE LAWS- The standards established under this section shall supersede any State law. The standard or regulation with respect to Medicare Choice products which are offered by Medicare Choice organizations and are issued by organizations to which section 1851(b)(1) applies, to the extent such law or regulation is inconsistent with such standards.

‘MEDICARE CHOICE CERTIFICATION

    ‘SEC. 1857. (a) IN GENERAL-

      ‘(1) ESTABLISHMENT- The Secretary shall establish a process for the certification of organizations and products offered by organizations as meeting the applicable standards for Medicare Choice organizations and Medicare Choice products established under section 1856.

      ‘(2) INVOLVEMENT OF SECRETARY OF LABOR- Such process shall be established and operated in cooperation with the Secretary of Labor with respect to union sponsors and Taft-Hartley sponsors.

      ‘(3) USE OF PRIVATE ACCREDITATION PROCESSES-

        ‘(A) IN GENERAL- The process under this subsection shall, to the maximum extent practicable, provide that Medicare Choice organizations and products that are licensed or certified through a qualified private accreditation process that the Secretary finds applies standards that are no less stringent than the requirements of this part are deemed to meet the corresponding requirements of this part for such an organization or product.

        ‘(B) PERIODIC ACCREDITATION- The use of an accreditation under subparagraph (A) shall be valid only for such period as the Secretary specifies.

      ‘(4) USER FEES- The Secretary may impose user fees on entities seeking certification under this subsection in such amounts as the Secretary deems sufficient to finance the costs of such certification.

    ‘(b) NOTICE TO ENROLLEES IN CASE OF DECERTIFICATION- If a Medicare Choice organization or product is decertified under this section, the organization shall notify each enrollee with the organization and product under this part of such decertification.

    ‘(c) QUALIFIED ASSOCIATIONS- In the case of Medicare Choice products offered by a Medicare Choice organization that is a qualified association (as defined in section 1854(c)(4)(C)) and issued by an organization to which section 1851(b)(1) applies or by a provider-sponsored organization (as defined in section 1854(a)), nothing in this section shall be construed as limiting the authority of States to regulate such products.

‘CONTRACTS WITH MEDICARE CHOICE ORGANIZATIONS

    ‘SEC. 1858. (a) IN GENERAL- The Secretary shall not permit the election under section 1805 of a Medicare Choice product offered by a Medicare Choice organization under this part, and no payment shall be made under section 1856 to an organization, unless the Secretary has entered into a contract under this section with an organization with respect to the offering of such product. Such a contract with an organization may cover more than one Medicare Choice product. Such contract shall provide that the organization agrees to comply with the applicable requirements and standards of this part and the terms and conditions of payment as provided for in this part.

    ‘(b) ENROLLMENT REQUIREMENTS-

      ‘(1)(A) MINIMUM ENROLLMENT REQUIREMENT- Subject to subparagraphs (B) and (C), the Secretary may not enter into a contract under this section with a Medicare Choice organization (other than a union sponsor or Taft-Hartley sponsor) unless the organization has at least 5,000 individuals (or 1,500 individuals in the case of an organization that is a provider-sponsored organization) who are receiving health benefits through the organization, except that the standards under section 1856 may permit the organization to have a lesser number of beneficiaries (but not less than 500 in the case of an organization that is a provider-sponsored organization) if the organization primarily serves individuals residing outside of urbanized areas.

      ‘(B) ALLOWING TRANSITION- The Secretary may waive the requirement of subparagraph (A) during the first 3 contract years with respect to an organization.

      ‘(C) TREATMENT OF AREAS WITH LOW MANAGED CARE PENETRATION- The Secretary may waive the requirement of subparagraph (A) in the case of organizations operating

in areas in which there is a low proportion of medicare beneficiaries who have made the Medicare Choice election.

      ‘(2) REQUIREMENT FOR ENROLLMENT OF NON-MEDICARE BENEFICIARIES-

        ‘(A) IN GENERAL- Each Medicare Choice organization with which the Secretary enters into a contract under this section shall have, for the duration of such contract, an enrolled membership at least one-half of which consists of individuals who are not entitled to benefits under this title or under a State plan approved under title XIX.

        ‘(B) EXCEPTION- Subparagraph (A) shall not apply to--

          ‘(i) an organization that has been certified by a national organization recognized by the Secretary and has been found to have met performance standards established by the Secretary for at least 2 years, or

          ‘(ii) a provider-sponsored organization for which commercial payments to providers participating in the organization exceed the payments to the organization under this part.

        ‘(C) MODIFICATION AND WAIVER- The Secretary may modify or waive the requirement imposed by subparagraph (A)--

          ‘(i) to the extent that more than 50 percent of the population of the area served by the organization consists of individuals who are entitled to benefits under this title or under a State plan approved under title XIX, or

          ‘(ii) in the case of an organization that is owned and operated by a governmental entity, only with respect to a period of three years beginning on the date the organization first enters into a contract under this section, and only if the organization has taken and is making reasonable efforts to enroll individuals who are not entitled to benefits under this title or under a State plan approved under title XIX.

        ‘(D) ENFORCEMENT- If the Secretary determines that an organization has failed to comply with the requirements of this paragraph, the Secretary may provide for the suspension of enrollment of individuals under this part or of payment to the organization under this part for individuals newly enrolled with the organization, after the date the Secretary notifies the organization of such noncompliance.

    ‘(c) CONTRACT PERIOD AND EFFECTIVENESS-

      ‘(1) PERIOD- Each contract under this section shall be for a term of at least one year, as determined by the Secretary, and may be made automatically renewable from term to term in the absence of notice by either party of intention to terminate at the end of the current term.

      ‘(2) TERMINATION AUTHORITY- In accordance with procedures established under subsection (h), the Secretary may at any time terminate any such contract or may impose the intermediate sanctions described in an applicable paragraph of subsection (g) on the Medicare Choice organization if the Secretary determines that the organization--

        ‘(A) has failed substantially to carry out the contract;

        ‘(B) is carrying out the contract in a manner inconsistent with the efficient and effective administration of this part;

        ‘(C) is operating in a manner that is not in the best interests of the individuals covered under the contract; or

        ‘(D) no longer substantially meets the applicable conditions of this part.

      ‘(3) EFFECTIVE DATE OF CONTRACTS- The effective date of any contract executed pursuant to this section shall be specified in the contract.

      ‘(4) PREVIOUS TERMINATIONS- The Secretary may not enter into a contract with a Medicare Choice organization if a previous contract with that organization under this section was terminated at the request of the organization within the preceding five-year period, except in circumstances which warrant special consideration, as determined by the Secretary.

      ‘(5) NO CONTRACTING AUTHORITY- The authority vested in the Secretary by this part may be performed without regard to such provisions of law or regulations relating to the making, performance, amendment, or modification of contracts of the United States as the Secretary may determine to be inconsistent with the furtherance of the purpose of this title.

    ‘(d) PROTECTIONS AGAINST FRAUD AND BENEFICIARY PROTECTIONS-

      ‘(1) INSPECTION AND AUDIT- Each contract under this section shall provide that the Secretary, or any person or organization designated by the Secretary--

        ‘(A) shall have the right to inspect or otherwise evaluate (i) the quality, appropriateness, and timeliness of services performed under the contract and (ii) the facilities of the organization when there is reasonable evidence of some need for such inspection, and

        ‘(B) shall have the right to audit and inspect any books and records of the Medicare Choice organization that pertain (i) to the ability of the organization to bear the risk of potential financial losses, or (ii) to services performed or determinations of amounts payable under the contract.

      ‘(2) ENROLLEE NOTICE AT TIME OF TERMINATION- Each contract under this section shall require the organization to provide (and pay for) written notice in advance of the contract’s termination, as well as a description of alternatives for obtaining benefits under this title, to each individual enrolled with the organization under this part.

      ‘(3) DISCLOSURE-

        ‘(A) IN GENERAL- Each Medicare Choice organization shall, in accordance with regulations of the Secretary, report to the Secretary financial information which shall include the following:

          ‘(i) Such information as the Secretary may require demonstrating that the organization has a fiscally sound operation.

          ‘(ii) A copy of the report, if any, filed with the Health Care Financing Administration containing the information required to be reported under section 1124 by disclosing entities.

          ‘(iii) A description of transactions, as specified by the Secretary, between the organization and a party in interest. Such transactions shall include--

            ‘(I) any sale or exchange, or leasing of any property between the organization and a party in interest;

            ‘(II) any furnishing for consideration of goods, services (including management services), or facilities between the organization and a party in interest, but not including salaries paid to employees for services provided in the normal course of their employment and health services provided to members by hospitals and other providers and by staff, medical group (or groups), individual practice association (or associations), or any combination thereof; and

            ‘(III) any lending of money or other extension of credit between an organization and a party in interest.

        The Secretary may require that information reported respecting an organization which controls, is controlled by, or is under common control with, another entity be in the form of a consolidated financial statement for the organization and such entity.

        ‘(B) PARTY IN INTEREST DEFINED- For the purposes of this paragraph, the term ‘party in interest’ means--

          ‘(i) any director, officer, partner, or employee responsible for management or administration of a Medicare Choice organization, any person who is directly or indirectly the beneficial owner of more than 5 percent of the equity of the organization, any person who is the beneficial owner of a mortgage, deed of trust, note, or other interest secured by, and valuing more than 5 percent of the organization, and, in the case of a Medicare Choice organization organized as a nonprofit corporation, an incorporator or member of such corporation under applicable State corporation law;

          ‘(ii) any entity in which a person described in clause (i)--

            ‘(I) is an officer or director;

            ‘(II) is a partner (if such entity is organized as a partnership);

            ‘(III) has directly or indirectly a beneficial interest of more than 5 percent of the equity; or

            ‘(IV) has a mortgage, deed of trust, note, or other interest valuing more than 5 percent of the assets of such entity;

          ‘(iii) any person directly or indirectly controlling, controlled by, or under common control with an organization; and

          ‘(iv) any spouse, child, or parent of an individual described in clause (i).

        ‘(C) ACCESS TO INFORMATION- Each Medicare Choice organization shall make the information reported pursuant to subparagraph (A) available to its enrollees upon reasonable request.

      ‘(4) LOAN INFORMATION- The contract shall require the organization to notify the Secretary of loans and other special financial arrangements which are made between the organization and subcontractors, affiliates, and related parties.

    ‘(f) ADDITIONAL CONTRACT TERMS- The contract shall contain such other terms and conditions not inconsistent with this part (including requiring the organization to provide the Secretary with such information) as the Secretary may find necessary and appropriate.

    ‘(g) INTERMEDIATE SANCTIONS-

      ‘(1) IN GENERAL- If the Secretary determines that a Medicare Choice organization with a contract under this section--

        ‘(A) fails substantially to provide medically necessary items and services that are required (under law or under the contract) to be provided to an individual covered under the contract, if the failure has adversely affected (or has substantial likelihood of adversely affecting) the individual;

        ‘(B) imposes premiums on individuals enrolled under this part in excess of the premiums permitted;

        ‘(C) acts to expel or to refuse to re-enroll an individual in violation of the provisions of this part;

        ‘(D) engages in any practice that would reasonably be expected to have the effect of denying or discouraging enrollment (except as permitted by this part) by eligible individuals with the organization whose medical condition or history indicates a need for substantial future medical services;

        ‘(E) misrepresents or falsifies information that is furnished--

          ‘(i) to the Secretary under this part, or

          ‘(ii) to an individual or to any other entity under this part;

        ‘(F) fails to comply with the requirements of section 1852(f)(3); or

        ‘(G) employs or contracts with any individual or entity that is excluded from participation under this title under section 1128 or 1128A for the provision of health care, utilization review, medical social work, or administrative services or employs or contracts with any entity for the provision (directly or indirectly) through such an excluded individual or entity of such services;

      the Secretary may provide, in addition to any other remedies authorized by law, for any of the remedies described in paragraph (2).

      ‘(2) REMEDIES- The remedies described in this paragraph are--

        ‘(A) civil money penalties of not more than $25,000 for each determination under paragraph (1) or, with respect to a determination under subparagraph (D) or (E)(i) of such paragraph, of not more than $100,000 for each such determination, plus, with respect to a determination under paragraph (1)(B), double the excess amount charged in violation of such paragraph (and the excess amount charged shall be deducted from the penalty and returned to the individual concerned), and plus, with respect to a determination under paragraph (1)(D), $15,000 for each individual not enrolled as a result of the practice involved,

        ‘(B) suspension of enrollment of individuals under this part after the date the Secretary notifies the organization of a determination under paragraph (1) and until the Secretary is satisfied that the basis for such determination has been corrected and is not likely to recur, or

        ‘(C) suspension of payment to the organization under this part for individuals enrolled after the date the Secretary notifies the organization of a determination under paragraph (1) and until the Secretary is satisfied that the basis for such determination has been corrected and is not likely to recur.

      ‘(3) OTHER INTERMEDIATE SANCTIONS- In the case of a Medicare Choice organization for which the Secretary makes a determination under subsection (c)(2) the basis of which is not described in paragraph (1), the Secretary may apply the following intermediate sanctions:

        ‘(A) civil money penalties of not more than $25,000 for each determination under subsection (c)(2) if the deficiency that is the basis of the determination has directly adversely affected (or has the substantial likelihood of adversely affecting) an individual covered under the organization’s contract;

        ‘(B) civil money penalties of not more than $10,000 for each week beginning after the initiation of procedures by the Secretary under subsection (h) during which the deficiency that is the basis of a determination under subsection (c)(2) exists; and

        ‘(C) suspension of enrollment of individuals under this part after the date the Secretary notifies the organization of a determination under subsection (c)(2) and until the Secretary is satisfied that the deficiency that is the basis for the determination has been corrected and is not likely to recur.

      ‘(4) PROCEDURES FOR IMPOSING SANCTIONS- The provisions of section 1128A (other than subsections (a) and (b)) shall apply to a civil money penalty under paragraph (1) or (2) in

the same manner as they apply to a civil money penalty or proceeding under section 1128A(a).

    ‘(h) PROCEDURES FOR IMPOSING SANCTIONS- The Secretary may terminate a contract with a Medicare Choice organization under this section or may impose the intermediate sanctions described in subsection (g) on the organization in accordance with formal investigation and compliance procedures established by the Secretary under which--

      ‘(1) the Secretary provides the organization with the opportunity to develop and implement a corrective action plan to correct the deficiencies that were the basis of the Secretary’s determination under subsection (c)(2);

      ‘(2) the Secretary shall impose more severe sanctions on organizations that have a history of deficiencies or that have not taken steps to correct deficiencies the Secretary has brought to their attention;

      ‘(3) there are no unreasonable or unnecessary delays between the finding of a deficiency and the imposition of sanctions; and

      ‘(4) the Secretary provides the organization with reasonable notice and opportunity for hearing (including the right to appeal an initial decision) before imposing any sanction or terminating the contract.

‘DEMONSTRATION PROJECT FOR HIGH DEDUCTIBLE/MEDISAVE PRODUCTS

    ‘SEC. 1859. (a) PERMITTING DEMONSTRATION PROJECTS-

      ‘(1) IN GENERAL- The Secretary shall permit, on a demonstration project basis, the offering of high deductible/medisave products under this part, subject to the special rules provided under this section.

      ‘(2) LIMITATION ON NUMBER AND DURATION OF PROJECTS- The Secretary shall not permit under this section the offering of more than 10 demonstration projects and each such project shall not exceed 7 years in duration.

    ‘(b) HIGH DEDUCTIBLE/MEDISAVE PRODUCT DEFINED-

      ‘(1) IN GENERAL- In this part, the term ‘high deductible/medisave product’ means a Medicare Choice product that--

        ‘(A) provides reimbursement for at least the items and services described in section 1852(a)(1) in a year but only after the enrollee incurs countable expenses (as specified under the product) equal to the amount of a deductible (described in paragraph (2));

        ‘(B) counts as such expenses (for purposes of such deductible) at least all amounts that would have been payable under parts A and B or by the enrollee if the enrollee had elected to receive benefits through the provisions of such parts; and

        ‘(C) provides, after such deductible is met for a year and for all subsequent expenses for benefits referred to in subparagraph (A) in the year, for a level of reimbursement that is not less than--

          ‘(i) 100 percent of such expenses, or

          ‘(ii) 100 percent of the amounts that would have been paid (without regard to any deductibles or coinsurance) under parts A and B with respect to such expenses,

        whichever is less. Such term does not include the Medicare Choice MSA itself or any contribution into such account.

      ‘(2) DEDUCTIBLE- The amount of deductible under a high deductible/medisave product--

        ‘(A) for contract year 1997 shall be not more than $10,000; and

        ‘(B) for a subsequent contract year shall be not more than the maximum amount of such deductible for the previous contract year under this paragraph increased by the national average per capita growth rate under section 1855(c)(3) for the year.

      If the amount of the deductible under subparagraph (B) is not a multiple of $50, the amount shall be rounded to the nearest multiple of $50.

    ‘(c) SPECIAL RULES RELATING TO ENROLLMENT- The rule under section 1805 relating to election of medicare choice products shall apply to election of high deductible/medisave products offered under the demonstration project under this section, except as follows:

      ‘(1) SPECIAL RULE FOR CERTAIN ANNUITANTS- An individual is not eligible to elect a high deductible/medisave product under section 1805 if the individual is entitled to benefits under chapter 89 of title 5, United States Code, as an annuitant or spouse of an annuitant.

      ‘(2) TRANSITION PERIOD RULE- During the transition period (as defined in section 1805(e)(1)(B)), an individual who has elected a high deductible/medisave product may not change such election to a Medicare Choice product that is not a high deductible/medisave product unless the individual has had such election in effect for 12 months.

      ‘(3) NO 90-DAY DISENROLLMENT OPTION- Paragraph (4)(A) of section 1805(e) shall not apply to an individual who elects a high deductible/medisave product.

      ‘(4) TIMING OF ELECTION- An individual may elect a high deductible/medisave product only during an annual, coordinated election period described in section 1805(e)(3)(B) or during the month of October, 1996.

      ‘(5) EFFECTIVENESS OF ELECTION- An election of coverage for a high deductible/medisave product made in a year shall take effect as of the first day of the following year.

    ‘(d) SPECIAL RULES RELATING TO BENEFITS-

      ‘(1) IN GENERAL- Paragraphs (1) and (3) of section 1852(a) shall not apply to high deductible/medisave products.

      ‘(2) PREMIUMS-

        ‘(A) APPLICATION OF ALTERNATIVE PREMIUM- In applying section 1852(d)(2) in the case of a high deductible/medisave product, instead of the amount specified in subparagraph (B) there shall be substituted the monthly adjusted Medicare Choice capitation rate specified in section 1855(b)(1) for the individual and period involved.

        ‘(B) CLASS ADJUSTED PREMIUMS- Notwithstanding section 1852(d)(3), a Medicare Choice organization shall establish premiums for any high deductible/medisave product it offers in a payment area based on each of the risk adjustment categories established for purposes of determining the amount of the payment to Medicare Choice organizations under section 1855(b)(1) and using the identical demographic and other adjustments among such categories as are used for such purposes.

        ‘(C) REQUIREMENT FOR ADDITIONAL BENEFITS NOT APPLICABLE- Section 1852(e)(1)(A) shall not apply to a high deductible/medisave product.

    ‘(e) ADDITIONAL DISCLOSURE- In any disclosure made pursuant to section 1853(a)(1) for a high deductible/medisave product, the disclosure shall include a comparison of benefits under such a product with benefits under other Medicare Choice products.

    ‘(f) SPECIAL RULES FOR INDIVIDUALS ELECTING HIGH DEDUCTIBLE/MEDISAVE PRODUCT-

      ‘(1) IN GENERAL- In the case of an individual who has elected a high deductible/medisave product, notwithstanding the provisions of section 1855--

        ‘(A) the amount of the payment to the Medicare Choice organization offering the high deductible/medisave product shall not exceed the premium for the product, and

        ‘(B) subject to paragraph (2), the difference between the amount of payment that would otherwise be made and the amount of payment to such organization shall be made directly into a Medicare Choice MSA established (and, if applicable, designated) by the individual under paragraph (2).

      ‘(2) ESTABLISHMENT AND DESIGNATION OF MEDICARE CHOICE MEDICAL SAVINGS ACCOUNT AS REQUIREMENT FOR PAYMENT OF CONTRIBUTION- In the case of an individual who has elected coverage under a high deductible/medisave product, no payment shall be made under paragraph (1)(B) on behalf of an individual for a month unless the individual--

        ‘(A) has established before the beginning of the month (or by such other deadline as the Secretary may specify) a Medicare Choice MSA (as defined in section 137(b) of the Internal Revenue Code of 1986), and

        ‘(B) if the individual has established more than one Medicare Choice MSA, has designated one of such accounts as the individual’s Medicare Choice MSA for purposes of this part.

      Under rules under this section, such an individual may change the designation of such account under subparagraph (B) for purposes of this part.

      ‘(3) LUMP SUM DEPOSIT OF MEDICAL SAVINGS ACCOUNT CONTRIBUTION- In the case of an individual electing a high deductible/medisave product effective beginning with a month in a year, the amount of the contribution to the Medicare Choice MSA on behalf of the individual for that month and all successive months in the year shall be deposited during that first month. In the case of a termination of such an election as of a month before the end of a year, the Secretary shall provide for a procedure for the recovery of deposits attributable to the remaining months in the year.

    ‘(g) SPECIAL CONTRACT RULES-

      ‘(1) ENROLLMENT REQUIREMENTS WAIVED- Subsection (b) of section 1858 shall not apply with respect to a contract that relates only to one or more high deductible/medisave products.

      ‘(2) EFFECTIVE DATE OF CONTRACTS- In no case shall a contract under section 1858 which provides for coverage under a high deductible/medisave account be effective before January 1997 with respect to such coverage.’.

    (b) CONFORMING REFERENCES TO PREVIOUS PART C- Any reference in law (in effect before the date of the enactment of this Act) to part C of title XVIII of the Social Security Act is deemed a reference to part D of such title (as in effect after such date).

    (c) USE OF INTERIM, FINAL REGULATIONS- In order to carry out the amendment made by subsection (a) in a timely manner, the Secretary of Health and Human Services may promulgate regulations that take effect on an interim basis, after notice and pending opportunity for public comment.

    (d) ADVANCE DIRECTIVES- Section 1866(f)(1) (42 U.S.C. 1395cc(f)(1)) is amended--

      (1) in paragraph (1)--

        (A) by inserting ‘1853(g),’ after ‘1833(s),’, and

        (B) by inserting ‘, Medicare Choice organization,’ after ‘provider of services’, and

      (2) by adding at the end the following new paragraph:

    ‘(4) Nothing in this subsection shall be construed to require the provision of information regarding assisted suicide, euthanasia, or mercy killing.’.

    (e) CONFORMING AMENDMENT- Section 1866(a)(1)(O) (42 U.S.C. 1395cc(a)(1)(O)) is amended by inserting before the semicolon at the end the following: ‘and in the case of hospitals to accept as payment in full for inpatient hospital services that are covered under this title and are furnished to any individual enrolled under part C with a Medicare Choice organization which does not have a contract establishing payment amounts for services furnished to members of the organization the amounts that would be made as a payment in full under this title if the individuals were not so enrolled’.

SEC. 8003. REPORTS.

    (a) ALTERNATIVE PAYMENT APPROACHES- By not later than 18 months after the date of the enactment of this Act, the Secretary of Health and Human Services (in this title referred to as the ‘Secretary’) shall submit to Congress a report on alternative provider payment approaches under the medicare program, including--

      (1) combined hospital and physician payments per admission,

      (2) partial capitation models for subsets of medicare benefits, and

      (3) risk-sharing arrangements in which the Secretary defines the risk corridor and shares in gains and losses.

    Such report shall include recommendations for implementing and testing such approaches and legislation that may be required to implement and test such approaches.

    (b) COVERAGE OF RETIRED WORKERS-

      (1) IN GENERAL- The Secretary shall work with employers and health benefit plans to develop standards and payment methodologies to allow retired workers to continue to participate in employer health plans instead of participating in the medicare program. Such standards shall also cover workers covered under the Federal Employees Health Benefits Program under chapter 89 of title 5, United States Code.

      (2) REPORT- Not later than 18 months after the date of the enactment of this Act, the Secretary shall submit to Congress a report on the development of such standards and payment methodologies. The report shall include recommendations relating to such legislation as may be necessary.

SEC. 8004. TRANSITIONAL RULES FOR CURRENT MEDICARE HMO PROGRAM.

    (a) TRANSITION FROM CURRENT CONTRACTS-

      (1) LIMITATION ON NEW CONTRACTS- The Secretary of Health and Human Services (in this section referred to as the ‘Secretary’) shall not enter into any risk-sharing or cost reimbursement contract under section 1876 of the Social Security Act with an eligible organization for any contract year beginning on or after the date standards for Medicare Choice organizations and products are first established under section 1856(a) of such Act with respect to Medicare Choice organizations that are insurers or health maintenance organizations unless such a contract had been in effect under section 1876 of such Act for the organization for the previous contract year.

      (2) TERMINATION OF CURRENT CONTRACTS-

        (A) RISK-SHARING CONTRACTS- Notwithstanding any other provision of law, the Secretary shall not extend or continue any risk-sharing contract with an eligible organization under section 1876 of the Social Security Act (for which a contract was entered into consistent with paragraph (1)(A)) for any contract year beginning on or after 1 year after the date standards described in paragraph (1)(A) are established.

        (B) COST REIMBURSEMENT CONTRACTS- The Secretary shall not extend or continue any reasonable cost reimbursement contract with an eligible organization under section 1876 of the Social Security Act for any contract year beginning on or after January 1, 1998.

    (b) CONFORMING PAYMENT RATES UNDER RISK-SHARING CONTRACTS- Notwithstanding any other provision of law, the Secretary shall provide that payment amounts under risk-sharing contracts under section 1876(a) of the Social Security Act for months in a year (beginning with January 1996) shall be computed--

      (1) with respect to individuals entitled to benefits under both parts A and B of title XVIII of such Act, by substituting payment rates under section 1855(a) of such Act for the payment rates otherwise established under section 1876(a) of such Act, and

      (2) with respect to individuals only entitled to benefits under part B of such title, by substituting an appropriate proportion of such rates (reflecting the relative proportion of payments under such title attributable to such part) for the payment rates otherwise established under section 1876(a) of such Act.

    For purposes of carrying out this paragraph for payment for months in 1996, the Secretary shall compute, announce, and apply the payment rates under section 1855(a) of such Act (notwithstanding any deadlines specified in such section) in as timely a manner as possible and may (to the extent necessary) provide for retroactive adjustment in payments made not in accordance with such rates.

PART 2--SPECIAL RULES FOR MEDICARE CHOICE MEDICAL SAVINGS ACCOUNTS

SEC. 8011. MEDICARE CHOICE MSA’S.

    (a) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to amounts specifically excluded from gross income) is amended by redesignating section 137 as section 138 and by inserting after section 136 the following new section:

‘SEC. 137. MEDICARE CHOICE MSA’S.

    ‘(a) EXCLUSION- Gross income shall not include any payment to the Medicare Choice MSA of an individual by the Secretary of Health and Human Services under section 1859(f)(1)(B) of the Social Security Act.

    ‘(b) MEDICARE CHOICE MSA- For purposes of this section--

      ‘(1) MEDICARE CHOICE MSA- The term ‘Medicare Choice MSA’ means a trust created or organized in the United States exclusively for the purpose of paying the qualified medical expenses of the account holder, but only if the written governing instrument creating the trust meets the following requirements:

        ‘(A) Except in the case of a trustee-to-trustee transfer described in subsection (d)(4), no contribution will be accepted unless it is made by the Secretary of Health and Human Services under section 1859(f)(1)(B) of the Social Security Act.

        ‘(B) The trustee is a bank (as defined in section 408(n)), an insurance company (as defined in section 816), or another person who demonstrates to the satisfaction of the Secretary that the manner in which such person will administer the trust will be consistent with the requirements of this section.

        ‘(C) No part of the trust assets will be invested in life insurance contracts.

        ‘(D) The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund.

        ‘(E) The interest of an individual in the balance in his account is nonforfeitable.

        ‘(F) Trustee-to-trustee transfers described in subsection (d)(4) may be made to and from the trust.

      ‘(2) QUALIFIED MEDICAL EXPENSES-

        ‘(A) IN GENERAL- The term ‘qualified medical expenses’ means, with respect to an account holder, amounts paid by such holder--

          ‘(i) for medical care (as defined in section 213(d)) for the account holder, but only to the extent such amounts are not compensated for by insurance or otherwise, or

          ‘(ii) for long-term care insurance for the account holder.

        ‘(B) HEALTH INSURANCE MAY NOT BE PURCHASED FROM ACCOUNT- Subparagraph (A)(i) shall not apply to any payment for insurance.

      ‘(3) ACCOUNT HOLDER- The term ‘account holder’ means the individual on whose behalf the Medicare Choice MSA is maintained.

      ‘(4) CERTAIN RULES TO APPLY- Rules similar to the rules of subsections (g) and (h) of section 408 shall apply for purposes of this section.

    ‘(c) TAX TREATMENT OF ACCOUNTS-

      ‘(1) IN GENERAL- A Medicare Choice MSA is exempt from taxation under this subtitle unless such MSA has ceased to be a Medicare Choice MSA by reason of paragraph (2). Notwithstanding the preceding sentence, any such MSA is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations).

      ‘(2) ACCOUNT ASSETS TREATED AS DISTRIBUTED IN THE CASE OF PROHIBITED TRANSACTIONS OR ACCOUNT PLEDGED AS SECURITY FOR LOAN- Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to Medicare Choice MSA’s, and any amount treated as distributed under such rules shall be treated as not used to pay qualified medical expenses.

    ‘(d) TAX TREATMENT OF DISTRIBUTIONS-

      ‘(1) INCLUSION OF AMOUNTS NOT USED FOR QUALIFIED MEDICAL EXPENSES- No amount shall be included in the gross income of the account holder by reason of a payment or distribution from a Medicare Choice MSA which is used exclusively to pay the qualified medical expenses of the account holder. Any amount paid or distributed from a Medicare Choice MSA which is not so used shall be included in the gross income of such holder.

      ‘(2) PENALTY FOR DISTRIBUTIONS NOT USED FOR QUALIFIED MEDICAL EXPENSES IF MINIMUM BALANCE NOT MAINTAINED-

        ‘(A) IN GENERAL- The tax imposed by this chapter for any taxable year in which there is a payment or distribution from a Medicare Choice MSA which is not used exclusively to pay the qualified medical expenses of the account holder shall be increased by 50 percent of the excess (if any) of--

          ‘(i) the amount of such payment or distribution, over

          ‘(ii) the excess (if any) of--

            ‘(I) the fair market value of the assets in the Medicare Choice MSA as of the close of the calendar year preceding the calendar year in which the taxable year begins, over

            ‘(II) an amount equal to 60 percent of the deductible under the catastrophic health plan covering the account holder as of January 1 of the calendar year in which the taxable year begins.

        ‘(B) EXCEPTIONS- Subparagraph (A) shall not apply if the payment or distribution is made on or after the date the account holder--

          ‘(i) becomes disabled within the meaning of section 72(m)(7), or

          ‘(ii) dies.

        ‘(C) SPECIAL RULES- For purposes of subparagraph (A)--

          ‘(i) all Medicare Choice MSA’s of the account holder shall be treated as 1 account,

          ‘(ii) all payments and distributions not used exclusively to pay the qualified medical expenses of the account holder during any taxable year shall be treated as 1 distribution, and

          ‘(iii) any distribution of property shall be taken into account at its fair market value on the date of the distribution.

      ‘(3) WITHDRAWAL OF ERRONEOUS CONTRIBUTIONS- Paragraphs (1) and (2) shall not apply to any payment or distribution from a Medicare Choice MSA to the Secretary of Health and Human Services of an erroneous contribution to such MSA and of the net income attributable to such contribution.

      ‘(4) TRUSTEE-TO-TRUSTEE TRANSFERS- Paragraphs (1) and (2) shall not apply to any trustee-to-trustee transfer from a Medicare Choice MSA of an account holder to another Medicare Choice MSA of such account holder.

      ‘(5) COORDINATION WITH MEDICAL EXPENSE DEDUCTION- For purposes of section 213, any payment or distribution out of a Medicare Choice MSA for qualified medical expenses shall not be treated as an expense paid for medical care.

    ‘(e) TREATMENT OF ACCOUNT AFTER DEATH OF ACCOUNT HOLDER-

      ‘(1) TREATMENT IF DESIGNATED BENEFICIARY IS SPOUSE-

        ‘(A) IN GENERAL- In the case of an account holder’s interest in a Medicare Choice MSA which is payable to (or for the benefit of) such holder’s spouse upon the death of such holder, such Medicare Choice MSA shall be treated as a Medicare Choice MSA of such spouse as of the date of such death.

        ‘(B) SPECIAL RULES IF SPOUSE NOT MEDICARE ELIGIBLE- If, as of the date of such death, such spouse is not entitled to benefits under title XVIII of the Social Security Act, then after the date of such death--

          ‘(i) the Secretary of Health and Human Services may not make any payments to such Medicare Choice MSA, other than payments attributable to periods before such date,

          ‘(ii) in applying subsection (b)(2) with respect to such Medicare Choice MSA, references to the account holder shall be treated as including references to any dependent (as defined in section 152) of such spouse and any subsequent spouse of such spouse, and

          ‘(iii) in lieu of applying subsection (d)(2), the rules of section 220(f)(2) shall apply.

      ‘(2) TREATMENT IF DESIGNATED BENEFICIARY IS NOT SPOUSE- In the case of an account holder’s interest in a Medicare Choice MSA which is payable to (or for the benefit of) any person other than such holder’s spouse upon the death of such holder--

        ‘(A) such account shall cease to be a Medicare Choice MSA as of the date of death, and

        ‘(B) an amount equal to the fair market value of the assets in such account on such date shall be includible--

          ‘(i) if such person is not the estate of such holder, in such person’s gross income for the taxable year which includes such date, or

          ‘(ii) if such person is the estate of such holder, in such holder’s gross income for last taxable year of such holder.

    ‘(f) REPORTS-

      ‘(1) IN GENERAL- The trustee of a Medicare Choice MSA shall make such reports regarding such account to the Secretary and to the account holder with respect to--

        ‘(A) the fair market value of the assets in such Medicare Choice MSA as of the close of each calendar year, and

        ‘(B) contributions, distributions, and other matters,

      as the Secretary may require by regulations.

      ‘(2) TIME AND MANNER OF REPORTS- The reports required by this subsection--

        ‘(A) shall be filed at such time and in such manner as the Secretary prescribes in such regulations, and

        ‘(B) shall be furnished to the account holder--

          ‘(i) not later than January 31 of the calendar year following the calendar year to which such reports relate, and

          ‘(ii) in such manner as the Secretary prescribes in such regulations.’

    (b) EXCLUSION OF MEDICARE CHOICE MSA’S FROM ESTATE TAX- Part IV of subchapter A of chapter 11 of such Code is amended by adding at the end the following new section:

‘SEC. 2057. MEDICARE CHOICE MSA’S.

    ‘For purposes of the tax imposed by section 2001, the value of the taxable estate shall be determined by deducting from the value of the gross estate an amount equal to the value of any Medicare Choice MSA (as defined in section 137(b)) included in the gross estate.’

    (c) TAX ON PROHIBITED TRANSACTIONS-

      (1) Section 4975 of such Code (relating to tax on prohibited transactions) is amended by adding at the end of subsection (c) the following new paragraph:

      ‘(5) SPECIAL RULE FOR MEDICARE CHOICE MSA’S- An individual for whose benefit a Medicare Choice MSA (within the meaning of section 137(b)) is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if, with respect to such transaction, the account ceases to be a Medicare Choice MSA by reason of the application of section 137(c)(2) to such account.’

      (2) Paragraph (1) of section 4975(e) of such Code is amended to read as follows:

      ‘(1) PLAN- For purposes of this section, the term ‘plan’ means--

        ‘(A) a trust described in section 401(a) which forms a part of a plan, or a plan described in section 403(a), which trust or plan is exempt from tax under section 501(a),

        ‘(B) an individual retirement account described in section 408(a),

        ‘(C) an individual retirement annuity described in section 408(b),

        ‘(D) a medical savings account described in section 220(d),

        ‘(E) a Medicare Choice MSA described in section 137(b), or

        ‘(F) a trust, plan, account, or annuity which, at any time, has been determined by the Secretary to be described in any preceding subparagraph of this paragraph.’

    (d) FAILURE TO PROVIDE REPORTS ON MEDICARE CHOICE MSA’S-

      (1) Subsection (a) of section 6693 of such Code (relating to failure to provide reports on individual retirement accounts or annuities) is amended to read as follows:

    ‘(a) REPORTS-

      ‘(1) IN GENERAL- If a person required to file a report under a provision referred to in paragraph (2) fails to file such report at the time and in the manner required by such provision, such person shall pay a penalty of $50 for each failure unless it is shown that such failure is due to reasonable cause.

      ‘(2) PROVISIONS- The provisions referred to in this paragraph are--

        ‘(A) subsections (i) and (l) of section 408 (relating to individual retirement plans),

        ‘(B) section 220(h) (relating to medical savings accounts), and

        ‘(C) section 137(f) (relating to Medicare Choice MSA’s).’

      (2) The section heading for section 6693 of such Code is amended to read as follows:

‘SEC. 6693. FAILURE TO FILE REPORTS ON INDIVIDUAL RETIREMENT PLANS AND CERTAIN OTHER TAX-FAVORED ACCOUNTS; PENALTIES RELATING TO DESIGNATED NONDEDUCTIBLE CONTRIBUTIONS.’

    (e) CLERICAL AMENDMENTS-

      (1) The table of sections for part III of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following:

‘Sec. 137. Medicare Choice MSA’s.

‘Sec. 138. Cross references to other Acts.’

      (2) The table of sections for subchapter B of chapter 68 of such Code is amended by striking the item relating to section 6693 and inserting the following new item:

‘Sec. 6693. Failure to file reports on individual retirement plans and certain other tax-favored accounts; penalties relating to designated nondeductible contributions.’

      (3) The table of sections for part IV of subchapter A of chapter 11 of such Code is amended by adding at the end the following new item:

‘Sec. 2057. Medicare Choice MSA’s.’

    (f) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1996.

SEC. 8012. CERTAIN REBATES EXCLUDED FROM GROSS INCOME.

    (a) IN GENERAL- Section 105 of the Internal Revenue Code of 1986 (relating to amounts received under accident and health plans) is amended by adding at the end the following new subsection:

    ‘(j) CERTAIN REBATES UNDER SOCIAL SECURITY ACT- Gross income does not include any rebate received under section 1852(e)(1)(A) of the Social Security Act during the taxable year.’

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to amounts received after the date of the enactment of this Act.

PART 3--SPECIAL ANTITRUST RULE FOR PROVIDER SERVICE NETWORKS

SEC. 8021. APPLICATION OF ANTITRUST RULE OF REASON TO PROVIDER SERVICE NETWORKS.

    (a) RULE OF REASON STANDARD- In any action under the antitrust laws, or under any State law similar to the antitrust laws--

      (1) the conduct of a provider service network in negotiating, making, or performing a contract (including the establishment and modification of a fee schedule and the development of a panel of physicians), to the extent such contract is for the purpose of providing health care services to individuals under the terms of a Medicare Choice PSO product, and

      (2) the conduct of any member of such network for the purpose of providing such health care services under such contract to such extent,

    shall not be deemed illegal per se. Such conduct shall be judged on the basis of its reasonableness, taking into account all relevant factors affecting competition, including the effects on competition in properly defined markets.

    (b) DEFINITIONS- For purposes of subsection (a):

      (1) ANTITRUST LAWS- The term ‘antitrust laws’ has the meaning given it in subsection (a) of the first section of the Clayton Act (15 U.S.C. 12), except that such term includes section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to the extent that such section 5 applies to unfair methods of competition.

      (2) HEALTH CARE PROVIDER- The term ‘health care provider’ means any individual or entity that is engaged in the delivery of health care services in a State and that is required by State law or regulation to be licensed or certified by the State to engage in the delivery of such services in the State.

      (3) HEALTH CARE SERVICE- The term ‘health care service’ means any service for which payment may be made under a Medicare Choice PSO product including services related to the delivery or administration of such service.

      (4) MEDICARE CHOICE PROGRAM- The term ‘Medicare Choice program’ means the program under part C of title XVIII of the Social Security Act.

      (5) MEDICARE CHOICE PSO PRODUCT- The term ‘Medicare Choice PSO product’ means a Medicare Choice product offered by a provider-sponsored organization under part C of title XVIII of the Social Security Act.

      (6) PROVIDER SERVICE NETWORK- The term ‘provider service network’ means an organization that--

        (A) is organized by, operated by, and composed of members who are health care providers and for purposes that include providing health care services,

        (B) is funded in part by capital contributions made by the members of such organization,

        (C) with respect to each contract made by such organization for the purpose of providing a type of health care service to individuals under the terms of a Medicare Choice PSO product--

          (i) requires all members of such organization who engage in providing such type of health care service to agree to provide health care services of such type under such contract,

          (ii) receives the compensation paid for the health care services of such type provided under such contract by such members, and

          (iii) provides for the distribution of such compensation,

        (D) has established, consistent with the requirements of the Medicare Choice program for provider-sponsored organizations, a program to review, pursuant to written guidelines, the quality, efficiency, and appropriateness of treatment methods and setting of services for all health care providers and all patients participating in such product, along with internal procedures to correct identified deficiencies relating to such methods and such services,

        (E) has established, consistent with the requirements of the Medicare Choice program for provider-sponsored organizations, a program to monitor and control utilization of health care services provided under such product, for the purpose of improving efficient, appropriate care and eliminating the provision of unnecessary health care services,

        (F) has established a management program to coordinate the delivery of health care services for all health care providers and all patients participating in such product, for the purpose of achieving efficiencies and enhancing the quality of health care services provided, and

        (G) has established, consistent with the requirements of the Medicare Choice program for provider-sponsored organizations, a grievance and appeal process for such organization designed to review and promptly resolve beneficiary or patient grievances and complaints.

      Such term may include a provider-sponsored organization.

      (7) PROVIDER-SPONSORED ORGANIZATION- The term ‘provider-sponsored organization’ means a Medicare Choice organization under the Medicare Choice program that is a provider-sponsored organization (as defined in section 1854(a)(1) of the Social Security Act).

      (8) STATE- The term ‘State’ has the meaning given it in section 4G(2) of the Clayton Act (15 U.S.C. 15g(2)).

    (c) ISSUANCE OF GUIDELINES- Not later than 120 days after the date of the enactment of this Act, the Attorney General and the Federal Trade Commission shall issue jointly guidelines specifying the enforcement policies and analytical principles that will be applied by the Department of Justice and the Commission with respect to the operation of subsection (a).

PART 4--COMMISSIONS

SEC. 8031. MEDICARE PAYMENT REVIEW COMMISSION.

    (a) IN GENERAL- Title XVIII, as amended by section 8001(a), is amended by inserting after section 1805 the following new section:

‘MEDICARE PAYMENT REVIEW COMMISSION

    ‘SEC. 1806. (a) ESTABLISHMENT- There is hereby established the Medicare Payment Review Commission (in this section referred to as the ‘Commission’).

    ‘(b) DUTIES-

      ‘(1) GENERAL DUTIES AND REPORTS- The Commission shall review, and make recommendations to Congress concerning, payment policies under this title. By not later than June 1 of each year, the Commission shall submit a report to Congress containing an examination of issues affecting the medicare program, including the implications of changes in health care delivery in the United States and in the market for health care services on the medicare program. The Commission may submit to Congress from time to time such other reports as the Commission deems appropriate. The Secretary shall respond to recommendations of the Commission in notices of rulemaking proceedings under this title.

      ‘(2) SPECIFIC DUTIES RELATING TO MEDICARE CHOICE PROGRAM- Specifically, the Commission shall review, with respect to the Medicare Choice program under part C--

        ‘(A) the appropriateness of the methodology for making payment to plans under such program, including the making of differential payments and the distribution of differential updates among different payment areas,

        ‘(B) the appropriateness of the mechanisms used to adjust payments for risk and the need to adjust such mechanisms to take into account health status of beneficiaries,

        ‘(C) the implications of risk selection both among Medicare Choice organizations and between the Medicare Choice option and the non-Medicare Choice option,

        ‘(D) in relation to payment under part C, the development and implementation of mechanisms to assure the quality of care for those enrolled with Medicare Choice organizations,

        ‘(E) the impact of the Medicare Choice program on access to care for medicare beneficiaries, and

        ‘(F) other major issues in implementation and further development of the Medicare Choice program.

      ‘(3) SPECIFIC DUTIES RELATING TO THE FEE-FOR-SERVICE SYSTEM- Specifically, the Commission shall review payment policies under parts A and B, including--

        ‘(A) the factors affecting expenditures for services in different sectors, including the process for updating hospital, physician, and other fees,

        ‘(B) payment methodologies; and

        ‘(C) the impact of payment policies on access and quality of care for medicare beneficiaries.

      ‘(4) SPECIFIC DUTIES RELATING TO INTERACTION OF PAYMENT POLICIES WITH HEALTH CARE DELIVERY GENERALLY- Specifically the Commission shall review the effect of payment policies under this title on the delivery of health care services under this title and assess the implications of changes in the health services market on the medicare program.

    ‘(c) MEMBERSHIP-

      ‘(1) NUMBER AND APPOINTMENT- The Commission shall be composed of 15 members appointed by the Comptroller General.

      ‘(2) QUALIFICATIONS- The membership of the Commission shall include individuals with national recognition for their expertise in health finance and economics, actuarial science, health facility management, health plans and integrated delivery systems, reimbursement of health facilities, physicians, and other providers of services, and other related fields, who provide a mix of different professionals, broad geographic representation, and a balance between urban and rural representatives, including physicians and other health professionals, employers, third party payors, individuals skilled in the conduct and interpretation of biomedical, health services, and health economics research and expertise in outcomes and effectiveness research and technology assessment. Such membership shall also include representatives of consumers and the elderly.

      ‘(3) CONSIDERATIONS IN INITIAL APPOINTMENT- To the extent possible, in first appointing members to the Commission the Comptroller General shall consider appointing individuals who (as of the date of the enactment of this section) were serving on the Prospective Payment Assessment Commission or the Physician Payment Review Commission.

      ‘(4) TERMS-

        ‘(A) IN GENERAL- The terms of members of the Commission shall be for 3 years except that the Comptroller General shall designate staggered terms for the members first appointed.

        ‘(B) VACANCIES- Any member appointed to fill a vacancy occurring before the expiration of the term for which the member’s predecessor was appointed shall be appointed only for the remainder of that term. A member may serve after the expiration of that member’s term until a successor has taken office. A vacancy in the Commission shall be filled in the manner in which the original appointment was made.

      ‘(5) COMPENSATION- While serving on the business of the Commission (including traveltime), a member of the Commission shall be entitled to compensation at the per diem equivalent of the rate provided for level IV of the Executive Schedule under section 5315 of title 5, United States Code; and while so serving away from home and member’s regular place of business, a member may be allowed travel expenses, as authorized by the Chairman of the Commission. Physicians serving as personnel of the Commission may be provided a physician comparability allowance by the Commission in the same manner as Government physicians may be provided such an allowance by an agency under section 5948 of title 5, United States Code, and for such purpose subsection (i) of such section shall apply to the Commission in the same manner as it applies to the Tennessee Valley Authority. For purposes of pay (other than pay of members of the Commission) and employment benefits, rights, and privileges, all personnel of the Commission shall be treated as if they were employees of the United States Senate.

      ‘(6) CHAIRMAN; VICE CHAIRMAN- The Comptroller General shall designate a member of the Commission, at the time of

appointment of the member, as Chairman and a member as Vice Chairman for that term of appointment.

      ‘(7) MEETINGS- The Commission shall meet at the call of the Chairman.

    ‘(d) DIRECTOR AND STAFF; EXPERTS AND CONSULTANTS- Subject to such review as the Comptroller General deems necessary to assure the efficient administration of the Commission, the Commission may--

      ‘(1) employ and fix the compensation of an Executive Director (subject to the approval of the Comptroller General) and such other personnel as may be necessary to carry out its duties (without regard to the provisions of title 5, United States Code, governing appointments in the competitive service);

      ‘(2) seek such assistance and support as may be required in the performance of its duties from appropriate Federal departments and agencies;

      ‘(3) enter into contracts or make other arrangements, as may be necessary for the conduct of the work of the Commission (without regard to section 3709 of the Revised Statutes (41 U.S.C. 5));

      ‘(4) make advance, progress, and other payments which relate to the work of the Commission;

      ‘(5) provide transportation and subsistence for persons serving without compensation; and

      ‘(6) prescribe such rules and regulations as it deems necessary with respect to the internal organization and operation of the Commission.

