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SubtitleH

SubtitleH

Note: this is a hand enrollment pursuant to Public Law 105-32.

H.R.2015

One Hundred Fifth Congress

of the

United States of America

AT THE FIRST SESSION

Begun and held at the City of Washington on Tuesday, the
seventh day of January, one thousand nine hundred and ninety-seven


An Act


Subtitle H–Medicaid


CHAPTER 1–MANAGED CARE

SEC. 4701. STATE OPTION OF USING MANAGED CARE; CHANGE IN
TERMINOLOGY.

(a) Use of Managed Care Generally.–Title XIX is amended by
redesignating section 1932 as section 1933 and by inserting after
section 1931 the following new section:

~ provisions relating to managed care ~

Sec. 1932. (a) State Option To Use Managed Care.– (1) Use of
medicaid managed care organizations and primary care case managers.–
(A) In general.–Subject to the succeeding provisions of this
section, and notwithstanding paragraph (1), (10)(B), or (23)(A) of
section 1902(a), a State– (i) may require an individual who is
eligible for medical assistance under the State plan under this title
to enroll with a managed care entity as a condition of receiving such
assistance (and, with respect to assistance furnished by or under
arrangements with such entity, to receive such assistance through the
entity), if–

(I) the entity and the contract with the State meet the applicable
requirements of this section and section 1903(m) or section 1905(t),
and (II) the requirements described in the succeeding paragraphs of
this subsection are met; and

(ii) may restrict the number of provider agreements with managed
care entities under the State plan if such restriction does not
substantially impair access to services.

(B) Definition of managed care entity.–In this section, the term
‘managed care entity’ means– (i) a medicaid managed care
organization, as defined in section 1903(m)(1)(A), that provides or
arranges for services for enrollees under a contract pursuant to
section 1903(m); and (ii) a primary care case manager, as defined in
section 1905(t)(2).

(2) Special rules.– (A) Exemption of certain children with
special needs.–A State may not require under paragraph (1) the
enrollment in a managed care entity of an individual under 19 years
of age who– (i) is eligible for supplemental security income under
title XVI; (ii) is described in section 501(a)(1)(D); (iii) is
described in section 1902(e)(3); (iv) is receiving foster care or
adoption assistance under part E of title IV; or (v) is in foster
care or otherwise in an out-of-home placement.

(B) Exemption of medicare beneficiaries.–A State may not require
under paragraph (1) the enrollment in a managed care entity of an
individual who is a qualified medicare beneficiary (as defined in
section 1905(p)(1)) or an individual otherwise eligible for benefits
under title XVIII.

(C) Indian enrollment.–A State may not require under paragraph
(1) the enrollment in a managed care entity of an individual who is
an Indian (as defined in section 4(c) of the Indian Health Care
Improvement Act of 1976 (25 U.S.C. 1603(c)) unless the entity is one
of the following (and only if such entity is participating under the
plan): (i) The Indian Health Service.

(ii) An Indian health program operated by an Indian tribe or
tribal organization pursuant to a contract, grant, cooperative
agreement, or compact with the Indian Health Service pursuant to the
Indian Self-Determination Act (25 U.S.C. 450 et seq.).

(iii) An urban Indian health program operated by an urban Indian
organization pursuant to a grant or contract with the Indian Health
Service pursuant to title V of the Indian Health Care Improvement Act
(25 U.S.C. 1601 et seq.).

(3) Choice of coverage.– (A) In general.–A State must permit an
individual to choose a managed care entity from not less than two
such entities that meet the applicable requirements of this section,
and of section 1903(m) or section 1905(t).

(B) State option.–At the option of the State, a State shall be
considered to meet the requirements of subparagraph (A) in the case
of an individual residing in a rural area, if the State requires the
individual to enroll with a managed care entity if such entity– (i)
permits the individual to receive such assistance through not less
than two physicians or case managers (to the extent that at least two
physicians or case managers are available to provide such assistance
in the area), and (ii) permits the individual to obtain such
assistance from any other provider in appropriate circumstances (as
established by the State under regulations of the Secretary).

(C) Treatment of certain county-operated health insuring
organizations.–A State shall be considered to meet the requirement
of subparagraph (A) if– (i) the managed care entity in which the
individual is enrolled is a health-insuring organization which–

(I) first became operational prior to January 1, 1986, or (II) is
described in section 9517(c)(3) of the Omnibus Budget Reconciliation
Act of 1985 (as added by section 4734(2) of the Omnibus Budget
Reconciliation Act of 1990), and

(ii) the individual is given a choice between at least two
providers within such entity.

(4) Process for enrollment and termination and change of
enrollment.–As conditions under paragraph (1)(A)– (A) In
general.–The State, enrollment broker (if any), and managed care
entity shall permit an individual eligible for medical assistance
under the State plan under this title who is enrolled with the entity
under this title to terminate (or change) such enrollment– (i) for
cause at any time (consistent with section 1903(m)(2)(A)(vi)), and
(ii) without cause–

(I) during the 90-day period beginning on the date the individual
receives notice of such enrollment, and (II) at least every 12 months
thereafter.

(B) Notice of termination rights.–The State shall provide for
notice to each such individual of the opportunity to terminate (or
change) enrollment under such conditions. Such notice shall be
provided at least 60 days before each annual enrollment opportunity
described in subparagraph (A)(ii)(II).

(C) Enrollment priorities.–In carrying out paragraph (1)(A), the
State shall establish a method for establishing enrollment priorities
in the case of a managed care entity that does not have sufficient
capacity to enroll all such individuals seeking enrollment under
which individuals already enrolled with the entity are given priority
in continuing enrollment with the entity.

(D) Default enrollment process.–In carrying out paragraph (1)(A),
the State shall establish a default enrollment process– (i) under
which any such individual who does not enroll with a managed care
entity during the enrollment period specified by the State shall be
enrolled by the State with such an entity which has not been found to
be out of substantial compliance with the applicable requirements of
this section and of section 1903(m) or section 1905(t); and (ii) that
takes into consideration–

(I) maintaining existing provider-individual relationships or
relationships with providers that have traditionally served
beneficiaries under this title; and (II) if maintaining such provider
relationships is not possible, the equitable distribution of such
individuals among qualified managed care entities available to enroll
such individuals, consistent with the enrollment capacities of the
entities.

(5) Provision of information.– (A) Information in easily
understood form.–Each State, enrollment broker, or managed care
entity shall provide all enrollment notices and informational and
instructional materials relating to such an entity under this title
in a manner and form which may be easily understood by enrollees and
potential enrollees of the entity who are eligible for medical
assistance under the State plan under this title.

(B) Information to enrollees and potential enrollees.– Each
managed care entity that is a medicaid managed care organization
shall, upon request, make available to enrollees and potential
enrollees in the organization’s service area information concerning
the following: (i) Providers.–The identity, locations,
qualifications, and availability of health care providers that
participate with the organization.

(ii) Enrollee rights and responsibilities.–The rights and
responsibilities of enrollees.

(iii) Grievance and appeal procedures.–The procedures available
to an enrollee and a health care provider to challenge or appeal the
failure of the organization to cover a service.

(iv) Information on covered items and services.–All items and
services that are available to enrollees under the contract between
the State and the organization that are covered either directly or
through a method of referral and prior authorization. Each managed
care entity that is a primary care case manager shall, upon request,
make available to enrollees and potential enrollees in the
organization’s service area the information described in clause
(iii).

(C) Comparative information.–A State that requires individuals to
enroll with managed care entities under paragraph (1)(A) shall
annually (and upon request) provide, directly or through the managed
care entity, to such individuals a list identifying the managed care
entities that are (or will be) available and information (presented
in a comparative, chart-like form) relating to the following for each
such entity offered: (i) Benefits and cost-sharing.–The benefits
covered and cost-sharing imposed by the entity.

(ii) Service area.–The service area of the entity.

(iii) Quality and performance.–To the extent available, quality
and performance indicators for the benefits under the entity.