    ‘(e) POWERS-

      ‘(1) OBTAINING OFFICIAL DATA- The Commission may secure directly from any department or agency of the United States information necessary to enable it to carry out this section. Upon request of the Chairman, the head of that department or agency shall furnish that information to the Commission on an agreed upon schedule.

      ‘(2) DATA COLLECTION- In order to carry out its functions, the Commission shall collect and assess information.

        ‘(A) utilize existing information, both published and unpublished, where possible, collected and assessed either by its own staff or under other arrangements made in accordance with this section,

        ‘(B) carry out, or award grants or contracts for, original research and experimentation, where existing information is inadequate, and

        ‘(C) adopt procedures allowing any interested party to submit information for the Commission’s use in making reports and recommendations.

      ‘(3) ACCESS OF GAO TO INFORMATION- The Comptroller General shall have unrestricted access to all deliberations, records, and data of the Commission, immediately upon request.

      ‘(4) PERIODIC AUDIT- The Commission shall be subject to periodic audit by the General Accounting Office.

    ‘(f) AUTHORIZATION OF APPROPRIATIONS-

      ‘(1) REQUEST FOR APPROPRIATIONS- The Commission shall submit requests for appropriations in the same manner as the Comptroller General submits requests for appropriations, but amounts appropriated for the Commission shall be separate from amounts appropriated for the Comptroller General.

      ‘(2) AUTHORIZATION- There are authorized to be appropriated such sums as may be necessary to carry out the provisions of this section. 60 percent of such appropriation shall be payable from the Federal Hospital Insurance Trust Fund, and 40 percent of such appropriation shall be payable from the Federal Supplementary Medical Insurance Trust Fund.’.

    (b) ABOLITION OF PROPAC AND PPRC-

      (1) PROPAC-

        (A) IN GENERAL- Section 1886(e) (42 U.S.C. 1395ww(e)) is amended--

          (i) by striking paragraphs (2) and (6); and

          (ii) in paragraph (3), by striking ‘(A) The Commission’ and all that follows through ‘(B)’.

        (B) CONFORMING AMENDMENT- Section 1862 (42 U.S.C. 1395y) is amended by striking ‘Prospective Payment Assessment Commission’ each place it appears in subsection (a)(1)(D) and subsection (i) and inserting ‘Medicare Payment Review Commission’.

      (2) PPRC-

        (A) IN GENERAL- Title XVIII is amended by striking section 1845 (42 U.S.C. 1395w-1).

        (B) CONFORMING AMENDMENTS-

          (i) Section 1834(b)(2) (42 U.S.C. 1395m(b)(2)) is amended by striking ‘Physician Payment Review Commission’ and inserting ‘Medicare Payment Review Commission’.

          (ii) Section 1842(b) (42 U.S.C. 1395u(b)) is amended by striking ‘Physician Payment Review Commission’ each place it appears in paragraphs (2)(C), (9)(D), and (14)(C)(i) and inserting ‘Medicare Payment Review Commission’.

          (iii) Section 1848 (42 U.S.C. 1395w@4) is amended by striking ‘Physician Payment Review Commission’ and inserting ‘Medicare Payment Review Commission’ each place it appears in paragraph (2)(A)(ii), (2)(B)(iii), and (5) of subsection (c), subsection (d)(2)(F), paragraphs (1)(B), (3), and (4)(A) of subsection (f), and paragraphs (6)(C) and (7)(C) of subsection (g).

    (c) EFFECTIVE DATE; TRANSITION-

      (1) IN GENERAL- The Comptroller General shall first provide for appointment of members to the Medicare Payment Review Commission (in this subsection referred to as ‘MPRC’) by not later than March 31, 1996.

      (2) TRANSITION- Effective on a date (not later than 30 days after the date a majority of members of the MPRC have first been appointed, the Prospective Payment Assessment Commission (in this subsection referred to as ‘ProPAC’) and the Physician Payment Review Commission (in this subsection referred to as ‘PPRC’), and amendments made by subsection (b), are terminated. The Comptroller General, to the maximum extent feasible, shall provide for the transfer to the MPRC of assets and staff of ProPAC and PPRC, without any loss of benefits or seniority by virtue of such transfers. Fund balances available to the ProPAC or PPRC for any period shall be available to the MPRC for such period for like purposes.

      (3) CONTINUING RESPONSIBILITY FOR REPORTS- The MPRC shall be responsible for the preparation and submission of reports required by law to be submitted (and which have not been submitted by the date of establishment of the MPRC) by the ProPAC and PPRC, and, for this purpose, any reference in law to either such Commission is deemed, after the appointment of the MPRC, to refer to the MPRC.

SEC. 8032. COMMISSION ON THE EFFECT OF THE BABY BOOM GENERATION ON THE MEDICARE PROGRAM.

    (a) ESTABLISHMENT- There is established a commission to be known as the Commission on the Effect of the Baby Boom Generation on the Medicare Program (in this section referred to as the ‘Commission’).

    (b) DUTIES-

      (1) IN GENERAL- The Commission shall--

        (A) examine the financial impact on the medicare program of the significant increase in the number of medicare eligible individuals which will occur beginning

approximately during 2010 and lasting for approximately 25 years, and

        (B) make specific recommendations to the Congress respecting a comprehensive approach to preserve the medicare program for the period during which such individuals are eligible for medicare.

      (2) CONSIDERATIONS IN MAKING RECOMMENDATIONS- In making its recommendations, the Commission shall consider the following:

        (A) The amount and sources of Federal funds to finance the medicare program, including the potential use of innovative financing methods.

        (B) The most efficient and effective manner of administering the program, including the appropriateness of continuing the enforcement of medicare budget targets under section 8701 for fiscal years after fiscal year 2002 and the appropriate long-term growth rates for contributions electing coverage under Medicare Choice under part C of title XVIII of such Act.

        (C) Methods used by other nations to respond to comparable demographic patterns in eligibility for health care benefits for elderly and disabled individuals.

        (D) Modifying age-based eligibility to correspond to changes in age-based eligibility under the OASDI program.

        (E) Trends in employment-related health care for retirees, including the use of medical savings accounts and similar financing devices.

    (c) MEMBERSHIP-

      (1) APPOINTMENT- The Commission shall be composed of 15 members appointed as follows:

        (A) The President shall appoint 3 members.

        (B) The Majority Leader of the Senate shall appoint, after consultation with the minority leader of the Senate, 6 members, of whom not more than 4 may be of the same political party.

        (C) The Speaker of the House of Representatives shall appoint, after consultation with the minority leader of the House of Representatives, 6 members, of whom not more than 4 may be of the same political party.

      (2) CHAIRMAN AND VICE CHAIRMAN- The Commission shall elect a Chairman and Vice Chairman from among its members.

      (3) VACANCIES- Any vacancy in the membership of the Commission shall be filled in the manner in which the original appointment was made and shall not affect the power of the remaining members to execute the duties of the Commission.

      (4) QUORUM- A quorum shall consist of 8 members of the Commission, except that 4 members may conduct a hearing under subsection (e).

      (5) MEETINGS- The Commission shall meet at the call of its Chairman or a majority of its members.

      (6) COMPENSATION AND REIMBURSEMENT OF EXPENSES- Members of the Commission are not entitled to receive compensation for service on the Commission. Members may be reimbursed for travel, subsistence, and other necessary expenses incurred in carrying out the duties of the Commission.

    (d) STAFF AND CONSULTANTS-

      (1) STAFF- The Commission may appoint and determine the compensation of such staff as may be necessary to carry out the duties of the Commission. Such appointments and compensation may be made without regard to the provisions of title 5, United States Code, that govern appointments in the competitive services, and the provisions of chapter 51 and subchapter III of chapter 53 of such title that relate to classifications and the General Schedule pay rates.

      (2) CONSULTANTS- The Commission may procure such temporary and intermittent services of consultants under section 3109(b) of title 5, United States Code, as the Commission determines to be necessary to carry out the duties of the Commission.

    (e) POWERS-

      (1) HEARINGS AND OTHER ACTIVITIES- For the purpose of carrying out its duties, the Commission may hold such hearings and undertake such other activities as the Commission determines to be necessary to carry out its duties.

      (2) STUDIES BY GAO- Upon the request of the Commission, the Comptroller General shall conduct such studies or investigations as the Commission determines to be necessary to carry out its duties.

      (3) COST ESTIMATES BY CONGRESSIONAL BUDGET OFFICE-

        (A) Upon the request of the Commission, the Director of the Congressional Budget Office shall provide to the Commission such cost estimates as the Commission determines to be necessary to carry out its duties.

        (B) The Commission shall reimburse the Director of the Congressional Budget Office for expenses relating to the employment in the office of the Director of such additional staff as may be necessary for the Director to comply with requests by the Commission under subparagraph (A).

      (4) DETAIL OF FEDERAL EMPLOYEES- Upon the request of the Commission, the head of any Federal agency is authorized to detail, without reimbursement, any of the personnel of such agency to the Commission to assist the Commission in carrying out its duties. Any such detail shall not interrupt or otherwise affect the civil service status or privileges of the Federal employee.

      (5) TECHNICAL ASSISTANCE- Upon the request of the Commission, the head of a Federal agency shall provide such technical assistance to the Commission as the Commission determines to be necessary to carry out its duties.

      (6) USE OF MAILS- The Commission may use the United States mails in the same manner and under the same conditions as Federal agencies and shall, for purposes of the frank, be considered a commission of Congress as described in section 3215 of title 39, United States Code.

      (7) OBTAINING INFORMATION- The Commission may secure directly from any Federal agency information necessary to enable it to carry out its duties, if the information may be disclosed under section 552 of title 5, United States Code. Upon request of the Chairman of the Commission, the head of such agency shall furnish such information to the Commission.

      (8) ADMINISTRATIVE SUPPORT SERVICES- Upon the request of the Commission, the Administrator of General Services shall provide to the Commission on a reimbursable basis such administrative support services as the Commission may request.

      (9) ACCEPTANCE OF DONATIONS- The Commission may accept, use, and dispose of gifts or donations of services or property.

      (10) PRINTING- For purposes of costs relating to printing and binding, including the cost of personnel detailed from the Government Printing Office, the Commission shall be deemed to be a committee of the Congress.

    (f) REPORT- Not later than May 1, 1997, the Commission shall submit to Congress a report containing its findings and recommendations regarding how to protect and preserve the medicare program in a financially solvent manner until 2030 (or, if later, throughout the period of projected solvency of the Federal Old-Age and Survivors Insurance Trust Fund). The report shall include detailed recommendations for appropriate legislative initiatives respecting how to accomplish this objective.

    (g) TERMINATION- The Commission shall terminate 60 days after the date of submission of the report required in subsection (f).

    (h) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated $1,500,000 to carry out this section. Amounts appropriated to carry out this section shall remain available until expended.

PART 5--PREEMPTION OF STATE ANTI-MANAGED CARE LAWS

SEC. 8041. PREEMPTION OF STATE LAW RESTRICTIONS ON MANAGED CARE ARRANGEMENTS.

    (a) LIMITATION ON RESTRICTIONS ON NETWORK PLANS- Effective as of January 1, 1997--

      (1) a State may not prohibit or limit a carrier or group health plan providing health coverage from including incentives for enrollees to use the services of participating providers;

      (2) a State may not prohibit or limit such a carrier or plan from limiting coverage of services to those provided by a participating provider, except as provided in section 1013;

      (3) a State may not prohibit or limit the negotiation of rates and forms of payments for providers by such a carrier or plan with respect to health coverage;

      (4) a State may not prohibit or limit such a carrier or plan from limiting the number of participating providers;

      (5) a State may not prohibit or limit such a carrier or plan from requiring that services be provided (or authorized) by a practitioner selected by the enrollee from a list of available participating providers or, except for services of a physician who specializes in obstetrics and gynecology, from requiring enrollees to obtain referral in order to have coverage for treatment by a specialist or health institution; and

      (6) a State may not prohibit or limit the corporate practice of medicine.

    (b) DEFINITIONS- In this section:

      (1) MANAGED CARE COVERAGE- The term ‘managed care coverage’ means health coverage to the extent the coverage is provided through a managed care arrangement (as defined in paragraph (3)) that meets the applicable requirements of such section.

      (2) PARTICIPATING PROVIDER- The term ‘participating provider’ means an entity or individual which provides, sells, or leases health care services as part of a provider network (as defined in paragraph (4)).

      (3) MANAGED CARE ARRANGEMENT- The term ‘managed care arrangement’ means, with respect to a group health plan or under health insurance coverage, an arrangement under such plan or coverage under which providers agree to provide items and services covered under the arrangement to individuals covered under the plan or who have such coverage.

      (4) PROVIDER NETWORK- The term ‘provider network’ means, with respect to a group health plan or health insurance coverage, providers who have entered into an agreement described in paragraph (3).

SEC. 8042. PREEMPTION OF STATE LAWS RESTRICTING UTILIZATION REVIEW PROGRAMS.

    (a) IN GENERAL- Effective January 1, 1997, no State law or regulation shall prohibit or regulate activities under a utilization review program (as defined in subsection (b)).

    (b) UTILIZATION REVIEW PROGRAM DEFINED- In this section, the term ‘utilization review program’ means a system of reviewing the medical necessity and appropriateness of patient services (which may include inpatient and outpatient services) using specified guidelines. Such a system may include preadmission certification, the application of practice guidelines, continued stay review, discharge planning, preauthorization of ambulatory procedures, and retrospective review.

    (c) EXEMPTION OF LAWS PREVENTING DENIAL OF LIFESAVING MEDICAL TREATMENT PENDING TRANSFER TO ANOTHER HEALTH CARE PROVIDER- Nothing in this subtitle shall be construed to invalidate any State law that has the effect of preventing involuntary denial of life-preserving medical treatment when such denial would cause the involuntary death of the patient pending transfer of the patient to a health care provider willing to provide such treatment.

Subtitle B--Provisions Relating to Regulatory Relief

Title VIII, Subtitle B

PART 1--PROVISIONS RELATING TO PHYSICIAN FINANCIAL RELATIONSHIPS

SEC. 8101. REPEAL OF PROHIBITIONS BASED ON COMPENSATION ARRANGEMENTS.

    (a) IN GENERAL- Section 1877(a)(2) (42 U.S.C. 1395nn(a)(2)) is amended by striking ‘is--’ and all that follows through ‘equity,’ and inserting the following: ‘is (except as provided in subsection (c)) an ownership or investment interest in the entity through equity,’.

    (b) CONFORMING AMENDMENTS- Section 1877 (42 U.S.C. 1395nn) is amended as follows:

      (1) In subsection (b)--

        (A) in the heading, by striking ‘TO BOTH OWNERSHIP AND COMPENSATION ARRANGEMENT PROVISIONS’ and inserting ‘WHERE FINANCIAL RELATIONSHIP EXISTS’; and

        (B) by redesignating paragraph (4) as paragraph (7).

      (2) In subsection (c)--

        (A) by amending the heading to read as follows: ‘EXCEPTION FOR OWNERSHIP OR INVESTMENT INTEREST IN PUBLICLY TRADED SECURITIES AND MUTUAL FUNDS’; and

        (B) in the matter preceding paragraph (1), by striking ‘subsection (a)(2)(A)’ and inserting ‘subsection (a)(2)’.

      (3) In subsection (d)--

        (A) by striking the matter preceding paragraph (1);

        (B) in paragraph (3), by striking ‘paragraph (1)’ and inserting ‘paragraph (4)’; and

        (C) by redesignating paragraphs (1), (2), and (3) as paragraphs (4), (5), and (6), and by transferring and inserting such paragraphs after paragraph (3) of subsection (b).

      (4) By striking subsection (e).

      (5) In subsection (f)(2), as amended by section 152(a) of the Social Security Act Amendments of 1994--

        (A) in the matter preceding paragraph (1), by striking ‘ownership, investment, and compensation’ and inserting ‘ownership and investment’;

        (B) in paragraph (2), by striking ‘subsection (a)(2)(A)’ and all that follows through ‘subsection (a)(2)(B)),’ and inserting ‘subsection (a)(2),’; and

        (C) in paragraph (2), by striking ‘or who have such a compensation relationship with the entity’.

      (6) In subsection (h)--

        (A) by striking paragraphs (1), (2), and (3);

        (B) in paragraph (4)(A), by striking clauses (iv) and (vi);

        (C) in paragraph (4)(B), by striking ‘RULES- ’ and all that follows through ‘(ii) FACULTY’ and inserting ‘RULES FOR FACULTY; and

        (D) by adding at the end of paragraph (4) the following new subparagraph:

        ‘(C) MEMBER OF A GROUP- A physician is a ‘member’ of a group if the physician is an owner or a bona fide employee, or both, of the group.’.

SEC. 8102. REVISION OF DESIGNATED HEALTH SERVICES SUBJECT TO PROHIBITION.

    (a) IN GENERAL- Section 1877(h)(6) (42 U.S.C. 1395nn(h)(6)) is amended by striking subparagraphs (B) through (K) and inserting the following:

        ‘(B) Items and services furnished by a community pharmacy (as defined in paragraph (1)).

        ‘(C) Magnetic resonance imaging and computerized tomography services.

        ‘(D) Outpatient physical therapy services.’.

    (b) COMMUNITY PHARMACY DEFINED- Section 1877(h) (42 U.S.C. 1395nn(h)), as amended by section 8101(b)(6), is amended by inserting before paragraph (4) the following new paragraph:

      ‘(1) COMMUNITY PHARMACY- The term ‘community pharmacy’ means any entity licensed or certified to dispense prescription drugs by the State in which the entity is located (including an entity which dispenses such drugs by mail order).’.

    (c) CONFORMING AMENDMENTS-

      (1) Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended in the matter preceding subparagraph (A) by striking ‘services’ and all that follows through ‘supplies)--’ and inserting ‘services--’.

      (2) Section 1877(h)(5)(C) (42 U.S.C. 1395nn(h)(5)(C)) is amended--

        (A) by striking ‘, a request by a radiologist for diagnostic radiology services, and a request by a radiation oncologist for radiation therapy,’ and inserting ‘and a request by a radiologist for magnetic resonance imaging or for computerized tomography’, and

        (B) by striking ‘radiologist, or radiation oncologist’ and inserting ‘or radiologist’.

SEC. 8103. DELAY IN IMPLEMENTATION UNTIL PROMULGATION OF REGULATIONS.

    (a) IN GENERAL- Section 13562(b) of OBRA-1993 (42 U.S.C. 1395nn note) is amended--

      (1) in paragraph (1), by striking ‘paragraph (2)’ and inserting ‘paragraphs (2) and (3)’; and

      (2) by adding at the end the following new paragraph:

      ‘(3) PROMULGATION OF REGULATIONS- Notwithstanding paragraphs (1) and (2), the amendments made by this section shall not apply to any referrals made before the effective date of final regulations promulgated by the Secretary of Health and Human Services to carry out such amendments.’.

    (b) EFFECTIVE DATE- The amendments made by subsection (a) shall take effect as if included in the enactment of OBRA-1993.

SEC. 8104. EXCEPTIONS TO PROHIBITION.

    (a) REVISIONS TO EXCEPTION FOR IN-OFFICE ANCILLARY SERVICES-

      (1) REPEAL OF SITE-OF-SERVICE REQUIREMENT- Section 1877 (42 U.S.C. 1395nn) is amended--

        (A) by amending subparagraph (A) of subsection (b)(2) to read as follows:

        ‘(A) that are furnished personally by the referring physician, personally by a physician who is a member of the same group practice as the referring physician, or personally by individuals who are under the general supervision of the physician or of another physician in the group practice, and’, and

        (B) by adding at the end of subsection (h) the following new paragraph:

      ‘(7) GENERAL SUPERVISION- An individual is considered to be under the ‘general supervision’ of a physician if the physician (or group practice of which the physician is a member) is legally responsible for the services performed by the individual and for ensuring that the individual meets licensure and certification requirements, if any, applicable under other provisions of law, regardless of whether or not the physician is physically present when the individual furnishes an item or service.’.

      (2) CLARIFICATION OF TREATMENT OF PHYSICIAN OWNERS OF GROUP PRACTICE- Section 1877(b)(2)(B) (42 U.S.C. 1395nn(b)(2)(B)) is amended by striking ‘physician or such group practice’ and inserting ‘physician, such group practice, or the physician owners of such group practice’.

      (3) CONFORMING AMENDMENT- Section 1877(b)(2) (42 U.S.C. 1395nn(b)(2)) is amended by amending the heading to read as follows: ‘ANCILLARY SERVICES FURNISHED PERSONALLY OR THROUGH GROUP PRACTICE- ’.

    (b) CLARIFICATION OF EXCEPTION FOR SERVICES FURNISHED IN A RURAL AREA- Paragraph (5) of section 1877(b) (42 U.S.C. 1395nn(b)), as transferred by section 8101(b)(3)(C), is amended by striking ‘substantially all’ and inserting ‘not less than 75 percent’.

    (c) REVISION OF EXCEPTION FOR CERTAIN MANAGED CARE ARRANGEMENTS- Section 1877(b)(3) (42 U.S.C. 1395nn(b)(3)) is amended--

      (1) in the heading by inserting ‘MANAGED CARE ARRANGEMENTS’ after ‘PREPAID PLANS’;

      (2) in the matter preceding subparagraph (A), by striking ‘organization--’ and inserting ‘organization, directly or through contractual arrangements with other entities, to individuals enrolled with the organization--’;

      (3) in subparagraph (A), by inserting ‘or part C’ after ‘section 1876’;

      (4) by striking ‘or’ at the end of subparagraph (C);

      (5) by striking the period at the end of subparagraph (D) and inserting a comma; and

      (6) by adding at the end the following new subparagraphs:

        ‘(E) with a contract with a State to provide services under the State plan under title XIX (in accordance with section 1903(m)) or a State MediGrant plan under title XXI; or

        ‘(F) which--

          ‘(i) provides health care items or services directly or through one or more subsidiary entities or arranges for the provision of health care items or services substantially through the services of health care providers under contract with the organization, and

          ‘(ii)(I) assumes financial risk for the provision of health services through mechanisms (such as capitation, risk pools, withholds, and per diem payments) or offers its network of contract health providers to an entity (including self-insured employers and indemnity plans) which assumes financial risk for the provision of such health services, or

          ‘(II) has in effect a written agreement with the provider of services under which the provider is at significant financial risk (whether through a withhold, capitation, incentive pool, per diem payments, or similar risk sharing arrangement) for the cost or utilization of services that the provider is obligated to provide.’.

    (d) NEW EXCEPTION FOR SHARED FACILITY SERVICES-

      (1) IN GENERAL- Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 8101(b)(3)(C), is amended--

        (A) by redesignating paragraphs (4) through (7) as paragraphs (5) through (8); and

        (B) by inserting after paragraph (3) the following new paragraph:

      ‘(4) SHARED FACILITY SERVICES- In the case of a designated health service consisting of a shared facility service of a shared facility--

        ‘(A) that is furnished--

          ‘(i) personally by the referring physician who is a shared facility physician or personally by an individual directly employed or under the general supervision of such a physician,

          ‘(ii) by a shared facility in a building in which the referring physician furnishes substantially all of the services of the physician that are unrelated to the furnishing of shared facility services, and

          ‘(iii) to a patient of a shared facility physician; and

        ‘(B) that is billed by the referring physician or a group practice of which the physician is a member.’.

      (2) DEFINITIONS- Section 1877(h) (42 U.S.C. 1395nn(h)), as amended by section 8101(b)(6) and section 8102(b), is amended by inserting after paragraph (1) the following new paragraph:

      ‘(2) SHARED FACILITY RELATED DEFINITIONS-

        ‘(A) SHARED FACILITY SERVICE- The term ‘shared facility service’ means, with respect to a shared facility, a designated health service furnished by the facility to patients of shared facility physicians.

        ‘(B) SHARED FACILITY- The term ‘shared facility’ means an entity that furnishes shared facility services under a shared facility arrangement.

        ‘(C) SHARED FACILITY PHYSICIAN- The term ‘shared facility physician’ means, with respect to a shared facility, a physician (or a group practice of which the physician is a member) who has a financial relationship under a shared facility arrangement with the facility.

        ‘(D) SHARED FACILITY ARRANGEMENT- The term ‘shared facility arrangement’ means, with respect to the provision of shared facility services in a building, a financial arrangement--

          ‘(i) which is only between physicians who are providing services (unrelated to shared facility services) in the same building,

          ‘(ii) in which the overhead expenses of the facility are shared, in accordance with methods previously determined by the physicians in the arrangement, among the physicians in the arrangement, and

          ‘(iii) which, in the case of a corporation, is wholly owned and controlled by shared facility physicians.’.

    (e) NEW EXCEPTION FOR SERVICES FURNISHED IN COMMUNITIES WITH NO ALTERNATIVE PROVIDERS- Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 8101(b)(3)(C) and subsection (d)(1), is amended--

      (1) by redesignating paragraphs (5) through (8) as paragraphs (6) through (9); and

      (2) by inserting after paragraph (4) the following new paragraph:

      ‘(5) NO ALTERNATIVE PROVIDERS IN AREA- In the case of a designated health service furnished in any area with respect to which the Secretary determines that individuals residing in the area do not have reasonable access to such a designated health service for which subsection (a)(1) does not apply.’.

    (f) NEW EXCEPTION FOR SERVICES FURNISHED IN AMBULATORY SURGICAL CENTERS- Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 8101(b)(3)(C), subsection (d)(1), and subsection (e)(1), is amended--

      (1) by redesignating paragraphs (6) through (9) as paragraphs (7) through (10); and

      (2) by inserting after paragraph (5) the following new paragraph:

      ‘(6) SERVICES FURNISHED IN AMBULATORY SURGICAL CENTERS- In the case of a designated health service furnished in an ambulatory surgical center described in section 1832(a)(2)(F)(i).’.

    (g) NEW EXCEPTION FOR SERVICES FURNISHED IN RENAL DIALYSIS FACILITIES- Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 8101(b)(3)(C), subsection (d)(1), subsection (e)(1), and subsection (f), is amended--

      (1) by redesignating paragraphs (7) through (10) as paragraphs (8) through (11); and

      (2) by inserting after paragraph (6) the following new paragraph:

      ‘(7) SERVICES FURNISHED IN RENAL DIALYSIS FACILITIES- In the case of a designated health service furnished in a renal dialysis facility under section 1881.’.

    (h) NEW EXCEPTION FOR SERVICES FURNISHED IN A HOSPICE- Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 8101(b)(3)(C), subsection (d)(1), subsection (e)(1), subsection (f), and subsection (g), is amended--

      (1) by redesignating paragraphs (8) through (11) as paragraphs (9) through (12); and

      (2) by inserting after paragraph (7) the following new paragraph:

      ‘(8) SERVICES FURNISHED BY A HOSPICE PROGRAM- In the case of a designated health service furnished by a hospice program under section 1861(dd)(2).’.

    (i) NEW EXCEPTION FOR SERVICES FURNISHED IN A COMPREHENSIVE OUTPATIENT REHABILITATION FACILITY- Section 1877(b) (42 U.S.C. 1395nn(b)), as amended by section 8101(b)(3)(C), subsection (d)(1), subsection (e)(1), subsection (f), subsection (g), and subsection (h), is amended--

      (1) by redesignating paragraphs (9) through (12) as paragraphs (10) through (13); and

      (2) by inserting after paragraph (8) the following new paragraph:

      ‘(9) SERVICES FURNISHED IN A COMPREHENSIVE OUTPATIENT REHABILITATION FACILITY- In the case of a designated health service furnished in a comprehensive outpatient rehabilitation facility (as defined in section 1861(cc)(2)).’.

    (i) DEFINITION OF REFERRAL- Section 1877(h)(5)(A) (42 U.S.C. 1395nn(h)(5)(A)) is amended--

      (1) by striking ‘an item or service’ and inserting ‘a designated health service’, and

      (2) by striking ‘the item or service’ and inserting ‘the designated health service’.

SEC. 8105. REPEAL OF REPORTING REQUIREMENTS.

    Section 1877 (42 U.S.C. 1395nn) is amended--

      (1) by striking subsection (f); and

      (2) by striking subsection (g)(5).

SEC. 8106. PREEMPTION OF STATE LAW.

    Section 1877 (42 U.S.C. 1395nn) is amended by adding at the end the following new subsection:

    ‘(i) PREEMPTION OF STATE LAW- This section preempts State law to the extent State law is inconsistent with this section.’.

SEC. 8107. EFFECTIVE DATE.

    Except as provided in section 8103(b), the amendments made by this part shall apply to referrals made on or after August 14, 1995, regardless of whether or not regulations are promulgated to carry out such amendments.

PART 2--ANTITRUST REFORM

SEC. 8111. PUBLICATION OF ANTITRUST GUIDELINES ON ACTIVITIES OF HEALTH PLANS.

    (a) IN GENERAL- The Attorney General shall provide for the development and publication of explicit guidelines on the application of antitrust laws to the activities of health plans. The guidelines shall be designed to facilitate development and operation of plans, consistent with the antitrust laws.

    (b) REVIEW PROCESS- The Attorney General shall establish a review process under which the administrator or sponsor of a health plan (or organization that proposes to administer or sponsor a health plan) may submit a request to the Attorney General to obtain a prompt opinion (but in no event later than 90 days after the Attorney General receives the request) from the Department of Justice on the plan’s conformity with the Federal antitrust laws.

SEC. 8112. ISSUANCE OF HEALTH CARE CERTIFICATES OF PUBLIC ADVANTAGE.

    (a) ISSUANCE AND EFFECT OF CERTIFICATE- The Attorney General, after consultation with the Secretary, shall issue in accordance with this section a certificate of public advantage to each eligible health care collaborative activity that complies with the requirements in effect under this section on or after the expiration of the 1-year period that begins on the date of the enactment of this Act (without regard to whether or not the Attorney General has promulgated regulations to carry out this section by such date). Such activity, and the parties to such activity, shall not be liable under any of the antitrust laws for conduct described in such certificate and engaged in by such activity if such conduct occurs while such certificate is in effect.

    (b) REQUIREMENTS APPLICABLE TO ISSUANCE OF CERTIFICATES-

      (1) STANDARDS TO BE MET- The Attorney General shall issue a certificate to an eligible health care collaborative activity if the Attorney General finds that--

        (A) the benefits that are likely to result from carrying out the activity outweigh the reduction in competition (if any) that is likely to result from the activity, and

        (B) such reduction in competition is necessary to obtain such benefits.

      (2) FACTORS TO BE CONSIDERED-

        (A) WEIGHING OF BENEFITS AGAINST REDUCTION IN COMPETITION- For purposes of making the finding described in paragraph (1)(A), the Attorney General shall consider whether the activity is likely--

          (i) to maintain or to increase the quality of health care by providing new services not currently offered in the relevant market,

          (ii) to increase access to health care,

          (iii) to achieve cost efficiencies that will be passed on to health care consumers, such as economies of scale, reduced transaction costs, and reduced administrative costs, that cannot be achieved by the provision of available services and facilities in the relevant market,

          (iv) to preserve the operation of health care facilities located in underserved geographical areas,

          (v) to improve utilization of health care resources, and

          (vi) to reduce inefficient health care resource duplication.

        (B) NECESSITY OF REDUCTION IN COMPETITION- For purposes of making the finding described in paragraph (1)(B), the Attorney General shall consider--

          (i) the ability of the providers of health care services that are (or likely to be) affected by the health care collaborative activity and the entities responsible for making payments to such providers to negotiate societally optimal payment and service arrangements,

          (ii) the effects of the health care collaborative activity on premiums and other charges imposed by the entities described in clause (i), and

          (iii) the availability of equally efficient, less restrictive alternatives to achieve the benefits that are intended to be achieved by carrying out the activity.

    (c) ESTABLISHMENT OF CRITERIA AND PROCEDURES- Subject to subsections (d) and (e), not later than 1 year after the date of the enactment of this Act, the Attorney General and the Secretary shall establish jointly by rule the criteria and procedures applicable to the issuance of certificates under subsection (a). The rules shall specify the form and content of the application to be submitted to the Attorney General to request a certificate, the information required to be submitted in support of such application, the procedures applicable to denying and to revoking a certificate, and the procedures applicable to the administrative appeal (if such appeal is authorized by rule) of the denial and the revocation of a certificate. Such information may include the terms of the health care collaborative activity (in the case of an activity in existence as of the time of the application) and implementation plan for the collaborative activity.

    (d) ELIGIBLE HEALTH CARE COLLABORATIVE ACTIVITY- To be an eligible health care collaborative activity for purposes of this section, a health care collaborative activity shall submit to the Attorney General an application that complies with the rules in effect under subsection (c) and that includes--

      (1) an agreement by the parties to the activity that the activity will not foreclose competition by entering into contracts that prevent health care providers from providing health care in competition with the activity,

      (2) an agreement that the activity will submit to the Attorney General annually a report that describes the operations of the activity and information regarding the impact of the activity on health care and on competition in health care, and

      (3) an agreement that the parties to the activity will notify the Attorney General and the Secretary of the termination of the activity not later than 30 days after such termination occurs.

    (e) REVIEW OF APPLICATIONS FOR CERTIFICATES- Not later than 90 days after an eligible health care collaborative activity submits to the Attorney General an application that complies with the rules in effect under subsection (c) and with subsection (d), the Attorney General shall issue or deny the issuance of such certificate. If, before the expiration of such 90-day period, the Attorney General may extend the time for issuance for good cause.

    (f) REVOCATION OF CERTIFICATE- Whenever the Attorney General finds that a health care collaborative activity with respect to which a certificate is in effect does not meet the standards specified in subsection (b), the Attorney General shall revoke such certificate.

    (g) WRITTEN REASONS; JUDICIAL REVIEW-

      (1) DENIAL AND REVOCATION OF CERTIFICATES- If the Attorney General denies an application for a certificate or revokes a certificate, the Attorney General shall include in the notice of denial or revocation a statement of the reasons relied upon for the denial or revocation of such certificate.

      (2) JUDICIAL REVIEW-

        (A) AFTER ADMINISTRATIVE PROCEEDING- (i) If the Attorney General denies an application submitted or revokes a certificate issued under this section after an opportunity for hearing on the record, then any party to the health care collaborative activity involved may commence a civil action, not later than 60 days after receiving notice of the denial or revocation, in an appropriate district court of the United States for review of the record of such denial or revocation.

        (ii) As part of the Attorney General’s answer, the Attorney General shall file in such court a certified copy of the record on which such denial or revocation is based. The findings of fact of the Attorney General may be set aside only if found to be unsupported by substantial evidence in such record taken as a whole.

        (B) DENIAL OR REVOCATION WITHOUT ADMINISTRATIVE PROCEEDING- If the Attorney General denies an application submitted or revokes a certificate issued under this section without an opportunity for hearing on the record, then any party to the health care collaborative activity involved may commence a civil action, not later than 60 days after receiving notice of the denial or revocation, in an appropriate district court of the United States for de novo review of such denial or revocation.

    (h) EXEMPTION- A person shall not be liable under any of the antitrust laws for conduct necessary--

      (1) to prepare, agree to prepare, or attempt to agree to prepare an application to request a certificate under this section, or

      (2) to attempt to enter into any health care collaborative activity with respect to which such a certificate is in effect.

    (i) DEFINITIONS- In this section:

      (1) The term ‘certificate’ means a certificate of public advantage authorized to be issued under subsection (a).

      (2) The term ‘health care collaborative activity’ means an agreement (whether existing or proposed) between 2 or more providers of health care services that is entered into solely for the purpose of sharing in the provision and coordination of health care services and that involves substantial integration and financial risk-sharing between the parties, but does not include the exchanging of information, the entering into of any agreement, or the engagement in any other conduct that is not reasonably required to carry out such agreement.

      (3) The term ‘health care services’ includes services related to the delivery or administration of health care services.

      (4) The term ‘liable’ means liable for any civil or criminal violation of the antitrust laws.

      (5) The term ‘provider of health care services’ means any individual or entity that is engaged in the delivery of health care services in a State and that is required by State law or regulation to be licensed or certified by the State to engage in the delivery of such services in the State.

SEC. 8113. STUDY OF IMPACT ON COMPETITION.

    The Attorney General, in consultation with the Chairman of the Federal Trade Commission, annually shall submit to the Congress a report as part of the annual budget oversight proceedings concerning the Antitrust Division of the Department of Justice. The report shall enable the Congress to determine how enforcement of antitrust laws is affecting the formation of efficient, cost-saving joint ventures and if the certificate of public advantage procedure set forth in section 8112 has resulted in undesirable reduction in competition in the health care marketplace. The report shall include an evaluation of the factors set forth in paragraphs (2)(A) and (2)(B) of section 8112(b).

SEC. 8114. ANTITRUST EXEMPTION.

    The antitrust laws shall not apply with respect to--

      (1) the merger of, or the attempt to merge, 2 or more hospitals,

      (2) a contract entered into solely by 2 or more hospitals to allocate hospital services, or

      (3) the attempt by only 2 or more hospitals to enter into a contract to allocate hospital services,

    if each of such hospitals satisfies all of the requirements of section 8115 at the time such hospitals engage in the conduct described in paragraph (1), (2), or (3), as the case may be.

SEC. 8115. REQUIREMENTS.

    The requirements referred to in section 8114 are as follows:

      (1) The hospital is located outside of a city, or in a city that has less than 150,000 inhabitants, as determined in accordance with the most recent data available from the Bureau of the Census.

      (2) In the most recently concluded calendar year, the hospital received more than 40 percent of its gross revenue from payments made under Federal programs.

      (3) There is in effect with respect to the hospital a certificate issued by the Health Care Financing Administration specifying that such Administration has determined that Federal expenditures would be reduced, consumer costs would not increase, and access to health care services would not be reduced, if the hospital and the other hospitals that requested such certificate merge, or allocate the hospital services specified in such request, as the case may be.

SEC. 8116. DEFINITION.

    For purposes of this subtitle, the term ‘antitrust laws’ has the meaning given such term in subsection (a) of the first section of the Clayton Act (15 U.S.C. 12), except that such term includes section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to the extent that such section 5 applies with respect to unfair methods of competition.

PART 3--MALPRACTICE REFORM

Subpart A--Uniform Standards for Malpractice Claims

SEC. 8121. APPLICABILITY.

    Except as provided in section 8131, this subpart shall apply to any medical malpractice liability action brought in a Federal or State court, and to any medical malpractice claim subject to an alternative dispute resolution system, that is initiated on or after January 1, 1996.

SEC. 8122. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION THROUGH ALTERNATIVE DISPUTE RESOLUTION.

    (a) IN GENERAL-

      (1) STATE CASES- A medical malpractice liability action may not be brought in any State court during a calendar year unless the medical malpractice liability claim that is the subject of the action has been initially resolved under an alternative dispute resolution system certified for the year by the Secretary under section 8132(a), or, in the case of a State in which such a system is not in effect for the year, under the alternative Federal system established under section 8132(b).

      (2) FEDERAL DIVERSITY ACTIONS- A medical malpractice liability action may not be brought in any Federal court under section 1332 of title 28, United States Code, during a calendar year unless the medical malpractice liability claim that is the subject of the action has been initially resolved under the alternative dispute resolution system referred to in paragraph (1) that applied in the State whose law applies in such action.

      (3) CLAIMS AGAINST UNITED STATES-

        (A) ESTABLISHMENT OF PROCESS FOR CLAIMS- The Attorney General shall establish an alternative dispute resolution process for the resolution of tort claims consisting of medical malpractice liability claims brought against the United States under chapter 171 of title 28, United States Code. Under such process, the resolution of a claim shall occur after the completion of the administrative claim process applicable to the claim under section 2675 of such title.

        (B) REQUIREMENT FOR INITIAL RESOLUTION UNDER PROCESS- A medical malpractice liability action based on a medical malpractice liability claim described in subparagraph (A) may not be brought in any Federal court unless the claim has been initially resolved under the alternative dispute resolution process established by the Attorney General under such subparagraph.

    (b) INITIAL RESOLUTION OF CLAIMS UNDER ADR- For purposes of subsection (a), an action is ‘initially resolved’ under an alternative dispute resolution system if--

      (1) the ADR reaches a decision on whether the defendant is liable to the plaintiff for damages; and

      (2) if the ADR determines that the defendant is liable, the ADR reaches a decision on the amount of damages assessed against the defendant.

    (c) PROCEDURES FOR FILING ACTIONS-

      (1) NOTICE OF INTENT TO CONTEST DECISION- Not later than 60 days after a decision is issued with respect to a medical malpractice liability claim under an alternative dispute resolution system, each party affected by the decision shall submit a sealed statement to a court of competent jurisdiction indicating whether or not the party intends to contest the decision.

      (2) DEADLINE FOR FILING ACTION- A medical malpractice liability action may not be brought by a party unless--

        (A) the party has filed the notice of intent required by paragraph (1); and

        (B) the party files the action in a court of competent jurisdiction not later than 90 days after the decision resolving the medical malpractice liability claim that is the subject of the action is issued under the applicable alternative dispute resolution system.

      (3) COURT OF COMPETENT JURISDICTION- For purposes of this subsection, the term ‘court of competent jurisdiction’ means--

        (A) with respect to actions filed in a State court, the appropriate State trial court; and

        (B) with respect to actions filed in a Federal court, the appropriate United States district court.

    (d) LEGAL EFFECT OF UNCONTESTED ADR DECISION- The decision reached under an alternative dispute resolution system shall, for purposes of enforcement by a court of competent jurisdiction, have the same status in the court as the verdict of a medical malpractice liability action adjudicated in a State or Federal trial court. The previous sentence shall not apply to a decision that is contested by a party affected by the decision pursuant to subsection (c)(1).

SEC. 8123. OPTIONAL APPLICATION OF PRACTICE GUIDELINES.

    (a) DEVELOPMENT AND CERTIFICATION OF GUIDELINES- Each State may develop, for certification by the Secretary, a set of specialty clinical practice guidelines, based on recommended guidelines from national specialty societies, to be updated annually. In the absence of recommended guidelines from such societies, each State may develop such guidelines based on such criteria as the State considers appropriate (including based on recommended guidelines developed by the Agency for Health Care Policy and Research).

    (b) PROVISION OF HEALTH CARE UNDER GUIDELINES- Notwithstanding any other provision of law, in any medical malpractice liability action arising from the conduct of a health care provider or health care professional, if such conduct was in accordance with a guideline developed by the State in which the conduct occurred and certified by the Secretary under subsection (a), the guideline--

      (1) may be introduced by any party to the action (including a health care provider, health care professional, or patient); and

      (2) if introduced, shall establish a rebuttable presumption that the conduct was in accordance with the appropriate standard of medical care, which may only be overcome by the presentation of clear and convincing evidence on behalf of the party against whom the presumption operates.

SEC. 8124. TREATMENT OF NONECONOMIC AND PUNITIVE DAMAGES.

    (a) LIMITATION ON NONECONOMIC DAMAGES- The total amount of noneconomic damages that may be awarded to a claimant and the members of the claimant’s family for losses resulting from the injury which is the subject of a medical malpractice liability action may not exceed $500,000, regardless of the number of parties against whom the action is brought or the number of actions brought with respect to the injury.

    (b) NO AWARD OF PUNITIVE DAMAGES AGAINST MANUFACTURER OF MEDICAL PRODUCT- In the case of a medical malpractice liability action in which the plaintiff alleges a claim against the manufacturer of a medical product, no punitive or exemplary damages may be awarded against such manufacturer.

    (c) JOINT AND SEVERAL LIABILITY FOR NONECONOMIC DAMAGES- The liability of each defendant for noneconomic damages shall be several only and shall not be joint, and each defendant shall be liable only for the amount of noneconomic damages allocated to the defendant in direct proportion to the defendant’s percentage of responsibility (as determined by the trier of fact).

    (d) USE OF PUNITIVE DAMAGE AWARDS FOR OPERATION OF ADR SYSTEMS IN STATES-

      (1) IN GENERAL- The total amount of any punitive damages awarded in a medical malpractice liability action shall be paid to the State in which the action is brought (or, in a case brought in Federal court, in the State in which the health care services that caused the injury that is the subject of the action were provided), and shall be used by the State solely to implement and operate the State alternative dispute resolution system certified by the Secretary under section 8132 (except as provided in paragraph (2)).

      (2) USE OF REMAINING AMOUNTS FOR PROVIDER LICENSING AND DISCIPLINARY ACTIVITIES- If the amount of punitive damages paid to a State under paragraph (1) for a year is greater than the State’s costs of implementing and operating the State alternative dispute resolution system during the year, the balance of such punitive damages paid to the State shall be used solely to carry out activities to assure the safety and quality of health care services provided in the State, including (but not limited to)--

        (A) licensing or certifying health care professionals and health care providers in the State; and

        (B) carrying out programs to reduce malpractice-related costs for providers volunteering to provide services in medically underserved areas.

      (3) MAINTENANCE OF EFFORT- A State shall use any amounts paid pursuant to paragraph (1) to supplement and not to replace amounts spent by the State for implementing and operating the State alternative dispute resolution system or carrying out the activities described in paragraph (2).

    (e) DRUGS AND DEVICES-

      (1)(A) Punitive damages shall not be awarded against a manufacturer or product seller of a drug (as defined in section 201(g)(1) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or medical device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) which caused the claimant’s harm where--

        (i) such drug or device was subject to premarket approval by the Food and Drug Administration with respect to the safety of the formulation or performance of the aspect of such drug or device which caused the claimant’s harm or the adequacy of the packaging or labeling of such drug or device, and such drug was approved by the Food and Drug Administration; or

        (ii) the drug is generally recognized as safe and effective pursuant to conditions established by the Food and Drug Administration and applicable regulations, including packaging and labeling regulations.

      (B) Subparagraph (A) shall not apply in any case in which the defendant, before or after premarket approval of a drug or device--

        (i) intentionally and wrongfully withheld from or misrepresented to the Food and Drug Administration information concerning such drug or device required to be submitted under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) or section 351 of the Public Health Service Act (42 U.S.C. 262) that is material and relevant to the harm suffered by the claimant, or

        (ii) made an illegal payment to an official or employee of the Food and Drug Administration for the purpose of securing or maintaining approval of such drug or device.

      (2) PACKAGING- In a product liability action for harm which is alleged to relate to the adequacy of the packaging (or labeling relating to such packaging) of a drug which is required to have tamper-resistant packaging under regulations of the Secretary of Health and Human Services (including labeling regulations related to such packaging), the manufacturer of the drug shall not be held liable for punitive damages unless the drug is found by the court by clear and convincing evidence to be substantially out of compliance with such regulations.

SEC. 8125. PERIODIC PAYMENTS FOR FUTURE LOSSES.

    (a) IN GENERAL- In any medical malpractice liability action in which the damages awarded for future economic loss exceeds $100,000, a defendant may not be required to pay such damages in a single, lump-sum payment, but may be permitted to make such payments on a periodic basis. The periods for such payments shall be determined by the court, based upon projections of when such expenses are likely to be incurred.

    (b) WAIVER- A court may waive the application of subsection (a) with respect to a defendant if the court determines that it is not in the best interests of the plaintiff to receive payments for damages on such a periodic basis.

SEC. 8126. TREATMENT OF ATTORNEY’S FEES AND OTHER COSTS.

    (a) REQUIRING PARTY CONTESTING ADR RULING TO PAY ATTORNEY’S FEES AND OTHER COSTS-

      (1) IN GENERAL- The court in a medical malpractice liability action shall require the party that (pursuant to section 8122(c)(1)) contested the ruling of the alternative dispute resolution system with respect to the medical malpractice liability claim that is the subject of the action to pay to the opposing party the costs incurred by the opposing party under the action, including attorney’s fees, fees paid to expert witnesses, and other litigation expenses (but not including court costs, filing fees, or other expenses paid directly by the party to the court, or any fees or costs associated with the resolution of the claim under the alternative dispute resolution system), but only if--

        (A) in the case of an action in which the party that contested the ruling is the claimant, the amount of damages awarded to the party under the action is less than the amount of damages awarded to the party under the ADR system; and

        (B) in the case of an action in which the party that contested the ruling is the defendant, the amount of damages assessed against the party under the action is greater than the amount of damages assessed under the ADR system.

      (2) EXCEPTIONS- Paragraph (1) shall not apply if--

        (A) the party contesting the ruling made under the previous alternative dispute resolution system shows that--

          (i) the ruling was procured by corruption, fraud, or undue means,

          (ii) there was partiality or corruption under the system,

          (iii) there was other misconduct under the system that materially prejudiced the party’s rights, or

          (iv) the ruling was based on an error of law;

        (B) the party contesting the ruling made under the alternative dispute resolution system presents new evidence before the trier of fact that was not available for presentation under the ADR system;

        (C) the medical malpractice liability action raised a novel issue of law; or

        (D) the court finds that the application of such paragraph to a party would constitute an undue hardship, and issues an order waiving or modifying the application of such paragraph that specifies the grounds for the court’s decision.

      (3) LIMIT ON ATTORNEYS’ FEES PAID- Attorneys’ fees that are required to be paid under paragraph (1) by the contesting party shall not exceed the amount of the attorneys’ fees incurred by the contesting party in the action. If the attorneys’ fees of the contesting party are based on a contingency fee agreement, the amount of attorneys’ fees for purposes of the preceding sentence shall not exceed the reasonable value of those services.

      (4) RECORDS- In order to receive attorneys’ fees under paragraph (1), counsel of record in the medical malpractice liability action involved shall maintain accurate, complete records of hours worked on the action, regardless of the fee arrangement with the client involved.

    (b) CONTINGENCY FEE DEFINED- As used in this section, the term ‘contingency fee’ means any fee for professional legal services which is, in whole or in part, contingent upon the recovery of any amount of damages, whether through judgment or settlement.

SEC. 8127. UNIFORM STATUTE OF LIMITATIONS.

    (a) IN GENERAL- Except as provided in subsection (b), no medical malpractice claim may be initiated after the expiration of the 2-year period that begins on the date on which the alleged injury that is the subject of such claim was discovered, but in no event may such a claim be initiated after the expiration of the 4-year period that begins on the date on which the alleged injury that is the subject of such claim occurred.

    (b) EXCEPTION FOR MINORS- In the case of an alleged injury suffered by a minor who has not attained 6 years of age, a medical malpractice claim may not be initiated after the expiration of the 2-year period that begins on the date on which the alleged injury that is the subject of such claim was discovered or should reasonably have been discovered, but in no event may such a claim be initiated after the date on which the minor attains 12 years of age.

SEC. 8128. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

    (a) IN GENERAL- In the case of a medical malpractice claim relating to services provided during labor or the delivery of a baby, if the health care professional or health care provider against whom the claim is brought did not previously treat the claimant for the pregnancy, the trier of fact may not find that such professional or provider committed malpractice and may not assess damages against such professional or provider unless the malpractice is proven by clear and convincing evidence.

    (b) APPLICABILITY TO GROUP PRACTICES OR AGREEMENTS AMONG PROVIDERS- For purposes of subsection (a), a health care professional shall be considered to have previously treated an individual for a pregnancy if the professional is a member of a group practice whose members previously treated the individual for the pregnancy or is providing services to the individual during labor or the delivery of a baby pursuant to an agreement with another professional.

SEC. 8129. JURISDICTION OF FEDERAL COURTS.

    Nothing in this subpart shall be construed to establish any jurisdiction over any medical malpractice liability action in the district courts of the United States on the basis of sections 1331 or 1337 of title 28, United States Code.

SEC. 8130. PREEMPTION.

    (a) IN GENERAL- The provisions of this subpart shall preempt any State law to the extent such law is inconsistent with such provisions, except that the provisions of this subpart shall not preempt any State law that provides for defenses or places limitations on a person’s liability in addition to those contained in this part, places greater limitations on the amount of attorneys’ fees that can be collected, or otherwise imposes greater restrictions than those provided in this part.

    (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE OF LAW OR VENUE- Nothing in this subpart shall be construed to--

      (1) waive or affect any defense of sovereign immunity asserted by any State under any provision of law;

      (2) waive or affect any defense of sovereign immunity asserted by the United States;

      (3) affect the applicability of any provision of the Foreign Sovereign Immunities Act of 1976;

      (4) preempt State choice-of-law rules with respect to claims brought by a foreign nation or a citizen of a foreign nation; or

      (5) affect the right of any court to transfer venue or to apply the law of a foreign nation or to dismiss a claim of a foreign nation or of a citizen of a foreign nation on the ground in inconvenient forum.

Subpart B--Requirements for State Alternative Dispute Resolution Systems (ADR)

SEC. 8131. BASIC REQUIREMENTS.

    (a) IN GENERAL- A State’s alternative dispute resolution system meets the requirements of this section if the system--

      (1) applies to all medical malpractice liability claims under the jurisdiction of the courts of that State;

      (2) requires that a written opinion resolving the dispute be issued not later than 6 months after the date by which each party against whom the claim is filed has received notice of the claim (other than in exceptional cases for which a longer period is required for the issuance of such an opinion), and that the opinion contain--

        (A) findings of fact relating to the dispute, and

        (B) a description of the costs incurred in resolving the dispute under the system (including any fees paid to the individuals hearing and resolving the claim), together with an appropriate assessment of the costs against any of the parties;

      (3) requires individuals who hear and resolve claims under the system to meet such qualifications as the State may require (in accordance with regulations of the Secretary);

      (4) is approved by the State or by local governments in the State;

      (5) with respect to a State system that consists of multiple dispute resolution procedures--

        (A) permits the parties to a dispute to select the procedure to be used for the resolution of the dispute under the system, and

        (B) if the parties do not agree on the procedure to be used for the resolution of the dispute, assigns a particular procedure to the parties;

      (6) provides for the transmittal to the State agency responsible for monitoring or disciplining health care professionals and health care providers of any findings made under the system that such a professional or provider committed malpractice, unless, during the 90-day period beginning on the date the system resolves the claim against the professional or provider, the professional or provider brings an action contesting the decision made under the system; and

      (7) provides for the regular transmittal to the Administrator for Health Care Policy and Research of information on disputes resolved under the system, in a manner that assures that the identity of the parties to a dispute shall not be revealed.

    (b) APPLICATION OF MALPRACTICE LIABILITY STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION- The provisions of subpart A (other than section 8122) shall apply with respect to claims brought under a State alternative dispute resolution system or the alternative Federal system in the same manner as such provisions apply with respect to medical malpractice liability actions brought in the State.

SEC. 8132. CERTIFICATION OF STATE SYSTEMS; APPLICABILITY OF ALTERNATIVE FEDERAL SYSTEM.

    (a) CERTIFICATION-

      (1) IN GENERAL- Not later than October 1 of each year (beginning with 1995), the Secretary, in consultation with the Attorney General, shall determine whether a State’s alternative dispute resolution system meets the requirements of this subpart for the following calendar year.

      (2) BASIS FOR CERTIFICATION- The Secretary shall certify a State’s alternative dispute resolution system under this subsection for a calendar year if the Secretary determines under paragraph (1) that the system meets the requirements of section 8131, including the requirement described in section 8124 that punitive damages awarded under the system are paid to the State for the uses described in such section.

    (b) Applicability of Alternative Federal System-

      (1) ESTABLISHMENT AND APPLICABILITY- Not later than October 1, 1995, the Secretary, in consultation with the Attorney General, shall establish by rule an alternative Federal ADR system for the resolution of medical malpractice liability claims during a calendar year in States that do not have in effect an alternative dispute resolution system certified under subsection (a) for the year.

      (2) REQUIREMENTS FOR SYSTEM- Under the alternative Federal ADR system established under paragraph (1)--

        (A) paragraphs (1), (2), (6), and (7) of section 8131(a) shall apply to claims brought under the system;

        (B) if the system provides for the resolution of claims through arbitration, the claims brought under the system shall be heard and resolved by arbitrators appointed by the Secretary in consultation with the Attorney General; and

        (C) with respect to a State in which the system is in effect, the Secretary may (at the State’s request) modify the system to take into account the existence of dispute resolution procedures in the State that affect the resolution of medical malpractice liability claims.

      (3) TREATMENT OF STATES WITH ALTERNATIVE SYSTEM IN EFFECT- If the alternative Federal ADR system established under this subsection is applied with respect to a State for a calendar year, the State shall make a payment to the United States (at such time and in such manner as the Secretary may require) in an amount equal to 110 percent of the costs incurred by the United States during the year as a result of the application of the system with respect to the State.

SEC. 8133. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF ALTERNATIVE DISPUTE RESOLUTION SYSTEMS.

    (a) IN GENERAL- Not later than 5 years after the date of the enactment of this Act, the Secretary shall prepare and submit to the Congress a report describing and evaluating State alternative dispute resolution systems operated pursuant to this subpart and the alternative Federal system established under section 8132(b).

    (b) CONTENTS OF REPORT- The Secretary shall include in the report prepared and submitted under subsection (a)--

      (1) information on--

        (A) the effect of the alternative dispute resolution systems on the cost of health care within each State,

        (B) the impact of such systems on the access of individuals to health care within the State, and

        (C) the effect of such systems on the quality of health care provided within the State; and

      (2) to the extent that such report does not provide information on no-fault systems operated by States as alternative dispute resolution systems pursuant to this part, an analysis of the feasibility and desirability of establishing a system under which medical malpractice liability claims shall be resolved on a no-fault basis.

Subpart C--Definitions

SEC. 8141. DEFINITIONS.

    As used in this part:

      (1) ALTERNATIVE DISPUTE RESOLUTION SYSTEM- The term ‘alternative dispute resolution system’ means a system that is enacted or adopted by a State to resolve medical malpractice claims other than through a medical malpractice liability action.

      (2) CLAIMANT- The term ‘claimant’ means any person who brings a health care liability action and, in the case of an individual who is deceased, incompetent, or a minor, the person on whose behalf such an action is brought.

      (3) CLEAR AND CONVINCING EVIDENCE- The term ‘clear and convincing evidence’ is that measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established, except that such measure or degree of proof is more than that required under preponderance of the evidence, but less than that required for proof beyond a reasonable doubt.

      (4) ECONOMIC DAMAGES- The term ‘economic damages’ means damages paid to compensate an individual for losses for hospital and other medical expenses, lost wages, lost employment, and other pecuniary losses.

      (5) HEALTH CARE PROFESSIONAL- The term ‘health care professional’ means any individual who provides health care services in a State and who is required by State law or regulation to be licensed or certified by the State to provide such services in the State.

      (6) HEALTH CARE PROVIDER- The term ‘health care provider’ means any organization or institution that is engaged in the delivery of health care services in a State that is required by State law or regulation to be licensed or certified by the State to engage in the delivery of such services in the State.

      (7) INJURY- The term ‘injury’ means any illness, disease, or other harm that is the subject of a medical malpractice claim.

      (8) MEDICAL MALPRACTICE LIABILITY ACTION- The term ‘medical malpractice liability action’ means any civil action brought pursuant to State law in which a plaintiff alleges a medical malpractice claim against a health care provider or health care professional, but does not include any action in

which the plaintiff’s sole allegation is an allegation of an intentional tort.

      (9) MEDICAL MALPRACTICE CLAIM- The term ‘medical malpractice claim’ means any claim relating to the provision of (or the failure to provide) health care services or the use of a medical product, without regard to the theory of liability asserted, and includes any third-party claim, cross-claim, counterclaim, or contribution claim in a medical malpractice liability action.

      (10) MEDICAL PRODUCT-

        (A) IN GENERAL- The term ‘medical product’ means, with respect to the allegation of a claimant, a drug (as defined in section 201(g)(1) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(g)(1)) or a medical device (as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) if--

          (i) such drug or device was subject to premarket approval under section 505, 507, or 515 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355, 357, or 360e) or section 351 of the Public Health Service Act (42 U.S.C. 262) with respect to the safety of the formulation or performance of the aspect of such drug or device which is the subject of the claimant’s allegation or the adequacy of the packaging or labeling of such drug or device, and such drug or device is approved by the Food and Drug Administration; or

          (ii) the drug or device is generally recognized as safe and effective under regulations issued by the Secretary of Health and Human Services under section 201(p) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(p)).

        (B) EXCEPTION IN CASE OF MISREPRESENTATION OR FRAUD- Notwithstanding subparagraph (A), the term ‘medical product’ shall not include any product described in such subparagraph if the claimant shows that the product is approved by the Food and Drug Administration for marketing as a result of withheld information, misrepresentation, or an illegal payment by manufacturer of the product.

      (11) NONECONOMIC DAMAGES- The term ‘noneconomic damages’ means damages paid to compensate an individual for losses for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of consortium, and other nonpecuniary losses, but does not include punitive damages.

      (12) PUNITIVE DAMAGES- The term ‘punitive damages’ means compensation, in addition to compensation for actual harm suffered, that is awarded for the purpose of punishing a person for conduct deemed to be malicious, wanton, willful, or excessively reckless.

PART 4--PAYMENT AREAS FOR PHYSICIANS’ SERVICES UNDER MEDICARE

SEC. 8151. MODIFICATION OF PAYMENT AREAS USED TO DETERMINE PAYMENTS FOR PHYSICIANS’ SERVICES UNDER MEDICARE.

    (a) IN GENERAL- Section 1848(j)(2) (42 U.S.C. 1395w@4(j)(2)) is amended to read as follows:

      ‘(2) FEE SCHEDULE AREA-

        ‘(A) GENERAL RULE- Except as provided in subparagraph (B), the term ‘fee schedule area’ means, with respect to physicians’ services furnished in a State, the State.

        ‘(B) EXCEPTION FOR STATES WITH HIGHEST VARIATION AMONG AREAS- In the case of the 15 States with the greatest variation in cost associated with physicians’ services among various geographic areas of the State (as determined by the Secretary in accordance with such standards as the Secretary considers appropriate), the fee schedule area applicable with respect to physicians’ services furnished in the State shall be a locality used under section 1842(b) for purposes of computing payment amounts for physicians’ services, except that the Secretary shall revise the localities used under such section so that there are no more than 5 such localities in any State.’.

    (b) BUDGET-NEUTRALITY REQUIREMENT- The Secretary of Health and Human Services shall carry out the amendment made by subsection (a) in a manner which ensures that the aggregate amount of payment made for physicians’ services under part B of the medicare program in any year does not exceed the aggregate amount of payment which would have been made for such services under part B during the year if the amendment were not in effect.

    (c) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to physicians’ services furnished on or after January 1, 1997.

Subtitle C--Medicare Payments to Health Care Providers

Title VIII, Subtitle C

PART 1--PROVISIONS AFFECTING ALL PROVIDERS

SEC. 8201. ONE-YEAR FREEZE IN PAYMENTS TO PROVIDERS.

    (a) FREEZE IN UPDATES-

      (1) IN GENERAL- Notwithstanding any other provision of law, except as otherwise provided in paragraph (2), for purposes of determining the amount to paid for an item or service under title XVIII of the Social Security Act, the percentage increase in any economic index by which a payment amount under title XVIII of the Social Security Act is required to be increased during fiscal year 1996 shall be deemed to be zero.

      (2) EXCEPTIONS- Paragraph (1) shall not apply to the determination of hospital-specific FTE resident amounts under section 1886(h) of such Act.

    (b) ECONOMIC INDEX- The term ‘economic index’ includes--

      (1) the hospital market basket index (described in section 1886(b)(3)(B)(iii) of the Social Security Act),

      (2) the medicare economic index (referred to in the fourth sentence of section 1842(b)(3) of such Act),

      (3) the consumer price index for all urban consumers (U.S. city average), and

      (4) any other index used to adjust payment amounts under title XVIII of such Act.

    (c) EXTENSION OF PAYMENT FREEZE FOR SNFS AND HHAS-

      (1) SKILLED NURSING FACILITIES-

        (A) NO CHANGE IN COST LIMITS- Section 13503(a)(1) of OBRA-1993 is amended by striking ‘1994 and 1995’ and inserting ‘1994, 1995, and 1996’.

        (B) DELAY IN UPDATES; NO CATCH UP- The last sentence of section 1888(a) (42 U.S.C. 1395yy(a)) is amended--

          (i) by striking ‘1995’ and inserting ‘1996’, and

          (ii) by striking ‘subsection.’ and inserting ‘subsection (except that such updates may not take into account any changes in the routine service costs of skilled nursing facilities during cost reporting periods which began during fiscal year 1994, 1995, or 1996).’.

        (C) PROSPECTIVE PAYMENTS- Section 13505(b) of OBRA-1993 is amended by striking ‘fiscal years 1994 and 1995’ and inserting ‘fiscal years 1994, 1995, and 1996’.

      (2) HOME HEALTH AGENCIES-

        (A) NO CHANGE IN COST LIMITS- Section 13564(a)(1) of OBRA-1993 is amended by striking ‘1996’ and inserting ‘1997’.

        (B) DELAY IN UPDATES; NO CATCH UP- Section 1861(v)(1)(L)(iii) (42 U.S.C. 1395x(v)(1)(L)(iii)) is amended--

          (i) by striking ‘1996’ and inserting ‘1997’, and

          (ii) by adding at the end the following: ‘In establishing limits under this subparagraph, the Secretary may not take into account any changes in the routine service costs of the provision of services furnished by home health agencies with respect to cost reporting periods which began on or after July 1, 1994, and before July 1, 1997.’.

PART 2--PROVISIONS AFFECTING DOCTORS

SEC. 8211. PAYMENTS FOR PHYSICIANS’ SERVICES.

    (a) ESTABLISHING UPDATE TO CONVERSION FACTOR TO MATCH SPENDING UNDER SUSTAINABLE GROWTH RATE-

      (1) IN GENERAL- Section 1848(d)(2) (42 U.S.C. 1395ww(d)(2)) is amended to read as follows:

      ‘(2) RECOMMENDATION OF UPDATE-

        ‘(A) IN GENERAL- Not later than April 15 of each year (beginning with 1996), the Secretary shall transmit to the Congress a report that includes a recommendation on the appropriate update in the conversion factor for all physicians’ services (as defined in subsection (f)(3)(A)) in the following year. In making the recommendation, the Secretary shall consider--

          ‘(i) the percentage change in the medicare economic index (described in the fourth sentence of section 1842(b)(3)) for that year;

          ‘(ii) such factors as enter into the calculation of the update adjustment factor as described in paragraph (3)(B); and

          ‘(iii) access to services.

        ‘(B) ADDITIONAL CONSIDERATIONS- In making recommendations under subparagraph (A), the Secretary may also consider--

          ‘(i) unexpected changes by physicians in response to the implementation of the fee schedule;

          ‘(ii) unexpected changes in outlay projections;

          ‘(iii) changes in the quality or appropriateness of care;

          ‘(iv) any other relevant factors not measured in the resource-based payment methodology; and

          ‘(v) changes in volume or intensity of services.

        ‘(C) COMMISSION REVIEW- The Medicare Payment Review Commission shall review the report submitted under subparagraph (A) in a year and shall submit to the Congress, by not later than May 15 of the year, a report including its recommendations respecting the update in the conversion factor for the following year.’.

      (2) UPDATE- Section 1848(d)(3) (42 U.S.C. 1395w@4(d)(3)) is amended to read as follows:

      ‘(3) UPDATE-

        ‘(A) IN GENERAL- Unless Congress otherwise provides, subject to subparagraph (E), for purposes of this section the update for a year (beginning with 1997) is equal to the product of--

          ‘(i) 1 plus the Secretary’s estimate of the percentage increase in the medicare economic index (described in the fourth sentence of section 1842(b)(3)) for the year (divided by 100), and

          ‘(ii) 1 plus the Secretary’s estimate of the update adjustment factor for the year (divided by 100),

        minus 1 and multiplied by 100.

        ‘(B) UPDATE ADJUSTMENT FACTOR- The ‘update adjustment factor’ for a year is equal to the quotient of--

          ‘(i) the difference between (I) the sum of the allowed expenditures for physicians’ services furnished during each of the years 1995 through the year involved and (II) the sum of the amount of actual expenditures for physicians’ services furnished during each of the years 1995 through the previous year; divided by

          ‘(ii) the Secretary’s estimate of allowed expenditures for physicians’ services furnished during the year.

        ‘(C) DETERMINATION OF ALLOWED EXPENDITURES- For purposes of subparagraph (B), allowed expenditures for physicians’ services shall be determined as follows (as estimated by the Secretary):

          ‘(i) In the case of allowed expenditures for 1995, such expenditures shall be equal to actual expenditures for services furnished during the 12-month period ending with June 30, 1995.

          ‘(ii) In the case of allowed expenditures for 1996 and each subsequent year, such expenditures shall be equal to allowed expenditures for the previous year, increased by the sustainable growth rate under subsection (f) for the fiscal year which begins during the year.

        ‘(D) DETERMINATION OF ACTUAL EXPENDITURES- For purposes of subparagraph (B), the amount of actual expenditures for physicians’ services furnished during a year shall be equal to the amount of expenditures for such services during the 12-month period ending with June of the previous year.

        ‘(E) RESTRICTION ON VARIATION FROM MEDICARE ECONOMIC INDEX- Notwithstanding the amount of the update adjustment factor determined under subparagraph (B) for a year, the update in the conversion factor under this paragraph for the year may not be--

          ‘(i) greater than 103 percent of 1 plus the Secretary’s estimate of the percentage increase in the medicare economic index (described in the fourth sentence of section 1842(b)(3)) for the year (divided by 100), minus 1 and multiplied by 100; or

          ‘(ii) less than 91.75 percent of 1 plus the Secretary’s estimate of the percentage increase in the medicare economic index (described in the fourth sentence of section 1842(b)(3)) for the year (divided by 100), minus 1 and multiplied by 100.’.

      (3) EFFECTIVE DATE- The amendments made by this subsection shall apply to physicians’ services furnished on or after January 1, 1997.

    (b) REPLACEMENT OF VOLUME PERFORMANCE STANDARD WITH SUSTAINABLE GROWTH RATE- Section 1848(f) (42 U.S.C. 1395w@4(f)) is amended to read as follows:

    ‘(f) SUSTAINABLE GROWTH RATE-

      ‘(1) PROCESS FOR ESTABLISHING SUSTAINABLE GROWTH RATE OF INCREASE-

        ‘(A) SECRETARY’S RECOMMENDATION- By not later than April 15 of each year (beginning with 1996), the Secretary shall transmit to the Congress a recommendation on the sustainable growth rate for the fiscal year beginning in such year. In making the recommendation, the Secretary shall confer with organizations representing physicians and shall consider--

          ‘(i) inflation,

          ‘(ii) changes in numbers of enrollees (other than private plan enrollees) under this part,

          ‘(iii) changes in the age composition of enrollees (other than private plan enrollees) under this part,

          ‘(iv) changes in technology,

          ‘(v) evidence of inappropriate utilization of services,

          ‘(vi) evidence of lack of access to necessary physicians’ services, and

          ‘(vii) such other factors as the Secretary considers appropriate.

        ‘(B) COMMISSION REVIEW- The Medicare Payment Review Commission shall review the recommendation transmitted during a year under subparagraph (A) and shall make its recommendation to Congress, by not later than May 15 of the year, respecting the sustainable growth rate for the fiscal year beginning in that year.

        ‘(C) PUBLICATION OF SUSTAINABLE GROWTH RATE- The Secretary shall cause to have the sustainable growth rate published in the Federal Register, in the last 15 days of October of each calendar year (beginning with 1997), for the fiscal year beginning in that year. The Secretary shall cause to have published in the Federal Register, by not later than January 1, 1997, the paragraph (2) for fiscal year 1997.

      ‘(2) SPECIFICATION OF GROWTH RATE-

        ‘(A) FISCAL YEAR 1996- The sustainable growth rate for all physicians’ services for fiscal year 1996 shall be equal to the product of--

          ‘(i) 1 plus the Secretary’s estimate of the percentage change in the medicare economic index for 1996 (described in the fourth sentence of section 1842(b)(3)) (divided by 100),

          ‘(ii) 1 plus the Secretary’s estimate of the percentage change (divided by 100) in the average number of individuals enrolled under this part (other than private plan enrollees) from fiscal year 1995 to fiscal year 1996,

          ‘(iii) 1 plus the Secretary’s estimate of the projected percentage growth in real gross domestic product per capita (divided by 100) from fiscal year 1995 to fiscal year 1996, and

          ‘(iv) 1 plus the Secretary’s estimate of the percentage change (divided by 100) in expenditures for all physicians’ services in fiscal year 1996 (compared with fiscal year 1995) which will result from changes in law (including the Common Sense Balanced Budget Act of 1995), determined without taking into account estimated changes in expenditures due to changes in the volume and intensity of physicians’ services or changes in expenditures resulting from changes in the update to the conversion factor under subsection (d),

        minus 1 and multiplied by 100.

        ‘(B) SUBSEQUENT FISCAL YEARS- The sustainable growth rate for all physicians’ services for fiscal year 1997 and each subsequent fiscal year shall be equal to the product of--

          ‘(i) 1 plus the Secretary’s estimate of the percentage change in the medicare economic index for the fiscal year involved (described in the fourth sentence of section 1842(b)(3)) (divided by 100),

          ‘(ii) 1 plus the Secretary’s estimate of the percentage change (divided by 100) in the average number of individuals enrolled under this part (other than private plan enrollees) from the previous fiscal year to the fiscal year involved,

          ‘(iii) 1 plus the Secretary’s estimate of the projected percentage growth in real gross domestic product per capita (divided by 100) from the previous fiscal year to the fiscal year involved, and

          ‘(iv) 1 plus the Secretary’s estimate of the percentage change (divided by 100) in expenditures for all physicians’ services in the fiscal year (compared with the previous fiscal year) which will result from changes in law, determined without taking into account estimated changes in expenditures due to changes in the volume and intensity of physicians’ services or changes in expenditures resulting from changes in the update to the conversion factor under subsection (d)(3),

        minus 1 and multiplied by 100.

      ‘(3) DEFINITIONS- In this subsection:

        ‘(A) SERVICES INCLUDED IN PHYSICIANS’ SERVICES- The term ‘physicians’ services’ includes other items and services (such as clinical diagnostic laboratory tests and radiology services), specified by the Secretary, that are commonly performed or furnished by a physician or in a physician’s office, but does not include services furnished to a private plan enrollee.

        ‘(B) PRIVATE PLAN ENROLLEE- The term ‘private plan enrollee’ means, with respect to a fiscal year, an individual enrolled under this part who has elected to receive benefits under this title for the fiscal year through a Medicare Choice product under part C or through enrollment with an eligible organization with a risk-sharing contract under section 1876.’.

    (c) ESTABLISHMENT OF SINGLE CONVERSION FACTOR FOR 1996-

      (1) IN GENERAL- Section 1848(d)(1) (42 U.S.C. 1395w@4(d)(1)) is amended--

        (A) by redesignating subparagraph (C) as subparagraph (D); and

        (B) by inserting after subparagraph (B) the following new subparagraph:

        ‘(C) SPECIAL RULE FOR 1996- For 1996, the conversion factor under this subsection shall be $36.40 for all physicians’ services.’.

      (2) CONFORMING AMENDMENTS- Section 1848 (42 U.S.C. 1395w@4), as amended by paragraph (1), is amended--

        (A) by striking ‘(or factors)’ each place it appears in subsection (d)(1)(A) and (d)(1)(D)(ii);

        (B) in subsection (d)(1)(A), by striking ‘or updates’;

        (C) in subsection (d)(1)(D)(ii), by striking ‘(or updates)’; and

        (D) in subsection (i)(1)(C), by striking ‘conversion factors’ and inserting ‘the conversion factor’.

PART 3--PROVISIONS AFFECTING HOSPITALS

SEC. 8221. REDUCTION IN UPDATE FOR INPATIENT HOSPITAL SERVICES.

    (a) PPS HOSPITALS- Section 1886(b)(3)(B)(i) (42 U.S.C. 1395ww(b)(3)(B)(i)) is amended--

      (1) by amending subclause (XII) to read as follows:

      ‘(XII) for each of the fiscal years 1997 through 2002, the market basket percentage increase minus 0.5 percentage point for hospitals in a rural area, and the market basket percentage increase minus 1.5 percentage points for all other hospitals, and’; and

      (2) in subclause (XIII), by striking ‘1998’ and inserting ‘2003’.

    (b) PPS-EXEMPT HOSPITALS-

      (1) IN GENERAL- Section 1886(b)(3)(B)(ii) (42 U.S.C. 1395ww(b)(3)(B)(ii)) is amended--

        (A) in subclause (V)--

          (i) by striking ‘thorugh 1997’ and inserting ‘through 1996’, and

          (ii) by striking ‘and’ at the end;

        (B) by redesignating subclause (VI) as subclause (VII); and

        (C) by inserting after subclause (V) the following new subclause:

      ‘(VI) fiscal years 1997 through 2002, is the market basket percentage increase minus 1.0 percentage point, and’.

      (2) CONFORMING AMENDMENT- Section 1886(b)(3)(B) (42 U.S.C. 1395ww(b)(3)(B)) is amended by striking clause (v).

SEC. 8222. ELIMINATION OF FORMULA-DRIVEN OVERPAYMENTS FOR CERTAIN OUTPATIENT HOSPITAL SERVICES.

    (a) AMBULATORY SURGICAL CENTER PROCEDURES- Section 1833(i)(3)(B)(i)(II) (42 U.S.C. 1395l(i)(3)(B)(i)(II)) is amended--

      (1) by striking ‘of 80 percent’; and

      (2) by striking the period at the end and inserting the following: ‘, less the amount a provider may charge as described in clause (ii) of section 1866(a)(2)(A).’.

    (b) RADIOLOGY SERVICES AND DIAGNOSTIC PROCEDURES- Section 1833(n)(1)(B)(i)(II) (42 U.S.C. 1395l(n)(1)(B)(i)(II)) is amended--

      (1) by striking ‘of 80 percent’; and

      (2) by striking the period at the end and inserting the following: ‘, less the amount a provider may charge as described in clause (ii) of section 1866(a)(2)(A).’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to services furnished during portions of cost reporting periods occurring on or after January 1, 1996.

SEC. 8223. ESTABLISHMENT OF PROSPECTIVE PAYMENT SYSTEM FOR OUTPATIENT SERVICES.

    (a) IN GENERAL- Section 1833(a)(2)(B) (42 U.S.C. 1395l(a)(2)(B)) is amended by striking ‘section 1886)--’ and all that follows and inserting the following: ‘section 1886), an amount equal to a prospectively determined payment rate established by the Secretary that provides for payments for such items and services to be based upon a national rate adjusted to take into account the relative costs of furnishing such items and services in various geographic areas, except that for items and services furnished during cost reporting periods (or portions thereof) in years beginning with 1996, such amount shall be equal to 95 percent of the amount that would otherwise have been determined;’.

    (b) ESTABLISHMENT OF PROSPECTIVE PAYMENT SYSTEM- Not later than July 1, 1995, the Secretary of Health and Human Services shall establish the prospective payment system for hospital outpatient services necessary to carry out section 1833(a)(2)(B) of the Social Security Act (as amended by subsection (a)).

    (c) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to items and services furnished on or after January 1, 1997.

SEC. 8224. REDUCTION IN MEDICARE PAYMENTS TO HOSPITALS FOR INPATIENT CAPITAL-RELATED COSTS.

    (a) PPS HOSPITALS- Section 1886(g)(1)(A) (42 U.S.C. 1395ww(g)(1)(A)) is amended by striking ‘1995’ and inserting ‘2002’.

    (b) PPS-EXEMPT HOSPITALS- Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at the end the following:

        ‘(T) Such regulations shall provide that, in determining the amount of the payments that may be made under this title with respect to the capital-related costs of inpatient hospital services furnished by a hospital that is not a subsection (d) hospital (as defined in section 1886(d)(1)(B)) or a subsection (d) Puerto Rico hospital (as defined in section 1886(d)(9)(A)), the Secretary shall reduce the amounts of such payments otherwise established under this title by 10 percent for payments attributable to portions of cost reporting periods occurring during each of the fiscal year 1996 through 2002.’.

SEC. 8225. MORATORIUM ON PPS EXEMPTION FOR LONG-TERM CARE HOSPITALS.

    (a) IN GENERAL- Section 1886(d)(1)(B)(iv) (42 U.S.C. 1395ww(d)(1)(B)(iv)) is amended by striking ‘Secretary)’ and inserting ‘Secretary on or before September 30, 1995)’.

    (b) RECOMMENDATIONS ON APPROPRIATE STANDARDS FOR LONG-TERM CARE HOSPITALS- Not later than 1 year after the date of the enactment of this Act, the Secretary of Health and Human Services shall submit to Congress recommendations for modifications to the standards used by the Secretary to determine whether a hospital (including a distinct part of another hospital) is classified as a long-term care hospital for purposes of determining the amount of payment to the hospital under part A of the medicare program for the operating costs of inpatient hospital services.

PART 4--PROVISIONS AFFECTING OTHER PROVIDERS

SEC. 8231. REVISION OF PAYMENT METHODOLOGY FOR HOME HEALTH SERVICES.

    (a) ADDITIONS TO COST LIMITS- Section 1861(v)(1)(L) (42 U.S.C. 1395x(v)(1)(L)) is amended by adding at the end the following new clauses:

          ‘(iv) For services furnished by home health agencies for cost reporting periods beginning on or after October 1, 1996, the Secretary shall provide for an interim system of limits. Payment shall be the lower of--

            ‘(I) costs determined under the preceding provisions of this subparagraph, or

            ‘(II) an agency-specific per beneficiary annual limit calculated from the agency’s 12-month cost reporting period ending on or after January 1, 1994 and on or before December 31, 1994 based on reasonable costs (including non-routine medical supplies), updated by the home health market basket index. The per beneficiary limitation shall be multiplied by the agency’s unduplicated census count of Medicare patients for the year subject to the limitation. The limitation shall represent total Medicare reasonable costs divided by the unduplicated census count of Medicare patients.

          ‘(v) For services furnished by home health agencies for cost reporting periods beginning on or after October 1, 1996, the following rules shall apply:

            ‘(I) For new providers and those providers without a 12-month cost reporting period ending in calendar year 1994, the per beneficiary limit shall be equal to the mean of these limits (or the Secretary’s best estimates thereof) applied to home health agencies as determined by the Secretary. Home health agencies that have altered their corporate structure or name may not be considered new providers for payment purposes.

            ‘(II) For beneficiaries who use services furnished by more than one home health agency, the per beneficiary limitation shall be pro-rated among agencies.

          ‘(vi) Home health agencies whose cost or utilization experience is below 125 percent of the mean national or census region aggregate per beneficiary cost or utilization experience for 1994, or best estimates thereof, and whose year-end reasonable costs are below the agency-specific per beneficiary limit, shall receive payment equal to 50 percent of the difference between the agency’s reasonable costs and its limit for fiscal years 1996, 1997, 1998, and 1999. Such payments may not exceed 5 percent of an agency’s aggregate Medicare reasonable cost in a year.

          ‘(vii) Effective January 1, 1997, or as soon as feasible, the Secretary shall modify the agency specific per beneficiary annual limit described in clause (iv) to provide for regional or national variations in utilization. For purposes of determining payment under clause (iv), the limit shall be calculated through a blend of 75 percent of the agency-specific cost or utilization experience in 1994 with 25 percent of the national or census region cost or utilization experience in 1994, or the Secretary’s best estimates thereof.’.

    (b) USE OF INTERIM FINAL REGULATIONS- The Secretary shall implement the payment limits described in section 1861(v)(1)(L)(iv) of the Social Security Act by publishing in the Federal Register a notice of interim final payment limits by August 1, 1996 and allowing for a period of public comments thereon. Payments subject to these limits will be effective for cost reporting periods beginning on or after October 1, 1996, without the necessity for consideration of comments received, but the Secretary shall, by Federal Register notice, affirm or modify the limits after considering those comments.

    (c) STUDIES- The Secretary shall expand research on a prospective payment system for home health agencies that shall tie prospective payments to an episode of care, including an intensive effort to develop a reliable case mix adjuster that explains a significant amount of the variances in costs. The Secretary shall develop such a system for implementation in fiscal year 2000.

    (d) PAYMENTS DETERMINED ON PROSPECTIVE BASIS- Title XVIII is amended by adding at the end the following new section:

‘PROSPECTIVE PAYMENT FOR HOME HEALTH SERVICES

    ‘SEC. 1893. (a) Notwithstanding section 1861(v), the Secretary shall, for cost reporting periods beginning on or after fiscal year 2000, provide for payments for home health services in accordance with a prospective payment system, which pays home health agencies on a per episode basis, established by the Secretary.

    ‘(b) Such a system shall include the following:

      ‘(1) Per episode rates under the system shall be 15 percent less than those that would otherwise occur under fiscal year 2000 Medicare expenditures for home health services.

      ‘(2) All services covered and paid on a reasonable cost basis under the Medicare home health benefit as of the date of the enactment of the Medicare Enhancement Act of 1995, including medical supplies, shall be subject to the per episode amount. In defining an episode of care, the Secretary shall consider an appropriate length of time for an episode the use of services and the number of visits provided within an episode, potential changes in the mix of services provided within an episode and their cost, and a general system design that will provide for continued access to quality services. The per episode amount shall be based on the most current audited cost report data available to the Secretary.

    ‘(c) The Secretary shall employ an appropriate case mix adjuster that explains a significant amount of the variation in cost.

    ‘(d) The episode payment amount shall be adjusted annually by the home health market basket index. The labor portion of the episode amount shall be adjusted for geographic differences in labor-related costs based on the most current hospital wage index.

    ‘(e) The Secretary may designate a payment provision for outliers, recognizing the need to adjust payments due to unusual variations in the type or amount of medically necessary care.

    ‘(f) A home health agency shall be responsible for coordinating all care for a beneficiary. If a beneficiary elects to transfer to, or receive services from, another home health agency within an episode period, the episode payment shall be pro-rated between home health agencies.’.

SEC. 8232. LIMITATION OF HOME HEALTH COVERAGE UNDER PART A.

    (a) IN GENERAL- Section 1812(a)(3) (42 U.S.C. 1395d(a)(3)) is amended by striking the semicolon and inserting ‘for up to 150 days during any spell of illness;’.

    (b) CONFORMING AMENDMENT- Section 1812(b) (42 U.S.C. 1395d(b)) is amended--

      (1) by striking ‘or’ at the end of paragraph (2),

      (2) by striking the period at the end of paragraph (3) and inserting ‘; or’, and

      (3) by adding at the end the following new paragraph:

      ‘(4) home health services furnished to the individual during such spell after such services have been furnished to the individual for 150 days during such spell.’.

    (c) EXCLUSION OF ADDITIONAL PART B COSTS FROM DETERMINATION OF PART B MONTHLY PREMIUM- Section 1839(a) (42 U.S.C. 1395r(a)) is amended--

      (1) in the second sentence of paragraph (1), by striking ‘enrollees.’ and inserting ‘enrollees (except as provided in paragraph (5)).’; and

      (2) by adding at the end the following new paragraph:

    ‘(5) In estimating the benefits and administrative costs which will be payable from the Federal Supplementary Medical Insurance Trust Fund for a year (beginning with 1996), the Secretary shall exclude an estimate of any benefits and costs attributable to home health services for which payment would have been made under part A during the year but for paragraph (4) of section 1812(b).’.

    (d) EFFECTIVE DATE- The amendments made by this subsection shall apply to spells of illness beginning on or after October 1, 1995.

SEC. 8233. REDUCTION IN FEE SCHEDULE FOR DURABLE MEDICAL EQUIPMENT.

    (a) IN GENERAL-

      (1) FREEZE IN UPDATE FOR COVERED ITEMS- Section 1834(a)(14) (42 U.S.C. 1395m(a)(14)) is amended--

        (A) by striking ‘and’ at the end of subparagraph (A);

        (B) in subparagraph (B)--

          (i) by striking ‘a subsequent year’ and inserting ‘1993, 1994, and 1995’, and

          (ii) by striking the period at the end and inserting ‘; and’; and

        (C) by adding at the end the following:

        ‘(C) for each of the years 1996 through 2002, 0 percent; and

        ‘(D) for a subsequent year, the percentage increase in the consumer price index for all urban consumers (U.S. urban average) for the 12-month period ending with June of the previous year.’.

      (2) UPDATE FOR ORTHOTICS AND PROSTHETICS- Section 1834(h)(4)(A)(iii) (42 U.S.C. 1395m(h)(4)(A)(iii)) is amended by striking ‘1994 and 1995’ and inserting ‘each of the years 1994 through 2002’.

    (b) OXYGEN AND OXYGEN EQUIPMENT- Section 1834(a)(9)(C) (42 U.S.C. 1395m(a)(9)(C)) is amended--

      (1) by striking ‘and’ at the end of clause (iii);

      (2) in clause (iv)--

        (A) by striking ‘a subsequent year’ and inserting ‘1993, 1994, and 1995’, and

        (B) by striking the period at the end and inserting ‘; and’; and

      (3) by adding at the end the following new clause:

          ‘(v) in 1996 and each subsequent year, is 90 percent of the national limited monthly payment rate computed under subparagraph (B) for the item for the year.’.

SEC. 8234. NURSING HOME BILLING.

    (a) PAYMENTS FOR ROUTINE SERVICE COSTS-

      (1) CLARIFICATION OF DEFINITION OF ROUTINE SERVICE COSTS- Section 1888 (42 U.S.C. 1395yy) is amended by adding at the end the following new subsection:

    ‘(e) For purposes of this section, the ‘routine service costs’ of a skilled nursing facility are all costs which are attributable to nursing services, room and board, administrative costs, other overhead costs, and all other ancillary services (including supplies and equipment), excluding costs attributable to covered non-routine services subject to payment limits under section 1888A.’.

      (2) CONFORMING AMENDMENT- Section 1888 (42 U.S.C. 1395yy) is amended in the heading by inserting ‘AND CERTAIN ANCILLARY’ after ‘SERVICE’.

    (b) INCENTIVES FOR COST EFFECTIVE MANAGEMENT OF COVERED NONROUTINE SERVICES-

      (1) IN GENERAL- Title XVIII is amended by inserting after section 1888 the following new section:

‘INCENTIVES FOR COST-EFFECTIVE MANAGEMENT OF COVERED NON-ROUTINE SERVICES OF SKILLED NURSING FACILITIES

    ‘SEC. 1888A. (a) DEFINITIONS- For purposes of this section:

      ‘(1) COVERED NON-ROUTINE SERVICES- The term ‘covered non-routine services’ means post-hospital extended care services consisting of any of the following:

        ‘(A) Physical or occupational therapy or speech-language pathology services, or respiratory therapy.

        ‘(B) Prescription drugs.

        ‘(C) Complex medical equipment.

        ‘(D) Intravenous therapy and solutions (including enteral and parenteral nutrients, supplies, and equipment).

        ‘(E) Radiation therapy.

        ‘(F) Diagnostic services, including laboratory, radiology (including computerized tomography services and imaging services), and pulmonary services.

      ‘(2) SNF MARKET BASKET PERCENTAGE INCREASE- The term ‘SNF market basket percentage increase’ for a fiscal year means a percentage equal to the percentage increase in routine service cost limits for the year under section 1888(a).

      ‘(3) STAY- The term ‘stay’ means, with respect to an individual who is a resident of a skilled nursing facility, a period of continuous days during which the facility provides extended care services for which payment may be made under this title to the individual during the individual’s spell of illness.

    ‘(b) NEW PAYMENT METHOD FOR COVERED NON-ROUTINE SERVICES-

      ‘(1) IN GENERAL- Subject to subsection (c), a skilled nursing facility shall receive interim payments under this title for covered non-routine services furnished to an individual during a cost reporting period beginning during a fiscal year (after fiscal year 1996) in an amount equal to the reasonable cost of providing such services in accordance with section 1861(v). The Secretary may adjust such payments if the Secretary determines (on the basis of such estimated information as the Secretary considers appropriate) that payments to the facility under this paragraph for a cost reporting period would substantially exceed the cost reporting period limit determined under subsection (c)(1)(B).

      ‘(2) RESPONSIBILITY OF SKILLED NURSING FACILITY TO MANAGE BILLINGS-

        ‘(A) CLARIFICATION RELATING TO PART A BILLING- In the case of a covered non-routine service furnished to an individual who (at the time the service is furnished) is a resident of a skilled nursing facility who is entitled to coverage under section 1812(a)(2) for such service, the skilled nursing facility shall submit a claim for payment under this title for such service under part A (without regard to whether or not the item or service was furnished by the facility, by others under arrangement with them made by the facility, under any other contracting or consulting arrangement, or otherwise).

        ‘(B) PART B BILLING- In the case of a covered non-routine service furnished to an individual who (at the time the service is furnished) is a resident of a skilled nursing facility who is not entitled to coverage under section 1812(a)(2) for such service but is entitled to coverage under part B for such service, the skilled nursing facility shall submit a claim for payment under this title for such service under part B (without regard to whether or not the item or service was furnished by the facility, by others under arrangement with them made by the facility, under any other contracting or consulting arrangement, or otherwise).

        ‘(C) MAINTAINING RECORDS ON SERVICES FURNISHED TO RESIDENTS- Each skilled nursing facility receiving payments for extended care services under this title shall document on the facility’s cost report all covered non-routine services furnished to all residents of the facility to whom the facility provided extended care services for which payment was made under part A during a fiscal year (beginning with fiscal year 1996) (without regard to whether or not the services were furnished by the facility, by others under arrangement with them made by the facility, under any other contracting or consulting arrangement, or otherwise).

    ‘(c) RECONCILIATION OF AMOUNTS-

      ‘(1) LIMIT BASED ON PER STAY LIMIT AND NUMBER OF STAYS-

        ‘(A) IN GENERAL- If a skilled nursing facility has received aggregate payments under subsection (b) for covered non-routine services during a cost reporting period beginning during a fiscal year in excess of an amount equal to the cost reporting period limit determined under subparagraph (B), the Secretary shall reduce the payments made to the facility with respect to such services for cost reporting periods beginning during the following fiscal year in an amount equal to such excess. The Secretary shall reduce payments under this subparagraph at such times and in such manner during a fiscal year as the Secretary finds necessary to meet the requirement of this subparagraph.

        ‘(B) COST REPORTING PERIOD LIMIT- The cost reporting period limit determined under this subparagraph is an amount equal to the product of--

          ‘(i) the per stay limit applicable to the facility under subsection (d) for the period; and

          ‘(ii) the number of stays beginning during the period for which payment was made to the facility for such services.

        ‘(C) PROSPECTIVE REDUCTION IN PAYMENTS- In addition to the process for reducing payments described in subparagraph (A), the Secretary may reduce payments made to a facility under this section during a cost reporting period if the Secretary determines (on the basis of such estimated information as the Secretary considers appropriate) that payments to the facility under this section for the period will substantially exceed the cost reporting period limit for the period determined under this paragraph.

      ‘(2) INCENTIVE PAYMENTS-

        ‘(A) IN GENERAL- If a skilled nursing facility has received aggregate payments under subsection (b) for covered non-routine services during a cost reporting period beginning during a fiscal year in an amount that is less than the amount determined under paragraph (1)(B), the Secretary shall pay the skilled nursing facility in the following fiscal year an incentive payment equal to 50 percent of the difference between such amounts, except that the incentive payment may not exceed 5 percent of the aggregate payments made to the facility under subsection (b) for the previous fiscal year (without regard to subparagraph (B)).

        ‘(B) INSTALLMENT INCENTIVE PAYMENTS- The Secretary may make installment payments during a fiscal year to a skilled nursing facility based on the estimated incentive payment that the facility would be eligible to receive with respect to such fiscal year.

    ‘(d) DETERMINATION OF FACILITY PER STAY LIMIT-

      ‘(1) Limit for fiscal year 1997-

        ‘(A) IN GENERAL- Except as provided in subparagraph (B), the Secretary shall establish separate per stay limits for hospital-based and freestanding skilled nursing facilities for the 12-month cost reporting period beginning during fiscal year 1997 that are equal to the sum of--

          ‘(i) 50 percent of the facility-specific stay amount for the facility (as determined under subsection (e)) for the last 12-month cost reporting period ending on or before September 30, 1994, increased (in a compounded manner) by the SNF market basket percentage increase for fiscal years 1995 through 1997; and

          ‘(ii) 50 percent of the average of all facility-specific stay amounts for all hospital-based facilities or all freestanding facilities (whichever is applicable) during the cost reporting period described in clause (i), increased (in a compounded manner) by the SNF market basket percentage increase for fiscal years 1995 through 1997.