(D) Information on benefits not covered under managed care
arrangement.–A State, directly or through managed care entities,
shall, on or before an individual enrolls with such an entity under
this title, inform the enrollee in a written and prominent manner of
any benefits to which the enrollee may be entitled to under this
title but which are not made available to the enrollee through the
entity. Such information shall include information on where and how
such enrollees may access benefits not made available to the enrollee
through the entity.”.

(b) Change in Terminology.– (1) In general.–Section
1903(m)(1)(A) (42 U.S.C. 1396b(m)) is amended– (A) by striking “The
term” and all that follows through “and–” and inserting “The term
‘medicaid managed care organization’ means a health maintenance
organization, an eligible organization with a contract under section
1876 or a Medicare+Choice organization with a contract under part C
of title XVIII, a provider sponsored organization, or any other
public or private organization, which meets the requirement of
section 1902(w) and–“; and (B) by adding after and below clause (ii)
the following: An organization that is a qualified health maintenance
organization (as defined in section 1310(d) of the Public Health
Service Act) is deemed to meet the requirements of clauses (i) and
(ii).”.

(2) Conforming changes in terminology.–(A) Each of the following
provisions is amended by striking “health maintenance organization”
and inserting “medicaid managed care organization”: (i) Section
1902(a)(23) (42 U.S.C. 1396a(a)(23)).

(ii) Section 1902(a)(57) (42 U.S.C. 1396a(a)(57)).

(iii) Section 1902(p)(2) (42 U.S.C. 1396a(p)(2)).

(iv) Section 1902(w)(2)(E) (42 U.S.C. 1396a(w)(2)(E)).

(v) Section 1903(k) (42 U.S.C. 1396b(k)).

(vi) In section 1903(m)(1)(B).

(vii) In subparagraphs (A)(i) and (H)(i) of section 1903(m)(2) (42
U.S.C. 1396b(m)(2)).

(viii) Section 1903(m)(4)(A) (42 U.S.C. 1396b(m)(4)(A)), the first
place it appears.

(ix) Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r- 6(b)(4)(D)(iv)).

(x) Section 1927(j)(1) (42 U.S.C. 1396r-8(j)(1)) is amended by
striking “Health Maintenance Organizations, including those
organizations” and inserting “health maintenance organizations,
including medicaid managed care organizations”.

(B) Section 1903(m)(2)(H) (42 U.S.C. 1396b(m)(2)(H)) is amended,
in the matter following clause (iii), by striking “health
maintenance”.

(C) Clause (viii) of section 1903(w)(7)(A) (42 U.S.C.
1396b(w)(7)(A)) is amended to read as follows: (viii) Services of a
medicaid managed care organization with a contract under section
1903(m).”.

(D) Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r-6(b)(4)(D)(iv)) is
amended– (i) in the heading, by striking “hmo” and inserting
“medicaid managed care organization”; and (ii) by inserting “and the
applicable requirements of section 1932” before the period at the
end.

(c) Compliance of Contract With New Requirements.–Section
1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A)) is amended– (1) by striking
“and” at the end of clause (x), (2) by striking the period at the end
of clause (xi) and inserting “; and”; and (3) by adding at the end
the following: (xi) such contract, and the entity complies with the
applicable requirements of section 1932.”.

(d) Conforming Amendments to Freedom-of-Choice and Termination of
Enrollment Requirements.– (1) Section 1902(a)(23) (42 U.S.C.
1396a(a)(23)), as amended by section 4724(d), is amended by striking
“and in section 1915” and inserting “, in section 1915, and in
section 1932(a)”.

(2) Section 1903(m)(2) (42 U.S.C. 1396b(m)(2)) is amended– (A) in
paragraph (A)(vi)– (i) by striking “except as provided under
subparagraph (F),”, (ii) by striking “without cause” and all that
follows through for such termination” and inserting “in accordance
with section 1932(a)(4);”, (iii) by inserting “in accordance with
such section” after “provides for notification”; and (B) by striking
subparagraph (F).


SEC. 4702. PRIMARY CARE CASE MANAGEMENT SERVICES AS STATE OPTION
WITHOUT NEED FOR WAIVER.

(a) In General.–Section 1905 (42 U.S.C. 1396d) is amended– (1)
in subsection (a)– (A) by striking “and” at the end of paragraph
(24); (B) by redesignating paragraph (25) as paragraph (26) and by
striking the period at the end of such paragraph and inserting a
comma; and (C) by inserting after paragraph (24) the following new
paragraph: (25) primary care case management services (as defined in
subsection (t)); and”; and (2) by adding at the end the following new
subsection: (t)(1) The term ‘primary care case management services’
means case-management related services (including locating,
coordinating, and monitoring of health care services) provided by a
primary care case manager under a primary care case management
contract.

(2) The term ‘primary care case manager’ means any of the
following that provides services of the type described in paragraph
(1) under a contract referred to in such paragraph: (A) A physician,
a physician group practice, or an entity employing or having other
arrangements with physicians to provide such services.

(B) At State option– (i) a nurse practitioner (as described in
section 1905(a)(21)); (ii) a certified nurse-midwife (as defined in
section 1861(gg)); or (iii) a physician assistant (as defined in
section 1861(aa)(5)).

(3) The term ‘primary care case management contract’ means a
contract between a primary care case manager and a State under which
the manager undertakes to locate, coordinate, and monitor covered
primary care (and such other covered services as may be specified
under the contract) to all individuals enrolled with the manager, and
which– (A) provides for reasonable and adequate hours of operation,
including 24-hour availability of information, referral, and
treatment with respect to medical emergencies; (B) restricts
enrollment to individuals residing sufficiently near a service
delivery site of the manager to be able to reach that site within a
reasonable time using available and affordable modes of
transportation; (C) provides for arrangements with, or referrals to,
sufficient numbers of physicians and other appropriate health care
professionals to ensure that services under the contract can be
furnished to enrollees promptly and without compromise to quality of
care; (D) prohibits discrimination on the basis of health status or
requirements for health care services in enrollment, disenrollment,
or reenrollment of individuals eligible for medical assistance under
this title; (E) provides for a right for an enrollee to terminate
enrollment in accordance with section 1932(a)(4); and (F) complies
with the other applicable provisions of section 1932.

(4) For purposes of this subsection, the term ‘primary care’
includes all health care services customarily provided in accordance
with State licensure and certification laws and regulations, and all
laboratory services customarily provided by or through, a general
practitioner, family medicine physician, internal medicine physician,
obstetrician/gynecologist, or pediatrician.”.

(b) Conforming Amendments.– (1) Application of reenrollment
provisions to pccms.–Section 1903(m)(2)(H) (42 U.S.C.
1396b(m)(2)(H)) is amended– (A) in clause (i), by inserting before
the comma the following: or with a primary care case manager with a
contract described in section 1905(t)(3)”; and (B) by inserting
before the period at the end the following: or with the manager
described in such clause if the manager continues to have a contract
described in section 1905(t)(3) with the State”.

(2) Conforming cross-reference.–Section 1902(j) (42 U.S.C.
1396a(j)) is amended by striking “paragraphs (1) through (25)” and
inserting “a numbered paragraph of”.


SEC. 4703. ELIMINATION OF 75:25 RESTRICTION ON RISK CONTRACTS.

(a) In General.–Section 1903(m)(2)(A) (42 U.S.C. 1396b(m)(2)(A))
is amended by striking clause (ii).

(b) Conforming Amendments.– (1) Section 1903(m)(2) (42 U.S.C.
1396b(m)(2)) is amended– (A) by striking subparagraphs (C), (D), and
(E); and (B) in subparagraph (G), by striking clauses (i) and (ii)”
and inserting “clause (i)”.

(2) Section 1925(b)(4)(D)(iv) (42 U.S.C. 1396r-6(b)(4)(D)(iv)) is
amended by striking “less than 50 percent” and all that follows up to
the period at the end.


SEC. 4704. INCREASED BENEFICIARY PROTECTIONS.

(a) In General.–Section 1932, as added by section 4701(a), is
amended by adding at the end the following: (b) Beneficiary
Protections.– (1) Specification of benefits.–Each contract with a
managed care entity under section 1903(m) or under section 1905(t)(3)
shall specify the benefits the provision (or arrangement) for which
the entity is responsible.

(2) Assuring coverage to emergency services.– (A) In
general.–Each contract with a medicaid managed care organization
under section 1903(m) and each contract with a primary care case
manager under section 1905(t)(3) shall require the organization or
manager– (i) to provide coverage for emergency services (as defined
in subparagraph (B)) without regard to prior authorization or the
emergency care provider’s contractual relationship with the
organization or manager, and (ii) to comply with guidelines
established under section 1852(d)(2) (respecting coordination of
post- stabilization care) in the same manner as such guidelines apply
to Medicare+Choice plans offered under part C of title XVIII.

The requirement under clause (ii) shall first apply 30 days after
the date of promulgation of the guidelines referred to in such
clause.

(B) Emergency services defined.–In subparagraph (A)(i), the term
’emergency services’ means, with respect to an individual enrolled
with an organization, covered inpatient and outpatient services
that– (i) are furnished by a provider that is qualified to furnish
such services under this title, and (ii) are needed to evaluate or
stabilize an emergency medical condition (as defined in subparagraph
(C)).

(C) Emergency medical condition defined.–In subparagraph (B)(ii),
the term ’emergency medical condition’ means a medical condition
manifesting itself by acute symptoms of sufficient severity
(including severe pain) such that a prudent layperson, who possesses
an average knowledge of health and medicine, could reasonably expect
the absence of immediate medical attention to result in– (i) placing
the health of the individual (or, with respect to a pregnant woman,
the health of the woman or her unborn child) in serious jeopardy,
(ii) serious impairment to bodily functions, or (iii) serious
dysfunction of any bodily organ or part.

(3) Protection of enrollee-provider communications.– (A) In
general.–Subject to subparagraphs (B) and (C), under a contract
under section 1903(m) a medicaid managed care organization (in
relation to an individual enrolled under the contract) shall not
prohibit or otherwise restrict a covered health care professional (as
defined in subparagraph (D)) from advising such an individual who is
a patient of the professional about the health status of the
individual or medical care or treatment for the individual’s
condition or disease, regardless of whether benefits for such care or
treatment are provided under the contract, if the professional is
acting within the lawful scope of practice.

(B) Construction.–Subparagraph (A) shall not be construed as
requiring a medicaid managed care organization to provide, reimburse
for, or provide coverage of, a counseling or referral service if the
organization– (i) objects to the provision of such service on moral
or religious grounds; and (ii) in the manner and through the written
instrumentalities such organization deems appropriate, makes
available information on its policies regarding such service to
prospective enrollees before or during enrollment and to enrollees
within 90 days after the date that the organization adopts a change
in policy regarding such a counseling or referral service.

Nothing in this subparagraph shall be construed to affect
disclosure requirements under State law or under the Employee
Retirement Income Security Act of 1974.

(C) Health care professional defined.–For purposes of this
paragraph, the term ‘health care professional’ means a physician (as
defined in section 1861(r)) or other health care professional if
coverage for the professional’s services is provided under the
contract referred to in subparagraph (A) for the services of the
professional. Such term includes a podiatrist, optometrist,
chiropractor, psychologist, dentist, physician assistant, physical or
occupational therapist and therapy assistant, speech-language
pathologist, audiologist, registered or licensed practical nurse
(including nurse practitioner, clinical nurse specialist, certified
registered nurse anesthetist, and certified nurse-midwife), licensed
certified social worker, registered respiratory therapist, and
certified respiratory therapy technician.

(4) Grievance procedures.–Each medicaid managed care organization
shall establish an internal grievance procedure under which an
enrollee who is eligible for medical assistance under the State plan
under this title, or a provider on behalf of such an enrollee, may
challenge the denial of coverage of or payment for such assistance.

(5) Demonstration of adequate capacity and services.–Each
medicaid managed care organization shall provide the State and the
Secretary with adequate assurances (in a time and manner determined
by the Secretary) that the organization, with respect to a service
area, has the capacity to serve the expected enrollment in such
service area, including assurances that the organization– (A) offers
an appropriate range of services and access to preventive and primary
care services for the population expected to be enrolled in such
service area, and (B) maintains a sufficient number, mix, and
geographic distribution of providers of services.

(6) Protecting enrollees against liability for payment.–Each
medicaid managed care organization shall provide that an individual
eligible for medical assistance under the State plan under this title
who is enrolled with the organization may not be held liable– (A)
for the debts of the organization, in the event of the organization’s
insolvency, (B) for services provided to the individual– (i) in the
event of the organization failing to receive payment from the State
for such services; or (ii) in the event of a health care provider
with a contractual, referral, or other arrangement with the
organization failing to receive payment from the State or the
organization for such services, or (C) for payments to a provider
that furnishes covered services under a contractual, referral, or
other arrangement with the organization in excess of the amount that
would be owed by the individual if the organization had directly
provided the services.

(7) Antidiscrimination.–A medicaid managed care organization
shall not discriminate with respect to participation, reimbursement,
or indemnification as to any provider who is acting within the scope
of the provider’s license or certification under applicable State
law, solely on the basis of such license or certification. This
paragraph shall not be construed to prohibit an organization from
including providers only to the extent necessary to meet the needs of
the organization’s enrollees or from establishing any measure
designed to maintain quality and control costs consistent with the
responsibilities of the organization.

(8) Compliance with certain maternity and mental health
requirements.–Each medicaid managed care organization shall comply
with the requirements of subpart 2 of part A of title XXVII of the
Public Health Service Act insofar as such requirements apply and are
effective with respect to a health insurance issuer that offers group
health insurance coverage.”.

(b) Protection of Enrollees Against Balance Billing Through
Subcontractors.–Section 1128B(d)(1) (42 U.S.C. 1320a-7b(d)(1)) is
amended by inserting “(or, in the case of services provided to an
individual enrolled with a medicaid managed care organization under
title XIX under a contract under section 1903(m) or under a
contractual, referral, or other arrangement under such contract, at a
rate in excess of the rate permitted under such contract)” before the
comma at the end.


SEC. 4705. QUALITY ASSURANCE STANDARDS.

(a) In General.–Section 1932 is further amended by adding at the
end the following: (c) Quality Assurance Standards.– (1) Quality
assessment and improvement strategy.– (A) In general.–If a State
provides for contracts with medicaid managed care organizations under
section 1903(m), the State shall develop and implement a quality
assessment and improvement strategy consistent with this paragraph.
Such strategy shall include the following: (i) Access
standards.–Standards for access to care so that covered services are
available within reasonable timeframes and in a manner that ensures
continuity of care and adequate primary care and specialized services
capacity.

(ii) Other measures.–Examination of other aspects of care and
service directly related to the improvement of quality of care
(including grievance procedures and marketing and information
standards).

(iii) Monitoring procedures.–Procedures for monitoring and
evaluating the quality and appropriateness of care and services to
enrollees that reflect the full spectrum of populations enrolled
under the contract and that includes requirements for provision of
quality assurance data to the State using the data and information
set that the Secretary has specified for use under part C of title
XVIII or such alternative data as the Secretary approves, in
consultation with the State.

(iv) Periodic review.–Regular, periodic examinations of the scope
and content of the strategy.

(B) Standards.–The strategy developed under subparagraph (A)
shall be consistent with standards that the Secretary first
establishes within 1 year after the date of the enactment of this
section. Such standards shall not preempt any State standards that
are more stringent than such standards.

Guidelines relating to quality assurance that are applied under
section 1915(b)(1) shall apply under this subsection until the
effective date of standards for quality assurance established under
this subparagraph.

(C) Monitoring.–The Secretary shall monitor the development and
implementation of strategies under subparagraph (A).

(D) Consultation.–The Secretary shall conduct activities under
subparagraphs (B) and (C) in consultation with the States.

(2) External independent review of managed care activities.– (A)
Review of contracts.– (i) In general.–Each contract under section
1903(m) with a medicaid managed care organization shall provide for
an annual (as appropriate) external independent review conducted by a
qualified independent entity of the quality outcomes and timeliness
of, and access to, the items and services for which the organization
is responsible under the contract. The requirement for such a review
shall not apply until after the date that the Secretary establishes
the identification method described in clause (ii).