        ‘(B) FACILITIES NOT HAVING 1994 COST REPORTING PERIOD- In the case of a skilled nursing facility for which payments were not made under this title for covered non-routine services for the last 12-month cost reporting period ending on or before September 30, 1994, the per stay limit for the 12-month cost reporting period beginning during fiscal year 1997 shall be twice the amount determined under subparagraph (A)(ii).

      ‘(2) LIMIT FOR SUBSEQUENT FISCAL YEARS- The per stay limit for a skilled nursing facility for a 12-month cost reporting period beginning during a fiscal year after fiscal year 1997 is equal to the per stay limit established under this subsection for the 12-month cost reporting period beginning during the previous fiscal year, increased by the SNF market basket percentage increase for such subsequent fiscal year minus 2 percentage points.

      ‘(3) REBASING OF AMOUNTS-

        ‘(A) IN GENERAL- The Secretary shall provide for an update to the facility-specific amounts used to determine the per stay limits under this subsection for cost reporting periods beginning on or after October 1, 1999, and every 2 years thereafter.

        ‘(B) TREATMENT OF FACILITIES NOT HAVING REBASED COST REPORTING PERIODS- Paragraph (1)(B) shall apply with respect to a skilled nursing facility for which payments were not made under this title for covered non-routine services for the 12-month cost reporting period used by the Secretary to update facility-specific amounts under subparagraph (A) in the same manner as such paragraph applies with respect to a facility for which payments were not made under this title for covered non-routine services for the last 12-month cost reporting period ending on or before September 30, 1994.

    ‘(e) DETERMINATION OF FACILITY-SPECIFIC STAY AMOUNTS- The ‘facility-specific stay amount’ for a skilled nursing facility for a cost reporting period is the sum of--

      ‘(1) the average amount of payments made to the facility under part A during the period which are attributable to covered non-routine services furnished during a stay (as determined on a per diem basis); and

      ‘(2) the Secretary’s best estimate of the average amount of payments made under part B during the period for covered non-routine services furnished to all residents of the facility to whom the facility provided extended care services for which payment was made under part A during the period (without regard to whether or not the services were furnished by the facility, by others under arrangement with them made by the facility, under any other contracting or consulting arrangement, or otherwise), as estimated by the Secretary.

    ‘(f) INTENSIVE NURSING OR THERAPY NEEDS-

      ‘(1) IN GENERAL- In applying subsection (b) to covered non-routine services furnished during a stay beginning during a cost reporting period beginning during a fiscal year (beginning with fiscal years after fiscal year 1997) to a resident of a skilled nursing facility who requires intensive nursing or therapy services, the per stay limit for such resident shall be the per stay limit developed under paragraph (2) instead of the per stay limit determined under subsection (d)(1)(A).

      ‘(2) PER STAY LIMIT FOR INTENSIVE NEED RESIDENTS- Not later than June 30, 1997, the Secretary, after consultation with the Medicare Payment Review Commission and skilled nursing facility experts, shall develop and publish a per stay limit for residents of a skilled nursing facility who require intensive nursing or therapy services.

      ‘(3) BUDGET NEUTRALITY- The Secretary shall adjust payments under subsection (b) in a manner that ensures that total payments for covered non-routine services under this section are not greater or less than total payments for such services would have been but for the application of paragraph (1).

    ‘(g) SPECIAL TREATMENT FOR SMALL SKILLED NURSING FACILITIES- This section shall not apply with respect to a skilled nursing facility for which payment is made for routine service costs during a cost reporting period on the basis of prospective payments under section 1888(d).

    ‘(h) EXCEPTIONS AND ADJUSTMENTS TO LIMITS-

      ‘(1) IN GENERAL- The Secretary may make exceptions and adjustments to the cost reporting limits applicable to a skilled nursing facility under subsection (c)(1)(B) for a cost reporting period, except that the total amount of any additional payments made under this section for covered non-routine services during the cost reporting period as a result of such exceptions and adjustments may not exceed 5 percent of the aggregate payments made to all skilled nursing facilities for covered non-routine services during the cost reporting period (determined without regard to this paragraph).

      ‘(2) BUDGET NEUTRALITY- The Secretary shall adjust payments under subsection (b) in a manner that ensures that total payments for covered non-routine services under this section are not greater or less than total payments for such services would have been but for the application of paragraph (1).

    ‘(i) SPECIAL RULE FOR X-RAY SERVICES- Before furnishing a covered non-routine service consisting of an X-ray service for which payment may be made under part A or part B to a resident, a skilled nursing facility shall consider whether furnishing the service through a provider of portable X-ray service services would be appropriate, taking into account the cost effectiveness of the service and the convenience to the resident.’.

      (2) CONFORMING AMENDMENT- Section 1814(b) (42 U.S.C. 1395f(b)) is amended in the matter preceding paragraph (1) by striking ‘1813 and 1886’ and inserting ‘1813, 1886, 1888, and 1888A’.

SEC. 8235. FREEZE IN PAYMENTS FOR CLINICAL DIAGNOSTIC LABORATORY TESTS.

    Section 1833(h)(2)(A)(ii)(IV) (42 U.S.C. 1395l(h)(2)(A)(ii)(IV)) is amended by striking ‘1994 and 1995’ and inserting ‘1994 through 2002’.

PART 5--GRADUATE MEDICAL EDUCATION AND TEACHING HOSPITALS

SEC. 8241. TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST FUND.

    (a) TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST FUND- The Social Security Act (42 U.S.C. 300 et seq.) is amended by adding at the end the following title:

‘TITLE XXI--TEACHING HOSPITAL AND GRADUATE MEDICAL EDUCATION TRUST FUND

‘Part A--Establishment of Fund

‘SEC. 2101. ESTABLISHMENT OF FUND.

    ‘(a) IN GENERAL- There is established in the Treasury of the United States a fund to be known as the Teaching Hospital and Graduate Medical Education Trust Fund (in this title referred to as the ‘Fund’), consisting of amounts transferred to the Fund under subsection (c), amounts appropriated to the Fund pursuant to subsections (d) and (e)(3), and such gifts and bequests as may be deposited in the Fund pursuant to subsection (f). Amounts in the Fund are available until expended.

    ‘(b) EXPENDITURES FROM FUND- Amounts in the Fund are available to the Secretary for making payments under section 2111.

    ‘(c) TRANSFERS TO FUND-

      ‘(1) IN GENERAL- From the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, the Secretary shall, for fiscal year 1996 and each subsequent fiscal year, transfer to the Fund an amount determined by the Secretary for the fiscal year involved in accordance with paragraph (2).

      ‘(2) DETERMINATION OF AMOUNTS- For purposes of paragraph (1), the amount determined under this paragraph for a fiscal year is an estimate by the Secretary of an amount equal to 75 percent of the difference between--

        ‘(A) the nationwide total of the amounts that would have been paid under sections 1855 and 1876 during the year but for the operation of section 1855(b)(2)(B)(ii); and

        ‘(B) the nationwide total of the amounts paid under such sections during the year.

      ‘(3) ALLOCATION BETWEEN MEDICARE TRUST FUNDS- In providing for a transfer under paragraph (1) for a fiscal year, the Secretary shall provide for an allocation of the amounts involved between part A and part B of title XVIII (and the trust funds established under the respective parts) as reasonably reflects the proportion of payments for the indirect costs of medical education and direct graduate medical education costs of hospitals associated with the provision of services under each respective part.

    ‘(d) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to the Fund such sums as may be necessary for each of the fiscal years 1996 through 2002.

    ‘(e) INVESTMENT-

      ‘(1) IN GENERAL- The Secretary of the Treasury shall invest such amounts of the Fund as such Secretary determines are not required to meet current withdrawals from the Fund. Such investments may be made only in interest-bearing obligations of the United States. For such purpose, such obligations may be acquired on original issue at the issue price, or by purchase of outstanding obligations at the market price.

      ‘(2) SALE OF OBLIGATIONS- Any obligation acquired by the Fund may be sold by the Secretary of the Treasury at the market price.

      ‘(3) AVAILABILITY OF INCOME- Any interest derived from obligations acquired by the Fund, and proceeds from any sale or redemption of such obligations, are hereby appropriated to the Fund.

    ‘(f) ACCEPTANCE OF GIFTS AND BEQUESTS- The Fund may accept on behalf of the United States money gifts and bequests made unconditionally to the Fund for the benefit of the Fund or any activity financed through the Fund.

‘Part B--Payments to Teaching Hospitals

‘SEC. 2111. FORMULA PAYMENTS TO TEACHING HOSPITALS.

    ‘(a) IN GENERAL- In the case of each teaching hospital that in accordance with subsection (b) submits to the Secretary a payment document for fiscal year 1996 or any subsequent fiscal year, the Secretary shall make payments for the year to the teaching hospital for the direct and indirect costs of operating approved medical residency training programs. Such payments shall be made from the Fund, and shall be made in accordance with a formula established by the Secretary.

    ‘(b) PAYMENT DOCUMENT- For purposes of subsection (a), a payment document is a document containing such information as may be necessary for the Secretary to make payments under such subsection to a teaching hospital for a fiscal year. The document is submitted in accordance with this subsection if the document is submitted not later than the date specified by the Secretary, and the document is in such form and is made in such manner as the Secretary may require. The Secretary may require that information under this subsection be submitted to the Secretary in periodic reports.’.

    (b) NATIONAL ADVISORY COUNCIL ON POSTGRADUATE MEDICAL EDUCATION-

      (1) IN GENERAL- There is established within the Department of Health and Human Services an advisory council to be known as the National Advisory Council on Postgraduate Medical Education (in this title referred to as the ‘Council’).

      (2) DUTIES- The council shall provide advice to the Secretary on appropriate policies for making payments for the support of postgraduate medical education in order to assure an adequate supply of physicians trained in various specialities, consistent with the health care needs of the United States.

      (3) COMPOSITION-

        (A) IN GENERAL- The Secretary shall appoint to the Council 15 individuals who are not officers or employees of the United States. Such individuals shall include not less than 1 individual from each of the following categories of individuals or entities:

          (i) Organizations representing consumers of health care services.

          (ii) Physicians who are faculty members of medical schools, or who supervise approved physician training programs.

          (iii) Physicians in private practice who are not physicians described in clause (ii).

          (iv) Practitioners in public health.

          (v) Advanced-practice nurses.

          (vi) Other health professionals who are not physicians.

          (vii) Medical schools.

          (viii) Teaching hospitals.

          (ix) The Accreditation Council on Graduate Medical Education.

          (x) The American Board of Medical Specialities.

          (xi) The Council on Postdoctoral Training of the American Osteopathic Association.

          (xii) The Council on Podiatric Medical Education of the American Podiatric Medical Association.

        (B) REQUIREMENTS REGARDING REPRESENTATIVE MEMBERSHIP- To the greatest extent feasible, the membership of the Council shall represent the various geographic regions of the United States, shall reflect the racial, ethnic, and gender composition of the population of the United States, and shall be broadly representative of medical schools and teaching hospitals in the United States.

        (C) EX OFFICIO MEMBERS; OTHER FEDERAL OFFICERS OR EMPLOYEES- The membership of the Council shall include individuals designated by the Secretary to serve as members of the Council from among Federal officers or employees who are appointed by the President, or by the Secretary (or by other Federal officers who are appointed by the President with the advice and consent of the Senate). Individuals designated under the preceding sentence shall include each of the following officials (or a designee of the official):

          (i) The Secretary of Health and Human Services.

          (ii) The Secretary of Veterans Affairs.

          (iii) The Secretary of Defense.

      (4) CHAIR- The Secretary shall, from among members of the council appointed under paragraph (3)(A), designate an individual to serve as the chair of the council.

      (5) TERMINATION- The Council terminates December 31, 1999.

    (c) REMOVE MEDICAL EDUCATION AND DISPROPORTIONATE SHARE HOSPITAL PAYMENTS FROM CALCULATION OF ADJUSTED AVERAGE PER CAPITA COST- For provision removing medical education and disproportionate share hospital payments from calculation of payment amounts for organizations paid on a capitated basis, see section 1855(b)(2)(B)(ii).

      (2) PAYMENTS TO HOSPITALS OF AMOUNTS ATTRIBUTABLE TO DSH- Section 1886 (42 U.S.C. 1395ww) is amended by adding at the end the following new subsection:

    ‘(j)(1) In addition to amounts paid under subsection (d)(5)(F), the Secretary is authorized to pay hospitals which are eligible for such payments for a fiscal year supplemental amounts that do not exceed the limit provided for in paragraph (2).

    ‘(2) The sum of the aggregate amounts paid pursuant to paragraph (1) for a fiscal year shall not exceed the Secretary’s estimate of 75 percent of the amount of reductions in payments under section 1855 that are attributable to the operation of subsection (b)(2)(B)(ii) of such section.’.

SEC. 8242. REDUCTION IN PAYMENT ADJUSTMENTS FOR INDIRECT MEDICAL EDUCATION.

    (a) MODIFICATION REGARDING 6.8 PERCENT- Section 1886(d)(5)(B)(ii) (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended--

      (1) by striking ‘on or after October 1, 1988,’ and inserting ‘on or after October 1, 1999,’; and

      (2) by striking ‘1.89’ and inserting ‘1.68’.

    (b) SPECIAL RULE REGARDING FISCAL YEARS 1996 THROUGH 1998; MODIFICATION REGARDING 6 PERCENT- Section 1886(d)(5)(B)(ii), as amended by paragraph (1), is amended by adding at the end the following: ‘In the case of discharges occurring on or after October 1, 1995, and before October 1, 1999, the preceding sentence applies to the same extent and in the same manner as the sentence applies to discharges occurring on or after October 1, 1999, except that the term ‘1.68’ is deemed to be 1.48.’.

Subtitle D--Provisions Relating to Medicare Beneficiaries

Title VIII, Subtitle D

SEC. 8301. PART B PREMIUM.

    (a) FREEZE IN PREMIUM FOR 1996- Section 1839(e)(1) (42 U.S.C. 1395r(e)(1)) is amended--

      (1) in subparagraph (A), by striking ‘December 1995’ and inserting ‘December 1996’; and

      (2) in subparagraph (B)(v), by striking ‘1995’ and inserting ‘1995 and 1996’.

    (b) ESTABLISHING PREMIUM AT 25 PERCENT OF PROGRAM COSTS THROUGH 2002- Section 1839(e)(1)(A) (42 U.S.C. 1395r(e)(1)(A)) is amended by striking ‘January 1999’ and inserting ‘January 2003’.

SEC. 8302. FULL COST OF MEDICARE PART B COVERAGE PAYABLE BY HIGH-INCOME INDIVIDUALS.

    (a) IN GENERAL- Subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end thereof the following new part:

‘PART VIII--SUPPLEMENTAL MEDICARE PART B PREMIUMS FOR HIGH-INCOME INDIVIDUALS

‘Sec. 59B. Supplemental Medicare part B premium.

‘SEC. 59B. SUPPLEMENTAL MEDICARE PART B PREMIUM.

    ‘(a) REQUIREMENT TO PAY PREMIUM- In the case of an individual to whom this section applies for the taxable year, there is hereby imposed (in addition to any other amount imposed by this subtitle) an amount equal to the aggregate of the supplemental Medicare part B premiums (if any) for months during such year that such individual is covered under Medicare part B.

    ‘(b) INDIVIDUALS TO WHOM SECTION APPLIES- This section shall apply to any individual for any taxable year if--

      ‘(1) such individual is covered under Medicare part B for any month during such year, and

      ‘(2) the modified adjusted gross income of the taxpayer for such taxable year exceeds the threshold amount.

    ‘(c) SUPPLEMENTAL MEDICARE PART B PREMIUM-

      ‘(1) IN GENERAL- For purposes of subsection (a), the supplemental Medicare part B premium for any month is an amount equal to the excess of--

        ‘(A) subject to adjustment under paragraph (2), 200 percent of the monthly actuarial rate for enrollees age 65 and over determined under subsection 1839(a)(1) of the Social Security Act for such month, over

        ‘(B) the total monthly premium under section 1839 of the Social Security Act (determined without regard to subsections (b) and (f) of section 1839 of such Act).

      ‘(2) ADJUSTING MONTHLY ACTUARIAL RATE BY GEOGRAPHIC AREA-

        ‘(A) IN GENERAL- In determining the amount described in paragraph (1)(A) for an individual residing in a premium area, the Secretary shall adjust such amount for a year by a geographic adjustment factor established by the Secretary which reflects the relative benefits and administrative costs payable from the Federal Supplementary Medical Insurance Trust Fund for services performed and related administrative costs incurred in the year with respect to enrollees residing in such area compared to the national average of such benefits and costs.

        ‘(B) PREMIUM AREA- In this paragraph, a ‘premium area’ means a metropolitan statistical area or the portion of a State outside of any metropolitan statistical area.

    ‘(d) PHASEIN-

      ‘(1) IN GENERAL- If the modified adjusted gross income of the taxpayer for any taxable year exceeds the threshold amount by less than $50,000, the amount imposed by this section for such taxable year shall be an amount which bears the same ratio to the amount which would (but for this subsection) be imposed by this section for such taxable year as such excess bears to $50,000. The preceding sentence shall not apply to any individual whose threshold amount is zero.

      ‘(2) PHASEIN RANGE FOR JOINT RETURNS- In the case of a joint return, paragraph (1) shall be applied by substituting ‘$75,000’ for ‘$50,000’.

    ‘(e) OTHER DEFINITIONS AND SPECIAL RULES- For purposes of this section--

      ‘(1) THRESHOLD AMOUNT- The term ‘threshold amount’ means--

        ‘(A) except as otherwise provided in this paragraph, $50,000,

        ‘(B) $75,000 in the case of a joint return, and

        ‘(C) zero in the case of a taxpayer who--

          ‘(i) is married at the close of the taxable year but does not file a joint return for such year, and

          ‘(ii) does not live apart from his spouse at all times during the taxable year.

      ‘(2) MODIFIED ADJUSTED GROSS INCOME- The term ‘modified adjusted gross income’ means adjusted gross income--

        ‘(A) determined without regard to sections 135, 911, 931, and 933, and

        ‘(B) increased by the amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.

      ‘(3) JOINT RETURNS- In the case of a joint return--

        ‘(A) the amount imposed by subsection (a) shall be the sum of the amounts so imposed determined separately for each spouse, and

        ‘(B) subsections (a) and (d) shall be applied by taking into account the combined modified adjusted gross income of the spouses.

      ‘(4) MEDICARE PART B COVERAGE- An individual shall be treated as covered under Medicare part B for any month if a premium is paid under part B of title XVIII of the Social Security Act for the coverage of the individual under such part for the month.

      ‘(5) MARRIED INDIVIDUAL- The determination of whether an individual is married shall be made in accordance with section 7703.

    ‘(f) COORDINATION WITH OTHER PROVISIONS-

      ‘(1) TREATMENT AS MEDICAL EXPENSE- For purposes of section 213, the supplemental Medicare part B premium imposed by this section shall be treated as an amount paid for insurance covering medical care (as defined in section 213(d)).

      ‘(2) TREATMENT UNDER SUBTITLE F- For purposes of subtitle F (other than section 6654), the supplemental Medicare part B premium imposed by this section shall be treated as if it were a tax imposed by section 1.

      ‘(3) NOT TREATED AS TAX FOR CERTAIN PURPOSES- The supplemental Medicare part B premium imposed by this section shall not be treated as a tax imposed by this chapter for purposes of determining--

        ‘(A) the amount of any credit allowable under this chapter, or

        ‘(B) the amount of the minimum tax imposed by section 55.’

    (b) TRANSFERS TO SUPPLEMENTAL MEDICAL INSURANCE TRUST FUND-

      (1) IN GENERAL- There are hereby appropriated to the Supplemental Medical Insurance Trust Fund amounts equivalent to the aggregate increase in liabilities under chapter 1 of the Internal Revenue Code of 1986 which is attributable to the application of section 59B of such Code, as added by this section.

      (2) TRANSFERS- The amounts appropriated by paragraph (1) to the Supplemental Medical Insurance Trust Fund shall be transferred from time to time (but not less frequently than quarterly) from the general fund of the Treasury on the basis of estimates made by the Secretary of the Treasury of the amounts referred to in paragraph (1). Any quarterly payment shall be made on the first day of such quarter and shall take into account the portion of the supplemental Medicare part B premium (as defined in such section 59B) which is attributable to months during such quarter. Proper adjustments shall be made in the amounts subsequently transferred to the extent prior estimates were in excess of or less than the amounts required to be transferred.

    (c) REPORTING REQUIREMENTS-

      (1) Paragraph (1) of section 6050F(a) (relating to returns relating to social security benefits) is amended by striking ‘and’ at the end of subparagraph (B) and by inserting after subparagraph (C) the following new subparagraph:

        ‘(D) the number of months during the calendar year for which a premium was paid under part B of title XVIII of the Social Security Act for the coverage of such individual under such part, and’.

      (2) Paragraph (2) of section 6050F(b) is amended to read as follows:

      ‘(2) the information required to be shown on such return with respect to such individual.’

      (3) Paragraph (1) of section 6050F(c) is amended by striking ‘and’ at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting ‘, and’, and by adding at the end the following new subparagraph:

        ‘(C) the Secretary of Health and Human Services in the case of the information specified in subsection (a)(1)(D).’

      (4) The heading for section 6050F is amended by inserting ‘and medicare part b coverage’ before the period.

      (5) The item relating to section 6050F in the table of sections for subpart B of part III of subchapter A of chapter 61 is amended by inserting ‘and Medicare part B coverage’ before the period.

    (d) CLERICAL AMENDMENT- The table of parts for subchapter A of chapter 1 is amended by adding at the end thereof the following new item:

‘Part VIII. Supplemental Medicare part B premiums for high-income individuals.’

    (e) EFFECTIVE DATE- The amendments made by this section shall apply to months after December 1995 in taxable years ending after December 31, 1995.

SEC. 8303. EXPANDED COVERAGE OF PREVENTIVE BENEFITS.

    (a) PROVIDING ANNUAL SCREENING MAMMOGRAPHY FOR WOMEN OVER AGE 49- Section 1834(c)(2)(A) (42 U.S.C. 1395m(c)(2)(A)) is amended--

      (1) in clause (iv), by striking ‘but under 65 years of age,’; and

      (2) by striking clause (v).

    (b) COVERAGE OF SCREENING PAP SMEAR AND PELVIC EXAMS-

      (1) COVERAGE OF PELVIC EXAM; INCREASING FREQUENCY OF COVERAGE OF PAP SMEAR- Section 1861(nn) (42 U.S.C. 1395x(nn)) is amended--

        (A) in the heading, by striking ‘Smear’ and inserting ‘Smear; Screening Pelvic Exam’;

        (B) by striking ‘(nn)’ and inserting ‘(nn)(1)’;

        (C) by striking ‘3 years’ and all that follows and inserting ‘3 years, or during the preceding year in the case of a woman described in paragraph (3).’; and

        (D) by adding at the end the following new paragraphs:

    ‘(2) The term ‘screening pelvic exam’ means an pelvic examination provided to a woman if the woman involved has not had such an examination during the preceding 3 years, or during the preceding year in the case of a woman described in paragraph (3), and includes a clinical breast examination.

    ‘(3) A woman described in this paragraph is a woman who--

      ‘(A) is of childbearing age and has not had a test described in this subsection during each of the preceding 3 years that did not indicate the presence of cervical cancer; or

      ‘(B) is at high risk of developing cervical cancer (as determined pursuant to factors identified by the Secretary).’.

      (2) WAIVER OF DEDUCTIBLE- The first sentence of section 1833(b) (42 U.S.C. 1395l(b)), as amended by subsection (a)(2), is amended--

        (A) by striking ‘and (5)’ and inserting ‘(5)’; and

        (B) by striking the period at the end and inserting the following: ‘, and (6) such deductible shall not apply with respect to screening pap smear and screening pelvic exam (as described in section 1861(nn)).’.

      (3) CONFORMING AMENDMENTS- (A) Section 1861(s)(14) (42 U.S.C. 1395x(s)(14)) is amended by inserting ‘and screening pelvic exam’ after ‘screening pap smear’.

      (B) Section 1862(a)(1)(F) (42 U.S.C. 1395y(a)(1)(F)) is amended by inserting ‘and screening pelvic exam’ after ‘screening pap smear’.

    (c) COVERAGE OF COLORECTAL SCREENING-

      (1) IN GENERAL- Section 1834 (42 U.S.C. 1395m) is amended by inserting after subsection (c) the following new subsection:

    ‘(d) FREQUENCY AND PAYMENT LIMITS FOR SCREENING FECAL-OCCULT BLOOD TESTS, SCREENING FLEXIBLE SIGMOIDOSCOPIES, AND SCREENING COLONOSCOPY-

      ‘(1) FREQUENCY LIMITS FOR SCREENING FECAL-OCCULT BLOOD TESTS- Subject to revision by the Secretary under paragraph (4), no payment may be made under this part for a screening fecal-occult blood test provided to an individual for the purpose of early detection of colon cancer if the test is performed--

        ‘(A) in the case of an individual under 65 years of age, more frequently than is provided in a periodicity schedule established by the Secretary for purposes of this subparagraph; or

        ‘(B) in the case of any other individual, within the 11 months following the month in which a previous screening fecal-occult blood test was performed.

      ‘(2) SCREENING FLEXIBLE SIGMOID-OSCOPIES-

        ‘(A) PAYMENT AMOUNT- The Secretary shall establish a payment amount under section 1848 with respect to screening flexible sigmoidoscopies provided for the purpose of early detection of colon cancer that is consistent with payment amounts under such section for similar or related services, except that such payment amount shall be established without regard to subsection (a)(2)(A) of such section.

        ‘(B) FREQUENCY LIMITS- Subject to revision by the Secretary under paragraph (4), no payment may be made under this part for a screening flexible sigmoidoscopy provided to an individual for the purpose of early detection of colon cancer if the procedure is performed--

          ‘(i) in the case of an individual under 65 years of age, more frequently than is provided in a periodicity schedule established by the Secretary for purposes of this subparagraph; or

          ‘(ii) in the case of any other individual, within the 59 months following the month in which a previous screening flexible sigmoidoscopy was performed.

      ‘(3) SCREENING COLONOSCOPY FOR INDIVIDUALS AT HIGH RISK FOR COLORECTAL CANCER-

        ‘(A) PAYMENT AMOUNT- The Secretary shall establish a payment amount under section 1848 with respect to screening colonoscopy for individuals at high risk for colorectal cancer (as determined in accordance with criteria established by the Secretary) provided for the purpose of early detection of colon cancer that is consistent with payment amounts under such section for similar or related services, except that such payment amount shall be established without regard to subsection (a)(2)(A) of such section.

        ‘(B) FREQUENCY LIMIT- Subject to revision by the Secretary under paragraph (4), no payment may be made under this part for a screening colonoscopy for individuals at high risk for colorectal cancer provided to an individual for the purpose of early detection of colon cancer if the procedure is performed within the 47 months following the month in which a previous screening colonoscopy was performed.

        ‘(C) FACTORS CONSIDERED IN ESTABLISHING CRITERIA FOR DETERMINING INDIVIDUALS AT HIGH RISK- In establishing criteria for determining whether an individual is at high risk for colorectal cancer for purposes of this paragraph, the Secretary shall take into consideration family history, prior experience of cancer, a history of chronic digestive disease condition, and the presence of any appropriate recognized gene markers for colorectal cancer.

      ‘(4) REVISION OF FREQUENCY-

        ‘(A) REVIEW- The Secretary shall review periodically the appropriate frequency for performing screening fecal-occult blood tests, screening flexible sigmoidoscopies, and screening colonoscopy based on age and such other factors as the Secretary believes to be pertinent.

        ‘(B) REVISION OF FREQUENCY- The Secretary, taking into consideration the review made under clause (i), may revise from time to time the frequency with which such tests and procedures may be paid for under this subsection.’.

      (2) CONFORMING AMENDMENTS- (A) Paragraphs (1)(D) and (2)(D) of section 1833(a) (42 U.S.C. 1395l(a)) are each amended by striking ‘subsection (h)(1),’ and inserting ‘subsection (h)(1) or section 1834(d)(1),’.

      (B) Clauses (i) and (ii) of section 1848(a)(2)(A) (42 U.S.C. 1395w-4(a)(2)(A)) are each amended by striking ‘a service’ and inserting ‘a service (other than a screening flexible sigmoidoscopy provided to an individual for the purpose of early detection of colon cancer or a screening colonoscopy provided to an individual at high risk for colorectal cancer for the purpose of early detection of colon cancer)’.

      (C) Section 1862(a) (42 U.S.C. 1395y(a)) is amended--

        (i) in paragraph (1)--

          (I) in subparagraph (E), by striking ‘and’ at the end;

          (II) in subparagraph (F), by striking the semicolon at the end and inserting ‘, and’; and

          (III) by adding at the end the following new subparagraph:

      ‘(G) in the case of screening fecal-occult blood tests, screening flexible sigmoidoscopies, and screening colonoscopy provided for the purpose of early detection of colon cancer, which are performed more frequently than is covered under section 1834(d);’; and

        (ii) in paragraph (7), by striking ‘paragraph (1)(B) or under paragraph (1)(F)’ and inserting ‘subparagraphs (B), (F), or (G) of paragraph (1)’.

    (d) PROSTATE CANCER SCREENING TESTS-

      (1) IN GENERAL- Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)) is amended--

        (A) by striking ‘and’ at the end of subparagraph (N) and subparagraph (O); and

        (B) by inserting after subparagraph (O) the following new subparagraph:

      ‘(P) prostate cancer screening tests (as defined in subsection (oo)); and’.

      (2) TESTS DESCRIBED- Section 1861 (42 U.S.C. 1395x) is amended by adding at the end the following new subsection:

‘Prostate Cancer Screening Tests

    ‘(oo) The term ‘prostate cancer screening test’ means a test that consists of a digital rectal examination or a prostate-specific antigen blood test (or both) provided for the purpose of early detection of prostate cancer to a man over 40 years of age who has not had such a test during the preceding year.’.

      (3) PAYMENT FOR PROSTATE-SPECIFIC ANTIGEN BLOOD TEST UNDER CLINICAL DIAGNOSTIC LABORATORY TEST FEE SCHEDULES- Section 1833(h)(1)(A) (42 U.S.C. 1395l(h)(1)(A)) is amended by inserting after ‘laboratory tests’ the following: ‘(including prostate cancer screening tests under section 1861(oo) consisting of prostate-specific antigen blood tests)’.

      (4) CONFORMING AMENDMENT- Section 1862(a) (42 U.S.C. 1395y(a)), as amended by subsection (c)(3)(C), is amended--

        (A) in paragraph (1)--

          (i) in subparagraph (F), by striking ‘and’ at the end,

          (ii) in subparagraph (G), by striking the semicolon at the end and inserting ‘, and’, and

          (iii) by adding at the end the following new subparagraph:

      ‘(H) in the case of prostate cancer screening test (as defined in section 1861(oo)) provided for the purpose of early detection of prostate cancer, which are performed more frequently than is covered under such section;’; and

        (B) in paragraph (7), by striking ‘or (G)’ and inserting ‘(G), or (H)’.

    (e) DIABETES SCREENING BENEFITS-

      (1) DIABETES OUTPATIENT SELF-MANAGEMENT TRAINING SERVICES-

        (A) IN GENERAL- Section 1861(s)(2) (42 U.S.C. 1395x(s)(2)), as amended by subsection (d)(1), is amended--

          (i) by striking ‘and’ at the end of subparagraph (N);

          (ii) by striking ‘and’ at the end of subparagraph (O); and

          (iii) by inserting after subparagraph (O) the following new subparagraph:

      ‘(P) diabetes outpatient self-management training services (as defined in subsection (pp)); and’.

        (B) DEFINITION- Section 1861 (42 U.S.C. 1395x), as amended by subsection (d)(2), is amended by adding at the end the following new subsection:

‘DIABETES OUTPATIENT SELF-MANAGEMENT TRAINING SERVICES

    ‘(pp)(1) The term ‘diabetes outpatient self-management training services’ means educational and training services furnished to an individual with diabetes by or under arrangements with a certified provider (as described in paragraph (2)(A)) in an outpatient setting by an individual or entity who meets the quality standards described in paragraph (2)(B), but only if the physician who is managing the individual’s diabetic condition certifies that such services are needed under a comprehensive plan of care related to the individual’s diabetic condition to provide the individual with necessary skills and knowledge (including skills related to the self-administration of injectable drugs) to participate in the management of the individual’s condition.

    ‘(2) In paragraph (1)--

      ‘(A) a ‘certified provider’ is an individual or entity that, in addition to providing diabetes outpatient self-management training services, provides other items or services for which payment may be made under this title; and

      ‘(B) an individual or entity meets the quality standards described in this paragraph if the individual or entity meets quality standards established by the Secretary, except that the individual or entity shall be deemed to have met such standards if the individual or entity meets applicable standards originally established by the National Diabetes Advisory Board and subsequently revised by organizations who participated in the establishment of standards by such Board, or is recognized by the American Diabetes Association as meeting standards for furnishing the services.’.

        (C) CONSULTATION WITH ORGANIZATIONS IN ESTABLISHING PAYMENT AMOUNTS FOR SERVICES PROVIDED BY PHYSICIANS- In establishing payment amounts under section 1848(a) of the Social Security Act for physicians’ services consisting of diabetes outpatient self-management training services, the Secretary of Health and Human Services shall consult with appropriate organizations, including the American Diabetes Association, in determining the relative value for such services under section 1848(c)(2) of such Act.

      (2) BLOOD-TESTING STRIPS FOR INDIVIDUALS WITH DIABETES-

        (A) INCLUDING STRIPS AS DURABLE MEDICAL EQUIPMENT- Section 1861(n) (42 U.S.C. 1395x(n)) is amended by striking the semicolon in the first sentence and inserting the following: ‘, and includes blood-testing strips for individuals with diabetes without regard to whether the individual has Type I or Type II diabetes (as determined under standards established by the Secretary in consultation with the American Diabetes Association);’.

      (2) PAYMENT FOR STRIPS BASED ON METHODOLOGY FOR INEXPENSIVE AND ROUTINELY PURCHASED EQUIPMENT- Section 1834(a)(2)(A) (42 U.S.C. 1395m(a)(2)(A)) is amended--

        (A) by striking ‘or’ at the end of clause (ii);

        (B) by adding ‘or’ at the end of clause (iii); and

        (C) by inserting after clause (iii) the following new clause:

          ‘(iv) which is a blood-testing strip for an individual with diabetes,’.

    (e) EFFECTIVE DATE- The amendments made by this section shall apply to items and services furnished on or after January 1, 2001.

Subtitle E--Medicare Fraud Reduction

Title VIII, Subtitle E

SEC. 8401. INCREASING BENEFICIARY AWARENESS OF FRAUD AND ABUSE.

    (a) BENEFICIARY OUTREACH EFFORTS- The Secretary of Health and Human Services (acting through the Administrator of the Health Care Financing Administration and the Inspector General of the Department of Health and Human Services) shall make ongoing efforts (through public service announcements, publications, and other appropriate methods) to alert individuals entitled to benefits under the medicare program of the existence of fraud and abuse committed against the program and the costs to the program of such fraud and abuse, and of the existence of the toll-free telephone line operated by the Secretary to receive information on fraud and abuse committed against the program.

    (b) CLARIFICATION OF REQUIREMENT TO PROVIDE EXPLANATION OF MEDICARE BENEFITS- The Secretary shall provide an explanation of benefits under the medicare program with respect to each item or service for which payment may be made under the program which is furnished to an individual, without regard to whether or not a deductible or coinsurance may be imposed against the individual with respect to the item or service.

    (c) PROVIDER OUTREACH EFFORTS; PUBLICATION OF FRAUD ALERTS-

      (1) SPECIAL FRAUD ALERTS-

        (A) IN GENERAL-

          (i) REQUEST FOR SPECIAL FRAUD ALERTS- Any person may present, at any time, a request to the Secretary to issue and publish a special fraud alert.

          (ii) SPECIAL FRAUD ALERT DEFINED- In this section, a ‘special fraud alert’ is a notice which informs the public of practices which the Secretary considers to be suspect or of particular concern under the medicare program or a State health care program (as defined in section 1128(h) of the Social Security Act).

        (B) ISSUANCE AND PUBLICATION OF SPECIAL FRAUD ALERTS-

          (i) INVESTIGATION- Upon receipt of a request for a special fraud alert under subparagraph (A), the Secretary shall investigate the subject matter of the request to determine whether a special fraud alert should be issued. If appropriate, the Secretary (in consultation with the Attorney General) shall issue a special fraud alert in response to the request. All special fraud alerts issued pursuant to this subparagraph shall be published in the Federal Register.

          (ii) CRITERIA FOR ISSUANCE- In determining whether to issue a special fraud alert upon a request under subparagraph (A), the Secretary may consider--

            (I) whether and to what extent the practices that would be identified in the special fraud alert may result in any of the consequences described in subparagraph (C); and

            (II) the extent and frequency of the conduct that would be identified in the special fraud alert.

        (C) CONSEQUENCES DESCRIBED- The consequences described in this subparagraph are as follows:

          (i) An increase or decrease in access to health care services.

          (ii) An increase or decrease in the quality of health care services.

          (iii) An increase or decrease in patient freedom of choice among health care providers.

          (iv) An increase or decrease in competition among health care providers.

          (v) An increase or decrease in the cost to health care programs of the Federal Government.

          (vi) An increase or decrease in the potential overutilization of health care services.

          (viii) Any other factors the Secretary deems appropriate in the interest of preventing fraud and abuse in health care programs of the Federal Government.

      (2) PUBLICATION OF ALL HCFA FRAUD ALERTS IN FEDERAL REGISTER- Each notice issued by the Health Care Financing Administration which informs the public of practices which the Secretary considers to be suspect or of particular concern under the medicare program or a State health care program (as defined in section 1128(h) of the Social Security Act) shall be published in the Federal Register, without regard to whether or not the notice is issued by a regional office of the Health Care Financing Administration.

SEC. 8402. BENEFICIARY INCENTIVES TO REPORT FRAUD AND ABUSE.

    (a) PROGRAM TO COLLECT INFORMATION ON FRAUD AND ABUSE-

      (1) ESTABLISHMENT OF PROGRAM- Not later than 3 months after the date of the enactment of this Act, the Secretary shall establish a program under which the Secretary shall encourage individuals to report to the Secretary information on individuals and entities who are engaging or who have engaged in acts or omissions which constitute grounds for the imposition of a sanction under section 1128, section 1128A, or section 1128B of the Social Security Act, or who have otherwise engaged in fraud and abuse against the medicare program.

      (2) PAYMENT OF PORTION OF AMOUNTS COLLECTED- If an individual reports information to the Secretary under the program established under paragraph (1) which serves as the basis for the collection by the Secretary or the Attorney General of any amount of at least $100 (other than any amount paid as a penalty under section 1128B of the Social Security Act), the Secretary may pay a portion of the amount collected to the individual (under procedures similar to those applicable under section 7623 of the Internal Revenue Code of 1986 to payments to individuals providing information on violations of such Code).

    (b) PROGRAM TO COLLECT INFORMATION ON PROGRAM EFFICIENCY-

      (1) ESTABLISHMENT OF PROGRAM- Not later than 3 months after the date of the enactment of this Act, the Secretary shall establish a program under which the Secretary shall encourage individuals to submit to the Secretary suggestions on methods to improve the efficiency of the medicare program.

      (2) PAYMENT OF PORTION OF PROGRAM SAVINGS- If an individual submits a suggestion to the Secretary under the program established under paragraph (1) which is adopted by the Secretary and which results in savings to the program, the Secretary may make a payment to the individual of such amount as the Secretary considers appropriate.

SEC. 8403. ELIMINATION OF HOME HEALTH OVERPAYMENTS.

    (a) REQUIRING BILLING AND PAYMENT TO BE BASED ON SITE WHERE SERVICE FURNISHED- Section 1891 (42 U.S.C. 1395bbb) is amended by adding at the end the following new subsection:

    ‘(g) A home health agency shall submit claims for payment for home health services under this title only on the basis of the geographic location at which the service is furnished.’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall apply to services furnished during cost reporting periods beginning on or after October 1, 1995.

SEC. 8404. SKILLED NURSING FACILITIES.

    (a) CLARIFICATION OF TREATMENT OF HOSPITAL TRANSFERS-

      (1) IN GENERAL- Section 1886(d)(5)(I) (42 U.S.C. 1395ww(d)(5)(I)) is amended by adding at the end the following new clause:

    ‘(iii) In making adjustments under clause (i) for transfer cases, the Secretary shall treat as a transfer any transfer to a hospital (without regard to whether or not the hospital is a subsection (d) hospital), a unit thereof, or a skilled nursing facility.’.

      (2) EFFECTIVE DATE- The amendment made by paragraph (1) shall apply to discharges occurring on or after October 1, 1995.

    (b) REQUIRING BILLING AND PAYMENT TO BE BASED ON SITE WHERE SERVICE FURNISHED- Section 1819(b) (42 U.S.C. 1395i@3(b)) is amended by adding at the end the following new paragraph:

      ‘(8) SPECIAL RULE FOR BILLING AND PAYMENT- A skilled nursing facility shall submit claims for payment for services under this title (whether such services are billed under part A or part B) only on the basis of the geographic location at which the service is furnished.’.

SEC. 8405. DIRECT SPENDING FOR ANTI-FRAUD ACTIVITIES UNDER MEDICARE.

    (a) ESTABLISHMENT OF MEDICARE INTEGRITY PROGRAM- Title XVIII, as amended by section 8231(d), is further amended by adding at the end the following new section:

‘MEDICARE INTEGRITY PROGRAM

    ‘SEC. 1894. (a) ESTABLISHMENT OF PROGRAM- There is hereby established the Medicare Integrity Program (hereafter in this section referred to as the ‘Program’) under which the Secretary shall promote the integrity of the medicare program by entering into contracts in accordance with this section with eligible private entities to carry out the activities described in subsection (b).

    ‘(b) ACTIVITIES DESCRIBED- The activities described in this subsection are as follows:

      ‘(1) Review of activities of providers of services or other individuals and entities furnishing items and services for which payment may be made under this title (including skilled nursing facilities and home health agencies), including medical and utilization review and fraud review (employing similar standards, processes, and technologies used by private health plans, including equipment and software technologies which surpass the capability of the equipment and technologies used in the review of claims under this title as of the date of the enactment of this section).

      ‘(2) Audit of cost reports.

      ‘(3) Determinations as to whether payment should not be, or should not have been, made under this title by reason of section 1862(b), and recovery of payments that should not have been made.

      ‘(4) Education of providers of services, beneficiaries, and other persons with respect to payment integrity and benefit quality assurance issues.

    ‘(c) ELIGIBILITY OF ENTITIES- An entity is eligible to enter into a contract under the Program to carry out any of the activities described in subsection (b) if--

      ‘(1) the entity has demonstrated capability to carry out such activities;

      ‘(2) in carrying out such activities, the entity agrees to cooperate with the Inspector General of the Department of Health and Human Services, the Attorney General of the United States, and other law enforcement agencies, as appropriate, in the investigation and deterrence of fraud and abuse in relation to this title and in other cases arising out of such activities;

      ‘(3) the entity’s financial holdings, interests, or relationships will not interfere with its ability to perform the functions to be required by the contract in an effective and impartial manner; and

      ‘(4) the entity meets such other requirements as the Secretary may impose.

    ‘(d) PROCESS FOR ENTERING INTO CONTRACTS- The Secretary shall enter into contracts under the Program in accordance with such procedures as the Secretary may by regulation establish, except that such procedures shall include the following:

      ‘(1) The Secretary shall determine the appropriate number of separate contracts which are necessary to carry out the Program and the appropriate times at which the Secretary shall enter into such contracts.

      ‘(2) The provisions of section 1153(e)(1) shall apply to contracts and contracting authority under this section, except that competitive procedures must be used when entering into new contracts under this section, or at any other time considered appropriate by the Secretary.

      ‘(3) A contract under this section may be renewed without regard to any provision of law requiring competition if the contractor has met or exceeded the performance requirements established in the current contract.

    ‘(e) LIMITATION ON CONTRACTOR LIABILITY- The Secretary shall by regulation provide for the limitation of a contractor’s liability for actions taken to carry out a contract under the Program, and such regulation shall, to the extent the Secretary finds appropriate, employ the same or comparable standards and other substantive and procedural provisions as are contained in section 1157.

    ‘(f) TRANSFER OF AMOUNTS TO MEDICARE ANTI-FRAUD AND ABUSE TRUST FUND- For each fiscal year, the Secretary shall transfer from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund to the Medicare Anti-Fraud and Abuse Trust Fund under subsection (g) such amounts as are necessary to carry out the activities described in subsection (b). Such transfer shall be in an allocation as reasonably reflects the proportion of such expenditures associated with part A and part B.

    ‘(g) MEDICARE ANTI-FRAUD AND ABUSE TRUST FUND-

      ‘(1) ESTABLISHMENT-

        ‘(A) IN GENERAL- There is hereby established in the Treasury of the United States the Anti-Fraud and Abuse Trust Fund (hereafter in this subsection referred to as the ‘Trust Fund’). The Trust Fund shall consist of such gifts and bequests as may be made as provided in subparagraph (B) and such amounts as may be deposited in the Trust Fund as provided in subsection (f), paragraph (3), and title XI.

        ‘(B) AUTHORIZATION TO ACCEPT GIFTS AND BEQUESTS- The Trust Fund is authorized to accept on behalf of the United States money gifts and bequests made unconditionally to the Trust Fund, for the benefit of the Trust Fund or any activity financed through the Trust Fund.

      ‘(2) INVESTMENT-

        ‘(A) IN GENERAL- The Secretary of the Treasury shall invest such amounts of the Fund as such Secretary determines are not required to meet current withdrawals from the Fund in government account serial securities.

        ‘(B) USE OF INCOME- Any interest derived from investments under subparagraph (A) shall be credited to the Fund.

      ‘(3) AMOUNTS DEPOSITED INTO TRUST FUND- In addition to amounts transferred under subsection (f), there shall be deposited in the Trust Fund--

        ‘(A) that portion of amounts recovered in relation to section 1128A arising out of a claim under title XVIII as remains after application of subsection (f)(2) (relating to repayment of the Federal Hospital Insurance Trust Fund or the Federal Supplementary Medical Insurance Trust Fund) of that section, as may be applicable,

        ‘(B) fines imposed under section 1128B arising out of a claim under this title, and

        ‘(C) penalties and damages imposed (other than funds awarded to a relator or for restitution) under sections 3729 through 3732 of title 31, United States Code (pertaining to false claims) in cases involving claims relating to programs under title XVIII, XIX, or XXI.

      ‘(4) DIRECT APPROPRIATION OF FUNDS TO CARRY OUT PROGRAM-

        ‘(A) IN GENERAL- There are appropriated from the Trust Fund for each fiscal year such amounts as are necessary to carry out the Medicare Integrity Program under this section, subject to subparagraph (B).

        ‘(B) AMOUNTS SPECIFIED- The amount appropriated under subparagraph (A) for a fiscal year is as follows:

          ‘(i) For fiscal year 1996, such amount shall be not less than $430,000,000 and not more than $440,000,000.

          ‘(ii) For fiscal year 1997, such amount shall be not less than $490,000,000 and not more than $500,000,000.

          ‘(iii) For fiscal year 1998, such amount shall be not less than $550,000,000 and not more than $560,000,000.

          ‘(iv) For fiscal year 1999, such amount shall be not less than $620,000,000 and not more than $630,000,000.

          ‘(v) For fiscal year 2000, such amount shall be not less than $670,000,000 and not more than $680,000,000.

          ‘(vi) For fiscal year 2001, such amount shall be not less than $690,000,000 and not more than $700,000,000.

          ‘(vii) For fiscal year 2002, such amount shall be not less than $710,000,000 and not more than $720,000,000.

      ‘(5) ANNUAL REPORT- The Secretary shall submit an annual report to Congress on the amount of revenue which is generated and disbursed by the Trust Fund in each fiscal year.’.

    (b) ELIMINATION OF FI AND CARRIER RESPONSIBILITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PROGRAM-

      (1) RESPONSIBILITIES OF FISCAL INTERMEDIARIES UNDER PART A- Section 1816 (42 U.S.C. 1395h) is amended by adding at the end the following new subsection:

    ‘(l) No agency or organization may carry out (or receive payment for carrying out) any activity pursuant to an agreement under this section to the extent that the activity is carried out pursuant to a contract under the Medicare Integrity Program under section 1894.’.