(ii) Qualifications of reviewer.–The Secretary, in consultation
with the States, shall establish a method for the identification of
entities that are qualified to conduct reviews under clause (i).

(iii) Use of protocols.–The Secretary, in coordination with the
National Governors’ Association, shall contract with an independent
quality review organization (such as the National Committee for
Quality Assurance) to develop the protocols to be used in external
independent reviews conducted under this paragraph on and after
January 1, 1999.

(iv) Availability of results.–The results of each external
independent review conducted under this subparagraph shall be
available to participating health care providers, enrollees, and
potential enrollees of the organization, except that the results may
not be made available in a manner that discloses the identity of any
individual patient.

(B) Nonduplication of accreditation.–A State may provide that, in
the case of a medicaid managed care organization that is accredited
by a private independent entity (such as those described in section
1852(e)(4)) or that has an external review conducted under section
1852(e)(3), the external review activities conducted under
subparagraph (A) with respect to the organization shall not be
duplicative of review activities conducted as part of the
accreditation process or the external review conducted under such
section.

(C) Deemed compliance for medicare managed care organizations.–At
the option of a State, the requirements of subparagraph (A) shall not
apply with respect to a medicaid managed care organization if the
organization is an eligible organization with a contract in effect
under section 1876 or a Medicare+Choice organization with a contract
in effect under C of title XVIII and the organization has had a
contract in effect under section 1903(m) at least during the previous
2- year period.

(b) Increased FFP for External Quality Review Organizations.–
Section 1903(a)(3)(C) (42 U.S.C. 1396b(a)(3)(C)) is amended– (1) by
inserting “(i)” after “(C)”, and (2) by adding at the end the
following new clause: (ii) 75 percent of the sums expended with
respect to costs incurred during such quarter (as found necessary by
the Secretary for the proper and efficient administration of the
State plan) as are attributable to the performance of independent
external reviews conducted under section 1932(c)(2); and”.

(c) Studies and Reports.– (1) GAO study and report on quality
assurance and accreditation standards.– (A) Study.–The Comptroller
General of the United States shall conduct a study and analysis of
the quality assurance programs and accreditation standards applicable
to managed care entities operating in the private sector, or to such
entities that operate under contracts under the medicare program
under title XVIII of the Social Security Act (42 U.S.C. 1395 et
seq.). Such study shall determine– (i) if such programs and
standards include consideration of the accessibility and quality of
the health care items and services delivered under such contracts to
low-income individuals; and (ii) the appropriateness of applying such
programs and standards to medicaid managed care organizations under
section 1932(c) of such Act.

(B) Report.–The Comptroller General shall submit a report to the
Committee on Commerce of the House of Representatives and the
Committee on Finance of the Senate on the study conducted under
subparagraph (A).

(2) Study and report on services provided to individuals with
special health care needs.– (A) Study.–The Secretary of Health and
Human Services, in consultation with States, managed care
organizations, the National Academy of State Health Policy,
representatives of beneficiaries with special health care needs,
experts in specialized health care, and others, shall conduct a study
concerning safeguards (if any) that may be needed to ensure that the
health care needs of individuals with special health care needs and
chronic conditions who are enrolled with medicaid managed care
organizations are adequately met.

(B) Report.–Not later than 2 years after the date of the
enactment of this Act, the Secretary shall submit to Committees
described in paragraph (1)(B) a report on such study.


SEC. 4706. SOLVENCY STANDARDS.

Section 1903(m)(1) (42 U.S.C. 1396b(m)(1)) is amended– (1) in
subparagraph (A)(ii), by inserting “, meets the requirements of
subparagraph (C)(i) (if applicable),” after “provision is
satisfactory to the State”, and (2) by adding at the end the
following: (C)(i) Subject to clause (ii), a provision meets the
requirements of this subparagraph for an organization if the
organization meets solvency standards established by the State for
private health maintenance organizations or is licensed or certified
by the State as a risk-bearing entity.

(ii) Clause (i) shall not apply to an organization if– (I) the
organization is not responsible for the provision (directly or
through arrangements with providers of services) of inpatient
hospital services and physicians’ services; (II) the organization is
a public entity; (III) the solvency of the organization is guaranteed
by the State; or (IV) the organization is (or is controlled by) one
or more Federally-qualified health centers and meets solvency
standards established by the State for such an organization.

For purposes of subclause (IV), the term ‘control’ means the
possession, whether direct or indirect, of the power to direct or
cause the direction of the management and policies of the
organization through membership, board representation, or an
ownership interest equal to or greater than 50.1 percent.”.


SEC. 4707. PROTECTIONS AGAINST FRAUD AND ABUSE.

(a) In General.–Section 1932 (42 U.S.C. 1396v) is further amended
by adding at the end the following: (d) Protections Against Fraud and
Abuse.– (1) Prohibiting affiliations with individuals debarred by
Federal agencies.– (A) In general.–A managed care entity may not
knowingly– (i) have a person described in subparagraph (C) as a
director, officer, partner, or person with beneficial ownership of
more than 5 percent of the entity’s equity, or (ii) have an
employment, consulting, or other agreement with a person described in
such subparagraph for the provision of items and services that are
significant and material to the entity’s obligations under its
contract with the State.

(B) Effect of noncompliance.–If a State finds that a managed care
entity is not in compliance with clause (i) or (ii) of subparagraph
(A), the State– (i) shall notify the Secretary of such
noncompliance; (ii) may continue an existing agreement with the
entity unless the Secretary (in consultation with the Inspector
General of the Department of Health and Human Services) directs
otherwise; and (iii) may not renew or otherwise extend the duration
of an existing agreement with the entity unless the Secretary (in
consultation with the Inspector General of the Department of Health
and Human Services) provides to the State and to Congress a written
statement describing compelling reasons that exist for renewing or
extending the agreement.

(C) Persons described.–A person is described in this subparagraph
if such person– (i) is debarred, suspended, or otherwise excluded
from participating in procurement activities under the Federal
Acquisition Regulation or from participating in nonprocurement
activities under regulations issued pursuant to Executive Order No.
12549 or under guidelines implementing such order; or (ii) is an
affiliate (as defined in such Act) of a person described in clause
(i).

(2) Restrictions on marketing.– (A) Distribution of materials.–
(i) In general.–A managed care entity, with respect to activities
under this title, may not distribute directly or through any agent or
independent contractor marketing materials within any State–

(I) without the prior approval of the State, and (II) that contain
false or materially misleading information.

The requirement of subclause (I) shall not apply with respect to a
State until such date as the Secretary specifies in consultation with
such State.

(ii) Consultation in review of market materials.–In the process
of reviewing and approving such materials, the State shall provide
for consultation with a medical care advisory committee.

(B) Service market.–A managed care entity shall distribute
marketing materials to the entire service area of such entity covered
under the contract under section 1903(m) or section 1903(t)(3).

(C) Prohibition of tie-ins.–A managed care entity, or any agency
of such entity, may not seek to influence an individual’s enrollment
with the entity in conjunction with the sale of any other insurance.

(D) Prohibiting marketing fraud.–Each managed care entity shall
comply with such procedures and conditions as the Secretary
prescribes in order to ensure that, before an individual is enrolled
with the entity, the individual is provided accurate oral and written
information sufficient to make an informed decision whether or not to
enroll.

(E) Prohibition of ‘cold-call’ marketing.–Each managed care
entity shall not, directly or indirectly, conduct door-to- door,
telephonic, or other ‘cold-call’ marketing of enrollment under this
title.

(3) State conflict-of-interest safeguards in medicaid risk
contracting.–A medicaid managed care organization may not enter into
a contract with any State under section 1903(m) 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 organizations or to the default enrollment
process described in subsection (a)(4)(C)(ii) that are at least as
effective as the Federal safeguards provided under section 27 of the
Office of Federal Procurement Policy Act (41 U.S.C. 423), against
conflicts of interest that apply with respect to Federal procurement
officials with comparable responsibilities with respect to such
contracts.