      (2) RESPONSIBILITIES OF CARRIERS UNDER PART B- Section 1842(c) (42 U.S.C. 1395u(c)) is amended by adding at the end the following new paragraph:

    ‘(6) No carrier may carry out (or receive payment for carrying out) any activity pursuant to a contract under this subsection to the extent that the activity is carried out pursuant to a contract under the Medicare Integrity Program under section 1894.’.

    (c) CONFORMING AMENDMENT- Section 1128A(f)(3) (42 U.S.C. 1320a-7a(f)(3)) is amended by striking ‘as miscellaneous receipts of the Treasury of the United States’ and inserting ‘in the Anti-Fraud and Abuse Trust Fund established under section 1895(g)’.

    (d) DIRECT SPENDING FOR MEDICARE-RELATED ACTIVITIES OF INSPECTOR GENERAL- Section 1894, as added by subsection (a), is amended by adding at the end the following new subsection:

    ‘(h) DIRECT SPENDING FOR MEDICARE-RELATED ACTIVITIES OF INSPECTOR GENERAL-

      ‘(1) IN GENERAL- There are appropriated from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund to the Inspector General of the Department of Health and Human Services for each fiscal year such amounts as are necessary to enable the Inspector General to carry out activities relating to the medicare program (as described in paragraph (2)), subject to paragraph (3).

      ‘(2) ACTIVITIES DESCRIBED- The activities described in this paragraph are as follows:

        ‘(A) Prosecuting medicare-related matters through criminal, civil, and administrative proceedings.

        ‘(B) Conducting investigations relating to the medicare program.

        ‘(C) Performing financial and performance audits of programs and operations relating to the medicare program.

        ‘(D) Performing inspections and other evaluations relating to the medicare program.

        ‘(E) Conducting provider and consumer education activities regarding the requirements of this title.

      ‘(3) AMOUNTS SPECIFIED- The amount appropriated under paragraph (1) for a fiscal year is as follows:

        ‘(A) For fiscal year 1996, such amount shall be $130,000,000.

        ‘(B) For fiscal year 1997, such amount shall be $181,000,000.

        ‘(C) For fiscal year 1998, such amount shall be $204,000,000.

        ‘(D) For each subsequent fiscal year, the amount appropriated for the previous fiscal year, increased by the percentage increase in aggregate expenditures under this title for the fiscal year involved over the previous fiscal year.

      ‘(4) ALLOCATION OF PAYMENTS AMONG TRUST FUNDS- The appropriations made under paragraph (1) shall be in an allocation as reasonably reflects the proportion of such expenditures associated with part A and part B.’.

SEC. 8406. FRAUD REDUCTION DEMONSTRATION PROJECT.

    (a) IN GENERAL- Not later than July 1, 1996, the Secretary of Health and Human Services (in this section referred to as the ‘Secretary’) shall establish not less than three demonstration projects under which organizations with a contract under section 1816 or section 1842 of the Social Security Act--

      (1) identify practitioners and providers whose patterns of providing care to beneficiaries enrolled under title XVIII of the Social Security Act are consistently outside the norm for other practitioners or providers of the same category, class, or type, and

      (2) experiment with ways of identifying fraudulent claims submitted to the program established under such title before they are paid.

    (b) DURATION OF PROJECTS- Each project established under subsection (a) shall last for at least 18 months and shall focus on those categories, classes, or types of providers and practitioners that have been identified by the Inspector General of the Department of Health and Human Services as having a high incidence of fraud and abuse.

    (c) REPORT- Not later than July 1, 1997, the Secretary shall report to the Congress on the demonstration projects established under subsection (a), and shall include in the report an assessment of the effectiveness of, and any recommended legislative changes based on, the projects.

SEC. 8407. REPORT ON COMPETITIVE PRICING.

    Not later than 1 year after the date of the enactment of this Act, the Secretary of Health and Human Services (acting through the Administrator of the Health Care Financing Administration) shall submit to Congress a report recommending legislative changes to the medicare program to enable the prices paid for items and services under the medicare program to be established on a more competitive basis.

Subtitle F--Improving Access to Health Care

Title VIII, Subtitle F

PART 1--ASSISTANCE FOR RURAL PROVIDERS

Subpart A--Rural Hospitals

SEC. 8501. SOLE COMMUNITY HOSPITALS.

    (a) UPDATE- Section 1886(b)(3)(B)(iv) (42 U.S.C. 1395ww(b)(3)(B)(iv)) is amended--

        (A) in subclause (III), by striking ‘and’ at the end; and

        (B) by striking subclause (IV) and inserting the following:

      ‘(IV) for each of the fiscal years 1996 through 2000, the market basket percentage increase minus 1 percentage points, and

      ‘(V) for fiscal year 2001 and each subsequent fiscal year, the applicable percentage increase under clause (i).’.

    (b) STUDY OF IMPACT OF SOLE COMMUNITY HOSPITAL DESIGNATIONS-

      (1) STUDY- The Medicare Payment Review Commission shall conduct a study of the impact of the designation of hospitals as sole community hospitals under the medicare program on the delivery of health care services to individuals in rural areas, and shall include in the study an analysis of the characteristics of the hospitals designated as such sole community hospitals under the program.

      (2) REPORT- Not later than 12 months after the date a majority of the members of the Commission are first appointed, the Commission shall submit to Congress a report on the study conducted under paragraph (1).

SEC. 8502. CLARIFICATION OF TREATMENT OF EAC AND RPC HOSPITALS.

    Paragraphs (1)(A) and (2)(A) of section 1820(i) (42 U.S.C. 1395i@4(i)) are each amended by striking the semicolon at the end and inserting the following: ‘, or in a State which the Secretary finds would receive a grant under such subsection during a fiscal year if funds were appropriated for grants under such subsection for the fiscal year;’.

SEC. 8503. ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS.

    (a) ESTABLISHMENT-

      (1) IN GENERAL- Section 1861 (42 U.S.C. 1395x) is amended by adding at the end the following new subsection:

‘Rural Emergency Access Care Hospital; Rural Emergency Access Care Hospital Services

    ‘(oo)(1) The term ‘rural emergency access care hospital’ means, for a fiscal year, a facility with respect to which the Secretary finds the following:

      ‘(A) The facility is located in a rural area (as defined in section 1886(d)(2)(D)).

      ‘(B) The facility was a hospital under this title at any time during the 5-year period that ends on the date of the enactment of this subsection.

      ‘(C) The facility is in danger of closing due to low inpatient utilization rates and operating losses, and the closure of the facility would limit the access to emergency services of individuals residing in the facility’s service area.

      ‘(D) The facility has entered into (or plans to enter into) an agreement with a hospital with a participation agreement in effect under section 1866(a), and under such agreement the hospital shall accept patients transferred to the hospital from the facility and receive data from and transmit data to the facility.

      ‘(E) There is a practitioner who is qualified to provide advanced cardiac life support services (as determined by the State in which the facility is located) on-site at the facility on a 24-hour basis.

      ‘(F) A physician is available on-call to provide emergency medical services on a 24-hour basis.

      ‘(G) The facility meets such staffing requirements as would apply under section 1861(e) to a hospital located in a rural area, except that--

        ‘(i) the facility need not meet hospital standards relating to the number of hours during a day, or days during a week, in which the facility must be open, except insofar as the facility is required to provide emergency care on a 24-hour basis under subparagraphs (E) and (F); and

        ‘(ii) the facility may provide any services otherwise required to be provided by a full-time, on-site dietitian, pharmacist, laboratory technician, medical technologist, or radiological technologist on a part-time, off-site basis.

      ‘(H) The facility meets the requirements applicable to clinics and facilities under subparagraphs (C) through (J) of paragraph (2) of section 1861(aa) and of clauses (ii) and (iv) of the second sentence of such paragraph (or, in the case of the requirements of subparagraph (E), (F), or (J) of such paragraph, would meet the requirements if any reference in such subparagraph to a ‘nurse practitioner’ or to ‘nurse practitioners’ were deemed to be a reference to a ‘nurse practitioner or nurse’ or to ‘nurse practitioners or nurses’); except that in determining whether a facility meets the requirements of this subparagraph, subparagraphs (E) and (F) of that paragraph shall be applied as if any reference to a ‘physician’ is a reference to a physician as defined in section 1861(r)(1).

    ‘(2) The term ‘rural emergency access care hospital services’ means the following services provided by a rural emergency access care hospital and furnished to an individual over a continuous period not to exceed 24 hours (except that such services may be furnished over a longer period in the case of an individual who is unable to leave the hospital because of inclement weather):

      ‘(A) An appropriate medical screening examination (as described in section 1867(a)).

      ‘(B) Necessary stabilizing examination and treatment services for an emergency medical condition and labor (as described in section 1867(b)).’.

      (2) REQUIRING RURAL EMERGENCY ACCESS CARE HOSPITALS TO MEET HOSPITAL ANTI-DUMPING REQUIREMENTS- Section 1867(e)(5) (42 U.S.C. 1395dd(e)(5)) is amended by striking ‘1861(mm)(1))’ and inserting ‘1861(mm)(1)) and a rural emergency access care hospital (as defined in section 1861(oo)(1))’.

    (b) COVERAGE AND PAYMENT UNDER PART B-

      (1) COVERAGE UNDER PART B- Section 1832(a)(2) (42 U.S.C. 1395k(a)(2)) is amended--

        (A) by striking ‘and’ at the end of subparagraph (I);

        (B) by striking the period at the end of subparagraph (J) and inserting ‘; and’; and

        (C) by adding at the end the following new subparagraph:

        ‘(K) rural emergency access care hospital services (as defined in section 1861(oo)(2)).’.

      (2) PAYMENT BASED ON PAYMENT FOR OUTPATIENT RURAL PRIMARY CARE HOSPITAL SERVICES-

        (A) IN GENERAL- Section 1833(a)(6) (42 U.S.C. 1395l(a)(6)) is amended by striking ‘services,’ and inserting ‘services and rural emergency access care hospital services,’.

        (B) PAYMENT METHODOLOGY DESCRIBED- Section 1834(g) (42 U.S.C. 1395m(g)) is amended--

          (i) in the heading, by striking ‘SERVICES’ and inserting ‘SERVICES AND RURAL EMERGENCY ACCESS CARE HOSPITAL SERVICES’; and

          (ii) by adding at the end the following new sentence: ‘The amount of payment for rural emergency access care hospital services provided during a year shall be determined using the applicable method provided under this subsection for determining payment for outpatient rural primary care hospital services during the year.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to fiscal years beginning on or after October 1, 1995.

SEC. 8504. CLASSIFICATION OF RURAL REFERRAL CENTERS.

    (a) PROHIBITING DENIAL OF REQUEST FOR RECLASSIFICATION ON BASIS OF COMPARABILITY OF WAGES-

      (1) IN GENERAL- Section 1886(d)(10)(D) (42 U.S.C. 1395ww(d)(10)(D)) is amended--

        (A) by redesignating clause (iii) as clause (iv); and

        (B) by inserting after clause (ii) the following new clause:

    ‘(iii) Under the guidelines published by the Secretary under clause (i), in the case of a hospital which is classified by the Secretary as a rural referral center under paragraph (5)(C), the Board may not reject the application of the hospital under this paragraph on the basis of any comparison between the average hourly wage of the hospital and the average hourly wage of hospitals in the area in which it is located.’.

      (2) EFFECTIVE DATE- Notwithstanding section 1886(d)(10)(C)(ii) of the Social Security Act, a hospital may submit an application to the Medicare Geographic Classification Review Board during the 30-day period beginning on the date of the enactment of this Act requesting a change in its classification for purposes of determining the area wage index applicable to the hospital under section 1886(d)(3)(D) of such Act for fiscal year 1997, if the hospital would be eligible for such a change in its classification under the standards described in section 1886(d)(10)(D) (as amended by paragraph (1)) but for its failure to meet the deadline for applications under section 1886(d)(10)(C)(ii).

    (b) CONTINUING TREATMENT OF PREVIOUSLY DESIGNATED CENTERS- Any hospital classified as a rural referral center by the Secretary of Health and Human Services under section 1886(d)(5)(C) of the Social Security Act for fiscal year 1994 shall be classified as such a rural referral center for fiscal year 1996 and each subsequent fiscal year.

SEC. 8505. FLOOR ON AREA WAGE INDEX.

    (a) IN GENERAL- For purposes of section 1886(d)(3)(E) of the Social Security Act for discharges occurring on or after October 1, 1995, the area wage index applicable under such section to any hospital which is not located in a rural area (as defined in section 1886(d)(2)(D) of such Act) may not be less than the average of the area wage indices applicable under such section to hospitals located in rural areas in the State in which the hospital is located.

    (b) BUDGET-NEUTRALITY IN IMPLEMENTATION- The Secretary of Health and Human Services shall make any adjustments required under subsection (a) in a manner which assures that the aggregate payments made under section 1886(d) of the Social Security Act in a fiscal year for the operating costs of inpatient hospital services are not greater or less than those which would have been made in the year without such adjustments.

SEC. 8506. MEDICAL EDUCATION.

    (a) STATE AND CONSORTIUM DEMONSTRATION PROJECTS-

      (1) IN GENERAL-

        (A) PARTICIPATION OF STATES AND CONSORTIA- The Secretary shall establish and conduct a demonstration project to increase the number and percentage of medical students entering primary care practice relative to those entering nonprimary care practice under which the Secretary shall make payments in accordance with paragraph (4)--

          (i) to not more than 10 States for the purpose of testing and evaluating mechanisms to meet the goals described in subsection (b); and

          (ii) to not more than 10 health care training consortia for the purpose of testing and evaluating mechanisms to meet such goals.

        (B) EXCLUSION OF CONSORTIA IN PARTICIPATING STATES- A consortia may not receive payments under the demonstration project under subparagraph (A)(ii) if any of its members is located in a State receiving payments under the project under subparagraph (A)(i).

      (2) APPLICATIONS-

        (A) IN GENERAL- Each State and consortium desiring to conduct a demonstration project under this subsection shall prepare and submit to the Secretary an application, at such time, in such manner, and containing such information as the Secretary may require to assure that the State or consortium will meet the goals described in subsection (b). In the case of an application of a State, the application shall include--

          (i) information demonstrating that the State has consulted with interested parties with respect to the project, including State medical associations, State hospital associations, and medical schools located in the State;

          (ii) an assurance that no hospital conducting an approved medical residency training program in the State will lose more than 10 percent of such hospital’s approved medical residency positions in any year as a result of the project; and

          (iii) an explanation of a plan for evaluating the impact of the project in the State.

        (B) APPROVAL OF APPLICATIONS- A State or consortium that submits an application under subparagraph (A) may begin a demonstration project under this subsection--

          (i) upon approval of such application by the Secretary; or

          (ii) at the end of the 60-day period beginning on the date such application is submitted, unless the Secretary denies the application during such period.

        (C) NOTICE AND COMMENT- A State or consortium shall issue a public notice on the date it submits an application under subparagraph (A) which contains a general description of the proposed demonstration project. Any interested party may comment on the proposed demonstration project to the State or consortium or the Secretary during the 30-day period beginning on the date the public notice is issued.

      (3) SPECIFIC REQUIREMENTS FOR PARTICIPANTS-

        (A) REQUIREMENTS FOR STATES- Each State participating in the demonstration project under this section shall use the payments provided under paragraph (4) to test and evaluate either of the following mechanisms to increase the number and percentage of medical students entering primary care practice relative to those entering nonprimary care practice:

          (i) USE OF ALTERNATIVE WEIGHTING FACTORS-

            (I) IN GENERAL- The State may make payments to hospitals in the State for direct graduate medical education costs in amounts determined under the methodology provided under section 1886(h) of the Social Security Act, except that the State shall apply weighting factors that are different than the weighting factors otherwise set forth in section 1886(h)(4)(C) of the Social Security Act.

            (II) USE OF PAYMENTS FOR PRIMARY CARE RESIDENTS- In applying different weighting factors under subclause (I), the State shall ensure that the amount of payment made to hospitals for costs attributable to primary care residents shall be greater than the amount that would have been paid to hospitals for costs attributable to such residents if the State had applied the weighting factors otherwise set forth in section 1886(h)(4)(C) of the Social Security Act.

          (ii) PAYMENTS FOR MEDICAL EDUCATION THROUGH CONSORTIUM- The State may make payments for graduate medical education costs through payments to a health care training consortium (or through any entity identified by such a consortium as appropriate for receiving payments on behalf of the consortium) that is established in the State but that is not otherwise participating in the demonstration project.

        (B) REQUIREMENTS FOR CONSORTIUM-

          (i) IN GENERAL- In the case of a consortium participating in the demonstration project under this section, the Secretary shall make payments for graduate medical education costs through a health care training consortium whose members provide medical residency training (or through any entity identified by such a consortium as appropriate for receiving payments on behalf of the consortium).

          (ii) USE OF PAYMENTS-

            (I) IN GENERAL- Each consortium receiving payments under clause (i) shall use such funds to conduct activities which test and evaluate mechanisms to increase the number and percentage of medical students entering primary care practice relative to those entering nonprimary care

practice, and may use such funds for the operation of the consortium.

            (II) PAYMENTS TO PARTICIPATING PROGRAMS- The consortium shall ensure that the majority of the payments received under clause (i) are directed to consortium members for primary care residency programs, and shall designate for each resident assigned to the consortium a hospital operating an approved medical residency training program for purposes of enabling the Secretary to calculate the consortium’s payment amount under the project. Such hospital shall be the hospital where the resident receives the majority of the resident’s hospital-based, nonambulatory training experience.

      (4) ALLOCATION OF PORTION OF MEDICARE GME PAYMENTS FOR ACTIVITIES UNDER PROJECT- Notwithstanding any provision of title XVIII of the Social Security Act, the following rules apply with respect to each State and each health care training consortium participating in the demonstration project established under this subsection during a year:

        (A) In the case of a State--

          (i) the Secretary shall reduce the amount of each payment made to hospitals in the State during the year for direct graduate medical education costs under section 1886(h) of the Social Security Act by 3 percent; and

          (ii) the Secretary shall pay the State an amount equal to the Secretary’s estimate of the sum of the reductions made during the year under clause (i) (as adjusted by the Secretary in subsequent years for over- or under-estimations in the amount estimated under this subparagraph in previous years).

        (B) In the case of a consortium--

          (i) the Secretary shall reduce the amount of each payment made to hospitals who are members of the consortium during the year for direct graduate medical education costs under section 1886(h) of the Social Security Act by 3 percent; and

          (ii) the Secretary shall pay the consortium an amount equal to the Secretary’s estimate of the sum of the reductions made during the year under clause (i) (as adjusted by the Secretary in subsequent years for over- or under-estimations in the amount estimated under this subparagraph in previous years).

      (5) DURATION- A demonstration project under this subsection shall be conducted for a period not to exceed 5 years. The Secretary may terminate a project if the Secretary determines that the State or consortium conducting the project is not in substantial compliance with the terms of the application approved by the Secretary.

      (6) Evaluations and reports-

        (A) EVALUATIONS- Each State or consortium participating in the demonstration project shall submit to the Secretary a final evaluation within 360 days of the termination of the State or consortium’s participation and such interim evaluations as the Secretary may require.

        (B) REPORTS TO CONGRESS- Not later than 360 days after the first demonstration project under this section begins, and annually thereafter for each year in which such a project is conducted, the Secretary shall submit a report to Congress which evaluates the effectiveness of the State and consortium activities conducted under such projects and includes any legislative recommendations determined appropriate by the Secretary.

      (7) MAINTENANCE OF EFFORT- Any funds available for the activities covered by a demonstration project under this section shall supplement, and shall not supplant, funds that are expended for similar purposes under any State, regional, or local program.

    (b) GOALS FOR PROJECTS- The goals referred to in this subsection for a State or consortium participating in the demonstration project under this section are as follows:

      (1) The training of an equal number of physician and nonphysician primary care providers.

      (2) The recruiting of residents for graduate medical education training programs who received a portion of undergraduate training in a rural area.

      (3) The allocation of not less than 50 percent of the training spent in a graduate medical residency training program at sites at which acute care inpatient hospital services are not furnished.

      (4) The rotation of residents in approved medical residency training programs among practices that serve residents of rural areas.

      (5) The development of a plan under which, after a 5-year transition period, not less than 50 percent of the residents who begin an initial residency period in an approved medical residency training program shall be primary care residents.

    (c) DEFINITIONS- In this section:

      (1) APPROVED MEDICAL RESIDENCY TRAINING PROGRAM- The term ‘approved medical residency training program’ has the meaning given such term in section 1886(h)(5)(A) of the Social Security Act.

      (2) HEALTH CARE TRAINING CONSORTIUM- The term ‘health care training consortium’ means a State, regional, or local entity consisting of at least one of each of the following:

        (A) A hospital operating an approved medical residency training program at which residents receive training at ambulatory training sites located in rural areas.

        (B) A school of medicine or osteopathic medicine.

        (C) A school of allied health or a program for the training of physician assistants (as such terms are defined in section 799 of the Public Health Service Act).

        (D) A school of nursing (as defined in section 853 of the Public Health Service Act).

      (3) PRIMARY CARE- The term ‘primary care’ means family practice, general internal medicine, general pediatrics, and obstetrics and gynecology.

      (4) RESIDENT- The term ‘resident’ has the meaning given such term in section 1886(h)(5)(H) of the Social Security Act.

      (5) RURAL AREA- The term ‘rural area’ has the meaning given such term in section 1886(d)(2)(D) of the Social Security Act.

Subpart B--Rural Physicians and Other Providers

SEC. 8511. PROVIDER INCENTIVES.

    (a) ADDITIONAL PAYMENTS UNDER MEDICARE FOR PHYSICIANS’ SERVICES FURNISHED IN SHORTAGE AREAS-

      (1) INCREASE IN AMOUNT OF ADDITIONAL PAYMENT- Section 1833(m) (42 U.S.C. 1395l(m)) is amended by striking ‘10 percent’ and inserting ‘20 percent’.

      (2) RESTRICTION TO PRIMARY CARE SERVICES- Section 1833(m) (42 U.S.C. 1395l(m)) is amended by inserting after ‘physicians’ services’ the following: ‘consisting of primary care services (as defined in section 1842(i)(4))’.

      (3) EXTENSION OF PAYMENT FOR FORMER SHORTAGE AREAS-

        (A) IN GENERAL- Section 1833(m) (42 U.S.C. 1395l(m)) is amended by striking ‘area,’ and inserting

‘area (or, in the case of an area for which the designation as a health professional shortage area under such section is withdrawn, in the case of physicians’ services furnished to such an individual during the 3-year period beginning on the effective date of the withdrawal of such designation),’.

        (B) EFFECTIVE DATE- The amendment made by subparagraph (A) shall apply to physicians’ services furnished in an area for which the designation as a health professional shortage area under section 332(a)(1)(A) of the Public Health Service Act is withdrawn on or after January 1, 1996.

      (4) REQUIRING CARRIERS TO REPORT ON SERVICES PROVIDED- Section 1842(b)(3) (42 U.S.C. 1395u(b)(3)) is amended--

        (A) by striking ‘and’ at the end of subparagraph (I); and

        (B) by inserting after subparagraph (I) the following new subparagraph:

      ‘(J) will provide information to the Secretary not later than 30 days after the end of the contract year on the types of providers to whom the carrier made additional payments during the year for certain physicians’ services pursuant to section 1833(m), together with a description of the services furnished by such providers during the year; and’.

      (5) STUDY-

        (A) IN GENERAL- The Secretary of Health and Human Services shall conduct a study analyzing the effectiveness of the provision of additional payments under part B of the medicare program for physicians’ services provided in health professional shortage areas in recruiting and retaining physicians to provide services in such areas.

        (B) REPORT- Not later than 1 year after the date of the enactment of this Act, the Secretary shall submit to Congress a report on the study conducted under subparagraph (A), and shall include in the report such recommendations as the Secretary considers appropriate.

      (6) EFFECTIVE DATE- The amendments made by paragraphs (1), (2), and (4) shall apply to physicians’ services furnished on or after January 1, 1996.

    (b) DEVELOPMENT OF MODEL STATE SCOPE OF PRACTICE LAW-

      (1) IN GENERAL- The Secretary of Health and Human Services shall develop and publish a model law that may be adopted by States to increase the access of individuals residing in underserved rural areas to health care services by expanding the services which non-physician health care professionals may provide in such areas.

      (2) DEADLINE- The Secretary shall publish the model law developed under paragraph (1) not later than 1 year after the date of the enactment of this Act.

SEC. 8512. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS EXCLUDED FROM GROSS INCOME.

    (a) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by redesignating section 137 as section 138 and by inserting after section 136 the following new section:

‘SEC. 137. NATIONAL HEALTH SERVICE CORPS LOAN REPAYMENTS.

    ‘(a) GENERAL RULE- Gross income shall not include any qualified loan repayment.

    ‘(b) QUALIFIED LOAN REPAYMENT- For purposes of this section, the term ‘qualified loan repayment’ means any payment made on behalf of the taxpayer by the National Health Service Corps Loan Repayment Program under section 338B(g) of the Public Health Service Act.’.

    (b) CONFORMING AMENDMENT- Paragraph (3) of section 338B(g) of the Public Health Service Act is amended by striking ‘Federal, State, or local’ and inserting ‘State or local’.

    (c) CLERICAL AMENDMENT- The table of sections for part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the item relating to section 137 and inserting the following:

‘Sec. 137. National Health Service Corps loan repayments.

‘Sec. 138. Cross references to other Acts.’.

    (d) EFFECTIVE DATE- The amendments made by this section shall apply to payments made under section 338B(g) of the Public Health Service Act after the date of the enactment of this Act.

SEC. 8513. TELEMEDICINE PAYMENT METHODOLOGY.

    The Secretary of Health and Human Services shall establish a methodology for making payments under part B of the medicare program for telemedicine services furnished on an emergency basis to individuals residing in an area designated as a health professional shortage area (under section 332(a) of the Public Health Service Act).

SEC. 8514. DEMONSTRATION PROJECT TO INCREASE CHOICE IN RURAL AREAS.

    The Secretary of Health and Human Services (acting through the Administrator of the Health Care Financing Administration) shall conduct a demonstration project to assess the advantages and disadvantages of requiring Medicare Choice organizations under part C of title XVIII of the Social Security Act (as added by section 8002(a)) to market Medicare Choice products in certain underserved areas which are near the standard service area for such products.

PART 2--MEDICARE SUBVENTION

SEC. 8521. MEDICARE PROGRAM PAYMENTS FOR HEALTH CARE SERVICES PROVIDED IN THE MILITARY HEALTH SERVICES SYSTEM.

    (a) PAYMENTS UNDER MEDICARE RISK CONTRACTS PROGRAM-

      (1) CURRENT PROGRAM- Section 1876 (42 U.S.C. 1395mm) is amended by adding at the end the following new subsection:

    ‘(k) Notwithstanding any other provision of this section, a managed health care plan established by the Secretary of Defense under chapter 55 of title 10, United States Code, shall be considered an eligible organization under this section, and the Secretary shall make payments to such a managed health care plan during a year on behalf of any individuals entitled to benefits under this title who are enrolled in such a managed health care plan during the year. Such payments shall be equal to 30 percent of the amount otherwise paid to other eligible organizations under this section, and shall be made under similar terms and conditions under which the Secretary makes payments to other eligible organizations with risk sharing contracts under this section.’.

      (2) MEDICARE CHOICE PROGRAM- Section 1855, as inserted by section 8002(a), by adding at the end the following new subsection:

    ‘(h) PAYMENTS TO MILITARY PROGRAM- Notwithstanding any other provision of this section, a managed health care plan established by the Secretary of Defense under chapter 55 of title 10, United States Code, shall be considered a Medicare Choice organization under this part, and the Secretary shall make payments to such a managed health care plan during a year on behalf of any individuals entitled to benefits under this title who are enrolled in such a managed health care plan during the year. Such payments shall be equal to 30 percent of the amount otherwise paid to other

Medicare Choice organizations under this section, and shall be made under similar terms and conditions under which the Secretary makes payments to other Medicare Choice organizations with contracts in effect under this part.’.

    (b) TEMPORARY PROVISION FOR WAIVER OF PART B PREMIUM PENALTY- Section 1839 (42 U.S.C. 1395r) is amended by adding at the end the following new subsection:

    ‘(h) The premium increase required by subsection (b) shall not apply with respect to a person who is enrolled with a managed care plan that is established by the Secretary of Defense under chapter 55 of title 10, United States Code, and is recognized as an eligible organization pursuant to section 1855(h) or section 1876(k), if such person first enrolled in such plan prior to January 1, 1998.’.

    (c) PAYMENTS UNDER PART A OF MEDICARE- Section 1814(c) (42 U.S.C. 1395f(c)) is amended--

      (1) by redesignating the current matter as paragraph (1); and

      (2) by adding at the end the following new paragraph:

      ‘(2) Paragraph (1) shall not apply to services provided by facilities of the uniformed services pursuant to chapter 55 of title 10, United States Code, and subject to the provisions of section 1095 of such title. With respect to such services, payments under this title shall be made without regard to whether the beneficiary under this title has paid the deductible and copayments amounts generally required by this title.’.

    (d) PAYMENTS UNDER PART B OF MEDICARE- Section 1835(d) (42 U.S.C. 1395n(d)) is amended--

      (1) by redesignating the current matter as paragraph (1); and

      (2) by adding at the end the following new paragraph:

    ‘(2) Paragraph (1) shall not apply to services provided by facilities of the uniformed services pursuant to chapter 55 of title 10, United States Code, and subject to the provisions of section 1095 of such title. With respect to such services, payments under this title shall be made without regard to whether the beneficiary under this title has paid the deductible and copayments amounts generally required by this title.’.

    (e) CONFORMING AMENDMENTS TO THE THIRD PARTY COLLECTION PROGRAM FOR MILITARY MEDICAL FACILITIES- (1) Section 1095(d) of title 10, United States Code, is amended--

      (A) by striking ‘XVIII or’; and

      (B) by striking ‘1395’ and inserting ‘1396’.

    (2) Section 1095(h)(2) of such title is amended by inserting after ‘includes’ the following: ‘plans administered under title XVIII of the Social Security Act (42 U.S.C. 1395 et seq.),’.

    (f) EFFECTIVE DATE- The amendments made by this section shall take effect at the end of the 30-day period beginning on the date of the enactment of this Act.

Subtitle G--Other Provisions

Title VIII, Subtitle G

SEC. 8601. EXTENSION AND EXPANSION OF EXISTING SECONDARY PAYER REQUIREMENTS.

    (a) DATA MATCH-

      (1) Section 1862(b)(5)(C) (42 U.S.C. 1395y(b)(5)(C)) is amended by striking clause (iii).

      (2) Section 6103(l)(12) of the Internal Revenue Code of 1986 is amended by striking subparagraph (F).

    (b) APPLICATION TO DISABLED INDIVIDUALS IN LARGE GROUP HEALTH PLANS-

      (1) IN GENERAL- Section 1862(b)(1)(B) (42 U.S.C. 1395y(b)(1)(B)) is amended--

        (A) in clause (i), by striking ‘clause (iv)’ and inserting ‘clause (iii)’,

        (B) by striking clause (iii), and

        (C) by redesignating clause (iv) as clause (iii).

      (2) CONFORMING AMENDMENTS- Paragraphs (1) through (3) of section 1837(i) (42 U.S.C. 1395p(i)) and the second sentence of section 1839(b) (42 U.S.C. 1395r(b)) are each amended by striking ‘1862(b)(1)(B)(iv)’ each place it appears and inserting ‘1862(b)(1)(B)(iii)’.

    (c) EXPANSION OF PERIOD OF APPLICATION TO INDIVIDUALS WITH END STAGE RENAL DISEASE- Section 1862(b)(1)(C) (42 U.S.C. 1395y(b)(1)(C)) is amended--

      (1) in the first sentence, by striking ‘12-month’ each place it appears and inserting ‘24-month’, and

      (2) by striking the second sentence.

SEC. 8602. REPEAL OF MEDICARE AND MEDICAID COVERAGE DATA BANK.

    (a) IN GENERAL- Section 1144 (42 U.S.C. 1320b-14) is repealed.

    (b) CONFORMING AMENDMENTS-

      (1) MEDICARE- Section 1862(b)(5) (42 U.S.C. 1395y(b)(5)) is amended--

        (A) in subparagraph (B), by striking ‘under--’ and all that follows through the end and inserting ‘subparagraph (A) for purposes of carrying out this subsection.’, and

        (B) in subparagraph (C)(i), by striking ‘subparagraph (B)(i)’ and inserting ‘subparagraph (B)’.

      (2) MEDICAID- Section 1902(a)(25)(A)(i) (42 U.S.C. 1396a(a)(25)(A)(i)) is amended by striking ‘including the use of’ and all that follows through ‘any additional measures’.

      (3) ERISA- Section 101(f) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021(f)) is repealed.

      (4) DATA MATCHES- Section 552a(a)(8)(B) of title 5, United States Code, is amended--

        (A) by adding ‘; or’ at the end of clause (v),

        (B) by striking ‘or’ at the end of clause (vi), and

        (C) by striking clause (vii).

SEC. 8603. CLARIFICATION OF MEDICARE COVERAGE OF ITEMS AND SERVICES ASSOCIATED WITH CERTAIN MEDICAL DEVICES APPROVED FOR INVESTIGATIONAL USE.

    (a) COVERAGE- Nothing in title XVIII of the Social Security Act may be construed to prohibit coverage under part A or part B of the medicare program of items and services associated with the use of a medical device in the furnishing of inpatient hospital services (as defined for purposes of part A of the medicare program) solely on the grounds that the device is not an approved device, if--

      (1) the device is an investigational device; and

      (2) the device is used instead of an approved device.

    (b) CLARIFICATION OF PAYMENT AMOUNT- Notwithstanding any other provision of title XVIII of the Social Security Act, the amount of payment made under the medicare program for any item or service associated with the use of an investigational device in the furnishing of inpatient hospital services (as defined for purposes of part A of the medicare program) may not exceed the amount of the payment which would have been made under the program for the item or service if the item or service were associated with the use of an approved device.

    (c) DEFINITIONS- In this section--

      (1) the term ‘approved device’ means a medical device which has been approved for marketing under pre-market approval under the Federal Food, Drug, and Cosmetic Act or cleared for marketing under a 510(k) notice under such Act; and

      (2) the term ‘investigational device’ means a medical device (other than a device described in paragraph (1)) which is approved for investigational use under section 520(g) of the Federal Food, Drug, and Cosmetic Act.

SEC. 8604. ADDITIONAL EXCLUSION FROM COVERAGE.

    (a) IN GENERAL- Section 1862(a) (42 U.S.C. 1395y(a)) is amended--

      (1) by striking ‘or’ at the end of paragraph (14),

      (2) by striking the period at the end of paragraph (15) and inserting ‘; or’, and

      (3) by inserting after paragraph (15) the following new paragraph:

      ‘(16) where such expenses are for items or services, or to assist in the purchase, in whole or in part, of health benefit coverage that includes items or services, for the purpose of causing, or assisting in causing, the death, suicide, euthanasia, or mercy killing of a person.’.

    (b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to payment for items and services furnished on or after the date of the enactment of this Act.

SEC. 8605. EXTENDING MEDICARE COVERAGE OF, AND APPLICATION OF HOSPITAL INSURANCE TAX TO, ALL STATE AND LOCAL GOVERNMENT EMPLOYEES.

    (a) IN GENERAL-

      (1) APPLICATION OF HOSPITAL INSURANCE TAX- Section 3121(u)(2) of the Internal Revenue Code of 1986 is amended by striking subparagraphs (C) and (D).

      (2) COVERAGE UNDER MEDICARE- Section 210(p) of the Social Security Act (42 U.S.C. 410(p)) is amended by striking paragraphs (3) and (4).

      (3) EFFECTIVE DATE- The amendments made by this subsection shall apply to services performed after December 31, 1996.

    (b) TRANSITION IN BENEFITS FOR STATE AND LOCAL GOVERNMENT EMPLOYEES AND FORMER EMPLOYEES-

      (1) IN GENERAL-

        (A) EMPLOYEES NEWLY SUBJECT TO TAX- For purposes of sections 226, 226A, and 1811 of the Social Security Act, in the case of any individual who performs services during the calendar quarter beginning January 1, 1997, the wages for which are subject to the tax imposed by section 3101(b) of the Internal Revenue Code of 1986 only because of the amendment made by subsection (a), the individual’s medicare qualified State or local government employment (as defined in subparagraph (B)) performed before January 1, 1997, shall be considered to be ‘employment’ (as defined for purposes of title II of such Act), but only for purposes of providing the individual (or another person) with entitlement to hospital insurance benefits under part A of title XVIII of such Act for months beginning with January 1997.

        (B) MEDICARE QUALIFIED STATE OR LOCAL GOVERNMENT EMPLOYMENT DEFINED- In this paragraph, the term ‘medicare qualified State or local government employment’ means medicare qualified government employment described in section 210(p)(1)(B) of the Social Security Act (determined without regard to section 210(p)(3) of such Act, as in effect before its repeal under subsection (a)(2)).

      (2) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to the Federal Hospital Insurance Trust Fund from time to time such sums as the Secretary of Health and Human Services deems necessary for any fiscal year on account of--

        (A) payments made or to be made during such fiscal year from such Trust Fund with respect to individuals who are entitled to benefits under title XVIII of the Social Security Act solely by reason of paragraph (1),

        (B) the additional administrative expenses resulting or expected to result therefrom, and

        (C) any loss in interest to such Trust Fund resulting from the payment of those amounts, in order to place such Trust Fund in the same position at the end of such fiscal year as it would have been in if this subsection had not been enacted.

      (3) INFORMATION TO INDIVIDUALS WHO ARE PROSPECTIVE MEDICARE BENEFICIARIES BASED ON STATE AND LOCAL GOVERNMENT EMPLOYMENT- Section 226(g) of the Social Security Act (42 U.S.C. 426(g)) is amended--

        (A) by redesignating paragraphs (1) through (3) as subparagraphs (A) through (C), respectively,

        (B) by inserting ‘(1)’ after ‘(g)’, and

        (C) by adding at the end the following new paragraph:

    ‘(2) The Secretary, in consultation with State and local governments, shall provide procedures designed to assure that individuals who perform medicare qualified government employment by virtue of service described in section 210(a)(7) are fully informed with respect to (A) their eligibility or potential eligibility for hospital insurance benefits (based on such employment) under part A of title XVIII, (B) the requirements for, and conditions of, such eligibility, and (C) the necessity of timely application as a condition of becoming entitled under subsection (b)(2)(C), giving particular attention to individuals who apply for an annuity or retirement benefit and whose eligibility for such annuity or retirement benefit is based on a disability.’

    (c) TECHNICAL AMENDMENTS-

      (1) Subparagraph (A) of section 3121(u)(2) of the Internal Revenue Code of 1986 is amended by striking ‘subparagraphs (B) and (C),’ and inserting ‘subparagraph (B),’.

      (2) Subparagraph (B) of section 210(p)(1) of the Social Security Act (42 U.S.C. 410(p)(1)) is amended by striking ‘paragraphs (2) and (3).’ and inserting ‘paragraph (2).’

      (3) Section 218 of the Social Security Act (42 U.S.C. 418) is amended by striking subsection (n).

      (4) The amendments made by this subsection shall apply after December 31, 1996.

Subtitle H--Monitoring Achievement of Medicare Reform Goals

SEC. 8701. ESTABLISHMENT OF BUDGETARY AND PROGRAM GOALS.

Title VIII, Subtitle H

    (a) IN GENERAL- The Secretary shall establish program budgetary and program goals for the medicare program consistent with this section.

    (b) BUDGETARY GOALS- The budgetary goal is to restrict total outlays under the medicare program as follows:

      (1) For fiscal year 1996, $173,500,000,000.

      (2) For fiscal year 1997, $187,300,000,000.

      (3) For fiscal year 1998, $200,800,000,000.

      (4) For fiscal year 1999, $215,200,000,000.

      (5) For fiscal year 2000, $220,500,000,000.

      (6) For fiscal year 2001, $248,000,000,000.

      (7) For fiscal year 2002, $267,100,000,000.

    (c) PROGRAM GOALS- The program goals shall be consistent with the following:

      (1) There should be an equitable distribution of funds between per beneficiary spending on payments to Medicare Choice organizations under part C of the medicare program and on payments to providers on a fee-for-service basis under parts A and B of the program.

      (2) Payments to Medicare Choice organizations should be established in a manner that promotes the availability of Medicare Choice products in all regions of the country and that permits such organizations to offer adequate coverage.

SEC. 8702. MEDICARE REFORM COMMISSION.

    (a) ESTABLISHMENT- There is established a commission to be known as the Medicare Reform Commission (in this section referred to as the ‘Commission’).

    (b) DUTIES-

      (1) IN GENERAL- The Commission shall examine how the medicare program has met the budgetary and program goals established under section 8701.

      (2) PERIODIC REPORTS-

        (A) IN GENERAL- The Commission shall issue a report on April 1, 1998, and on March 1 of every third subsequent year, on the status of the medicare program in relation to the budgetary and program goals specified in section 8601.

        (B) CONTENTS- Each report shall include the following information about the medicare program in the most recent fiscal year and projects for the succeeding 3 fiscal years:

          (i) The actuarial value of the traditional medicare benefit package.

          (ii) The projected rate of growth of outlays under the traditional medicare program.

          (iii) The ability of Medicare Choice organizations to offer an adequate benefit package under part C of the medicare program.

          (iv) The extent of Medicare Choice products made available to medicare beneficiaries in the different regions of the country.

      (3) RECOMMENDATIONS-

        (A) IN GENERAL- If a report under paragraph (2) finds that any of the following problems exists, the Commission shall include recommendations to respond to the problem:

          (i) The actuarial value of the traditional medicare benefit package exceeds the payment rate under the Medicare Choice program.

          (ii) The rate of growth of the traditional medicare program under parts A and B is projected to result in medicare outlays exceeding the outlay targets specified in section 8701.

          (iii) The payments under the Medicare Choice program are not sufficient to allow contractors to provide an adequate benefit package.

          (iv) The selection of Medicare Choice products are limited or not available in parts of the country.

        (B) TYPES OF RECOMMENDATIONS- The recommendations provided under subparagraph (A) may include--

          (i) in response to the problem described in subparagraph (A)(ii), reduction in payments to providers under parts A and B or an increase in cost sharing by beneficiaries; and

          (ii) in response to the problems described in subparagraphs (A)(iii) and (A)(iv), an adjustment to payment rates to Medicare Choice organizations.

        Such recommendations may not include any change that is inconsistent with attaining the outlay targets specified under section 8701.

      (4) PRESIDENTIAL RESPONSE- If the Commission reports under this subsection that the goals established in section 8701 are not met (or projects that such goals will not be met during a 3-year period), the President shall submit to Congress, within 90 days after the date of submission of the report, specific legislative recommendations to correct the problem. Such recommendations may include those described in paragraph (3)(B) and may not include any change that is inconsistent with attaining the outlay targets specified under section 8701.

      (5) CONGRESSIONAL CONSIDERATION-

        (A) IN GENERAL- The President’s recommendations submitted under paragraph (4) shall not apply unless a joint resolution (described in subparagraph (B)) approving such recommendations is enacted, in accordance with the provisions of subparagraph (C), before the end of the 60-day period beginning on the date on which a report containing such recommendations is submitted by the President under paragraph (4). For purposes of applying the preceding sentence and subparagraphs (B) and (C), the days on which either House of Congress is not in session because of an adjournment of more than three days to a day certain shall be excluded in the computation of a period.

        (B) JOINT RESOLUTION OF APPROVAL- A joint resolution described in this subparagraph means only a joint resolution which is introduced within the 10-day period beginning on the date on which the report described in subparagraph (A) is submitted and--

          (i) which does not have a preamble;

          (ii) the matter after the resolving clause of which is as follows: ‘That Congress approves the recommendations of the President under section 8702(b)(4) of the Medicare Preservation Act, as submitted by the President on XXXXXXX.’, the blank space being filled in with the appropriate date; and

          (iii) the title of which is as follows: ‘Joint resolution approving Presidential recommendations submitted under section 8702(b)(4) of the Medicare Preservation Act, as submitted by the President on XXXXXXX.’, the blank space being filled in with the appropriate date.

        (C) PROCEDURES FOR CONSIDERATION OF RESOLUTION OF APPROVAL- Subject to subparagraph (D), the provisions of section 2908 (other than subsection (a)) of the Defense Base Closure and Realignment Act of 1990 shall apply to the consideration of a joint resolution described in subparagraph (B) in the same manner as such provisions apply to a joint resolution described in section 2908(a) of such Act.

        (D) SPECIAL RULES- For purposes of applying subparagraph (C) with respect to such provisions--

          (i) any reference to the Committee on Armed Services of the House of Representatives shall be deemed a reference to the Committee on Ways and Means and any reference to the Committee on Armed Services of the Senate shall be deemed a reference to the Committee on Finance of the Senate; and

          (ii) any reference to the date on which the President transmits a report shall be deemed a reference to the date on which the President submits the recommendations under paragraph (4).

    (c) MEMBERSHIP-

      (1) APPOINTMENT- The Commission shall be composed of 5 members appointed by the President, of which 4 of whom are appointed from a list (of at least 5 nominees) submitted by each of the following:

        (A) The Speaker of the House of Representatives.

        (B) The Minority Leader of the House of Representatives.

        (C) The Majority Leader of the Senate.

        (D) The Minority Leader of the Senate.

      (2) TERM OF SERVICE- Each member of the Commission shall serve for a term of 3 years. Members may be reappointed for additional terms.

      (3) CHAIRMAN AND VICE CHAIRMAN- The Commission shall elect a Chairman and Vice Chairman from among its members.

      (4) VACANCIES- Any vacancy in the membership of the Commission shall be filled in the manner in which the original appointment was made and shall not affect the power of the remaining members to execute the duties of the Commission.

      (5) QUORUM- A quorum shall consist of 3 members of the Commission, except that 2 members may conduct a hearing under subsection (e).

      (6) MEETINGS- The Commission shall meet at the call of its Chairman or a majority of its members.

      (7) COMPENSATION AND REIMBURSEMENT OF EXPENSES- Members of the Commission are not entitled to receive compensation for service on the Commission. Members may be reimbursed for travel, subsistence, and other necessary expenses incurred in carrying out the duties of the Commission.

    (d) STAFF AND CONSULTANTS-

      (1) STAFF- The Commission may appoint and determine the compensation of such staff as may be necessary to carry out the duties of the Commission. Such appointments and compensation may be made without regard to the provisions of title 5, United States Code, that govern appointments in the competitive services, and the provisions of chapter 51 and subchapter III of chapter 53 of such title that relate to classifications and the General Schedule pay rates.

      (2) CONSULTANTS- The Commission may procure such temporary and intermittent services of consultants under section 3109(b) of title 5, United States Code, as the Commission determines to be necessary to carry out the duties of the Commission.

    (e) POWERS-

      (1) HEARINGS AND OTHER ACTIVITIES- For the purpose of carrying out its duties, the Commission may hold such hearings and undertake such other activities as the Commission determines to be necessary to carry out its duties.

      (2) STUDIES BY GAO- Upon the request of the Commission, the Comptroller General shall conduct such studies or investigations as the Commission determines to be necessary to carry out its duties.

      (3) COST ESTIMATES BY CONGRESSIONAL BUDGET OFFICE-

        (A) Upon the request of the Commission, the Director of the Congressional Budget Office shall provide to the Commission such cost estimates as the Commission determines to be necessary to carry out its duties.

        (B) The Commission shall reimburse the Director of the Congressional Budget Office for expenses relating to the employment in the office of the Director of such additional staff as may be necessary for the Director to comply with requests by the Commission under subparagraph (A).

      (4) DETAIL OF FEDERAL EMPLOYEES- Upon the request of the Commission, the head of any Federal agency is authorized to detail, without reimbursement, any of the personnel of such agency to the Commission to assist the Commission in carrying out its duties. Any such detail shall not interrupt or otherwise affect the civil service status or privileges of the Federal employee.

      (5) TECHNICAL ASSISTANCE- Upon the request of the Commission, the head of a Federal agency shall provide such technical assistance to the Commission as the Commission determines to be necessary to carry out its duties.

      (6) USE OF MAILS- The Commission may use the United States mails in the same manner and under the same conditions as Federal agencies and shall, for purposes of the frank, be considered a commission of Congress as described in section 3215 of title 39, United States Code.

      (7) OBTAINING INFORMATION- The Commission may secure directly from any Federal agency information necessary to enable it to carry out its duties, if the information may be disclosed under section 552 of title 5, United States Code. Upon request of the Chairman of the Commission, the head of such agency shall furnish such information to the Commission. In particular, the Administrator of the Health Care Financing Administration and the Director of the Office of Management and Budget shall provide the Commission with access to data for the conduct of its work.

      (8) ADMINISTRATIVE SUPPORT SERVICES- Upon the request of the Commission, the Administrator of General Services shall provide to the Commission on a reimbursable basis such administrative support services as the Commission may request.

      (9) ACCEPTANCE OF DONATIONS- The Commission may accept, use, and dispose of gifts or donations of services or property.

      (10) PRINTING- For purposes of costs relating to printing and binding, including the cost of personnel detailed from the Government Printing Office, the Commission shall be deemed to be a committee of the Congress.

    (f) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated such sums as may be necessary to carry out this section. Amounts appropriated to carry out this section shall remain available until expended.

Subtitle I--Lock-Box Provisions for Medicare Part B Savings from Growth Reductions

Title VIII, Subtitle I

SEC. 8801. ESTABLISHMENT OF MEDICARE GROWTH REDUCTION TRUST FUND FOR PART B SAVINGS.

    Part B of title XVIII is amended by inserting after section 1841 the following new section:

‘MEDICARE GROWTH REDUCTION TRUST FUND

    ‘SEC. 1841A. (a)(1) There is hereby created on the books of the Treasury of the United States a trust fund to be known as the ‘Federal Medicare Growth Reduction Trust Fund’ (in this section referred to as the ‘Trust Fund’). The Trust Fund shall consist of such gifts and bequests as may be made as provided in section 201(i)(1) and amounts appropriated under paragraph (2).

    ‘(2) There are hereby appropriated to the Trust Fund amounts equivalent to 100 percent of the Secretary’s estimate of the reductions in expenditures under this part that are attributable to the Medicare Preservation Act of 1995. The amounts appropriated by the preceding sentence shall be transferred from time to time (not less frequently than monthly) from the general fund in the Treasury to the Trust Fund.

    ‘(3)(A) Subject to subparagraph (B), with respect to monies transferred to the Trust Fund, no transfers, authorizations of appropriations, or appropriations are permitted.

    ‘(B) Beginning with fiscal year 2003, the Secretary may expend funds in the Trust Fund to carry out this title, but only to the extent provided by Congress in advance through a specific amendment to this section.

    ‘(b) The provisions of subsections (b) through (e) of section 1841 shall apply to the Trust Fund in the same manner as they apply to the Federal Supplementary Medical Insurance Trust Fund, except that the Board of Trustees and Managing Trustee of the Trust Fund shall be composed of the members of the Board of Trustees and the Managing Trustee, respectively, of the Federal Supplementary Medical Insurance Trust Fund.’.

Subtitle J--Clinical Laboratories

SEC. 8901. EXEMPTION OF PHYSICIAN OFFICE LABORATORIES.

Title VIII, Subtitle J

    Section 353(d) of the Public Health Service Act (42 U.S.C. 263a(d)) is amended--

      (1) by redesignating paragraphs (2), (3), and (4) as paragraphs (3), (4), and (5) and by adding after paragraph (1) the following:

      ‘(2) EXEMPTION OF PHYSICIAN OFFICE LABORATORIES-

        ‘(A) IN GENERAL- Except as provided in subparagraph (B), a clinical laboratory in a physician’s office (including an office of a group of physicians) which is directed by a physician and in which examinations and procedures are either performed by a physician or by individuals supervised by a physician solely as an adjunct to other services provided by the physician’s office is exempt from this section.

        ‘(B) EXCEPTION- A clinical laboratory described in subparagraph (A) is not exempt from this section when it performs a pap smear (Papanicolaou Smear) analysis.

        ‘(C) DEFINITION- For purposes of subparagraph (A), the term ‘physician’ has the same meaning as is prescribed for such term by section 1861(r) of the Social Security Act (42 U.S.C. 1395x(r)).’;

      (2) in paragraph (3) (as so redesignated) by striking ‘(3)’ and inserting ‘(4)’; and

      (3) in paragraphs (4) and (5) (as so redesignated) by striking ‘(2)’ and inserting ‘(3)’.

TITLE IX--WELFARE REFORM

Title IX

SEC. 9000. AMENDMENT OF THE SOCIAL SECURITY ACT.

    Except as otherwise expressly provided, wherever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Social Security Act.

Subtitle A--Temporary Employment Assistance

Title IX, Subtitle A

SEC. 9101. STATE PLAN.

    (a) IN GENERAL- Title IV (42 U.S.C. 601 et seq.) is amended by striking part A and inserting the following:

‘PART A--TEMPORARY EMPLOYMENT ASSISTANCE

‘SEC. 400. APPROPRIATION.

    ‘For the purpose of providing assistance to families with needy children and assisting parents of children in such families to obtain and retain private sector work to the extent possible, and public sector or volunteer work if necessary, through the Work First Employment Block Grant program (hereafter in this title referred to as the ‘Work First program’), there is hereby authorized to be appropriated, and is hereby appropriated, for each fiscal year a sum sufficient to carry out the purposes of this part. The sums made available under this section shall be used for making payments to States which have approved State plans for temporary employment assistance.

‘Subpart 1--State Plans for Temporary Employment Assistance

‘SEC. 401. ELEMENTS OF STATE PLANS.

    ‘A State plan for temporary employment assistance shall provide a description of the State program which carries out the purpose described in section 400 and shall meet the requirements of the following sections of this subpart.

‘SEC. 402. FAMILY ELIGIBILITY FOR TEMPORARY EMPLOYMENT ASSISTANCE.

    ‘(a) IN GENERAL- The State plan shall provide that any family--

      ‘(1) with 1 or more children (or any expectant family, at the option of the State), defined as needy by the State; and

      ‘(2) which fulfills the conditions set forth in subsection (b),

    shall be eligible for cash assistance under the plan, except as otherwise provided under this part.

    ‘(b) INDIVIDUAL RESPONSIBILITY PLAN- The State plan shall provide that not later than 30 days after the approval of the application for temporary employment assistance, a parent qualifying for assistance shall execute an individual responsibility plan as described in section 403. If a child otherwise eligible for assistance under this part is residing with a relative other than a parent, the State plan may require the relative to execute such a plan as a condition of the family receiving such assistance.

    ‘(c) LIMITATIONS ON ELIGIBILITY-

      ‘(1) LENGTH OF TIME-

        ‘(A) IN GENERAL- Except as provided in subparagraphs (B), (C), (D), and (E), the State plan shall provide that the family of an individual who, after attaining age 18 years (or age 19 years, at the option of the State), has received assistance under the plan for 60 months, shall no longer be eligible for cash assistance under the plan.

        ‘(B) HARDSHIP EXCEPTION- With respect to any family, the State plan shall not include in the determination of the 60-month period under subparagraph (A) any month in which--

          ‘(i) at the option of the State, the family includes an individual working 20 hours per week (or more, at the option of the State);

          ‘(ii) the family resides in an area with an unemployment rate exceeding 8 percent; or

          ‘(iii) the family is experiencing other special hardship circumstances which make it appropriate for the State to provide an exemption for such month, except that the total number of exemptions under this clause for any month shall not exceed 15 percent of the number of families to which the State is providing assistance under the plan.

        ‘(C) EXCEPTION FOR TEEN PARENTS- With respect to any family, the State plan shall not include in the determination of the 60-month period under subparagraph (A) any month in which the parent--

          ‘(i) is under age 18 (or age 19, at the option of the State); and

          ‘(ii) is making satisfactory progress while attending high school or an alternative technical preparation school.

        ‘(D) EXCEPTION FOR INDIVIDUALS EXEMPT FROM WORK REQUIREMENTS- With respect to any family, the State plan shall not include in the determination of the 60-month period under subparagraph (A) any month in which 1 or each of the parents--

          ‘(i) is seriously ill, incapacitated, or of advanced age;

          ‘(ii)(I) except for a child described in subclause (II), is responsible for a child under age 1 year (or age 6 months, at the option of the State), or

          ‘(II) in the case of a 2nd or subsequent child born during such period, is responsible for a child under age 3 months;

          ‘(iii) is pregnant in the 3rd trimester; or

          ‘(iv) is caring for a family member who is ill or incapacitated.

        ‘(E) EXCEPTION FOR CHILD-ONLY CASES- With respect to any child who has not attained age 18 (or age 19, at the option of the State) and who is eligible for assistance under this part, but not as a member of a family otherwise eligible for assistance under this part (determined without regard to this paragraph), the State plan shall not include in the determination of the 60-month period under subparagraph (A) any month in which such child has not attained such age.

        ‘(F) OTHER PROGRAM ELIGIBILITY- The State plan shall provide that if a family is no longer eligible for cash assistance under the plan due to the imposition of the 60-month period under subparagraph (A) or due to the imposition of a penalty under subparagraph (A)(ii) or (B)(ii) of section 403(e)(1)--

          ‘(i) for purposes of determining eligibility for any other Federal or federally assisted program based on need, such family shall continue to be considered eligible for such cash assistance;

          ‘(ii) for purposes of determining the amount of assistance under any other Federal or federally assisted program based on need, such family shall continue to be considered receiving such cash assistance; and

          ‘(iii) the State may, at the option of the State, after having assessed the needs of the child or children of the family, provide for such needs with a voucher for such family--

            ‘(I) determined on the same basis as the State would provide assistance under the State plan to such a family with 1 less individual,

            ‘(II) designed appropriately to pay third parties for shelter, goods, and services received by the child or children, and

            ‘(III) payable directly to such third parties.

      ‘(2) TREATMENT OF INTERSTATE MIGRANTS- The State plan may apply to a category of families the rules for such category under a plan of another State approved under this part, if a family in such category has moved to the State from the other State and has resided in the State for less than 12 months.

      ‘(3) INDIVIDUALS ON OLD-AGE ASSISTANCE OR SSI INELIGIBLE FOR TEMPORARY EMPLOYMENT ASSISTANCE- The State plan shall provide that no assistance shall be furnished any individual under the plan with respect to any period with respect to which such individual is receiving old-age assistance under the State plan approved under section 102 of title I or supplemental security income under title XVI.

      ‘(4) CHILDREN FOR WHOM FEDERAL, STATE, OR LOCAL FOSTER CARE MAINTENANCE OR ADOPTION ASSISTANCE PAYMENTS ARE MADE- A child with respect to whom foster care maintenance payments or adoption assistance payments are made under part E or under State or local law shall not, for the period for which such payments are made, be regarded as a needy child under this part, and such child’s income and resources shall be disregarded in determining the eligibility of the family of such child for temporary employment assistance.

      ‘(5) DENIAL OF ASSISTANCE FOR 10 YEARS TO A PERSON FOUND TO HAVE FRAUDULENTLY MISREPRESENTED RESIDENCE IN ORDER TO OBTAIN ASSISTANCE IN 2 OR MORE STATES- The State plan shall provide that no assistance will be furnished any individual under the plan during the 10-year period that begins on the date the individual is convicted in Federal or State court of having made, a fraudulent statement or representation with respect to the place of residence of the individual in order to receive benefits or services simultaneously from 2 or more States under programs that are funded under this part, title XIX, or the Food Stamp Act of 1977, or benefits in 2 or more States under the supplemental security income program under title XVI.

      ‘(6) DENIAL OF ASSISTANCE FOR FUGITIVE FELONS AND PROBATION AND PAROLE VIOLATORS-

        ‘(A) IN GENERAL- The State plan shall provide that no assistance will be furnished any individual under the plan for any period if during such period the State agency has knowledge that such individual is--

          ‘(i) fleeing to avoid prosecution, or custody or confinement after conviction, under the laws of the place from which the individual flees, for a crime, or an attempt to commit a crime, which is a felony under the laws of the place from which the individual flees, or which, in the case of the State of New Jersey, is a high misdemeanor under the laws of such State; or

          ‘(ii) violating a condition of probation or parole imposed under Federal or State law.

        ‘(B) EXCHANGE OF INFORMATION WITH LAW ENFORCEMENT AGENCIES- Notwithstanding any other provision of law, the State plan shall provide that the State shall furnish any Federal, State, or local law enforcement officer, upon the request of the officer, with the current address of any recipient of assistance under the plan, if the officer furnishes the agency with the name of the recipient and notifies the agency that--

          ‘(i) such recipient--

            ‘(I) is described in clause (i) or (ii) of subparagraph (A); or

            ‘(II) has information that is necessary for the officer to conduct the officer’s official duties; and

          ‘(ii) the location or apprehension of the recipient is within such officer’s official duties.

    ‘(d) DETERMINATION OF ELIGIBILITY-

      ‘(1) DETERMINATION OF NEED- The State plan shall provide that the State agency take into consideration any income and resources of any individual the State determines should be considered in determining the need of the child or relative claiming temporary employment assistance, subject to section 407.

      ‘(2) RESOURCE AND INCOME DETERMINATION- In determining the total resources and income of the family of any needy child, the State plan shall provide the following:

        ‘(A) RESOURCES- The State’s resource limit, including a description of the policy determined by the State regarding any exclusion allowed for vehicles owned by family members, resources set aside for future needs of a child, individual development accounts, or other policies established by the State to encourage savings.

        ‘(B) FAMILY INCOME- The extent to which earned or unearned income is disregarded in determining eligibility for, and amount of, assistance.

        ‘(C) CHILD SUPPORT- The State’s policy, if any, for determining the extent to which child support received in excess of $50 per month on behalf of a member of the family is disregarded in determining eligibility for, and the amount of, assistance.

        ‘(D) CHILD’S EARNINGS- The treatment of earnings of a child living in the home.

        ‘(E) EARNED INCOME TAX CREDIT- The State agency shall disregard any refund of Federal income taxes made to a family receiving temporary employment assistance by reason of section 32 of the Internal Revenue Code of 1986 (relating to earned income tax credit) and any payment made to such a family by an employer under section 3507

of such Code (relating to advance payment of earned income credit).

      ‘(3) VERIFICATION SYSTEM- The State plan shall provide that information is requested and exchanged for purposes of income and eligibility verification in accordance with a State system which meets the requirements of section 1137.

‘SEC. 403. INDIVIDUAL RESPONSIBILITY PLAN.

    ‘(a) ASSESSMENT- The State agency responsible for administering the State plan shall make an initial assessment of the skills, prior work experience, and employability of each applicant for, or recipient of, assistance under the State plan who--

      ‘(1) has attained 18 years of age; or

      ‘(2) has not completed high school or obtained a certificate of high school equivalency, and is not attending secondary school.

    ‘(b) INDIVIDUAL RESPONSIBILITY PLANS-

      ‘(1) IN GENERAL- On the basis of the assessment made under subsection (a) with respect to an individual, the State agency, in consultation with the individual, shall develop an individual responsibility plan for the individual, which--

        ‘(A) shall provide that participation by the individual in job search activities shall be a condition of eligibility for assistance under the State plan approved under part A, except during any period for which the individual is employed full-time in an unsubsidized job in the private sector;

        ‘(B) sets forth an employment goal for the individual and a plan for moving the individual immediately into private sector employment;

        ‘(C) sets forth the obligations of the individual, which may include a requirement that the individual attend school, maintain certain grades and attendance, keep school age children of the individual in school, immunize children, attend parenting and money management classes, or do other things that will help the individual become and remain employed in the private sector;

        ‘(D) may require that the individual enter the State program established under part F, if the caseworker determines that the individual will need education, training, job placement assistance, wage enhancement, or other services to become employed in the private sector;

        ‘(E) shall provide that the individual must--

          ‘(i) assign to the State any rights to support from any other person the individual may have in such individual’s own behalf or in behalf of any other family member for whom the individual is applying for or receiving assistance; and

          ‘(ii) cooperate with the State--

            ‘(I) in establishing the paternity of a child born out of wedlock with respect to whom assistance is claimed, and

            ‘(II) in obtaining support payments for the individual and for a child with respect to whom such assistance is claimed, or in obtaining any other payments or property due the individual or the child,

        unless (in either case) the individual is found to have good cause for refusing to cooperate as determined by the State agency in accordance with standards prescribed by the Secretary, which standards shall take into consideration the best interests of the child on whose behalf assistance is claimed.

        ‘(F) to the greatest extent possible shall be designed to move the individual into whatever private sector employment the individual is capable of handling as quickly as possible, and to increase the responsibility and amount of work the individual is to handle over time;

        ‘(G) shall describe what services the State will provide the individual so that the individual will be able to obtain and keep employment in the private sector, and describe the job counseling and other services that will be provided by the State; and

        ‘(H) at the option of the State, may require the individual to undergo appropriate substance abuse treatment.

      ‘(2) TIMING- The State agency shall comply with paragraph (1) with respect to an individual--

        ‘(A) within 90 days (or, at the option of the State, 180 days) after the effective date of this part, in the case of an individual who, as of such effective date, is a recipient of assistance under the State plan approved under this part; or

        ‘(B) within 30 days (or, at the option of the State, 90 days) after the individual is determined to be eligible for such assistance, in the case of any other individual.

    ‘(c) PROVISION OF PROGRAM AND EMPLOYMENT INFORMATION- The State shall inform all applicants for and recipients of assistance under the State plan approved under this part of all available services under the State plan for which they are eligible.

    ‘(d) REQUIREMENT THAT RECIPIENTS ENTER THE WORK FIRST PROGRAM-

      ‘(1) IN GENERAL- Beginning with fiscal year 2004, the State shall place recipients of assistance under the State plan approved under this part, who have not become employed in the private sector within 1 year after signing an individual responsibility plan, in the first available slot in the State program established under part F, except as provided in paragraph (2).

      ‘(2) EXCEPTIONS- A state may not be required to place a recipient of such assistance in the State program established under part F if the recipient--

        ‘(A) is ill, incapacitated, or of advanced age;

        ‘(B) has not attained 18 years of age;

        ‘(C) is caring for a child or parent who is ill or incapacitated; or

        ‘(D) is enrolled in school or in educational or training programs that will lead to private sector employment.

    ‘(e) PENALTIES-

      ‘(1) STATE NOT OPERATING A WORK FIRST OR WORKFARE PROGRAM- In the case of a State that is not operating a program under part F or G:

        ‘(A) FAILURE TO COMPLY WITH INDIVIDUAL RESPONSIBILITY PLAN OR AGREEMENT OF MUTUAL RESPONSIBILITY-

          ‘(i) PROGRESSIVE REDUCTIONS IN ASSISTANCE FOR 1ST AND 2ND FAILURES- The amount of assistance otherwise to be provided under the State plan approved under this part to a family that includes an individual who fails without good cause to comply with an individual responsibility plan (or, if the State has established a program under subpart 1 of part F and the individual is required to participate in the program, an agreement of mutual responsibility) signed by the individual (other than by reason of conduct described in paragraph (2)) shall be reduced by--

            ‘(I) 33 percent for the 1st such act of noncompliance; or

            ‘(II) 66 percent for the 2nd such act of noncompliance.

          ‘(ii) DENIAL OF ASSISTANCE FOR 3RD FAILURE- In the case of the 3rd such act of noncompliance, the family of which the individual is a member shall not

thereafter be eligible for assistance under the State plan approved under this part.

          ‘(iii) ACTS OF NONCOMPLIANCE- For purposes of this paragraph, a 1st act of noncompliance by an individual continues for more than 1 calendar month shall be considered a 2nd act of noncompliance, and a 2nd act of noncompliance that continues for more than 3 calendar months shall be considered a 3rd act of noncompliance.

        ‘(B) DENIAL OF ASSISTANCE TO ADULTS REFUSING TO WORK, LOOK FOR WORK, OR ACCEPT A BONA FIDE OFFER OF EMPLOYMENT-

          ‘(i) REFUSAL TO WORK OR LOOK FOR WORK- If an unemployed individual who has attained 18 years of age refuses to work or look for work--

            ‘(I) in the case of the 1st such refusal, assistance under the State plan approved under this part shall not be payable with respect to the individual until the later of--

‘(aa) a period of not less than 6 months after the date of the first such refusal; or

‘(bb) the first date the individual agrees to work or look for work; or

            ‘(II) in the case of the 2nd such refusal, the family of which the individual is a member shall not thereafter be eligible for assistance under the State plan approved under this part.

          ‘(ii) REFUSAL TO ACCEPT A BONA FIDE OFFER OF EMPLOYMENT- If an unemployed individual who has attained 18 years of age refuses to accept a bona fide offer of employment, the family of which the individual is a member shall not thereafter be eligible for assistance under the State plan approved under this part.

      ‘(2) OTHER STATES- In the case of any other State, the State shall reduce, by such amount as the State considers appropriate, the amount of assistance otherwise payable under the State plan approved under this part to a family that includes an individual who fails without good cause to comply with an individual responsibility plan signed by the individual.

‘SEC. 404. PAYMENT OF ASSISTANCE.

    ‘(a) STANDARDS OF ASSISTANCE- The State plan shall specify standards of assistance, including--

      ‘(1) the composition of the unit for which assistance will be provided;

      ‘(2) a standard, expressed in money amounts, to be used in determining the need of applicants and recipients;

      ‘(3) a standard, expressed in money amounts, to be used in determining the amount of the assistance payment; and

      ‘(4) the methodology to be used in determining the payment amount received by assistance units.

    ‘(b) LEVEL OF ASSISTANCE- Except as otherwise provided in this title, the State plan shall provide that--

      ‘(1) the determination of need and the amount of assistance for all applicants and recipients shall be made on an objective and equitable basis; and

      ‘(2) families of similar composition with similar needs and circumstances shall be treated similarly.

    ‘(c) CORRECTION OF PAYMENTS- The State plan shall provide that the State agency will promptly take all necessary steps to correct any overpayment or underpayment of assistance under such plan, including the request for Federal tax refund intercepts as provided under section 416.

    ‘(d) OPTIONAL VOLUNTARY DIVERSION PROGRAM- The State plan shall, at the option of the State, and in such part or parts of the State as the State may select, provide that--

      ‘(1) upon the recommendation of the caseworker who is handling the case of a family eligible for assistance under the State plan, the State shall, in lieu of any other assistance under the State plan to the family during a time period of not more than 3 months, make a lump-sum payment to the family for the time period in an amount not to exceed--

        ‘(A) the value of the monthly benefits that would otherwise be provided to the family under the State plan; multiplied by

        ‘(B) the number of months in the time period;

      ‘(2) a lump-sum payment pursuant to subparagraph (A) shall not be made more than once to any family; and

      ‘(3) if, during a time period for which the State has made a lump-sum payment to a family pursuant to subparagraph (A), the family applies for and (but for the lump-sum payment) would be eligible under the State plan for a monthly benefit that is greater than the value of the monthly benefit which would have been provided to the family under the State plan at the time of the calculation of the lump sum payment, then, notwithstanding subparagraph (A), the State shall, for that part of the time period that remains after the family becomes eligible for the greater monthly benefit, provide monthly benefits to the family in an amount not to exceed--

        ‘(A) the amount by which the value of the greater monthly benefit exceeds the value of the former monthly benefit, multiplied by the number of months in the time period; divided by

        ‘(B) the whole number of months remaining in the time period.’.

‘SEC. 405. OTHER PROGRAMS.

    ‘(a) WORK FIRST PROGRAM; WORKFARE OR JOB PLACEMENT VOUCHER PROGRAM- The State plan shall provide that the State has in effect and operation--

      ‘(1) a work first program that meets the requirements of part F; and

      ‘(2) a workfare program that meets the requirements of part G, or a job placement voucher program that meets the requirements of part H, but not both.

    ‘(b) PROVISION OF POSITIONS AND VOUCHERS- The State plan shall provide that the State shall provide a position in the workfare program established by the State under part G, or a job placement voucher under the job placement voucher program established by the State under part H to any individual who, by reason of section 487(b), is prohibited from participating in the work first program operated by the State, and shall not provide such a position or such a voucher to any other individual.

    ‘(c) PROVISION OF CASE MANAGEMENT SERVICES- The State plan shall provide that the State shall provide to participants in such programs such case management services as are necessary to ensure the integrated provision of benefits and services under such programs.

    ‘(d) STATE CHILD SUPPORT AGENCY- The State plan shall--

      ‘(1) provide that the State has in effect a plan approved under part D and operates a child support program in substantial compliance with such plan;

      ‘(2) provide that the State agency administering the plan approved under this part shall be responsible for assuring that--

        ‘(A) the benefits and services provided under plans approved under this part and part D are furnished in an integrated manner, including coordination of intake procedures with the agency administering the plan approved under part D;

        ‘(B) all applicants for, and recipients of, temporary employment assistance are encouraged, assisted, and required (as provided under section 403(b)(1)(E)(ii)) to

cooperate in the establishment and enforcement of paternity and child support obligations and are notified about the services available under the State plan approved under part D; and

        ‘(C) procedures require referral of paternity and child support enforcement cases to the agency administering the plan approved under part D not later than 10 days after the application for temporary employment assistance; and

      ‘(3) provide for prompt notice (including the transmittal of all relevant information) to the State child support collection agency established pursuant to part D of the furnishing of temporary employment assistance with respect to a child who has been deserted or abandoned by a parent (including a child born out-of-wedlock without regard to whether the paternity of such child has been established).

    ‘(e) CHILD WELFARE SERVICES AND FOSTER CARE AND ADOPTION ASSISTANCE- The State plan shall provide that the State has in effect--

      ‘(1) a State plan for child welfare services approved under part B; and

      ‘(2) a State plan for foster care and adoption assistance approved under part E,

    and operates such plans in substantial compliance with the requirements of such parts.

    ‘(f) REPORT OF CHILD ABUSE, ETC- The State plan shall provide that the State agency will--

      ‘(1) report to an appropriate agency or official, known or suspected instances of physical or mental injury, sexual abuse or exploitation, or negligent treatment or maltreatment of a child receiving assistance under the State plan under circumstances which indicate that the child’s health or welfare is threatened thereby; and

      ‘(2) provide such information with respect to a situation described in paragraph (1) as the State agency may have.

    ‘(g) AVAILABILITY OF ASSISTANCE IN RURAL AREAS OF STATE- The State plan shall consider and address the needs of rural areas in the State to ensure that families in such areas receive assistance to become self-sufficient.

    ‘(h) FAMILY PRESERVATION-

      ‘(1) IN GENERAL- The State plan shall describe the efforts by the State to promote family preservation and stability, including efforts--

        ‘(A) to encourage fathers to stay home and be a part of the family;

        ‘(B) to keep families together to the extent possible; and

        ‘(C) except to the extent provided in paragraph (2), to treat 2-parent families and 1-parent families equally with respect to eligibility for assistance.

      ‘(2) MAINTENANCE OF TREATMENT- The State may impose eligibility limitations relating specifically to 2-parent families to the extent such limitations are no more restrictive than such limitations in effect in the State plan in fiscal year 1995.

‘SEC. 406. ADMINISTRATIVE REQUIREMENTS FOR STATE PLAN.

    ‘(a) STATEWIDE PLAN- The State plan shall be in effect in all political subdivisions of the State, and, if administered by the subdivisions, be mandatory upon such subdivisions. If such plan is not administered uniformly throughout the State, the plan shall describe the administrative variations.

    ‘(b) SINGLE ADMINISTRATING AGENCY- The State plan shall provide for the establishment or designation of a single State agency to administer the plan or supervise the administration of the plan.

    ‘(c) FINANCIAL PARTICIPATION- The State plan shall provide for financial participation by the State in the same manner and amount as such State participates under title XIX, except that with respect to the sums expended for the administration of the State plan, the percentage shall be 50 percent.

    ‘(d) REASONABLE PROMPTNESS- The State plan shall provide that all individuals wishing to make application for temporary employment assistance shall have opportunity to do so, and that such assistance be furnished with reasonable promptness to all eligible individuals.

    ‘(e) AUTOMATED DATA PROCESSING SYSTEM- The State plan shall, at the option of the State, provide for the establishment and operation of an automated statewide management information system designed effectively and efficiently, to assist management in the administration of the State plan approved under this part, so as--

      ‘(1) to control and account for--

        ‘(A) all the factors in the total eligibility determination process under such plan for assistance, and

        ‘(B) the costs, quality, and delivery of payments and services furnished to applicants for and recipients of assistance; and

      ‘(2) to notify the appropriate officials for child support, food stamp, and social service programs, and the medical assistance program approved under title XIX, whenever a recipient becomes ineligible for such assistance or the amount of assistance provided to a recipient under the State plan is changed.

    ‘(f) DISCLOSURE OF INFORMATION- The State plan shall provide for safeguards which restrict the use or disclosure of information concerning applicants or recipients.

    ‘(g) DETECTION OF FRAUD- The State plan shall provide, in accordance with regulations issued by the Secretary, for appropriate measures to detect fraudulent applications for temporary employment assistance before the establishment of eligibility for such assistance.

‘Subpart 2--Administrative Provisions

‘SEC. 411. APPROVAL OF PLAN.

    ‘(a) IN GENERAL- The Secretary shall approve a State plan which fulfills the requirements under subpart 1 within 120 days of the submission of the plan by the State to the Secretary.

    ‘(b) DEEMED APPROVAL- If a State plan has not been rejected by the Secretary during the period specified in subsection (a), the plan shall be deemed to have been approved.

‘SEC. 412. COMPLIANCE.

    In the case of any State plan for temporary employment assistance which has been approved under section 411, if the Secretary, after reasonable notice and opportunity for hearing to the State agency administering or supervising the administration of such plan, finds that in the administration of the plan there is a failure to comply substantially with any provision required by subpart 1 to be included in the plan, the Secretary shall notify such State agency that further payments will not be made to the State (or in the Secretary’s discretion, that payments will be limited to categories under or parts of the State plan not affected by such failure) until the Secretary is satisfied that such prohibited requirement is no longer so imposed, and that there is no longer any such failure to comply. Until the Secretary is so satisfied the Secretary shall make no further payments to such State (or shall limit payments to categories under or parts of the State plan not affected by such failure).

‘SEC. 413. PAYMENTS TO STATES.

    ‘(a) COMPUTATION OF AMOUNT- Subject to section 412, from the sums appropriated therefor, the Secretary of the Treasury shall pay to each State which has an approved plan for temporary employment assistance, for each quarter, beginning with the quarter

commencing October 1, 1996, an amount equal to the Federal medical assistance percentage (as defined in section 1905(b)) of the expenditures by the State under such plan.

    ‘(b) METHOD OF COMPUTATION AND PAYMENT- The method of computing and paying such amounts shall be as follows:

      ‘(1) The Secretary shall, prior to the beginning of each quarter, estimate the amount to be paid to the State for such quarter under the provisions of subsection (a), such estimate to be based on--

        ‘(A) a report filed by the State containing its estimate of the total sum to be expended in such quarter in accordance with the provisions of such subsection and stating the amount appropriated or made available by the State and its political subdivisions for such expenditures in such quarter, and if such amount is less than the State’s proportionate share of the total sum of such estimated expenditures, the source or sources from which the difference is expected to be derived;

        ‘(B) records showing the number of needy children in the State; and

        ‘(C) such other information as the Secretary may find necessary.

      ‘(2) The Secretary of Health and Human Services shall then certify to the Secretary of the Treasury the amount so estimated by the Secretary of Health and Human Services--

        ‘(A) reduced or increased, as the case may be, by any sum by which the Secretary of Health and Human Services finds that the estimate for any prior quarter was greater or less than the amount which should have been paid to the State for such quarter;

        ‘(B) reduced by a sum equivalent to the pro rata share to which the Federal Government is equitably entitled, as determined by the Secretary of Health and Human Services, of the net amount recovered during any prior quarter by the State or any political subdivision thereof with respect to temporary employment assistance furnished under the State plan; and

        ‘(C) reduced by such amount as is necessary to provide the appropriate reimbursement to the Federal Government that the State is required to make under section 457 out of that portion of child support collections retained by the State pursuant to such section,

      except that such increases or reductions shall not be made to the extent that such sums have been applied to make the amount certified for any prior quarter greater or less than the amount estimated by the Secretary of Health and Human Services for such prior quarter.

    ‘(c) METHOD OF PAYMENT- The Secretary of the Treasury shall thereupon, through the Fiscal Service of the Department of the Treasury and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Secretary of Health and Human Services, the amount so certified.

‘SEC. 414. QUALITY ASSURANCE, DATA COLLECTION, AND REPORTING SYSTEM.

    ‘(a) QUALITY ASSURANCE-

      ‘(1) IN GENERAL- Under the State plan, a quality assurance system shall be developed based upon a collaborative effort involving the Secretary, the State, the political subdivisions of the State, and assistance recipients, and shall include quantifiable program outcomes related to self sufficiency in the categories of welfare-to-work, payment accuracy, and child support.

      ‘(2) MODIFICATIONS TO SYSTEM- As deemed necessary, but not more often than every 2 years, the Secretary, in consultation with the State, the political subdivisions of the State, and assistance recipients, shall make appropriate changes in the design and administration of the quality assurance system, including changes in benchmarks, measures, and data collection or sampling procedures.

    ‘(b) DATA COLLECTION AND REPORTING-

      ‘(1) IN GENERAL- The State plan shall provide for a quarterly report to the Secretary regarding the data described in paragraphs (2) and (3) and such additional data needed for the quality assurance system. The data collection and reporting system under this subsection shall promote accountability, continuous improvement, and integrity in the State plans for temporary employment assistance and Work First.

      ‘(2) DISAGGREGATED DATA- The State shall collect the following data items on a monthly basis from disaggregated case records of applicants for and recipients of temporary employment assistance from the previous month:

        ‘(A) The age of adults and children (including pregnant women).

        ‘(B) Marital or familial status of cases: married (2-parent family), widowed, divorced, separated, or never married; or child living with other adult relative.

        ‘(C) The gender, race, educational attainment, work experience, disability status (whether the individual is seriously ill, incapacitated, or caring for a disabled or incapacitated child) of adults.

        ‘(D) The amount of cash assistance and the amount and reason for any reduction in such assistance. Any other data necessary to determine the timeliness and accuracy of benefits and welfare diversions.

        ‘(E) Whether any member of the family receives benefits under any of the following:

          ‘(i) Any housing program.

          ‘(ii) The food stamp program under the Food Stamp Act of 1977.

          ‘(iii) The Head Start programs carried out under the Head Start Act.

          ‘(iv) Any job training program.

        ‘(F) The number of months since the most recent application for assistance under the plan.

        ‘(G) The total number of months for which assistance has been provided to the families under the plan.

        ‘(H) The employment status, hours worked, and earnings of individuals while receiving assistance, whether the case was closed due to employment, and other data needed to meet the work performance rate.

        ‘(I) Status in Work First and workfare, including the number of hours an individual participated and the component in which the individual participated.

        ‘(J) The number of persons in the assistance unit and their relationship to the youngest child. Nonrecipients in the household and their relationship to the youngest child.

        ‘(K) Citizenship status.

        ‘(L) Shelter arrangement.

        ‘(M) Unearned income (not including temporary employment assistance), such as child support, and assets.

        ‘(N) The number of children who have a parent who is deceased, incapacitated, or unemployed.

        ‘(O) Geographic location.

      ‘(3) AGGREGATED DATA- The State shall collect the following data items on a monthly basis from aggregated case records of applicants for and recipients of temporary employment assistance from the previous month:

        ‘(A) The number of adults receiving assistance.

        ‘(B) The number of children receiving assistance.

        ‘(C) The number of families receiving assistance.

        ‘(D) The number of assistance units who had their grants reduced or terminated and the reason for the

reduction or termination, including sanction, employment, and meeting the time limit for assistance).

        ‘(E) The number of applications for assistance; the number approved and the number denied and the reason for denial.

      ‘(4) LONGITUDINAL STUDIES- The State shall submit selected data items for a cohort of individuals who are tracked over time. This longitudinal sample shall be used for selected data items described in paragraphs (2) and (3), as determined appropriate by the Secretary.

    ‘(c) ADDITIONAL DATA- The report required by subsection (b) for a fiscal year quarter shall also include the following:

      ‘(1) REPORT ON USE OF FEDERAL FUNDS TO COVER ADMINISTRATIVE COSTS AND OVERHEAD- A statement of--

        ‘(A) the percentage of the Federal funds paid to the State under this part for the fiscal year quarter that are used to cover administrative costs or overhead; and

        ‘(B) the total amount of State funds that are used to cover such costs or overhead.

      ‘(2) REPORT ON STATE EXPENDITURES ON PROGRAMS FOR NEEDY FAMILIES- A statement of the total amount expended by the State during the fiscal year quarter on programs for needy families, with the amount spent on the program under this part, and the purposes for which such amount was spent, separately stated.

      ‘(3) REPORT ON NONCUSTODIAL PARENTS PARTICIPATING IN WORK ACTIVITIES- The number of noncustodial parents in the State who participated in work activities during the fiscal year quarter.

      ‘(4) REPORT ON CHILD SUPPORT COLLECTED- The total amount of child support collected by the State agency administering the State plan under part D on behalf of a family receiving assistance under this part.

      ‘(5) REPORT ON CHILD CARE- The total amount expended by the State for child care under this part, along with a description of the types of child care provided, such as child care provided in the case of a family that has ceased to receive assistance under this part because of increased hours of, or increased income from, employment, or in the case of a family that is not receiving assistance under this part but would be at risk of becoming eligible for such assistance if child care was not provided.

      ‘(6) REPORT ON TRANSITIONAL SERVICES- The total amount expended by the State for providing transitional services to a family that has ceased to receive assistance under this part because of increased hours of, or increased income from, employment, along with a description of such services.

    ‘(d) COLLECTION PROCEDURES- The Secretary shall provide case sampling plans and data collection procedures as deemed necessary to make statistically valid estimates of plan performance.

    ‘(e) VERIFICATION- The Secretary shall develop and implement procedures for verifying the quality of the data submitted by the State, and shall provide technical assistance, funded by the compliance penalties imposed under section 412, if such data quality falls below acceptable standards.

‘SEC. 415. COMPILATION AND REPORTING OF DATA.

    ‘(a) CURRENT PROGRAMS- The Secretary shall, on the basis of the Secretary’s review of the reports received from the States under section 414, compile such data as the Secretary believes necessary, and from time to time, publish the findings as to the effectiveness of the programs developed and administered by the States under this part. The Secretary shall annually report to the Congress on the programs developed and administered by each State under this part.

    ‘(b) RESEARCH, DEMONSTRATION AND EVALUATION- Of the amount specified under section 413(a), an amount equal to 0.25 percent is authorized to be expended by the Secretary to support the following types of research, demonstrations, and evaluations:

      ‘(1) STATE-INITIATED RESEARCH- States may apply for grants to cover 90 percent of the costs of self-evaluations of programs under State plans approved under this part.

      ‘(2) DEMONSTRATIONS-

        ‘(A) IN GENERAL- The Secretary may implement and evaluate demonstrations of innovative and promising strategies to--

          ‘(i) improve child well-being through reductions in illegitimacy, teen pregnancy, welfare dependency, homelessness, and poverty;

          ‘(ii) test promising strategies by nonprofit and for-profit institutions to increase employment, earning, child support payments, and self-sufficiency with respect to temporary employment assistance clients under State plans; and

          ‘(iii) foster the development of child care.

        ‘(B) ADDITIONAL PARAMETERS- Demonstrations implemented under this paragraph--

          ‘(i) may provide one-time capital funds to establish, expand, or replicate programs;

          ‘(ii) may test performance-based grant to loan financing in which programs meeting performance targets receive grants while programs not meeting such targets repay funding on a pro-rated basis; and

          ‘(iii) should test stategies in multiple States and types of communities.

      ‘(3) FEDERAL EVALUATIONS-

        ‘(A) IN GENERAL- The Secretary shall conduct research on the effects, benefits, and costs of different approaches to operating welfare programs, including an implementation study based on a representative sample of States and localities, documenting what policies were adopted, how such policies were implemented, the types and mix of services provided, and other such factors as the Secretary deems appropriate.

        ‘(B) RESEARCH ON RELATED ISSUES- The Secretary shall also conduct research on issues related to the purposes of this part, such as strategies for moving welfare recipients into the workforce quickly, reducing teen pregnancies and out-of-wedlock births, and providing adequate child care.

        ‘(C) STATE REIMBURSEMENT- The Secretary may reimburse a State for any research-related costs incurred pursuant to research conducted under this paragraph.

        ‘(D) USE OF RANDOM ASSIGNMENT- Evaluations authorized under this paragraph should use random assignment to the maximum extent feasible and appropriate.

      ‘(4) REGIONAL INFORMATION CENTERS-

        ‘(A) IN GENERAL- The Secretary shall establish not less than 5, nor more than 7 regional information centers located at major research universities or consortiums of universities to ensure the effective implementation of welfare reform and the efficient dissemination of information about innovations, evaluation outcomes, and training initiatives.

        ‘(B) CENTER RESPONSIBILITIES- The Centers shall have the following functions:

          ‘(i) Disseminate information about effective income support and related programs, along with suggestions for the replication of such programs.

          ‘(ii) Research the factors that cause and sustain welfare dependency and poverty in the regions served by the respective centers.

          ‘(iii) Assist the States in the region formulate and implement innovative programs and improvements in existing programs that help clients move off welfare and become productive citizens.

          ‘(iv) Provide training as appropriate to staff of State agencies to enhance the ability of the agencies to successfully place Work First clients in productive employment or self-employment.

        ‘(C) CENTER ELIGIBILITY TO PERFORM EVALUATIONS- The Centers may compete for demonstration and evaluation contracts developed under this section.

‘SEC. 416. COLLECTION OF OVERPAYMENTS FROM FEDERAL TAX REFUNDS.

    ‘(a) IN GENERAL- Upon receiving notice from a State agency administering a plan approved under this part that a named individual has been overpaid under the State plan approved under this part, the Secretary of the Treasury shall determine whether any amounts as refunds of Federal taxes paid are payable to such individual, regardless of whether such individual filed a tax return as a married or unmarried individual. If the Secretary of the Treasury finds that any such amount is payable, the Secretary shall withhold from such refunds an amount equal to the overpayment sought to be collected by the State and pay such amount to the State agency.

    ‘(b) REGULATIONS- The Secretary of the Treasury shall issue regulations, approved by the Secretary of Health and Human Services, that provide--

      ‘(1) that a State may only submit under subsection (a) requests for collection of overpayments with respect to individuals--

        ‘(A) who are no longer receiving temporary employment assistance under the State plan approved under this part,

        ‘(B) with respect to whom the State has already taken appropriate action under State law against the income or resources of the individuals or families involved; and

        ‘(C) to whom the State agency has given notice of its intent to request withholding by the Secretary of the Treasury from the income tax refunds of such individuals;

      ‘(2) that the Secretary of the Treasury will give a timely and appropriate notice to any other person filing a joint return with the individual whose refund is subject to withholding under subsection (a); and

      ‘(3) the procedures that the State and the Secretary of the Treasury will follow in carrying out this section which, to the maximum extent feasible and consistent with the specific provisions of this section, will be the same as those issued pursuant to section 464(b) applicable to collection of past-due child support.’.

    (b) PAYMENTS TO PUERTO RICO- Section 1108(a)(1) (42 U.S.C. 1308(a)(1)) is amended--

      (1) in subparagraph (F), by striking ‘or’; and

      (2) by striking subparagraph (G) and inserting the following:

        ‘(G) $82,000,000 with respect to each of fiscal years 1989 through 1995, or

        ‘(H) $102,500,000 with respect to the fiscal year 1996 and each fiscal year thereafter;’.

    (c) CONFORMING AMENDMENTS RELATING TO COLLECTION OF OVERPAYMENTS-

      (1) Section 6402 of the Internal Revenue Code of 1986 (relating to authority to make credits or refunds) is amended--

        (A) in subsection (a), by striking ‘(c) and (d)’ and inserting ‘(c), (d), and (e)’;

        (B) by redesignating subsections (e) through (i) as subsections (f) through (j), respectively; and

        (C) by inserting after subsection (d) the following:

    ‘(g) COLLECTION OF OVERPAYMENTS UNDER TITLE IV-A OF THE SOCIAL SECURITY ACT- The amount of any overpayment to be refunded to the person making the overpayment shall be reduced (after reductions pursuant to subsections (c) and (d), but before a credit against future liability for an internal revenue tax) in accordance with section 416 of the Social Security Act (concerning recovery of overpayments to individuals under State plans approved under part A of title IV of such Act).’.

      (2) Section 552a(a)(8)(B)(iv)(III) of title 5, United States Code, is amended by striking ‘section 464 or 1137 of the Social Security Act’ and inserting ‘section 416, 464, or 1137 of the Social Security Act’.

    (d) EFFECTIVE DATES-

      (1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall be effective with respect to calendar quarters beginning on or after October 1, 1996.

      (2) SPECIAL RULE- In the case of a State that the Secretary of Health and Human Services determines requires State legislation (other than legislation appropriating funds) in order to meet the requirements imposed by the amendment made by subsection (a), the State shall not be regarded as failing to comply with the requirements of such amendment before the first day of the first calendar quarter beginning after the close of the first regular session of the State legislature that begins after the date of enactment of this Act. For purposes of this paragraph, in the case of a State that has a 2-year legislative session, each year of the session shall be treated as a separate regular session of the State legislature.

Subtitle B--Make Work Pay

Title IX, Subtitle B

SEC. 9201. TRANSITIONAL MEDICAID BENEFITS.

    (a) STATE OPTION OF EXTENSION OF MEDICAID ENROLLMENT FOR FORMER AFDC RECIPIENTS FOR 1 ADDITIONAL YEAR-

      (1) IN GENERAL- Section 1925(b)(1) (42 U.S.C. 1396r-6(b)(1)) is amended by striking the period at the end and inserting the following: ‘, and that the State may, at its option, offer to each such family the option of extending coverage under this subsection for any of the first 2 succeeding 6-month periods, in the same manner and under the same conditions as the option of extending coverage under this subsection for the first succeeding 6-month period.’.

      (2) CONFORMING AMENDMENTS- Section 1925(b) (42 U.S.C. 1396r-6(b)) is amended--

        (A) in the heading, by striking ‘EXTENSION’ and inserting ‘EXTENSIONS’;

        (B) in the heading of paragraph (1), by striking ‘REQUIREMENT’ and inserting ‘IN GENERAL’;

        (C) in paragraph (2)(B)(ii)--

          (i) in the heading, by striking ‘PERIOD’ and inserting ‘PERIODS’, and

          (ii) by striking ‘in the period’ and inserting ‘in any of the 6-month periods’;

        (D) in paragraph (3)(A), by striking ‘the 6-month period’ and inserting ‘any 6-month period’;

        (E) in paragraph (4)(A), by striking ‘the extension period’ and inserting ‘any extension period’; and

        (F) in paragraph (5)(D)(i), by striking ‘is a 3-month period’ and all that follows and inserting the following: ‘is, with respect to a particular 6-month additional extension period provided under this subsection, a 3-month period beginning with the 1st or 4th month of such extension period.’.

    (b) EFFECTIVE DATE- The amendments made by subsection (a) shall apply to calendar quarters beginning on or after October 1, 1997, without regard to whether or not final regulations to carry out such amendments have been promulgated by such date.

SEC. 9202. NOTICE OF AVAILABILITY REQUIRED TO BE PROVIDED TO APPLICANTS AND FORMER RECIPIENTS OF TEMPORARY FAMILY ASSISTANCE, FOOD STAMPS, AND MEDICAID.

    (a) TEMPORARY FAMILY ASSISTANCE- Section 406, as added by the amendment made by section 9101(a) of this Act, is amended by adding at the end the following:

    ‘(h) NOTICE OF AVAILABILITY OF EITC- The State plan shall provide that the State agency referred to in subsection (b) must provide written notice of the existence and availability of the earned income credit under section 32 of the Internal Revenue Code of 1986 to--

      ‘(1) any individual who applies for assistance under the State plan, upon receipt of the application; and

      ‘(2) any individual whose assistance under the State plan (or under the State plan approved under part A of this title (as in effect before the effective date of title IX of the Omnibus Budget Reconciliation Act of 1995) is terminated, in the notice of termination of benefits.’.

    (b) FOOD STAMPS- Section 11(e) of the Food Stamp Act of 1977 (7 U.S.C. 2020(e)) is amended--

      (1) in paragraph (24) by striking ‘and’ at the end;

      (2) in paragraph (25) by striking the period at the end and inserting ‘; and’; and

      (3) by inserting after paragraph (25) the following:

      ‘(26) that whenever a household applies for food stamp benefits, and whenever such benefits are terminated with respect to a household, the State agency shall provide to each member of such household notice of--

        ‘(A) the existence of the earned income tax credit under section 32 of the Internal Revenue Code of 1986; and

        ‘(B) the fact that such credit may be applicable to such member.’.