(4) Use of unique physician identifier for participating
physicians.–Each medicaid managed care organization 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
1173(b).

(e) Sanctions for Noncompliance.– (1) Use of intermediate
sanctions by the state to enforce requirements.– (A) In general.–A
State may not enter into or renew a contract under section 1903(m)
unless the State has established intermediate sanctions, which may
include any of the types described in paragraph (2), other than the
termination of a contract with a medicaid managed care organization,
which the State may impose against a medicaid managed care
organization with such a contract, if the organization– (i) fails
substantially to provide medically necessary items and services that
are required (under law or under such organization’s contract with
the State) to be provided to an enrollee covered under the contract;
(ii) imposes premiums or charges on enrollees in excess of the
premiums or charges permitted under this title; (iii) 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 this title, or
engaging in any practice that would reasonably be expected to have
the effect of denying or discouraging enrollment with the
organization by eligible individuals whose medical condition or
history indicates a need for substantial future medical services;
(iv) misrepresents or falsifies information that is furnished–

(I) to the Secretary or the State under this title; or (II) to an
enrollee, potential enrollee, or a health care provider under such
title; or

(v) fails to comply with the applicable requirements of section
1903(m)(2)(A)(x).

The State may also impose such intermediate sanction against a
managed care entity if the State determines that the entity
distributed directly or through any agent or independent contractor
marketing materials in violation of subsection (d)(2)(A)(i)(II).

(B) Rule of construction.–Clause (i) of subparagraph (A) shall
not apply to the provision of abortion services, except that a State
may impose a sanction on any medicaid managed care organization that
has a contract to provide abortion services if the organization does
not provide such services as provided for under the contract.

(2) Intermediate sanctions.–The sanctions described in this
paragraph are as follows: (A) Civil money penalties as follows: (i)
Except as provided in clause (ii), (iii), or (iv), not more than
$25,000 for each determination under paragraph (1)(A).

(ii) With respect to a determination under clause (iii) or (iv)(I)
of paragraph (1)(A), not more than $100,000 for each such
determination.

(iii) With respect to a determination under paragraph (1)(A)(ii),
double the excess amount charged in violation of such subsection (and
the excess amount charged shall be deducted from the penalty and
returned to the individual concerned).

(iv) Subject to clause (ii), with respect to a determination under
paragraph (1)(A)(iii), $15,000 for each individual not enrolled as a
result of a practice described in such subsection.

(B) The appointment of temporary management– (i) to oversee the
operation of the medicaid managed care organization upon a finding by
the State that there is continued egregious behavior by the
organization or there is a substantial risk to the health of
enrollees; or (ii) to assure the health of the organization’s
enrollees, if there is a need for temporary management while–

(I) there is an orderly termination or reorganization of the
organization; or (II) improvements are made to remedy the violations
found under paragraph (1), except that temporary management under
this subparagraph may not be terminated until the State has
determined that the medicaid managed care organization has the
capability to ensure that the violations shall not recur.

(C) Permitting individuals enrolled with the managed care entity
to terminate enrollment without cause, and notifying such individuals
of such right to terminate enrollment.

(D) Suspension or default of all enrollment of individuals under
this title after the date the Secretary or the State notifies the
entity of a determination of a violation of any requirement of
section 1903(m) or this section.

(E) Suspension of payment to the entity under this title for
individuals enrolled after the date the Secretary or State notifies
the entity of such a determination and until the Secretary or State
is satisfied that the basis for such determination has been corrected
and is not likely to recur.

(3) Treatment of chronic substandard entities.–In the case of a
medicaid managed care organization which has repeatedly failed to
meet the requirements of section 1903(m) and this section, the State
shall (regardless of what other sanctions are provided) impose the
sanctions described in subparagraphs (B) and (C) of paragraph (2).

(4) Authority to terminate contract.– (A) In general.–In the
case of a managed care entity which has failed to meet the
requirements of this part or a contract under section 1903(m) or
1905(t)(3), the State shall have the authority to terminate such
contract with the entity and to enroll such entity’s enrollees with
other managed care entities (or to permit such enrollees to receive
medical assistance under the State plan under this title other than
through a managed care entity).

(B) Availability of hearing prior to termination of contract.–A
State may not terminate a contract with a managed care entity under
subparagraph (A) unless the entity is provided with a hearing prior
to the termination.

(C) Notice and right to disenroll in cases of termination
hearing.–A State may– (i) notify individuals enrolled with a
managed care entity which is the subject of a hearing to terminate
the entity’s contract with the State of the hearing, and (ii) in the
case of such an entity, permit such enrollees to disenroll
immediately with the entity without cause.

(5) Other protections for managed care entities against sanctions
imposed by state.–Before imposing any sanction against a managed
care entity other than termination of the entity’s contract, the
State shall provide the entity with notice and such other due process
protections as the State may provide, except that a State may not
provide a managed care entity with a pre- termination hearing before
imposing the sanction described in paragraph (2)(B).”.

(b) Limitation on Availability of FFP for Use of Enrollment
Brokers.–Section 1903(b) (42 U.S.C. 1396b(b)) is amended by adding
at the end the following: (4) Amounts expended by a State for the use
an enrollment broker in marketing medicaid managed care organizations
and other managed care entities to eligible individuals under this
title shall be considered, for purposes of subsection (a)(7), to be
necessary for the proper and efficient administration of the State
plan but only if the following conditions are met with respect to the
broker: (A) The broker is independent of any such entity and of any
health care providers (whether or not any such provider participates
in the State plan under this title) that provide coverage of services
in the same State in which the broker is conducting enrollment
activities.

(B) No person who is an owner, employee, consultant, or has a
contract with the broker either has any direct or indirect financial
interest with such an entity or health care provider or has been
excluded from participation in the program under this title or title
XVIII or debarred by any Federal agency, or subject to a civil money
penalty under this Act.”.

(c) Application of Disclosure Requirements to Managed Care
Entities.–Section 1124(a)(2)(A) (42 U.S.C. 1320a-3(a)(2)(A)) is
amended by inserting “a managed care entity, as defined in section
1932(a)(1)(B),” after “renal disease facility,”.


SEC. 4708. IMPROVED ADMINISTRATION.

(a) Change in Threshold Amount for Contracts Requiring Secretary’s
Prior Approval.–Section 1903(m)(2)(A)(iii) (42 U.S.C.
1396b(m)(2)(A)(iii)) is amended by striking “$100,000” and inserting
“$1,000,000 for 1998 and, for a subsequent year, the amount
established under this clause for the previous year increased by the
percentage increase in the consumer price index for all urban
consumers over the previous year”.

(b) Permitting Same Copayments in Health Maintenance Organizations
as in Fee-for-Service.–Section 1916 (42 U.S.C. 1396o) is amended–
(1) in subsection (a)(2)(D), by striking “or services furnished” and
all that follows through enrolled,”; and (2) in subsection (b)(2)(D),
by striking “or (at the option” and all that follows through
enrolled,”.

(c) Assuring Timeliness of Provider Payments.–Section 1932 is
further amended by adding at the end the following: (f) Timeliness of
Payment.–A contract under section 1903(m) with a medicaid managed
care organization shall provide that the organization shall make
payment to health care providers for items and services which are
subject to the contract and that are furnished to individuals
eligible for medical assistance under the State plan under this title
who are enrolled with the organization on a timely basis consistent
with the claims payment procedures described in section
1902(a)(37)(A), unless the health care provider and the organization
agree to an alternate payment schedule.”.

(d) Clarification of Application of FFP Denial Rules to Payments
Made Pursuant to Managed Care Entities.–Section 1903(i) (42 U.S.C.
1396b(i)) is amended by adding at the end the following new sentence:
Paragraphs (1), (2), (16), (17), and (18) shall apply with respect to
items or services furnished and amounts expended by or through a
managed care entity (as defined in section 1932(a)(1)(B)) in the same
manner as such paragraphs apply to items or services furnished and
amounts expended directly by the State.”.


SEC. 4709. 6-MONTH GUARANTEED ELIGIBILITY FOR ALL INDIVIDUALS
ENROLLED IN MANAGED CARE.