    (c) MEDICAID- Section 1902(a) (42 U.S.C. 1396a(a)) is amended--

      (1) by striking ‘and’ at the end of paragraph (61);

      (2) by striking the period at the end of paragraph (62) and inserting ‘; and’; and

      (3) by inserting after paragraph (62) the following new paragraph:

      ‘(63) provide that the State shall provide notice of the existence and availability of the earned income tax credit under section 32 of the Internal Revenue Code of 1986 to each individual applying for medical assistance under the State plan and to each individual whose eligibility for medical assistance under the State plan is terminated.’.

SEC. 9203. NOTICE OF AVAILABILITY OF EARNED INCOME TAX CREDIT AND DEPENDENT CARE TAX CREDIT TO BE INCLUDED ON W-4 FORM.

    (a) IN GENERAL- Section 11114 of the Omnibus Budget Reconciliation Act of 1990 (26 U.S.C. 21 note), relating to program to increase public awareness, is amended by adding at the end the following new sentence: ‘Such means shall include printing a notice of the availability of such credits on the forms used by employees to determine the proper number of withholding exemptions under chapter 24 of such Code.’

SEC. 9204. ADVANCE PAYMENT OF EARNED INCOME TAX CREDIT THROUGH STATE DEMONSTRATION PROGRAMS.

    (a) IN GENERAL- Section 3507 of the Internal Revenue Code of 1986 (relating to the advance payment of the earned income tax credit) is amended by adding at the end the following:

    ‘(g) STATE DEMONSTRATIONS-

      ‘(1) IN GENERAL- In lieu of receiving earned income advance amounts from an employer under subsection (a), a participating resident shall receive advance earned income payments from a responsible State agency pursuant to a State Advance Payment Program that is designated pursuant to paragraph (2).

      ‘(2) DESIGNATIONS-

        ‘(A) IN GENERAL- From among the States submitting proposals satisfying the requirements of paragraph (3), the Secretary (in consultation with the Secretary of Health and Human Services) may designate not more than 4 State Advance Payment Demonstrations. States selected for the demonstrations may have, in the aggregate, no more than 5 percent of the total number of households participating in the program under the Food Stamp program in the immediately preceding fiscal year. Administrative costs of a State in conducting a demonstration under this section may be included for matching under section 413(a) of the Social Security Act and section 16(a) of the Food Stamp Act of 1977.

        ‘(B) WHEN DESIGNATION MAY BE MADE- Any designation under this paragraph shall be made no later than December 31, 1996.

        ‘(C) PERIOD FOR WHICH DESIGNATION IS IN EFFECT-

          ‘(i) IN GENERAL- Designations made under this paragraph shall be effective for advance earned income payments made after December 31, 1996, and before January 1, 2000.

          ‘(ii) SPECIAL RULES-

          ‘(I) REVOCATION OF DESIGNATIONS- The Secretary may revoke any designation made under this paragraph if the Secretary determines that the State is not complying substantially with the proposal described in paragraph (3) submitted by the State.

          ‘(II) AUTOMATIC TERMINATION OF DESIGNATIONS- Any failure by a State to comply with the reporting requirements described in paragraphs (3)(F) and (3)(G) shall have the effect of immediately terminating the designation under this paragraph and rendering paragraph (5)(A)(ii) inapplicable to subsequent payments.

      ‘(3) PROPOSALS- No State may be designated under paragraph (2) unless the State’s proposal for such designation--

        ‘(A) identifies the responsible State agency,

        ‘(B) describes how and when the advance earned income payments will be made by that agency, including a description of any other State or Federal benefits with which such payments will be coordinated,

        ‘(C) describes how the State will obtain the information on which the amount of advance earned income payments made to each participating resident will be determined in accordance with paragraph (4),

        ‘(D) describes how State residents who will be eligible to receive advance earned income payments will be selected, notified of the opportunity to receive advance earned income payments from the responsible State agency, and given the opportunity to elect to participate in the program,

        ‘(E) describes how the State will verify, in addition to receiving the certifications and statement described in paragraph (7)(D)(iv), the eligibility of participating residents for the earned income tax credit,

        ‘(F) commits the State to furnishing to each participating resident by January 31 of each year a written statement showing--

          ‘(i) the name and taxpayer identification number of the participating resident, and

          ‘(ii) the total amount of advance earned income payments made to the participating resident during the prior calendar year,

        ‘(G) commits the State to furnishing to the Secretary by December 1 of each year a written statement showing the name and taxpayer identification number of each participating resident,

        ‘(H) commits the State to treat any advance earned income payments as described in paragraph (5) and any repayments of excessive advance earned income payments as described in paragraph (6),

        ‘(I) commits the State to assess the development and implementation of its State Advance Payment Program, including an agreement to share its findings and lessons with other interested States in a manner to be described by the Secretary, and

        ‘(J) is submitted to the Secretary on or before June 30, 1996.

      ‘(4) AMOUNT AND TIMING OF ADVANCE EARNED INCOME PAYMENTS-

        ‘(A) AMOUNT-

          ‘(i) IN GENERAL- The method for determining the amount of advance earned income payments made to each participating resident shall conform to the fullest extent possible with the provisions of subsection (c).

          ‘(ii) SPECIAL RULE- A State may, at its election, apply the rules of subsection (c)(2)(B) by substituting ‘between 60 percent and 75 percent of the credit percentage in effect under section 32(b)(1) for an individual with the corresponding number of qualifying children’ for ‘60 percent of the credit percentage in effect under section 32(b)(1) for such an eligible individual with 1 qualifying child’ in clause (i) and ‘the same percentage (as applied in clause (i))’ for ‘60 percent’ in clause (ii).

        ‘(B) TIMING- The frequency of advance earned income payments may be determined on the basis of the payroll periods of participating residents, on a single statewide schedule, or on any other reasonable basis prescribed by the State in its proposal; however, in no event may advance earned income payments be made to any participating resident less frequently than on a calendar-quarter basis.

      ‘(5) PAYMENTS TO BE TREATED AS PAYMENTS OF WITHHOLDING AND FICA TAXES-

        ‘(A) IN GENERAL- For purposes of this title, advance earned income payments during any calendar quarter--

          ‘(i) shall neither be treated as a payment of compensation nor be included in gross income, and

          ‘(ii) shall be treated as made out of--

            ‘(I) amounts required to be deducted by the State and withheld for the calendar quarter by the State under section 3401 (relating to wage withholding),

            ‘(II) amounts required to be deducted for the calendar quarter under section 3102 (relating to FICA employee taxes), and

            ‘(III) amounts of the taxes imposed on the State for the calendar quarter under section 3111 (relating to FICA employer taxes),

          as if the State had paid to the Secretary, on the day on which payments are made to participating residents, an amount equal to such payments.

        ‘(B) IF ADVANCE PAYMENTS EXCEED TAXES DUE- If for any calendar quarter the aggregate amount of advance earned income payments made by the responsible State agency under a State Advance Payment Program exceeds the sum of the amounts referred to in subparagraph (A)(ii) (without regard to paragraph (6)(A)), each such advance earned income payment shall be reduced by an amount which bears the same ratio to such excess as such advance earned income payment bears to the aggregate amount of all such advance earned income payments.

      ‘(6) STATE REPAYMENT OF EXCESSIVE ADVANCE EARNED INCOME PAYMENTS-

        ‘(A) IN GENERAL- Notwithstanding any other provision of law, in the case of an excessive advance earned income payment a State shall be treated as having deducted and withheld under section 3401 (relating to wage withholding), and as being required to pay to the United States, the repayment amount during the repayment calendar quarter.

        ‘(B) EXCESSIVE ADVANCE EARNED INCOME PAYMENT- For purposes of this section, the term ‘excessive advance income payment’ means that portion of any advance earned income payment that, when combined with other advance earned income payments previously made to the same participating resident during the same calendar year, exceeds the amount of earned income tax credit to which that participating resident is entitled under section 32 for that year.

        ‘(C) REPAYMENT AMOUNT- For purposes of this subsection, the term ‘repayment amount’ means an amount equal to 50 percent of the excess of--

          ‘(i) excessive advance earned income payments made by a State during a particular calendar year, over

          ‘(ii) the sum of--

            ‘(I) 4 percent of all advance earned income payments made by the State during that calendar year, and

            ‘(II) the excessive advance earned income payments made by the State during that calendar year that have been collected from participating residents by the Secretary.

        ‘(D) REPAYMENT CALENDAR QUARTER- For purposes of this subsection, the term ‘repayment calendar quarter’ means the second calendar quarter of the third calendar year beginning after the calendar year in which an excessive earned income payment is made.

      ‘(7) DEFINITIONS- For purposes of this subsection--

        ‘(A) STATE ADVANCE PAYMENT PROGRAM- The term ‘State Advance Payment Program’ means the program described in a proposal submitted for designation under paragraph (1) and designated by the Secretary under paragraph (2).

        ‘(B) RESPONSIBLE STATE AGENCY- The term ‘responsible State agency’ means the single State agency that will be making the advance earned income payments to residents of the State who elect to participate in a State Advance Payment Program.

        ‘(C) ADVANCE EARNED INCOME PAYMENTS- The term ‘advance earned income payments’ means an amount paid by a responsible State agency to residents of the State pursuant to a State Advance Payment Program.

        ‘(D) PARTICIPATING RESIDENT- The term ‘participating resident’ means an individual who--

          ‘(i) is a resident of a State that has in effect a designated State Advance Payment Program,

          ‘(ii) makes the election described in paragraph (3)(D) pursuant to guidelines prescribed by the State,

          ‘(iii) certifies to the State the number of qualifying children the individual has, and

          ‘(iv) provides to the State the certifications and statement described in subsections (b)(1), (b)(2), (b)(3), and (b)(4) (except that for purposes of this clause, the term ‘any employer’ shall be substituted for ‘another employer’ in subsection (b)(3)), along with any other information required by the State.’.

    (b) TECHNICAL ASSISTANCE- The Secretaries of the Treasury and Health and Human Services shall jointly ensure that technical assistance is provided to State Advance Payment Programs and that these programs are rigorously evaluated.

    (c) ANNUAL REPORTS- The Secretary shall issue annual reports detailing the extent to which--

      (1) residents participate in the State Advance Payment Programs,

      (2) participating residents file Federal and State tax returns,

      (3) participating residents report accurately the amount of the advance earned income payments made to them by the responsible State agency during the year, and

      (4) recipients of excessive advance earned income payments repay those amounts.

    The report shall also contain an estimate of the amount of advance earned income payments made by each responsible State agency but not reported on the tax returns of a participating resident and the amount of excessive advance earned income payments.

    (d) AUTHORIZATION OF APPROPRIATIONS- For purposes of providing technical assistance described in subsection (b), preparing the reports described in subsection (c), and providing grants to States in support of designated State Advance Payment Programs, there are authorized to be appropriated in advance to the Secretary of the Treasury and the Secretary of Health and Human Services a total of $1,400,000 for fiscal years 1997 through 2000.

SEC. 9205. FUNDING OF CHILD CARE SERVICES.

    (a) REPEAL OF CHILD CARE PROGRAMS UNDER THE CHILD CARE AND DEVELOPMENT BLOCK GRANT ACT OF1990- The Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858 et seq.) is hereby repealed.

    (b) FUNDING OF CHILD CARE SERVICES THROUGH SOCIAL SERVICES BLOCK GRANT PROGRAM- Title XX (42 U.S.C. 1397-1397f) is amended by adding at the end the following:

‘SEC. 2008. CHILD CARE.

    ‘(a) CONDITIONAL GRANT-

      ‘(1) IN GENERAL- In addition to any payment under section 2002 or 2007, the Secretary shall make a grant to each State with a plan approved under this section for a fiscal year in an amount equal to the special allotment of the State for the fiscal year.

      ‘(2) LIMITATIONS ON AUTHORIZATION OF APPROPRIATIONS- For grants under this section, there are authorized to be appropriated to the Secretary not more than--

        ‘(A) $1,400,000,000 for fiscal year 1997;

        ‘(B) $1,450,000,000 for each of fiscal years 1998, 1999, and 2000; and

        ‘(C) $1,500,000,000 for each of fiscal years 2001 and 2002.

    ‘(b) STATE PLANS-

      ‘(1) CONTENT- A plan meets the requirements of this paragraph if the plan--

        ‘(A) identifies an appropriate State agency to be the lead agency responsible for administering at the State level, and coordinating with local governments, the activities of the State pursuant to this section;

        ‘(B) describes the activities the State will carry out with funds provided under this section;

        ‘(C) provides assurances that the funds provided under this section will be used to supplement, not supplant, State and local funds as well as Federal funds provided under any Act and applied to child care activities in the State during fiscal year 1989;

        ‘(D) provides assurances that the State will not expend more than 7 percent of the funds provided to the States under this section for the fiscal year for administrative expenses;

        ‘(E) provides assurances that, in providing child care assistance, the State will give priority to families with low income and families living in a low-income geographical area;

        ‘(F) ensures that child care providers reimbursed under this section meet applicable standards of State and local law;

        ‘(G) provides assurances that the lead agency will coordinate the use of funds provided under this section with the use of other Federal resources for child care provided under this Act, and with other Federal, State, or local child care and preschool programs operated in the State;

        ‘(H) provides for the establishment of such fiscal and accounting procedures as may be necessary to--

          ‘(i) ensure a proper accounting of Federal funds received by the State under this section; and

          ‘(ii) ensure the proper verification of the reports submitted by the State under subsection (f)(2);

        ‘(I) provides assurances that the State will not impose more stringent standards and licensing or regulatory requirements on child care providers receiving funds provided under this section than those imposed on other child care providers in the State;

        ‘(J) provides assurances that the State will not implement any policy or practice which has the effect of significantly restricting parental choice by--

          ‘(i) expressly or effectively excluding any category of care or type of provider within a category of care;

          ‘(ii) limiting parental access to or choices from among various categories of care or types of providers; or

          ‘(iii) excluding a significant number of providers in any category of care; and

        ‘(K) provides assurances that parents will be informed regarding their options under this section, including the option of receiving a child care certificate or voucher.

      ‘(2) FORM- A State may submit a plan that meets the requirements of paragraph (1) in the form of amendments to the State plan submitted pursuant to section 658E of the Child Care and Development Block Grant Act of 1990, as in effect before the effective date of section 9205 of the Omnibus Budget Reconciliation Act of 1995.

      ‘(3) APPROVAL- Not later than 90 days after the date the State submits a plan to the Secretary under this subsection, the Secretary shall either approve or disapprove the plan. If the Secretary disapproves the plan, the Secretary shall provide the State with an explanation and recommendations for changes in the plan to gain approval.

    ‘(c) SPECIAL ALLOTMENTS- The special allotment of a State for a fiscal year equals the amount that bears the same ratio to the amount appropriated pursuant to this section for the fiscal year, as the number of children who have not attained 13 years of age and are residing with families in the State bears to the total number of such children in all States with plans approved under this section for the fiscal year, determined on the basis of the most recent data available from the Department of Commerce at the time the special allotment is determined.

    ‘(d) PAYMENTS TO STATES-

      ‘(1) PAYMENTS-

        ‘(A) COMPUTATION OF AMOUNT- From the sums appropriated therefor, the Secretary of the Treasury shall pay to each State which has a plan approved under this section for a fiscal year, for each quarter, beginning with the quarter commencing October 1, 1996, an amount equal to 1/4 of the special allotment of the State for the fiscal year.

        ‘(B) METHOD OF COMPUTATION AND PAYMENT- The method of computing and paying such amounts shall be as follows:

          ‘(i) ESTIMATE- The Secretary shall, before each quarter, estimate the amount to be paid to the State for the quarter under this section, based on a report filed by the State containing the State’s estimate of the total sum to be expended by the State in such quarter in accordance with subsection (e).

          ‘(ii) CERTIFICATION- The Secretary of Health and Human Services shall then certify to the Secretary of the Treasury the amount so estimated by the Secretary of Health and Human Services reduced or increased, as the case may be, by any sum by which the Secretary of Health and Human Services finds that the estimate for any prior quarter was greater or less than the amount which should have been paid to the State for such quarter, except that such increases or reductions shall not be made to the extent that such sums have been applied to make the amount certified for any prior quarter greater or less than the amount estimated by the Secretary of Health and Human Services for such prior quarter.

          ‘(iii) METHOD OF PAYMENT- The Secretary of the Treasury shall thereupon, through the Fiscal Service of the Department of the Treasury and prior to audit or settlement by the General Accounting Office, pay to the State, at the time or times fixed by the Secretary of Health and Human Services, the amount so certified.

      ‘(2) DEADLINE FOR EXPENDITURE OF FUNDS BY STATES- Except as provided in paragraph (3)(A), each State to which funds are paid under this section for a fiscal year shall expend such funds in the fiscal year or in the immediately succeeding fiscal year.

      ‘(3) REDISTRIBUTION OF UNEXPENDED SPECIAL ALLOTMENTS-

        ‘(A) REMITTANCE TO THE SECRETARY- Each State to which funds are paid under this section for a fiscal year shall remit to the Secretary that part of such funds which the State intends not to, or does not, expend in the fiscal year or in the immediately succeeding fiscal year.

        ‘(B) REDISTRIBUTION- The Secretary shall increase the special allotment of each State with a plan approved under this part for a fiscal year that does not remit any amount to the Secretary for the fiscal year by an amount equal to--

          ‘(i) the aggregate of the amounts remitted pursuant to subparagraph (A) for the fiscal year; multiplied by

          ‘(ii) the adjusted State share for the fiscal year.

        ‘(C) ADJUSTED STATE SHARE- As used in subparagraph (B)(ii), the term ‘adjusted State share’ means, with respect to a fiscal year--

          ‘(i) the special allotment of the State for the fiscal year (before any increase under subparagraph (B)); divided by

          ‘(ii)(I) the sum of the special allotments of all States with plans approved under this part for the fiscal year; minus

          ‘(II) the aggregate of the amounts remitted to the Secretary pursuant to subparagraph (A) for the fiscal year.

    ‘(e) USE OF FUNDS-

      ‘(1) IN GENERAL- Funds provided under this section shall be used to expand parent choices in selecting child care, to address deficiencies in the supply of child care, and to expand and improve child care services, with an emphasis on providing such services to low-income families and geographical areas. Subject to the approval of the Secretary, States to which funds are paid under this section shall use such funds to carry out child care programs and activities through cash grants, certificates, or contracts with families, or public or private entities as the State determines appropriate. States shall take parental preference into account to the maximum extent possible in carrying out child care programs.

      ‘(2) SPECIFIC USES- Each State to which funds are paid under this section may expend such funds for--

        ‘(A) child care services for infants, sick children, children with special needs, and children of adolescent parents;

        ‘(B) after-school and before-school programs and programs during nontraditional hours for the children of working parents;

        ‘(C) programs for the recruitment and training of day care workers, including older Americans;

        ‘(D) grant and loan programs to enable child care workers and providers to meet State and local standards and requirements;

        ‘(E) child care programs developed by public and private sector partnerships;

        ‘(F) State efforts to provide technical assistance designed to help providers improve the services offered to parents and children; and

        ‘(G) other child care-related programs consistent with the purpose of this section and approved by the Secretary.

      ‘(3) LIMITATIONS ON USE OF FUNDS- A State to which funds are paid under this section for a fiscal year shall use not less than 80 percent of such funds to provide direct child care assistance to low-income parents through child care certificates or vouchers, contracts, or grants.

      ‘(4) METHODS OF FUNDING- Funds for child care services under this title shall be for the benefit of parents and shall be provided through child care vouchers or certificates provided directly to parents or through contracts or grants with public or private providers.

      ‘(5) PARENTAL RIGHTS OF CHOICE- Any parent who receives a child care certificate under this title may use such certificate with any child care provider, including those providers which have religious activities, if such provider is freely chosen by the parent from among the available alternatives.

      ‘(6) CHILD CARE CERTIFICATES-

        ‘(A) IN GENERAL- For purposes of this title, a child care certificate is a certificate issued by a State directly to a parent or legal guardian for use only as payment for child care services in any child care facility eligible to receive funds under this Act.

        ‘(B) REDEMPTION- If the demand for child care services of families qualified to receive such services from a State under this Act exceeds the available supply of such services, the State shall ration assistance to obtain such services using procedures that do not disadvantage parents using child care certificates, relative to other methods of

financing, in either the waiting period or the pecuniary value of such services.

        ‘(C) COMMENCEMENT OF CERTIFICATE PROGRAM- Beginning not later than 1 year after the date of the enactment of this section, each State that receives funds under this title shall offer a child care certificate program in accordance with this section.

        ‘(D) AUTHORITY TO USE CHILD CARE FUNDS FOR CERTIFICATE PROGRAM- Each State to which funds are paid under this title may use the funds provided to the State under this title which are required to be used for child care activities to plan and establish the State’s child care certificate program.

      ‘(7) OPTION OF RECEIVING A CHILD CARE CERTIFICATE- Each parent or legal guardian who receives assistance pursuant to this title shall be provided with the option of enrolling their child with an eligible child care provider that receives funds through grants, contracts, or child care certificates provided under this title. Such parent shall have the right to use such certificates to purchase child care services from an eligible provider of their choice. The State shall ensure that parental preference is considered to the maximum extent possible in awarding grants or contracts.

      ‘(8) RIGHTS OF RELIGIOUS CHILD CARE PROVIDERS- Notwithstanding any other provision of law, a religious child care provider who receives funds under this Act may require adherence by employees to the religious tenets or teachings of the provider.

      ‘(9) ELIGIBLE CHILD CARE PROVIDERS- Any child care provider who meets applicable standards of State and local law shall be eligible to receive funds under this section. As used in this paragraph, the term ‘child care provider’ includes--

        ‘(A) proprietary for-profit entities, relatives, informal day care homes, religious child care providers, day care centers, and any other entities that the State determines appropriate subject to approval of the Secretary;

        ‘(B) nonprofit organizations under subsections (c) and (d) of section 501 of the Internal Revenue Code of 1986;

        ‘(C) professional or employee associations;

        ‘(D) consortia of small businesses; and

        ‘(E) units of State and local governments, and elementary, secondary, and post-secondary educational institutions.

      ‘(10) PROHIBITED USES- Any State to which funds are paid under this section may not use such funds--

        ‘(A) to satisfy any State matching requirement imposed under any Federal grant;

        ‘(B) for the purchase or improvement of land, or the purchase, construction, or permanent improvement (other than minor remodeling) of any building or other facility; or

        ‘(C) to provide any service which the State makes generally available to the residents of the State without cost to such residents and without regard to the income of such residents.

    ‘(f) REPORTING REQUIREMENTS-

      ‘(1) NOTICE TO SECRETARY OF UNEXPENDED FUNDS- Each State which has not completely expended the funds paid to the State under this section for a fiscal year in the fiscal year or the immediately succeeding fiscal year shall notify the Secretary of any amount not so expended.

      ‘(2) STATE REPORTS ON USE OF FUNDS- Not later than 18 months after the date of the enactment of this section, and each year thereafter, the State shall prepare and submit to the Secretary, in such form as the Secretary shall prescribe, a report describing the State’s use of funds paid to the State under this section, including--

        ‘(A) the number, type, and distribution of services and programs under this section;

        ‘(B) the average cost of child care, by type of provider;

        ‘(C) the number of children serviced under this section;

        ‘(D) the average income and distribution of incomes of the families being served;

        ‘(E) efforts undertaken by the State pursuant to this section to promote and ensure health and safety and improve quality; and

        ‘(F) such other information as the Secretary considers appropriate.

      ‘(3) GUIDELINES FOR STATE REPORTS; COORDINATION WITH REPORTS UNDER SECTION 2006- Within 6 months after the date of the enactment of this section, the Secretary shall establish guidelines for State reports under paragraph (2). To the extent feasible, the Secretary shall coordinate such reporting requirement with the reports required under section 2006 and, as the Secretary deems appropriate, with other reporting requirements placed on States as a condition of receipt of other Federal funds which support child care.

      ‘(4) REPORTS BY THE SECRETARY-

        ‘(A) REPORTS TO THE CONGRESS OF SUMMARY OF STATE REPORTS- The Secretary shall annually summarize the information reported to the Secretary pursuant to paragraph (2) and provide such summary to the Congress.

        ‘(B) REPORTS TO THE STATES ON EFFECTIVE PRACTICES- The Secretary shall annually provide the States with a report on particularly effective practices and programs supported by funds paid to the State under this section, which ensure the health and safety of children in care, promote quality child care, and provide training to all types of providers.

    ‘(g) ADMINISTRATION AND ENFORCEMENT-

      ‘(1) ADMINISTRATION- The Secretary shall--

        ‘(A) coordinate all activities of the Department of Health and Human Services relating to child care, and, to the maximum extent practicable, coordinate such activities with similar activities of other Federal entities;

        ‘(B) collect, publish, and make available to the public a listing of State child care standards at least once every 3 years; and

        ‘(C) provide technical assistance to assist States to carry out this section, including assistance on a reimbursable basis.

      ‘(2) ENFORCEMENT-

        ‘(A) REVIEW OF COMPLIANCE WITH STATE PLAN- The Secretary shall review and monitor State compliance with this section and the plans approved under this section for the State, and shall have the power to terminate payments to the State in accordance with subparagraph (B).

        ‘(B) NONCOMPLIANCE-

          ‘(i) IN GENERAL- If the Secretary, after reasonable notice to a State and opportunity for a hearing, finds that--

            ‘(I) there has been a failure by the State to comply substantially with any provision or requirement set forth in the plan approved under this section for the State; or

            ‘(II) in the operation of any program for which assistance is provided under this section there is a failure by the State to comply substantially with any provision of this section;

          the Secretary shall notify the State of the findings and that no further payments may be made to such State under this section (or, in the case of noncompliance in

the operation of a program or activity, that no further payments to the State will be made with respect to such program or activity) until the Secretary is satisfied that there is no longer any such failure to comply or that the noncompliance will be promptly corrected.

          ‘(ii) ADDITIONAL SANCTIONS- In the case of a finding of noncompliance made pursuant to clause (i), the Secretary may, in addition to imposing the sanctions described in such subparagraph, impose the other appropriate sanctions, including recoupment of money improperly expended for purposes prohibited or not authorized by this section, and disqualification from the receipt of financial assistance under this section.

          ‘(iii) NOTICE- The notice required under subparagraph (A) shall include a specific identification of any additional sanction being imposed under clause (ii).

        ‘(C) ISSUANCE OF RULES- The Secretary shall establish by rule procedures for--

          ‘(i) receiving, processing, and determining the validity of complaints concerning any failure of a State to comply with the State plan or any requirement of this section; and

          ‘(ii) imposing sanctions under this subsection.

‘SEC. 2009. CHILD CARE DURING PARTICIPATION IN EMPLOYMENT, EDUCATION, AND TRAINING; EXTENDED ELIGIBILITY.

    ‘(a) CHILD CARE GUARANTEE-

      ‘(1) IN GENERAL- Each State agency referred to in section 2008(b)(1)(A) shall guarantee child care in accordance with section 2008--

        ‘(A) for any individual who is participating in an education or training activity (including participation in a program established under part G of title IV) if the State agency approves the activity and determines that the individual is participating satisfactorily in the activity;

        ‘(B) for each family with a dependent child (as defined in section 413(a)(2)(E)) requiring such care to the extent that such care is determined by the State agency to be necessary for an individual in the family to accept employment or remain employed, including in a community service job under part G of title IV; and

        ‘(C) to the extent that the State agency determines that such care is necessary for the employment of an individual, if the family of which the individual is a member has ceased to receive assistance under the State plan approved under part A of title IV by reason of increased hours of, or income from, such employment, subject to paragraph (2) of this subsection.

      ‘(2) LIMITATIONS ON ELIGIBILITY FOR TRANSITIONAL CHILD CARE- A family shall not be eligible for child care under paragraph (1)(C)--

        ‘(A) for more than 12 months after the last month for which the family received assistance described in such paragraph;

        ‘(B) if the family did not receive such assistance in at least 3 of the most recent 6 months in which the family received such assistance;

        ‘(C) if the family does not include a child who is (or, if needy, would be) a dependent child (within the meaning of section 413(a)(2)(E));

        ‘(D) for any month beginning after the caretaker relative (within the meaning of such part) in the family has terminated his or her employment without good cause; or

        ‘(E) with respect to a child, for any month beginning after the caretaker relative in the family has refused to cooperate with the State in establishing or enforcing the obligation of any parent of the child to provide support for the child, without good cause as determined by the State agency in accordance with standards prescribed by the Secretary which shall take into consideration the best interests of the child.

    ‘(b) STATE ENTITLEMENT TO PAYMENTS- Each State with a plan approved under section 2008 shall be entitled to receive from the Secretary for any fiscal year an amount equal to--

      ‘(1) the total amount expended by the State to carry out subsection (a) during the fiscal year; multiplied by

      ‘(2) the Federal medical assistance percentage (as defined in the last sentence of section 1118).’.

    (c) EFFECTIVE DATE- The amendments and repeals made by this section shall take effect on October 1, 1996.

SEC. 9206. CERTAIN FEDERAL ASSISTANCE INCLUDIBLE IN GROSS INCOME.

    (a) IN GENERAL- Part II of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically included in gross income) is amended by adding at the end the following new section:

‘SEC. 91. CERTAIN FEDERAL ASSISTANCE.

    ‘(a) IN GENERAL- Gross income shall include an amount equal to the specified Federal assistance received by the taxpayer during the taxable year.

    ‘(b) SPECIFIED FEDERAL ASSISTANCE- For purposes of this section--

      ‘(1) IN GENERAL- The term ‘specified Federal assistance’ means--

        ‘(A) assistance provided under a State plan approved under part A of title IV of the Social Security Act (relating to temporary employment assistance program),

        ‘(B) assistance provided under any food stamp program, and

        ‘(C) supplemental security income benefits under title XVI of the Social Security Act (including supplemental security income benefits of the type described in section 1616 of such Act or section 212 of Public Law 93-66).

      ‘(2) SPECIAL RULE- In the case of assistance provided under a program described in subsection (d)(2), such term shall include only the assistance required to be provided under section 21 or 22 (as the case may be) of the Food Stamp Act of 1977.

    ‘(c) INDIVIDUALS SUBJECT TO TAX- For purposes of this section--

      ‘(1) TEMPORARY EMPLOYMENT ASSISTANCE PROGRAM- Assistance described in subsection (b)(1)(A) shall be treated as received by the relative with whom the dependent child is living (within the meaning of section 406(c) of the Social Security Act).

      ‘(2) FOOD STAMPS- In the case of assistance described in subsection (b)(1)(B)--

        ‘(A) IN GENERAL- Except as provided in subparagraph (B), such assistance shall be treated as received ratably by each of the individuals taken into account in determining the amount of such assistance for the benefit of such individuals.

        ‘(B) ASSISTANCE TO CHILDREN TREATED AS RECEIVED BY PARENTS, ETC- The amount of assistance which would (but for this subparagraph) be treated as received by a child shall be treated as received as follows:

          ‘(i) If there is an includible parent, such amount shall be treated as received by the includible parent (or if there is more than 1 includible parent, as received ratably by each includible parent).

          ‘(ii) If there is no includible parent and there is an includible grandparent, such amount shall be treated as received by the includible grandparent (or if there is more than 1 includible grandparent, as received ratably by each includible grandparent).

          ‘(iii) If there is no includible parent or grandparent, such amount shall be treated as received ratably by each includible adult.

        ‘(C) DEFINITIONS- For purposes of subparagraph (B)--

          ‘(i) CHILD- The term ‘child’ means any individual who has not attained age 16 as of the close of the taxable year. Such term shall not include any individual who is an includible parent of a child (as defined in the preceding sentence).

          ‘(ii) ADULT- The term ‘adult’ means any individual who is not a child.

          ‘(iii) INCLUDIBLE- The term ‘includible’ means, with respect to any individual, an individual who is included in determining the amount of assistance paid to the household which includes the child.

          ‘(iv) PARENT- The term ‘parent’ includes the stepfather and stepmother of the child.

          ‘(v) GRANDPARENT- The term ‘grandparent’ means any parent of a parent of the child.

    ‘(d) FOOD STAMP PROGRAM- For purposes of subsection (b), the term ‘food stamp program’ means--

      ‘(1) the food stamp program (as defined in section 3(h) of the Food Stamp Act of 1977), and

      ‘(2) the portion of the program under sections 21 and 22 of such Act which provides food assistance.’

    (b) REPORTING-

      (1) IN GENERAL- Subpart B of part III of subchapter A of chapter 61 of such Code is amended by adding at the end the following new section:

‘SEC. 6050Q. PAYMENTS OF CERTAIN FEDERAL ASSISTANCE.

    ‘(a) REQUIREMENT OF REPORTING- The appropriate official shall make a return, according to the forms and regulations prescribed by the Secretary, setting forth--

      ‘(1) the aggregate amount of specified Federal assistance paid to any individual during any calendar year, and

      ‘(2) the name, address, and TIN of such individual.

    ‘(b) STATEMENTS TO BE FURNISHED TO PERSONS WITH RESPECT TO WHOM INFORMATION IS REQUIRED- Every person required to make a return under subsection (a) shall furnish to each individual whose name is required to be set forth in such return a written statement showing--

      ‘(1) the aggregate amount of payments made to the individual which are required to be shown on such return, and

      ‘(2) the name of the agency making the payments.

    The written statement required under the preceding sentence shall be furnished to the individual on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made.

    ‘(c) DEFINITIONS AND SPECIAL RULE- For purposes of this section--

      ‘(1) APPROPRIATE OFFICIAL- The term ‘appropriate official’ means--

        ‘(A) in the case of specified Federal assistance described in section 91(b)(1)(A), the head of the State agency administering the plan under which such assistance is provided,

        ‘(B) in the case of specified Federal assistance described in section 91(b)(1)(B), the head of the State agency administering the program under which such assistance is provided, and

        ‘(C) in the case of specified Federal assistance described in section 91(b)(1)(C), the Secretary of Health and Human Services.

      ‘(2) SPECIFIED FEDERAL ASSISTANCE- The term ‘specified Federal assistance’ has the meaning given such term by section 91(b).

      ‘(3) AMOUNTS TREATED AS PAID- The rules of section 91(c) shall apply for purposes of determining to whom specified Federal assistance is paid.’

      (2) PENALTIES-

        (A) Subparagraph (B) of section 6724(d)(1) of such Code is amended by redesignating clauses (ix) through (xiv) as clauses (x) through (xv), respectively, and by inserting after clause (viii) the following new clause:

          ‘(ix) section 6050Q (relating to payments of certain Federal assistance),’.

        (B) Paragraph (2) of section 6724(d) of such Code is amended by redesignating subparagraphs (Q) through (T) as subparagraphs (R) through (U), respectively, and by inserting after subparagraph (P) the following new subparagraph:

        ‘(Q) section 6050Q(b) (relating to payments of certain Federal assistance),’.

    (c) TEMPORARY EMPLOYMENT ASSISTANCE PROGRAM, SUPPLEMENTAL SECURITY INCOME, AND FOOD STAMP BENEFITS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF THE EARNED INCOME TAX CREDIT- Section 32 of the Internal Revenue Code of 1986 (relating to the earned income tax credit), is amended by adding at the end the following new subsection:

    ‘(k) ADJUSTED GROSS INCOME DETERMINED WITHOUT REGARD TO CERTAIN FEDERAL ASSISTANCE- For purposes of this section, adjusted gross income shall be determined without regard to any amount which is includible in gross income solely by reason of section 91.’

    (d) CLERICAL AMENDMENTS-

      (1) The table of sections for part II of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item:

‘Sec. 91. Certain Federal assistance.’

      (2) The table of sections for subpart B of part III of subchapter A of chapter 61 of such Code is amended by adding at the end the following new item:

‘Sec. 6050Q. Payments of certain Federal assistance.’

    (e) EFFECTIVE DATE- The amendments made by this section shall apply to benefits received after December 31, 1995, except that the amendment made by subsection (c) shall apply to taxable years beginning after such date.

SEC. 9207. DEPENDENT CARE CREDIT TO BE REFUNDABLE; HIGH-INCOME TAXPAYERS INELIGIBLE FOR CREDIT.

    (a) CREDIT TO BE REFUNDABLE-

      (1) IN GENERAL- Section 21 of the Internal Revenue Code of 1986 (relating to expenses for household and dependent care services necessary for gainful employment) is hereby moved to subpart C of part IV of subchapter A of chapter 1 of such Code (relating to refundable credits) and inserted after section 34.

      (2) TECHNICAL AMENDMENTS-

        (A) Section 35 of such Code is redesignated as section 36.

        (B) Section 21 of such Code is redesignated as section 35.

        (C) Paragraph (1) of section 35(a) of such Code (as redesignated by subparagraph (B)) is amended by striking ‘this chapter’ and inserting ‘this subtitle’.

        (D) Subparagraph (C) of section 129(a)(2) of such Code is amended by striking ‘section 21(e)’ and inserting ‘section 35(e)’.

        (E) Paragraph (2) of section 129(b) of such Code is amended by striking ‘section 21(d)(2)’ and inserting ‘section 35(d)(2)’.

        (F) Paragraph (1) of section 129(e) of such Code is amended by striking ‘section 21(b)(2)’ and inserting ‘section 35(b)(2)’.

        (G) Subsection (e) of section 213 of such Code is amended by striking ‘section 21’ and inserting ‘section 35’.

        (H) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period ‘, or from section 35 of such Code’.

        (I) The table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended by striking the item relating to section 35 and inserting the following:

‘Sec. 35. Expenses for household and dependent care services necessary for gainful employment.

‘Sec. 36. Overpayments of tax.’.

        (J) The table of sections for subpart A of such part IV is amended by striking the item relating to section 21.

    (b) HIGHER-INCOME TAXPAYERS INELIGIBLE FOR CREDIT- Subsection (a) of section 35 of such Code, as redesignated by subsection (a), is amended by adding at the end the following new paragraph:

      ‘(3) PHASEOUT OF CREDIT FOR HIGHER-INCOME TAXPAYERS- The amount of the credit which would (but for this paragraph) be allowed by this section shall be reduced (but not below zero) by an amount which bears the same ratio to such amount of credit as the excess of the taxpayer’s adjusted gross income for the taxable year over $60,000 bears to $20,000. Any reduction determined under the preceding sentence which is not a multiple of $10 shall be rounded to the nearest multiple of $10.’.

    (c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 1996.

Subtitle C--Work First

Title IX, Subtitle C

SEC. 9301. WORK FIRST PROGRAM.

    (a) ESTABLISHMENT AND OPERATION OF PROGRAM- Title IV (42 U.S.C. 601 et seq.) is amended by striking part F and inserting the following:

‘Part F--Work First Program

‘SEC. 481. STATE ROLE.

    ‘(a) PROGRAM REQUIREMENTS- Any State may establish and operate a work first program that meets the following requirements:

      ‘(1) OBJECTIVE- The objective of the program is for each program participant to find and hold a full-time unsubsidized paid job, and for this goal to be achieved in a cost-effective fashion.

      ‘(2) METHOD- The method of the program is to connect recipients of assistance under the State plan approved under part A with the private sector labor market as soon as possible and offer them the support and skills necessary to remain in the labor market. Each component of the program should be permeated with an emphasis on employment and with an understanding that minimum wage jobs are a stepping stone to more highly paid employment. The program shall provide recipients with education, training, job search and placement,

wage supplementation, temporary subsidized jobs, or such other services that the State deems necessary to help a recipient obtain private sector employment.

      ‘(3) JOB CREATION- The creation of jobs, with an emphasis on private sector jobs, shall be a component of the program and shall be a priority for each State office with responsibilities under the program.

      ‘(4) FORMS OF ASSISTANCE- The State shall provide assistance to participants in the program in the form of education, training, job placement services (including vouchers for job placement services), work supplementation programs, temporary subsidized job creation, job counseling, assistance in establishing microenterprises, or other services to provide individuals with the support and skills necessary to obtain and keep employment in the private sector.

      ‘(5) 2-YEAR LIMITATION ON PARTICIPATION- The program shall comply with section 487(b).

      ‘(6) AGREEMENTS OF MUTUAL RESPONSIBILITY-

        ‘(A) IN GENERAL- The State agency shall develop an agreement of mutual responsibility for each program participant, which will be an individualized comprehensive plan, developed by the team and the participant, to move the participant into a full-time unsubsidized job. The agreement should detail the education, training, or skills that the individual will be receiving to obtain a full-time unsubsidized job, and the obligations of the individual.

        ‘(B) HOURS OF PARTICIPATION REQUIREMENT- The agreement shall provide that the individual shall participate in activities in accordance with the agreement for--

          ‘(i) not fewer than 20 hours per week during fiscal years 1997 and 1998;

          ‘(ii) not fewer than 25 hours per week during fiscal year 1999; and

          ‘(iii) not fewer than 30 hours per week thereafter.

      ‘(7) CASELOAD PARTICIPATION RATES- The program shall comply with section 488.

      ‘(8) NONDISPLACEMENT- The program may not be operated in a manner that results in--

        ‘(A) the displacement of a currently employed worker or position by a program participant;

        ‘(B) the replacement of an employee who has been terminated with a program participant; or

        ‘(C) the replacement of an individual who is on layoff from the same position given to a program participant or any equivalent position.

    ‘(b) ANNUAL REPORTS-

      ‘(1) COMPLIANCE WITH PERFORMANCE MEASURES- Each State that operates a program under this part shall submit to the Secretary annual reports that compare the achievements of the program with the performance-based measures established under section 488(c).

      ‘(2) COMPLIANCE WITH PARTICIPATION RATES- Each State that operates a program under this part for a fiscal year shall submit to the Secretary a report on the participation rate of the State for the fiscal year.

‘SEC. 482. REVAMPED JOBS PROGRAM.

    ‘A State that establishes a program under this part may operate a program similar to the program known as the ‘GAIN Program’ that has been operated by Riverside County, California, under Federal law in effect immediately before the date this part first applies to the State of California.

‘SEC. 483. USE OF PLACEMENT COMPANIES.

    ‘(a) IN GENERAL- A State that establishes a program under this part may enter into contracts with private companies (whether operated for profit or not for profit) for the placement of participants in the program in positions of full-time employment, preferably in the private sector, for wages sufficient to eliminate the need of such participants for cash assistance.

    ‘(b) REQUIRED CONTRACT TERMS- Each contract entered into under this section with a company shall meet the following requirements:

      ‘(1) PROVISION OF JOB READINESS AND SUPPORT SERVICES- The contract shall require the company to provide, to any program participant who presents to the company a voucher issued under subsection (d) intensive personalized support and job readiness services designed to prepare the individual for employment and ensure the continued success of the individual in employment.

      ‘(2) PAYMENTS-

        ‘(A) IN GENERAL- The contract shall provide for payments to be made to the company with respect to each program participant who presents to the company a voucher issued under subsection (d).

        ‘(B) STRUCTURE- The contract shall provide for the majority of the amounts to be paid under the contract with respect to a program participant, to be paid after the company has placed the participant in a position of full-time employment and the participant has been employed in the position for such period of not less than 5 months as the State deems appropriate.

    ‘(c) COMPETITIVE BIDDING REQUIRED- Contracts under this section shall be awarded only after competitive bidding.

    ‘(d) VOUCHERS- The State shall issue a voucher to each program participant whose agreement of mutual responsibility provides for the use of placement companies under this section, indicating that the participant is eligible for the services of such a company.

‘SEC. 484. TEMPORARY SUBSIDIZED JOB CREATION.

    ‘A State that establishes a program under this part may establish a program similar to the program known as ‘JOBS Plus’ that has been operated by the State of Oregon under Federal law in effect immediately before the date this part first applies to the State of Oregon.

‘SEC. 485. MICROENTERPRISE.

    ‘(a) GRANTS AND LOANS TO NONPROFIT ORGANIZATIONS FOR THE PROVISION OF TECHNICAL ASSISTANCE, TRAINING, AND CREDIT TO LOW INCOME ENTREPRENEURS- A State that establishes a program under this part may make grants and loans to nonprofit organizations to provide technical assistance, training, and credit to low income entrepreneurs for the purpose of establishing microenterprises.

    ‘(b) MICROENTERPRISE DEFINED- For purposes of this subsection, the term ‘microenterprise’ means a commercial enterprise which has 5 or fewer employees, 1 or more of whom owns the enterprise.

‘SEC. 486. WORK SUPPLEMENTATION PROGRAM.

    ‘(a) IN GENERAL- A State that establishes a program under this part may institute a work supplementation program under which the State, to the extent it considers appropriate, may reserve the sums that would otherwise be payable under the State plan approved under part A to participants in the program and use the sums instead for the purpose of providing and subsidizing jobs for the participants (as described in subsection (c)(3)(A) and (B)), as an alternative to providing such assistance to the participants.

    ‘(b) STATE FLEXIBILITY-

      ‘(1) Nothing in this part, or in any State plan approved under part A, shall be construed to prevent a State from operating (on such terms and conditions and in such cases as the State may find to be necessary or appropriate) a work supplementation program in accordance with this section and

section 484 (as in effect immediately before the date this part first applies to the State).

      ‘(2) Notwithstanding any other provision of law, a State may adjust the levels of the standards of need under the State plan as the State determines to be necessary and appropriate for carrying out a work supplementation program under this section.

      ‘(3) Notwithstanding any other provision of law, a State operating a work supplementation program under this section may provide that the need standards in effect in those areas of the State in which the program is in operation may be different from the need standards in effect in the areas in which the program is not in operation, and the State may provide that the need standards for categories of recipients may vary among such categories to the extent the State determines to be appropriate on the basis of ability to participate in the work supplementation program.

      ‘(4) Notwithstanding any other provision of law, a State may make such further adjustments in the amounts of assistance provided under the plan to different categories of recipients (as determined under paragraph (3)) in order to offset increases in benefits from needs-related programs (other than the State plan approved under part A) as the State determines to be necessary and appropriate to further the purposes of the work supplementation program.

      ‘(5) In determining the amounts to be reserved and used for providing and subsidizing jobs under this section as described in subsection (a), the State may use a sampling methodology.

      ‘(6) Notwithstanding any other provision of law, a State operating a work supplementation program under this section, may reduce or eliminate the amount of earned income to be disregarded under the State plan as the State determines to be necessary and appropriate to further the purposes of the work supplementation program.

    ‘(c) RULES RELATING TO SUPPLEMENTED JOBS-

      ‘(1) A work supplementation program operated by a State under this section may provide that any individual who is an eligible individual (as determined under paragraph (2)) shall take a supplemented job (as defined in paragraph (3)) to the extent that supplemented jobs are available under the program. Payments by the State to individuals or to employers under the work supplementation program shall be treated as expenditures incurred by the State for temporary employment assistance under part A except as limited by subsection (d).

      ‘(2) For purposes of this section, an eligible individual is an individual who is in a category which the State determines should be eligible to participate in the work supplementation program, and who would, at the time of placement in the job involved, be eligible for assistance under an approved State plan if the State did not have a work supplementation program in effect.

      ‘(3) For purposes of this subsection, a supplemented job is--

        ‘(A) a job provided to an eligible individual by the State or local agency administering the State plan under part A; or

        ‘(B) a job provided to an eligible individual by any other employer for which all or part of the wages are paid by the State or local agency.

      A State may provide or subsidize under the program any job which the State determines to be appropriate.

    ‘(d) COST LIMITATION- The amount of the Federal payment to a State under section 413 for expenditures incurred in making payments to individuals and employers under a work supplementation program under this subsection shall not exceed an amount equal to the amount which would otherwise be payable under such section if the family of each individual employed in the program established in the State under this section had received the maximum amount of assistance providable under the State plan to such a family with no income (without regard to adjustments under subsection (b) of this section) for the lesser of--

      ‘(1) 9 months; or

      ‘(2) the number of months in which the individual was employed in the program.

    ‘(e) RULES OF INTERPRETATION-

      ‘(1) This section shall not be construed as requiring the State or local agency administering the State plan to provide employee status to an eligible individual to whom the State or local agency provides a job under the work supplementation program (or with respect to whom the State or local agency provides all or part of the wages paid to the individual by another entity under the program), or as requiring any State or local agency to provide that an eligible individual filling a job position provided by another entity under the program be provided employee status by the entity during the first 13 weeks the individual fills the position.

      ‘(2) Wages paid under a work supplementation program shall be considered to be earned income for purposes of any provision of law.