Section 1902(e)(2) (42 U.S.C. 1396a(e)(2)) is amended– (1) by
striking “who is enrolled” and all that follows through section
1903(m)(2)(A)” and inserting “who is enrolled with a medicaid managed
care organization (as defined in section 1903(m)(1)(A)), with a
primary care case manager (as defined in section 1905(t)),”; and (2)
by inserting before the period “or by or through the case manager”.


SEC. 4710. EFFECTIVE DATES.

(a) General Effective Date.–Except as otherwise provided in this
chapter and section 4759, the amendments made by this chapter shall
take effect on the date of the enactment of this Act and shall apply
to contracts entered into or renewed on or after October 1, 1997.

(b) Specific Effective Dates.–Subject to subsection (c) and
section 4759– (1) PCCM option.–The amendments made by section 4702
shall apply to primary care case management services furnished on or
after October 1, 1997.

(2) 75:25 rule.–The amendments made by section 4703 apply to
contracts under section 1903(m) of the Social Security Act (42 U.S.C.
1396b(m)) on and after June 20, 1997.

(3) Quality standards.–Section 1932(c)(1) of the Social Security
Act, as added by section 4705(a), shall take effect on January 1,
1999.

(4) Solvency standards.– (A) In general.–The amendments made by
section 4706 shall apply to contracts entered into or renewed on or
after October 1, 1998.

(B) Transition rule.–In the case of an organization that as of
the date of the enactment of this Act has entered into a contract
under section 1903(m) of the Social Security Act with a State for the
provision of medical assistance under title XIX of such Act under
which the organization assumes full financial risk and is receiving
capitation payments, the amendment made by section 4706 shall not
apply to such organization until 3 years after the date of the
enactment of this Act.

(5) Sanctions for noncompliance.–Section 1932(e) of the Social
Security Act, as added by section 4707(a), shall apply to contracts
entered into or renewed on or after April 1, 1998.

(6) Limitation on ffp for enrollment brokers.–The amendment made
by section 4707(b) shall apply to amounts expended on or after
October 1, 1997.

(7) 6-month guaranteed eligibility.–The amendments made by
section 4709 shall take effect on October 1, 1997.

(c) Nonapplication to Waivers.–Nothing in this chapter (or the
amendments made by this chapter) shall be construed as affecting the
terms and conditions of any waiver, or the authority of the Secretary
of Health and Human Services with respect to any such waiver, under
section 1115 or 1915 of the Social Security Act (42 U.S.C. 1315,
1396n).


CHAPTER 2–FLEXIBILITY IN PAYMENT OF
PROVIDERS

SEC. 4711. FLEXIBILITY IN PAYMENT METHODS FOR HOSPITAL, NURSING
FACILITY, ICF/MR, AND HOME HEALTH SERVICES.

(a) Repeal of Boren Requirements.–Section 1902(a)(13) (42 U.S.C.
1396a(a)(13)) is amended– (1) by striking all that precedes
subparagraph (D) and inserting the following: (13) provide– (A) for
a public process for determination of rates of payment under the plan
for hospital services, nursing facility services, and services of
intermediate care facilities for the mentally retarded under which–
(i) proposed rates, the methodologies underlying the establishment of
such rates, and justifications for the proposed rates are published,
(ii) providers, beneficiaries and their representatives, and other
concerned State residents are given a reasonable opportunity for
review and comment on the proposed rates, methodologies, and
justifications, (iii) final rates, the methodologies underlying the
establishment of such rates, and justifications for such final rates
are published, and (iv) in the case of hospitals, such rates take
into account (in a manner consistent with section 1923) the situation
of hospitals which serve a disproportionate number of low-income
patients with special needs;”; (2) by redesignating subparagraphs (D)
and (E) as subparagraphs (B) and (C), respectively; (3) in
subparagraph (B), as so redesignated, by adding and” at the end; (4)
in subparagraph (C), as so redesignated, by striking “and” at the
end; and (5) by striking subparagraph (F).

(b) Study and Report.– (1) Study.–The Secretary of Health and
Human Services shall study the effect on access to, and the quality
of, services provided to beneficiaries of the rate-setting methods
used by States pursuant to section 1902(a)(13)(A) of the Social
Security Act (42 U.S.C. 1396a(a)(13)(A)), as amended by subsection
(a).

(2) Report.–Not later than 4 years after the date of the
enactment of this Act, the Secretary of Health and Human Services
shall submit a report to the appropriate committees of Congress on
the conclusions of the study conducted under paragraph (1), together
with any recommendations for legislation as a result of such
conclusions.

(c) Conforming Amendments.– (1) Section 1905(o)(3) (42 U.S.C.
1396d(o)(3)) is amended by striking “amount described in section
1902(a)(13)(D)” and inserting “amount determined in section
1902(a)(13)(B)”.

(2) Section 1923 (42 U.S.C. 1396r-4) is amended, in subsections
(a)(1) and (e)(1), by striking “1902(a)(13)(A)” each place it appears
and inserting “1902(a)(13)(A)(iv)”.

(d) Effective Date.–This section shall take effect on the date of
the enactment of this Act and the amendments made by subsections (a)
and (c) shall apply to payment for items and services furnished on or
after October 1, 1997.


SEC. 4712. PAYMENT FOR CENTER AND CLINIC SERVICES.

(a) Phase-Out of Payment Based on Reasonable Costs.–Section
1902(a)(13)(C) (42 U.S.C. 1396a(a)(13)(C)), as redesignated by
section 4711(a)(2), is amended by inserting “(or 95 percent for
services furnished during fiscal year 2000, 90 percent for services
furnished during fiscal year 2001, 85 percent for services furnished
during fiscal year 2002, or 70 percent for services furnished during
fiscal year 2003)” after “100 percent”.

(b) Transitional Supplemental Payment for Services Furnished Under
Certain Managed Care Contracts.– (1) In general.–Section
1902(a)(13)(C) (42 U.S.C. 1396a(a)(13)(C)), as so redesignated, is
further amended– (A) by inserting “(i)” after “(C)”, and (B) by
inserting before the semicolon at the end the following: and (ii) in
carrying out clause (i) in the case of services furnished by a
Federally-qualified health center or a rural health clinic pursuant
to a contract between the center and an organization under section
1903(m), for payment to the center or clinic at least quarterly by
the State of a supplemental payment equal to the amount (if any) by
which the amount determined under clause (i) exceeds the amount of
the payments provided under such contract”.

(2) Conforming amendment to managed care contract
requirement.–Clause (ix) of section 1903(m)(2)(A) (42 U.S.C.
1396b(m)(2)(A)) is amended to read as follows: (ix) such contract
provides, in the case of an entity that has entered into a contract
for the provision of services with a Federally-qualified health
center or a rural health clinic, that the entity shall provide
payment that is not less than the level and amount of payment which
the entity would make for the services if the services were furnished
by a provider which is not a Federally-qualified health center or a
rural health clinic;”.

(3) Effective date.–The amendments made by this subsection shall
apply to services furnished on or after October 1, 1997.

(c) End of Transitional Payment Rules.–Effective for services
furnished on or after October 1, 2003– (1) subparagraph (C) of
section 1902(a)(13) (42 U.S.C. 1396a(a)(13)), as so redesignated, is
repealed, and (2) clause (ix) of section 1903(m)(2)(A) (42 U.S.C.
1396b(m)(2)(A)) is repealed.

(d) Flexibility in Coverage of Non-Freestanding Look-Alikes.– (1)
In general.–Section 1905(l)(2)(B)(iii) (42 U.S.C.
1396d(l)(2)(B)(iii)) is amended by inserting “including requirements
of the Secretary that an entity may not be owned, controlled, or
operated by another entity,” after “such a grant,”.

(2) Effective date.–The amendment made by paragraph (1) shall
apply to services furnished on or after the date of the enactment of
this Act.


SEC. 4713. ELIMINATION OF OBSTETRICAL AND PEDIATRIC PAYMENT RATE
REQUIREMENTS.

(a) In General.–Section 1926 (42 U.S.C. 1396r-7) is repealed.

(b) Effective Date.–The repeal made by subsection (a) shall apply
to services furnished on or after October 1, 1997.


SEC. 4714. MEDICAID PAYMENT RATES FOR CERTAIN MEDICARE COST-SHARING.

(a) Clarification Regarding State Liability for Medicare Cost-
Sharing.– (1) In general.–Section 1902(n) (42 U.S.C. 1396a(n)) is
amended– (A) by inserting “(1)” after “(n)”, and (B) by adding at
the end the following: (2) In carrying out paragraph (1), a State is
not required to provide any payment for any expenses incurred
relating to payment for deductibles, coinsurance, or copayments for
medicare cost-sharing to the extent that payment under title XVIII
for the service would exceed the payment amount that otherwise would
be made under the State plan under this title for such service if
provided to an eligible recipient other than a medicare beneficiary.

(3) In the case in which a State’s payment for medicare cost-
sharing for a qualified medicare beneficiary with respect to an item
or service is reduced or eliminated through the application of
paragraph (2)– (A) for purposes of applying any limitation under
title XVIII on the amount that the beneficiary may be billed or
charged for the service, the amount of payment made under title XVIII
plus the amount of payment (if any) under the State plan shall be
considered to be payment in full for the service; (B) the beneficiary
shall not have any legal liability to make payment to a provider or
to an organization described in section 1903(m)(1)(A) for the
service; and (C) any lawful sanction that may be imposed upon a
provider or such an organization for excess charges under this title
or title XVIII shall apply to the imposition of any charge imposed
upon the individual in such case.

This paragraph shall not be construed as preventing payment of any
medicare cost-sharing by a medicare supplemental policy or an
employer retiree health plan on behalf of an individual.”.

(2) Conforming clarification.–Section 1905(p)(3) (42 U.S.C.
1396d(p)(3)) is amended by inserting “(subject to section
1902(n)(2))” after “means”.

(b) Limitation on Medicare Providers.– (1) Provider
agreements.–Section 1866(a)(1)(A) (42 U.S.C. 1395cc(a)(1)(A)) is
amended– (A) by inserting “(i)” after “(A)”, and (B) by inserting
before the comma at the end the following: “, and (ii) not to impose
any charge that is prohibited under section 1902(n)(3)”.

(2) Nonparticipating providers.–Section 1848(g)(3)(A) (42 U.S.C.
1395w-4(g)(3)(A)) is amended by inserting before the period at the
end the following: and the provisions of section 1902(n)(3)(A) apply
to further limit permissible charges under this section”.

(c) Effective Date.–The amendments made by this section shall
apply to payment for (and with respect to provider agreements with
respect to) items and services furnished on or after the date of the
enactment of this Act. The amendments made by subsection (a) shall
also apply to payment by a State for items and services furnished
before such date if such payment is the subject of a law suit that is
based on the provisions of sections 1902(n) and 1905(p) of the Social
Security Act and that is pending as of, or is initiated after, the
date of the enactment of this Act.


SEC. 4715. TREATMENT OF VETERANS’ PENSIONS UNDER MEDICAID.

(a) Post-Eligibility Treatment.–Section 1902(r)(1) (42 U.S.C.
1396a(r)(1)) is amended– (1) by inserting “(A)” after “(r)(1)”, (2)
by inserting “, the treatment described in subparagraph (B) shall
apply,” after “under such a waiver”; (3) by striking “and,” and
inserting “, and”; and (4) by adding at the end the following: (B)(i)
In the case of a veteran who does not have a spouse or a child, if
the veteran– (I) receives, after the veteran has been determined to
be eligible for medical assistance under the State plan under this
title, a veteran’s pension in excess of $90 per month, and (II)
resides in a State veterans home with respect to which the Secretary
of Veterans Affairs makes per diem payments for nursing home care
pursuant to section 1741(a) of title 38, United States Code, any such
pension payment, including any payment made due to the need for aid
and attendance, or for unreimbursed medical expenses, that is in
excess of $90 per month shall be counted as income only for the
purpose of applying such excess payment to the State veterans home’s
cost of providing nursing home care to the veteran.

(ii) The provisions of clause (i) shall apply with respect to a
surviving spouse of a veteran who does not have a child in the same
manner as they apply to a veteran described in such clause.”.

(b) Effective Date.–The amendments made by this section shall
apply on and after October 1, 1997.


CHAPTER 3–FEDERAL PAYMENTS TO STATES

SEC. 4721. REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER STATE
MEDICAID PROGRAMS.

(a) Adjustment of State DSH Allotments.– (1) In general.–Section
1923(f) (42 U.S.C. 1396r-4(f)) is amended to read as follows: (f)
Limitation on Federal Financial Participation.– (1) In
general.–Payment under section 1903(a) shall not be made to a State
with respect to any payment adjustment made under this section for
hospitals in a State for quarters in a fiscal year in excess of the
disproportionate share hospital (in this subsection referred to as
‘DSH’) allotment for the State for the fiscal year, as specified in
paragraphs (2) and (3).

(2) State dsh allotments for fiscal years 1998 through 2002.–The
DSH allotment for a State for each fiscal year during the period
beginning with fiscal year 1998 and ending with fiscal year 2002 is
determined in accordance with the following table:

DSH Allotment (in millions
of dollars)

State

FY98

FY99

FY00

FY01

FY02

Alabama

293

269

248

246

246

Alaska

10

10

10

9

9

Arizona

81

81

81

81

81

Arkansas

2

2

2

2

2

California

1085

1068

986

931

877

Colorado

93

85

79

74

74

Connecticut

200

194

164

160

160

Delaware

4

4

4

4

4

D.C.

23

23

23

23

23

Florida

207

203

197

188

160

Georgia

253

248

241

228

215

Hawaii

0

0

0

0

0

Idaho

1

1

1

1

1

Illinois

203

199

193

182

172

Indiana

201

197

191

181

171

Iowa

8

8

8

8

8

Kansas

51

49

42

36

33

Kentucky

137

134

130

123

116

Louisiana

880

795

713

658

631

Maine

103

99

84

84

84

Maryland

72

70

68

64

61

Massachusetts

288

282

273

259

244

Michigan

249

244

237

224

212

Minnesota

16

16

16

16

16

Montana

0.2

0.2

0.2

0.2

0.2

Missouri

436

423

379

379

379

Mississippi

143

141

136

129

122

Nebraska

5

5

5

5

5

Nevada

37

37

37

37

37

NewHampshire

140

136

130

130

130

New Jersey

600

582

515

515

515

New Mexico

5

5

5

5

5

New York

1,512

1,482

1,436

1,361

1,285

North Carolina

278

272

264

250

236

North Dakota

1

1

1

1

1

Ohio

382

374

363

344

325

Oklahoma

16

16

16

16

16

Oregon

20

20

20

20

20

Pennsylvania

529

518

502

476

449

Rhode Island

62

60

58

55

52

South Carolina

313

303

262

262

262

South Dakota

1

1

1

1

1

Tennessee

0

0

0

0

0

Texas

979

950

806

765

765

Utah

3

3

3

3

3

Vermont

18

18

18

18

18

Virginia

70

68

66

63

59

Washington

174

171

166

157

148

West Virginia

64

63

61

58

54

Wisconsin

7

7

7

7

7

Wyoming

0

0

0

0

0

(3) State dsh allotments for fiscal year 2003 and thereafter.–
(A) In general.–The DSH allotment for any State for fiscal year 2003
and each succeeding fiscal year is equal to the DSH allotment for the
State for the preceding fiscal year under paragraph (2) or this
paragraph, increased, subject to subparagraph (B), by the percentage
change in the consumer price index for all urban consumers (all
items; U.S. city average), for the previous fiscal year.

(B) Limitation.–The DSH allotment for a State shall not be
increased under subparagraph (A) for a fiscal year to the extent that
such an increase would result in the DSH allotment for the year
exceeding the greater of– (i) the DSH allotment for the previous
year, or (ii) 12 percent of the total amount of expenditures under
the State plan for medical assistance during the fiscal year.