    ‘(f) PRESERVATION OF MEDICAID ELIGIBILITY- Any State that chooses to operate a work supplementation program under this section shall provide that any individual who participates in the program, and any child or relative of the individual (or other individual living in the same household as the individual) who would be eligible for assistance under the State plan approved under part A if the State did not have a work supplementation program, shall be considered individuals receiving assistance under the State plan approved under part A for purposes of eligibility for medical assistance under the State plan approved under title XIX.

‘SEC. 487. PARTICIPATION RULES.

    ‘(a) IN GENERAL- Except as provided in subsection (b), a State that establishes a program under this part may require any individual receiving assistance under the State plan approved under part A to participate in the program.

    ‘(b) 2-YEAR LIMITATION ON PARTICIPATION-

      ‘(1) IN GENERAL- Except as provided in paragraph (2), an individual may not participate in a State program established under this part if the individual has participated in the State program established under this part for 24 months after the date the individual first signed an agreement of mutual responsibility under this part, excluding any month during which the individual worked for an average of at least 25 hours per week in a private sector job.

      ‘(2) AUTHORITY TO ALLOW REPEAT PARTICIPATION-

        ‘(A) IN GENERAL- Subject to subparagraph (B) of this paragraph, a State may allow an individual who, by reason of paragraph (1), would be prohibited from participating in the State program established under this part to participate in the program for such additional period or periods as the State determines appropriate.

        ‘(B) LIMITATION ON PERCENTAGE OF REPEAT PARTICIPANTS-

          ‘(i) IN GENERAL- Except as provided in clause (ii) of this subparagraph, the number of individuals allowed under subparagraph (A) to participate during a program year in a State program established under this part shall not exceed--

            ‘(I) 10 percent of the total number of individuals who participated in the State program established under this part or the State program established

under part H during the immediately preceding program year; or

            ‘(II) in the case of fiscal year 2004 or any succeeding fiscal year, 15 percent of such total number of individuals.

          ‘(ii) AUTHORITY TO INCREASE LIMITATION-

            ‘(I) PETITION- A State may request the Secretary to increase to not more than 15 percent the percentage limitation imposed by clause (i)(I) for a fiscal year before fiscal year 2004.

            ‘(II) AUTHORITY TO GRANT REQUEST- The Secretary may approve a request made pursuant to subclause (I) if the Secretary deems it appropriate. The Secretary shall develop recommendations on the criteria that should be applied in evaluating requests under subclause (I).

‘SEC. 488. CASELOAD PARTICIPATION RATES; PERFORMANCE MEASURES.

    ‘(a) PARTICIPATION RATES-

      ‘(1) REQUIREMENT- A State that operates a program under this part shall achieve a participation rate for the following fiscal years of not less than the following percentage:

‘Fiscal year:

Percentage:

1997

20

1998

24

1999

28

2000

32

2001

36

2002

40

2003 or later

52.

      ‘(2) PARTICIPATION RATE DEFINED-

        ‘(A) IN GENERAL- As used in this subsection, the term ‘participation rate’ means, with respect to a State and a fiscal year, an amount equal to--

          ‘(i) the average monthly number of individuals who, during the fiscal year, participate in the State program established under this part or (if applicable) part G or H; divided by

          ‘(ii) the average monthly number of individuals who are not described in section 402(c)(1)(D) and for whom an individual responsibility plan is in effect under section 403 during the fiscal year.

        ‘(B) SPECIAL RULE- For each of the 1st 12 months after an individual ceases to receive assistance under a State plan approved under part A by reason of having become employed for more than 25 hours per week in an unsubsidized job in the private sector, the individual shall be considered to be participating in the State program established under this part, and to be an adult recipient of such assistance, for purposes of subparagraph (A).

      ‘(3) STATE COMPLIANCE REPORTS- Each State that operates a program under this part for a fiscal year shall submit to the Secretary a report on the participation rate of the State for the fiscal year.

      ‘(4) EFFECT OF FAILURE TO MEET PARTICIPATION RATES-

        ‘(A) IN GENERAL- If a State reports that the State has failed to achieve the participation rate required by paragraph (1) for the fiscal year, the Secretary may make recommendations for changes in the State program established under this part and (if the State has established a program under part G) the State program established under part G. The State may elect to follow such recommendations, and shall demonstrate to the Secretary how the State will achieve the required participation rates.

        ‘(B) SECOND CONSECUTIVE FAILURE- Notwithstanding subparagraph (A), if a State fails to achieve the participation rate required by paragraph (1) for 2 consecutive fiscal years, the Secretary may--

          ‘(i) require the State to make changes in the State program established under this part and (if the State has established a program under part G) the State program established under part G; and

          ‘(ii) reduce by 5 percent the amount otherwise payable to the State under section 413.

    ‘(b) PERFORMANCE STANDARDS- The Secretary shall develop standards to be used to measure the effectiveness of the programs established under this part and part G in moving recipients of assistance under the State plan approved under part A into full-time unsubsidized employment.

    ‘(c) PERFORMANCE-BASED MEASURES-

      ‘(1) ESTABLISHMENT- The Secretary shall, by regulation, establish measures of the effectiveness of the State programs established under this part and under part G in moving recipients of assistance under the State plan approved under part A into full-time unsubsidized employment, based on the performance of such programs.

      ‘(2) ANNUAL COMPLIANCE REPORTS- Each State that operates a program under this part shall submit to the Secretary annual reports that compare the achievements of the program with the performance-based measures established under paragraph (1).

‘SEC. 489. FEDERAL ROLE.

    ‘(a) APPROVAL OF STATE PLANS-

      ‘(1) IN GENERAL- Within 60 days after the date a State submits to the Secretary a plan that provides for the establishment and operation of a work first program that meets the requirements of section 481, the Secretary shall approve the plan.

      ‘(2) AUTHORITY TO EXTEND APPROVAL DEADLINE- The 60-day deadline established in paragraph (1) with respect to a State may be extended in accordance with an agreement between the Secretary and the State.

    ‘(b) PERFORMANCE-BASED MEASURES- The Secretary shall, by regulation, establish measures of the effectiveness of the State program established under this part and (if the State has established a program under part G) the State program established under part G in moving recipients of assistance under the State plan approved under part A into full-time unsubsidized employment, based on the performance of such programs.

    ‘(c) EFFECT OF FAILURE TO MEET PARTICIPATION RATES-

      ‘(1) IN GENERAL- If a State reports that the State has failed to achieve the participation rate required by section 488 for the fiscal year, the Secretary may make recommendations for changes in the State program established under this part and (if the State has established a program under part G) the State program established under part G. The State may elect to follow such recommendations, and shall demonstrate to the Secretary how the State will achieve the required participation rates.

      ‘(2) SECOND CONSECUTIVE FAILURE- Notwithstanding paragraph (1), if the State has failed to achieve the participation rates required by section 488 for 2 consecutive fiscal years, the Secretary may require the State to make changes in the State program established under this part and (if the State has established a program under part G) the State program established under part G.

‘Part G--Workfare Program

‘SEC. 490. ESTABLISHMENT AND OPERATION OF PROGRAM.

    ‘(a) IN GENERAL- A State that establishes a work first program under part F may establish and carry out a workfare

program that meets the requirements of this part, unless the State has established a job placement voucher program under part H.

    ‘(b) OBJECTIVE- The objective of the workfare program is for each program participant to find and hold a full-time unsubsidized paid job, and for this goal to be achieved in a cost-effective fashion.

    ‘(c) CASE MANAGEMENT TEAMS- The State shall assign to each program participant a case management team that shall meet with the participant and assist the participant to choose the most suitable workfare job under subsection (e), (f), or (g) and to eventually obtain a full-time unsubsidized paid job.

    ‘(d) PROVISION OF JOBS- The State shall provide each participant in the program with a community service job that meets the requirements of subsection (e) or a subsidized job that meets the requirements of subsection (f) or (g).

    ‘(e) COMMUNITY SERVICE JOBS-

      ‘(1) IN GENERAL- Except as provided in paragraphs (2) and (3), each participant shall work for not fewer than 30 hours per week (or, at the option of the State, 20 hours per week during fiscal years 1997 and 1998, not fewer than 25 hours per week during fiscal year 1999, not fewer than 30 hours per week during fiscal years 2000 and 2001, and not fewer than 35 hours per week thereafter) in a community service job, and be paid at a rate which is not greater than 75 percent (or, at the option of the State, 100 percent) of the maximum amount of assistance that may be provided under the State plan approved under part A to a family of the same size and composition with no income.

      ‘(2) EXCEPTION- (A) If the participant has obtained unsubsidized part-time employment in the private sector, the State shall provide the participant with a part-time community service job.

      ‘(B) If the State provides a participant a part-time community service job under subparagraph (A), the State shall ensure that the participant works for not fewer than 30 hours per week.

      ‘(3) WAGES NOT CONSIDERED EARNED INCOME- Wages paid under a workfare program shall not be considered to be earned income for purposes of any provision of law.

      ‘(4) COMMUNITY SERVICE JOB DEFINED- For purposes of this section, the term ‘community service job’ means--

        ‘(A) a job provided to a participant by the State administering the State plan under part A; or

        ‘(B) a job provided to a participant by any other employer for which all or part of the wages are paid by the State.

      A State may provide or subsidize under the program any job which the State determines to be appropriate.

    ‘(f) TEMPORARY SUBSIDIZED JOB CREATION- A State that establishes a workfare program under this part may establish a program similar to the program operated by the State of Oregon, which is known as ‘JOBS Plus’.

    ‘(g) WORK SUPPLEMENTATION PROGRAM-

      ‘(1) IN GENERAL- A State that establishes a workfare program under this part may institute a work supplementation program under which the State, to the extent it considers appropriate, may reserve the sums that would otherwise be payable to participants in the program as a community service minimum wage and use the sums instead for the purpose of providing and subsidizing private sector jobs for the participants.

      ‘(2) EMPLOYER AGREEMENT- An employer who provides a private sector job to a participant under paragraph (1) shall agree to provide to the participant an amount in wages equal to the poverty threshold for a family of three.

    ‘(h) JOB SEARCH REQUIREMENT- The State shall require each participant to spend a minimum of 5 hours per week on activities related to securing unsubsidized full-time employment in the private sector.

    ‘(i) DURATION OF PARTICIPATION-

      ‘(1) IN GENERAL- Except as provided in paragraph (2), an individual may not participate for more than 2 years in a workfare program under this part.

      ‘(2) AUTHORITY TO ALLOW REPEATED PARTICIPATION-

        ‘(A) IN GENERAL- Subject to subparagraph (B), a State may allow an individual who, by reason of paragraph (1), would be prohibited from participating in the State program established under this part to participate in the program for such additional period or periods as the State determines appropriate.

        ‘(B) LIMITATION ON PERCENTAGE OF REPEAT PARTICIPANTS-

          ‘(i) IN GENERAL- Except as provided in clause (ii), the number of individuals allowed under subparagraph (A) to participate during a program year in a State program established under this part shall not exceed 10 percent of the total number of individuals who participated in the program during the immediately preceding program year.

          ‘(ii) AUTHORITY TO INCREASE LIMITATION-

            ‘(I) PETITION- A State may request the Secretary to increase the percentage limitation imposed by clause (i) to not more than 15 percent.

            ‘(II) AUTHORITY TO GRANT REQUEST- The Secretary may approve a request made pursuant to subclause (I) if the Secretary deems it appropriate. The Secretary shall develop recommendations on the criteria that should be applied in evaluating requests under subclause (I).

    ‘(j) USE OF PLACEMENT COMPANIES- A State that establishes a workfare program under this part may enter into contracts with private companies (whether operated for profit or not for profit) for the placement of participants in the program in positions of full-time employment, preferably in the private sector, for wages sufficient to eliminate the need of such participants for cash assistance in accordance with section 483.

    ‘(k) MAXIMUM OF 3 COMMUNITY SERVICE JOBS- A program participant may not receive more than 3 community service jobs under the program.

‘Part H--Job Placement Voucher Program

‘SEC. 490A. JOB PLACEMENT VOUCHER PROGRAM.

    ‘A State that is not operating a workfare program under part G may establish a job placement voucher program that meets the following requirements:

      ‘(1) The program shall offer each program participant a voucher which the participant may use to obtain employment in the private sector.

      ‘(2) An employer who receives a voucher issued under the program from an individual may redeem the voucher at any time after the individual has been employed by the employer for 6 months, unless another employee of the employer was displaced by the employment of the individual.

      ‘(3) Upon presentation of a voucher by an employer to the State agency responsible for the administration of the program, the State agency shall pay to the employer an amount equal to 50 percent of the total amount of assistance provided under the State plan approved under part A to the family of which the individual is a member for the most recent 12 months for which the family was eligible for such assistance.’.

    (c) FUNDING- Section 413(a), as added by section 9101(a) of this Act, is amended--

      (1) by striking ‘Subject to’ and inserting the following:

      ‘(1) IN GENERAL- Subject to’; and

      (2) by inserting after and below the end the following:

      ‘(2) WORK FIRST AND OTHER PROGRAMS- (A) Each State that is operating a program in accordance with a plan approved under part F and a program in accordance with part G or H shall be entitled to payments under paragraph (3) for any fiscal year in an amount equal to the sum of the applicable percentages (specified in such paragraph) of its expenditures to carry out such programs (subject to limitations prescribed by or pursuant to such parts or this part on expenditures that may be included for purposes of determining payment under paragraph (3)), but such payments for any fiscal year in the case of any State may not exceed the limitation determined under subparagraph (B) with respect to the State.

      ‘(B) The limitation determined under this subparagraph with respect to a State for any fiscal year is the amount that bears the same ratio to the amount specified in subparagraph (C) for such fiscal year as the average monthly number of adult recipients (as defined in subparagraph (D)) in the State in the preceding fiscal year bears to the average monthly number of such recipients in all the States for such preceding year.

      ‘(C)(i) The amount specified in this subparagraph is--

        ‘(I) $1,600,000,000 for fiscal year 1997;

        ‘(II) $1,600,000,000 for fiscal year 1998;

        ‘(III) $1,900,000,000 for fiscal year 1999;

        ‘(IV) $2,500,000,000 for fiscal year 2000; and

        ‘(V) $3,200,000,000 for fiscal year 2001; and

        ‘(VI) $4,700,000,000 for fiscal year 2002; and

        ‘(VII) the amount determined under clause (ii) for fiscal year 2003 and each succeeding fiscal year.

      ‘(ii) The amount determined under this clause for a fiscal year is the product of the following:

        ‘(I) The amount specified in this subparagraph for the immediately preceding fiscal year.

        ‘(II) 1.00 plus the percentage (if any) by which--

          ‘(aa) the average of the Consumer Price Index (as defined in section 1(f)(5) of the Internal Revenue Code of 1986) for the most recent 12-month period for which such information is available; exceeds

          ‘(bb) the average of the Consumer Price Index (as so defined) for the 12-month period ending on June 30 of the 2nd preceding fiscal year.

        ‘(III) The amount that bears the same ratio to the amount specified in this subparagraph for the immediately preceding fiscal year as the number of individuals whom the Secretary estimates will participate in programs operated under part F, G, or H during the fiscal year bears to the total number of individuals who participated in such programs during such preceding fiscal year.

      ‘(D) For purposes of this paragraph, the term ‘adult recipient’ in the case of any State means an individual other than a dependent child (unless such child is the custodial parent of another dependent child) whose needs are met (in whole or in part) with assistance provided under the State plan approved under this part.

      ‘(E) For purposes of subparagraph (D), the term ‘dependent child’ means a needy child (i) who has been deprived of parental support or care by reason of the death, continued absence from the home (other than absence occasioned solely by reason of the performance of active duty in the uniformed services of the United States), or physical or mental incapacity of a parent, and who is living with his father, mother, grandfather, grandmother, brother, sister, stepfather, stepmother, stepbrother, stepsister, uncle, aunt, first cousin, nephew, or niece, in a place of residence maintained by one or more of such relatives as his or their own home, and (ii) who is (I) under the age of eighteen, or (II) at the option of the State, under the age of nineteen and a full-time student in a secondary school (or in the equivalent level of vocational or technical training), if, before he attains age nineteen, he may reasonably be expected to complete the program of such secondary school (or such training).

      ‘(F) For purposes of subparagraph (E), the term ‘relative with whom any dependent child is living’ means the individual who is one of the relatives specified in subparagraph (E) and with whom such child is living (within the meaning of such subsection) in a place of residence maintained by such individual (himself or together with any one or more of the other relatives so specified) as his (or their) own home.

      ‘(3)(A) In lieu of any payment under paragraph (1) therefor, the Secretary shall pay to each State that is operating a program in accordance with a plan approved under part F and a program in accordance with part G or H, with respect to expenditures by the State to carry out such programs, an amount equal to--

        ‘(i) with respect to so much of such expenditures in a fiscal year as do not exceed the State’s expenditures in the fiscal year 1987 with respect to which payments were made to such State from its allotment for such fiscal year pursuant to part C of this title as then in effect, 90 percent; and

        ‘(ii) with respect to so much of such expenditures in a fiscal year as exceed the amount described in clause (i)--

          ‘(I) 50 percent, in the case of expenditures for administrative costs made by a State in operating such programs for such fiscal year (other than the personnel costs for staff employed full-time in the operation of such program) and the costs of transportation and other work-related supportive services; and

          ‘(II) 60 percent or the Federal medical assistance percentage (as defined in the last sentence of section 1118), whichever is the greater, in the case of expenditures made by a State in operating such programs for such fiscal year (other than for costs described in subclause (I)).

      ‘(B) With respect to the amount for which payment is made to a State under subparagraph (A)(i), the State’s expenditures for the costs of operating such programs may be in cash or in kind, fairly evaluated.

      ‘(C) Not more than 10 percent of the amount payable to a State under this paragraph for a quarter may be for expenditures made during the quarter with respect to program participants who are not eligible for assistance under the State plan approved under this part.’.

    (d) SECRETARY’S SPECIAL ADJUSTMENT FUND- Section 413(a), as added by section 9101(a) of this Act, is amended by adding at the end the following:

      ‘(4) SECRETARY’S SPECIAL ADJUSTMENT FUND- (A) There shall be available to the Secretary from the amount appropriated for payments under paragraph (2) for States’ programs under parts F and G for fiscal year 1996, $300,000,000 for special adjustments to States’ limitations on Federal payments for such programs.

      ‘(B) A State may, not later than March 1 and September 1 of each fiscal year, submit to the Secretary a request to adjust the limitation on payments under this section with respect to its program under part F (and, in fiscal years after 1997) its program under part G for the following fiscal year. The Secretary shall only consider such a request from a State which has, or which demonstrates convincingly on the basis of estimates that it will, submit allowable claims for Federal

payment in the full amount available to it under paragraph (2) in the current fiscal year and obligated 95 percent of its full amount in the prior fiscal year. The Secretary shall by regulation prescribe criteria for the equitable allocation among the States of Federal payments pursuant to adjustments of the limitations referred to in the preceding sentence in the case where the requests of all States that the Secretary finds reasonable exceed the amount available, and, within 30 days following the dates specified in this paragraph, will notify each State whether one or more of its limitations will be adjusted in accordance with the State’s request and the amount of the adjustment (which may be some or all of the amount requested).

      ‘(C) The Secretary may adjust the limitation on Federal payments to a State for a fiscal year under paragraph (2), and upon a determination by the Secretary that (and the amount by which) a State’s limitation should be raised, the amount specified in such paragraph shall be considered to be so increased for the following fiscal year.

      ‘(D) The amount made available under subparagraph (A) for special adjustments shall remain available to the Secretary until expended. That amount shall be reduced by the sum of the adjustments approved by the Secretary in any fiscal year, and the amount shall be increased in a fiscal year by the amount by which all States’ limitations under paragraph (2) of this subsection and section 2008 for a fiscal year exceeded the sum of the Federal payments under such provisons of law for such fiscal year, but for fiscal years after 1997, such amount at the end of such fiscal year shall not exceed $400,000,000.’.

    (e) CONFORMING AMENDMENTS-

      (1) Section 1115(b)(2)(A) (42 U.S.C. 1315(b)(2)(A)) is amended by striking ‘, and 402(a)(19) (relating to the work incentive program)’.

      (2) Section 1108 (42 U.S.C. 1308) is amended--

        (A) in subsection (a), by striking ‘or, in the case of part A of title IV, section 403(k)’; and

        (B) in subsection (d), by striking ‘(exclusive of any amounts on account of services and items to which, in the case of part A of such title, section 403(k) applies)’.

      (3) Section 1902(a)(10)(A)(i)(I) (42 U.S.C. 1396a(a)(19)(A)(i)(I)) is amended--

        (A) by striking ‘402(a)(37), 406(h), or’; and

        (B) by striking ‘482(e)(6)’ and inserting ‘486(f)’.

      (4) Section 1928(a)(1) (42 U.S.C. 1396s(a)(1)) is amended by striking ‘482(e)(6)’ and inserting ‘486(f)’.

    (f) INTENT OF THE CONGRESS- The Congress intends for State activities under section 484 of the Social Security Act (as added by the amendment made by section 9301(a) of this Act) to emphasize the use of the funds that would otherwise be used to provide individuals with assistance under part A of title IV of the Social Security Act and with food stamp benefits under the Food Stamp Act of 1977, to subsidize the wages of such individuals in temporary jobs.

    (g) SENSE OF THE CONGRESS- It is the sense of the Congress that States should target individuals who have not attained 25 years of age for participation in the program established by the State under part F of title IV of the Social Security Act (as added by the amendment made by section 9301(a) of this section) in order to break the cycle of welfare dependency.

SEC. 9302. REGULATIONS.

    The Secretary of Health and Human Services shall prescribe such regulations as may be necessary to implement the amendments made by this subtitle.

SEC. 9303. APPLICABILITY TO STATES.

    (a) STATE OPTION TO ACCELERATE APPLICABILITY- If a State formally notifies the Secretary of Health and Human Services that the State desires to accelerate the applicability to the State of the amendments made by this subtitle, the amendments shall apply to the State on and after such earlier date as the State may select.

    (b) STATE OPTION TO DELAY APPLICABILITY UNTIL WAIVERS EXPIRE- The amendments made by this subtitle shall not apply to a State with respect to which there is in effect a waiver issued under section 1115 of the Social Security Act for the State program established under part F of title IV of such Act, until the waiver expires, if the State formally notifies the Secretary of Health and Human Services that the State desires to so delay such effective date.

    (c) AUTHORITY OF THE SECRETARY OF HEALTH AND HUMAN SERVICES TO DELAY APPLICABILITY TO A STATE- If a State formally notifies the Secretary of Health and Human Services that the State desires to delay the applicability to the State of the amendments made by this title, the amendments shall apply to the State on and after any later date agreed upon by the Secretary and the State.

Subtitle D--Family Responsibility And Improved Child Support Enforcement

Title IX, Subtitle D

CHAPTER 1--ELIGIBILITY AND OTHER MATTERS CONCERNING TITLE IV-D PROGRAM CLIENTS

SEC. 9401. STATE OBLIGATION TO PROVIDE PATERNITY ESTABLISHMENT AND CHILD SUPPORT ENFORCEMENT SERVICES.

    (a) STATE LAW REQUIREMENTS- Section 466(a) (42 U.S.C. 666(a)) is amended by inserting after paragraph (11) the following:

      ‘(12) USE OF CENTRAL CASE REGISTRY AND CENTRALIZED COLLECTIONS UNIT- Procedures under which--

        ‘(A) every child support order established or modified in the State on or after October 1, 1998, is recorded in the central case registry established in accordance with section 454A(e); and

        ‘(B) child support payments are collected through the centralized collections unit established in accordance with section 454B--

          ‘(i) on and after October 1, 1998, under each order subject to wage withholding under section 466(b); and

          ‘(ii) on and after October 1, 1999, under each other order required to be recorded in such central case registry under this paragraph or section 454A(e), except as provided in subparagraph (C); and

        ‘(C)(i) parties subject to a child support order described in subparagraph (B)(ii) may opt out of the procedure for payment of support through the centralized collections unit (but not the procedure for inclusion in the central case registry) by filing with the State agency a written agreement, signed by both parties, to an alternative payment procedure; and

        ‘(ii) an agreement described in clause (i) becomes void whenever either party advises the State agency of an intent to vacate the agreement.’.

    (b) STATE PLAN REQUIREMENTS- Section 454 (42 U.S.C. 654) is amended--

      (1) by striking paragraph (4) and inserting the following:

      ‘(4) provide that such State will undertake--

        ‘(A) to provide appropriate services under this part to--

          ‘(i) each child with respect to whom an assignment is effective under section 403(b)(1)(E)(i), 471(a)(17), or 1912 (except in cases where the State agency determines, in accordance with paragraph (25), that it is against the best interests of the child to do so); and

          ‘(ii) each child not described in clause (i)--

            ‘(I) with respect to whom an individual applies for such services; and

            ‘(II) (on and after October 1, 1998) each child with respect to whom a support order is recorded in the central State case registry established under section 454A, regardless of whether application is made for services under this part; and

        ‘(B) to enforce the support obligation established with respect to the custodial parent of a child described in subparagraph (A) unless the parties to the order which establishes the support obligation have opted, in accordance with section 466(a)(12)(C), for an alternative payment procedure.’; and

      (2) in paragraph (6)--

        (A) by striking subparagraph (A) and inserting the following:

        ‘(A) services under the State plan shall be made available to nonresidents on the same terms as to residents;’;

        (B) in subparagraph (B)--

          (i) by inserting ‘on individuals not receiving assistance under part A’ after ‘such services shall be imposed’; and

          (ii) by inserting ‘but no fees or costs shall be imposed on any absent or custodial parent or other individual for inclusion in the central State registry maintained pursuant to section 454A(e)’; and

        (C) in each of subparagraphs (B), (C), and (D)--

          (i) by indenting such subparagraph and aligning its left margin with the left margin of subparagraph (A); and

          (ii) by striking the final comma and inserting a semicolon.

    (c) CONFORMING AMENDMENTS-

      (1) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is amended by striking ‘454(6)’ each place it appears and inserting ‘454(4)(A)(ii)’.

      (2) Section 454(23) (42 U.S.C. 654(23)) is amended, effective October 1, 1998, by striking ‘information as to any application fees for such services and’.

      (3) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is amended by striking ‘in the case of overdue support which a State has agreed to collect under section 454(6)’ and inserting ‘in any other case’.

      (4) Section 466(e) (42 U.S.C. 666(e)) is amended by striking ‘or (6)’.

SEC. 9402. DISTRIBUTION OF PAYMENTS.

    (a) DISTRIBUTIONS THROUGH STATE CHILD SUPPORT ENFORCEMENT AGENCY TO FORMER ASSISTANCE RECIPIENTS- Section 454(5) (42 U.S.C. 654(5)) is amended--

      (1) in subparagraph (A)--

        (A) by striking section 402(a)(26) is effective,’ and inserting ‘section 403(b)(1)(E)(i) is effective, except as otherwise specifically provided in section 464 or 466(a)(3),’; and

        (B) by striking ‘except that’ and all that follows through the semicolon; and

      (2) in subparagraph (B), by striking ‘, except’ and all that follows through ‘medical assistance’.

    (b) DISTRIBUTION TO A FAMILY CURRENTLY RECEIVING TEMPORARY EMPLOYMENT ASSISTANCE- Section 457 (42 U.S.C. 657) is amended--

      (1) by striking subsection (a) and redesignating subsection (b) as subsection (a);

      (2) in subsection (a) (as so redesignated)--

        (A) in the matter preceding paragraph (2), to read as follows:

    ‘(a) IN THE CASE OF A FAMILY RECEIVING TEA- Amounts collected under this part during any month as support of a child who is receiving assistance under part A (or a parent or caretaker relative of such a child) shall (except in the case of a State exercising the option under subsection (b)) be distributed as follows:

      ‘(1) an amount equal to the amount that will be disregarded pursuant to section 402(d)(2)(C) shall be taken from each of--

        ‘(A) the amounts received in a month which represent payments for that month; and

        ‘(B) the amounts received in a month which represent payments for a prior month which were made by the absent parent in that prior month;

      and shall be paid to the family without affecting its eligibility for assistance or decreasing any amount otherwise payable as assistance to such family during such month;’;

        (B) in paragraph (4), by striking ‘or (B)’ and all that follows through the period and inserting ‘; then (B) from any remainder, amounts equal to arrearages of such support obligations assigned, pursuant to part A, to any other State or States shall be paid to such other State or States and used to pay any such arrearages (with appropriate reimbursement of the Federal Government to the extent of its participation in the financing); and then (C) any remainder shall be paid to the family.’; and

      (3) by inserting after subsection (a) (as so redesignated) the following new subsection:

    ‘(b) ALTERNATIVE DISTRIBUTION IN CASE OF FAMILY RECEIVING TEA- In the case of a State electing the option under this subsection, amounts collected as described in subsection (a) shall be distributed as follows:

      ‘(1) an amount equal to the amount that will be disregarded pursuant to section 402(d)(2)(C) shall be taken from each of--

        ‘(A) the amounts received in a month which represent payments for that month; and

        ‘(B) the amounts received in a month which represent payments for a prior month which were made by the absent parent in that prior month;

      and shall be paid to the family without affecting its eligibility for assistance or decreasing any amount otherwise payable as assistance to such family during such month;

      ‘(2) second, from any remainder, amounts equal to the balance of support owed for the current month shall be paid to the family;

      ‘(3) third, from any remainder, amounts equal to arrearages of such support obligations assigned, pursuant to part A, to the State making the collection shall be retained and used by such State to pay any such arrearages (with appropriate reimbursement of the Federal Government to the extent of its participation in the financing);

      ‘(4) fourth, from any remainder, amounts equal to arrearages of such support obligations assigned, pursuant to part A, to any other State or States shall be paid to such other State or States and used to pay any such arrearages (with appropriate reimbursement of the Federal Government to the extent of its participation in the financing); and

      ‘(5) fifth, any remainder shall be paid to the family.’.

    (c) DISTRIBUTION TO A FAMILY NOT RECEIVING TEA- Section 457(c) (42 U.S.C. 657(c)) is amended to read as follows:

    ‘(c) DISTRIBUTIONS IN CASE OF FAMILY NOT RECEIVING TEA- Amounts collected by a State agency under this part during any month as support of a child who is not receiving assistance under part A (or of a parent or caretaker relative of such a child) shall (subject to the remaining provisions of this section) be distributed as follows:

      ‘(1) first, amounts equal to the total of such support owed for such month shall be paid to the family;

      ‘(2) second, from any remainder, amounts equal to arrearages of such support obligations for months during which such child did not receive assistance under part A shall be paid to the family;

      ‘(3) third, from any remainder, amounts equal to arrearages of such support obligations assigned to the State making the collection pursuant to part A shall be retained and used by such State to pay any such arrearages (with appropriate reimbursement of the Federal Government to the extent of its participation in the financing); and

      ‘(4) fourth, from any remainder, amounts equal to arrearages of such support obligations assigned to any other State pursuant to part A shall be paid to such other State or States, and used to pay such arrearages, in the order in which such arrearages accrued (with appropriate reimbursement of the Federal Government to the extent of its participation in the financing).’.

    (d) DISTRIBUTION TO A CHILD RECEIVING ASSISTANCE UNDER TITLE IV-E- Section 457(d) (42 U.S.C. 657(d)) is amended, in the matter preceding paragraph (1), by striking ‘Notwithstanding the preceding provisions of this section, amounts’ and inserting the following:

    ‘(d) DISTRIBUTIONS IN CASE OF A CHILD RECEIVING ASSISTANCE UNDER TITLE IV-E- Amounts’.

    (e) REGULATIONS- The Secretary of Health and Human Services shall promulgate regulations under part A of title IV of the Social Security Act, establishing standards applicable to States electing the alternative formula under section 457(b) of such Act for distribution of collections on behalf of families receiving temporary employment assistance, designed to minimize irregular monthly payments to such families.

    (f) CLERICAL AMENDMENTS- Section 454 (42 U.S.C. 654) is amended--

      (1) in paragraph (11)--

        (A) by striking ‘(11)’ and inserting ‘(11)(A)’; and

        (B) by inserting after the semicolon ‘and’; and

      (2) by redesignating paragraph (12) as subparagraph (B) of paragraph (11).

    (g) EFFECTIVE DATES-

      (1) IN GENERAL- Except as otherwise provided in this subsection, the amendments made by this section shall become effective on October 1, 1996.

      (2) FAMILY NOT RECEIVING TEA- The amendment made by subsection (c) shall become effective on October 1, 1999.

      (3) SPECIAL RULES-

        (A) APPLICABILITY- A State may elect to have the amendments made by any subsection of this section become effective only with respect to child support cases beginning on or after the effective date of such subsection.

        (B) DELAYED IMPLEMENTATION- A State may elect to have the amendments made by this section (other than subsection (c)) become effective on a date later than October 1, 1996, which date shall coincide with the operation of the single statewide automated data processing and information retrieval system required by section 454A of the Social Security Act (as added by section 9415(a)(2) of this Act) and the State centralized collection unit required by section 454B of the Social Security Act (as added by section 9422(b) of this Act).

SEC. 9403. DUE PROCESS RIGHTS.

    (a) IN GENERAL- Section 454 (42 U.S.C. 654), as amended by section 9402(f) of this Act, is amended by inserting after paragraph (11) the following new paragraph:

      ‘(12) provide for procedures to ensure that--

        ‘(A) individuals who are applying for or receiving services under this part, or are parties to cases in which services are being provided under this part--

          ‘(i) receive notice of all proceedings in which support obligations might be established or modified; and

          ‘(ii) receive a copy of any order establishing or modifying a child support obligation, or (in the case of a petition for modification) a notice of determination that there should be no change in the amount of the child support award, within 14 days after issuance of such order or determination;

        ‘(B) individuals applying for or receiving services under this part have access to a fair hearing that meets standards established by the Secretary and ensures prompt consideration and resolution of complaints (but the resort to such procedure shall not stay the enforcement of any support order); and

        ‘(C) individuals adversely affected by the establishment or modification of (or, in the case of a petition for modification, the determination that there should be no change in) a child support order shall be afforded not less than 30 days after the receipt of the order or determination to initiate proceedings to challenge such order or determination;’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall become effective on October 1, 1997.

SEC. 9404. PRIVACY SAFEGUARDS.

    (a) STATE PLAN REQUIREMENT- Section 454 (42 U.S.C. 454) is amended--

      (1) by striking ‘and’ at the end of paragraph (23);

      (2) by striking the period at the end of paragraph (24) and inserting ‘; and’; and

      (3) by adding after paragraph (24) the following:

      ‘(25) will have in effect safeguards applicable to all sensitive and confidential information handled by the State agency designed to protect the privacy rights of the parties, including--

        ‘(A) safeguards against unauthorized use or disclosure of information relating to proceedings or actions to establish paternity, or to establish or enforce support;

        ‘(B) prohibitions on the release of information on the whereabouts of one party to another party against whom a protective order with respect to the former party has been entered; and

        ‘(C) prohibitions on the release of information on the whereabouts of one party to another party if the State has reason to believe that the release of the information may result in physical or emotional harm to the former party.’.

    (b) EFFECTIVE DATE- The amendment made by subsection (a) shall become effective on October 1, 1997.

CHAPTER 2--PROGRAM ADMINISTRATION AND FUNDING

SEC. 9411. FEDERAL MATCHING PAYMENTS.

    (a) INCREASED BASE MATCHING RATE- Section 455(a)(2) (42 U.S.C. 655(a)(2)) is amended to read as follows:

      ‘(2) The applicable percent for a quarter for purposes of paragraph (1)(A) is--

        ‘(A) for fiscal year 1997, 69 percent,

        ‘(B) for fiscal year 1998, 72 percent, and

        ‘(C) for fiscal year 1999 and succeeding fiscal years, 75 percent.’.

    (b) MAINTENANCE OF EFFORT- Section 455 (42 U.S.C. 655) is amended--

      (1) in subsection (a)(1), in the matter preceding subparagraph (A), by striking ‘From’ and inserting ‘Subject to subsection (c), from’; and

      (2) by inserting after subsection (b) the following new subsection:

    ‘(c) MAINTENANCE OF EFFORT- Notwithstanding the provisions of subsection (a), total expenditures for the State program under this part for fiscal year 1997 and each succeeding fiscal year, reduced by the percentage specified for such fiscal year under subsection (a)(2)(A), (B), or (C)(i), shall not be less than such total expenditures for fiscal year 1996, reduced by 66 percent.’.

SEC. 9412. PERFORMANCE-BASED INCENTIVES AND PENALTIES.

    (a) INCENTIVE ADJUSTMENTS TO FEDERAL MATCHING RATE- Section 458 (42 U.S.C. 658) is amended to read as follows:

‘INCENTIVE ADJUSTMENTS TO MATCHING RATE

    ‘SEC. 458. (a) INCENTIVE ADJUSTMENT- (1) IN GENERAL- In order to encourage and reward State child support enforcement programs which perform in an effective manner, the Federal matching rate for payments to a State under section 455(a)(1)(A), for each fiscal year beginning on or after October 1, 1998, shall be increased by a factor reflecting the sum of the applicable incentive adjustments (if any) determined in accordance with regulations under this section with respect to Statewide paternity establishment and to overall performance in child support enforcement.

    ‘(2) STANDARDS- (A) IN GENERAL- The Secretary shall specify in regulations--

      ‘(i) the levels of accomplishment, and rates of improvement as alternatives to such levels, which States must attain to qualify for incentive adjustments under this section; and

      ‘(ii) the amounts of incentive adjustment that shall be awarded to States achieving specified accomplishment or improvement levels, which amounts shall be graduated, ranging up to--

        ‘(I) 5 percentage points, in connection with Statewide paternity establishment; and

        ‘(II) 10 percentage points, in connection with overall performance in child support enforcement.

    ‘(B) LIMITATION- In setting performance standards pursuant to subparagraph (A)(i) and adjustment amounts pursuant to subparagraph (A)(ii), the Secretary shall ensure that the aggregate number of percentage point increases as incentive adjustments to all States do not exceed such aggregate increases as assumed by the Secretary in estimates of the cost of this section as of June 1995, unless the aggregate performance of all States exceeds the projected aggregate performance of all States in such cost estimates.

    ‘(3) DETERMINATION OF INCENTIVE ADJUSTMENT- The Secretary shall determine the amount (if any) of incentive adjustment due each State on the basis of the data submitted by the State pursuant to section 454(15)(B) concerning the levels of accomplishment (and rates of improvement) with respect to performance indicators specified by the Secretary pursuant to this section.

    ‘(4) FISCAL YEAR SUBJECT TO INCENTIVE ADJUSTMENT- The total percentage point increase determined pursuant to this section with respect to a State program in a fiscal year shall apply as an adjustment to the applicable percent under section 455(a)(2) for payments to such State for the succeeding fiscal year.

    ‘(5) RECYCLING OF INCENTIVE ADJUSTMENT- A State shall expend in the State program under this part all funds paid to the State by the Federal Government as a result of an incentive adjustment under this section.

    ‘(b) MEANING OF TERMS- For purposes of this section--

      ‘(1) the term ‘Statewide paternity establishment percentage’ means, with respect to a fiscal year, the ratio (expressed as a percentage) of--

        ‘(A) the total number of out-of-wedlock children in the State under one year of age for whom paternity is established or acknowledged during the fiscal year, to

        ‘(B) the total number of children born out of wedlock in the State during such fiscal year; and

      ‘(2) the term ‘overall performance in child support enforcement’ means a measure or measures of the effectiveness of the State agency in a fiscal year which takes into account factors including--

        ‘(A) the percentage of cases requiring a child support order in which such an order was established;

        ‘(B) the percentage of cases in which child support is being paid;

        ‘(C) the ratio of child support collected to child support due; and

        ‘(D) the cost-effectiveness of the State program, as determined in accordance with standards established by the Secretary in regulations.’.

    (b) ADJUSTMENT OF PAYMENTS UNDER PART D OF TITLE IV- Section 455(a)(2) (42 U.S.C. 655(a)(2)), as amended by section 9411(a) of this Act, is amended--

      (1) by striking the period at the end of subparagraph (C)(ii) and inserting a comma; and

      (2) by adding after and below subparagraph (C), flush with the left margin of the subsection, the following:

    ‘increased by the incentive adjustment factor (if any) determined by the Secretary pursuant to section 458.’.

    (c) CONFORMING AMENDMENTS- Section 454(22) (42 U.S.C. 654(22)) is amended--

      (1) by striking ‘incentive payments’ the first place it appears and inserting ‘incentive adjustments’; and

      (2) by striking ‘any such incentive payments made to the State for such period’ and inserting ‘any increases in Federal payments to the State resulting from such incentive adjustments’.

    (d) CALCULATION OF IV-D PATERNITY ESTABLISHMENT PERCENTAGE- (1) Section 452(g)(1) (42 U.S.C. 652(g)(1)) is amended in the matter preceding subparagraph (A) by inserting ‘its overall performance in child support enforcement is satisfactory (as defined in section 458(b) and regulations of the Secretary), and’ after ‘1994,’.

    (2) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended--

      (A) in subparagraph (A), in the matter preceding clause (i)--

        (i) by striking ‘paternity establishment percentage’ and inserting ‘IV-D paternity establishment percentage’; and

        (ii) by striking ‘(or all States, as the case may be)’;

      (B) in subparagraph (A)(i), by striking ‘during the fiscal year’;

      (C) in subparagraph (A)(ii)(I), by striking ‘as of the end of the fiscal year’ and inserting ‘in the fiscal year or, at the option of the State, as of the end of such year’;

      (D) in subparagraph (A)(ii)(II), by striking ‘or (E) as of the end of the fiscal year’ and inserting ‘in the fiscal year or, at the option of the State, as of the end of such year’;

      (E) in subparagraph (A)(iii)--

        (i) by striking ‘during the fiscal year’; and

        (ii) by striking ‘and’ at the end; and

      (F) in the matter following subparagraph (A)--

        (i) by striking ‘who were born out of wedlock during the immediately preceding fiscal year’ and inserting ‘born out of wedlock’;

        (ii) by striking ‘such preceding fiscal year’ both places it appears and inserting ‘the preceding fiscal year’; and

        (iii) by striking ‘or (E)’ the second place it appears.

    (3) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is amended--

      (A) by striking subparagraph (A) and redesignating subparagraphs (B) and (C) as subparagraphs (A) and (B), respectively;

      (B) in subparagraph (A), as redesignated, by striking ‘the percentage of children born out-of-wedlock in the State’ and inserting ‘the percentage of children in the State who are born out of wedlock or for whom support has not been established’; and

      (C) in subparagraph (B), as redesignated--

        (i) by inserting ‘and overall performance in child support enforcement’ after ‘paternity establishment percentages’; and

        (ii) by inserting ‘and securing support’ before the period.

    (e) REDUCTION OF PAYMENTS UNDER PART D OF TITLE IV-

      (1) NEW REQUIREMENTS- Section 455 (42 U.S.C. 655) is amended by inserting after subsection (b) the following:

    ‘(c)(1) If the Secretary finds, with respect to a State program under this part in a fiscal year beginning on or after October 1, 1997--

      ‘(A)(i) on the basis of data submitted by a State pursuant to section 454(15)(B), that the State program in such fiscal year failed to achieve the IV-D paternity establishment percentage (as defined in section 452(g)(2)(A)) or the appropriate level of overall performance in child support enforcement (as defined in section 458(b)(2)), or to meet other performance measures that may be established by the Secretary, or

      ‘(ii) on the basis of an audit or audits of such State data conducted pursuant to section 452(a)(4)(C), that the State data submitted pursuant to section 454(15)(B) is incomplete or unreliable; and

      ‘(B) that, with respect to the succeeding fiscal year--

        ‘(i) the State failed to take sufficient corrective action to achieve the appropriate performance levels as described in subparagraph (A)(i) of this paragraph, or

        ‘(ii) the data submitted by the State pursuant to section 454(15)(B) is incomplete or unreliable,

    the amounts otherwise payable to the State under this part for quarters following the end of such succeeding fiscal year, prior to quarters following the end of the first quarter throughout which the State program is in compliance with such performance requirement, shall be reduced by the percentage specified in paragraph (2).

    ‘(2) The reductions required under paragraph (1) shall be--

      ‘(A) not less than 6 nor more than 8 percent, or

      ‘(B) not less than 8 nor more than 12 percent, if the finding is the second consecutive finding made pursuant to paragraph (1), or

      ‘(C) not less than 12 nor more than 15 percent, if the finding is the third or a subsequent consecutive such finding.

    ‘(3) For purposes of this subsection, section 405(d), and section 452(a)(4), a State which is determined as a result of an audit to have submitted incomplete or unreliable data pursuant to section 454(15)(B), shall be determined to have submitted adequate data if the Secretary determines that the extent of the incompleteness or unreliability of the data is of a technical nature which does not adversely affect the determination of the level of the State’s performance.’.

      (2) CONFORMING AMENDMENTS-

        (A) Section 452(a)(4) (42 U.S.C. 652(a)(4)) is amended by striking ‘403(h)’ each place such term appears and inserting ‘455(c)’.

        (B) Subsections (d)(3)(A), (g)(1), and (g)(3)(A) of section 452 (42 U.S.C. 652) are each amended by striking ‘403(h)’ and inserting ‘455(c)’.

    (f) EFFECTIVE DATES-

      (1) INCENTIVE ADJUSTMENTS- (A) The amendments made by subsections (a), (b), and (c) shall become effective October 1, 1997, except to the extent provided in subparagraph (B).

      (B) Section 458 of the Social Security Act, as in effect prior to the enactment of this section, shall be effective for purposes of incentive payments to States for fiscal years prior to fiscal year 1999.

      (2) PENALTY REDUCTIONS- (A) The amendments made by subsection (d) shall become effective with respect to calendar quarters beginning on and after the date of enactment of this Act.

      (B) The amendments made by subsection (e) shall become effective with respect to calendar quarters beginning on and after the date one year after the date of enactment of this Act.

SEC. 9413. FEDERAL AND STATE REVIEWS AND AUDITS.

    (a) STATE AGENCY ACTIVITIES- Section 454 (42 U.S.C. 654) is amended--

      (1) in paragraph (14), by striking ‘(14)’ and inserting ‘(14)(A)’;

      (2) by redesignating paragraph (15) as subparagraph (B) of paragraph (14); and

      (3) by inserting after paragraph (14) the following new paragraph:

      ‘(15) provide for--

        ‘(A) a process for annual reviews of and reports to the Secretary on the State program under this part, which shall include such information as may be necessary to measure State compliance with Federal requirements for expedited procedures and timely case processing, using such standards and procedures as are required by the Secretary, under which the State agency will determine the extent to which such program is in conformity with applicable requirements with respect to the operation of State programs under this part (including the status of complaints filed under the procedure required under paragraph (12)(B)); and

        ‘(B) a process of extracting from the State automated data processing system and transmitting to the Secretary data and calculations concerning the levels of accomplishment (and rates of improvement) with respect to applicable performance indicators (including IV-D paternity establishment percentages and overall performance in child support enforcement) to the extent necessary for purposes of sections 452(g) and 458.’.

    (b) FEDERAL ACTIVITIES- Section 452(a)(4) (42 U.S.C. 652(a)(4)) is amended to read as follows:

      ‘(4)(A) review data and calculations transmitted by State agencies pursuant to section 454(15)(B) on State program accomplishments with respect to performance indicators for purposes of section 452(g) and 458, and determine the amount (if any) of penalty reductions pursuant to section 455(c) to be applied to the State;

      ‘(B) review annual reports by State agencies pursuant to section 454(15)(A) on State program conformity with Federal requirements; evaluate any elements of a State program in which significant deficiencies are indicated by such report on the status of complaints under the State procedure under section 454(12)(B); and, as appropriate, provide to the State agency comments, recommendations for additional or alternative corrective actions, and technical assistance; and

      ‘(C) conduct audits, in accordance with the government auditing standards of the United States Comptroller General--

        ‘(i) at least once every 3 years (or more frequently, in the case of a State which fails to meet requirements of this part, or of regulations implementing such requirements,

concerning performance standards and reliability of program data) to assess the completeness, reliability, and security of the data, and the accuracy of the reporting systems, used for the calculations of performance indicators specified in subsection (g) and section 458;

        ‘(ii) of the adequacy of financial management of the State program, including assessments of--

          ‘(I) whether Federal and other funds made available to carry out the State program under this part are being appropriately expended, and are properly and fully accounted for; and

          ‘(II) whether collections and disbursements of support payments and program income are carried out correctly and are properly and fully accounted for; and