(4) Definition of state.– In this subsection, the term ‘State’
means the 50 States and the District of Columbia.”.

(2) Effective date.–The amendment made by paragraph (1) shall
apply to payment adjustments attributable to DSH allotments for
fiscal years beginning with fiscal year 1998.

(b) Limitation on Payments to Institutions For Mental Diseases.–
Section 1923 of the Social Security Act (42 U.S.C. 1396r-4) is
amended by adding at the end the following: (h) Limitation on Certain
State DSH Expenditures.– (1) In general.–Payment under section
1903(a) shall not be made to a State with respect to any payment
adjustments made under this section for quarters in a fiscal year
(beginning with fiscal year 1998) to institutions for mental diseases
or other mental health facilities, to the extent the aggregate of
such adjustments in the fiscal year exceeds the lesser of the
following: (A) 1995 imd dsh payment adjustments.–The total State DSH
expenditures that are attributable to fiscal year 1995 for payments
to institutions for mental diseases and other mental health
facilities (based on reporting data specified by the State on HCFA
Form 64 as mental health DSH, and as approved by the Secretary).

(B) Applicable percentage of 1995 total dsh payment
allotment.–The amount of such payment adjustments which are equal to
the applicable percentage of the Federal share of payment adjustments
made to hospitals in the State under subsection (c) that are
attributable to the 1995 DSH allotment for the State for payments to
institutions for mental diseases and other mental health facilities
(based on reporting data specified by the State on HCFA Form 64 as
mental health DSH, and as approved by the Secretary).

(2) Applicable percentage.– (A) In general.–For purposes of
paragraph (1), the applicable percentage with respect to– (i) each
of fiscal years 1998, 1999, and 2000, is the percentage determined
under subparagraph (B); or (ii) a succeeding fiscal year is the
lesser of the percentage determined under subparagraph (B) or the
following percentage:

(I) For fiscal year 2001, 50 percent.

(II) For fiscal year 2002, 40 percent.

(III) For each succeeding fiscal year, 33 percent.

(B) 1995 percentage.–The percentage determined under this
subparagraph is the ratio (determined as a percentage) of– (i) the
Federal share of payment adjustments made to hospitals in the State
under subsection (c) that are attributable to the 1995 DSH allotment
for the State (as reported by the State not later than January 1,
1997, on HCFA Form 64, and as approved by the Secretary) for payments
to institutions for mental diseases and other mental health
facilities, to (ii) the State 1995 DSH spending amount.

(C) State 1995 dsh spending amount.–For purposes of subparagraph
(B)(ii), the ‘State 1995 DSH spending amount’, with respect to a
State, is the Federal medical assistance percentage (for fiscal year
1995) of the payment adjustments made under subsection (c) under the
State plan that are attributable to the fiscal year 1995 DSH
allotment for the State (as reported by the State not later than
January 1, 1997, on HCFA Form 64, and as approved by the
Secretary).”.

(c) Description of Targeting Payments.–Section 1923(a)(2) (42
U.S.C. 1396r-4(a)(2)) is amended by adding at the end the following:
(D) A State plan under this title shall not be considered to meet the
requirements of section 1902(a)(13)(A)(iv) (insofar as it requires
payments to hospitals to take into account the situation of hospitals
that serve a disproportionate number of low-income patients with
special needs), as of October 1, 1998, unless the State has submitted
to the Secretary by such date a description of the methodology used
by the State to identify and to make payments to disproportionate
share hospitals, including children’s hospitals, on the basis of the
proportion of low-income and medicaid patients served by such
hospitals. The State shall provide an annual report to the Secretary
describing the disproportionate share payments to each such
disproportionate share hospital.”.

(d) Direct Payment by State for Managed Care Enrollees.–Section
1923 (42 U.S.C. 1396r-4) is amended by adding at the end the
following: (i) Requirement for Direct Payment.– (1) In general.–No
payment may be made under section 1903(a)(1) with respect to a
payment adjustment made under this section, for services furnished by
a hospital on or after October 1, 1997, with respect to individuals
eligible for medical assistance under the State plan who are enrolled
with a managed care entity (as defined in section 1932(a)(1)(B)) or
under any other managed care arrangement unless a payment, equal to
the amount of the payment adjustment– (A) is made directly to the
hospital by the State; and (B) is not used to determine the amount of
a prepaid capitation payment under the State plan to the entity or
arrangement with respect to such individuals.

(2) Exception for current arrangements.–Paragraph (1) shall not
apply to a payment adjustment provided pursuant to a payment
arrangement in effect on July 1, 1997.”.

(e) Transition Rule.–Effective July 1, 1997, section
1923(g)(2)(A) of the Social Security Act (42 U.S.C. 1396r-4(g)(2)(A))
shall be applied to the State of California as though– (1) (or that
begins on or after July 1, 1997, and before July 1, 1999)” were
inserted in such section after “January 1, 1995,”; and (2) (or 175
percent in the case of a State fiscal year that begins on or after
July 1, 1997, and before July 1, 1999)” were inserted in such section
after “200 percent”.


SEC. 4722. TREATMENT OF STATE TAXES IMPOSED ON CERTAIN HOSPITALS.

(a) Exception From Tax Does Not Disqualify as Broad-Based Tax.–
Section 1903(w)(3) (42 U.S.C. 1396b(w)(3)) is amended– (1) in
subparagraph (B), by striking “and (E)” and inserting “(E), and (F)”;
and (2) by adding at the end the following: (F) In no case shall a
tax not qualify as a broad-based health care related tax under this
paragraph because it does not apply to a hospital that is described
in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt
from taxation under section 501(a) of such Code and that does not
accept payment under the State plan under this title or under title
XVIII.”.

(b) Reduction in Federal Financial Participation in Case of
Imposition of Tax.–Section 1903(b) (42 U.S.C. 1396b(b)), as amended
by section 4707(b), is amended by adding at the end the following:
(5) Notwithstanding the preceding provisions of this section, the
amount determined under subsection (a)(1) for any State shall be
decreased in a quarter by the amount of any health care related taxes
(described in section 1902(w)(3)(A)) that are imposed on a hospital
described in subsection (w)(3)(F) in that quarter.”.

(c) Waiver of Certain Provider Tax Provisions.–Notwithstanding
any other provision of law, taxes, fees, or assessments, as defined
in section 1903(w)(3)(A) of the Social Security Act (42 U.S.C.
1396b(w)(3)(A)), that were collected by the State of New York from a
health care provider before June 1, 1997, and for which a waiver of
the provisions of subparagraph (B) or (C) of section 1903(w)(3) of
such Act has been applied for, or that would, but for this subsection
require that such a waiver be applied for, in accordance with
subparagraph (E) of such section, and, (if so applied for) upon which
action by the Secretary of Health and Human Services (including any
judicial review of any such proceeding) has not been completed as of
July 23, 1997, are deemed to be permissible health care related taxes
and in compliance with the requirements of subparagraphs (B) and (C)
of section 1903(w)(3) of such Act.

(d) Effective Date.–The amendments made by subsection (a) shall
apply to taxes imposed before, on, or after the date of the enactment
of this Act and the amendment made by subsection (b) shall apply to
taxes imposed on or after such date.


SEC. 4723. ADDITIONAL FUNDING FOR STATE EMERGENCY HEALTH SERVICES
FURNISHED TO UNDOCUMENTED ALIENS.

(a) Total Amount Available for Allotment.–There are available for
allotments under this section for each of the 4 consecutive fiscal
years (beginning with fiscal year 1998) $25,000,000 for payments to
certain States under this section.

(b) State Allotment Amount.– (1) In general.–The Secretary of
Health and Human Services shall compute an allotment for each fiscal
year beginning with fiscal year 1998 and ending with fiscal year 2001
for each of the 12 States with the highest number of undocumented
aliens. The amount of such allotment for each such State for a fiscal
year shall bear the same ratio to the total amount available for
allotments under subsection (a) for the fiscal year as the ratio of
the number of undocumented aliens in the State in the fiscal year
bears to the total of such numbers for all such States for such
fiscal year. The amount of allotment to a State provided under this
paragraph for a fiscal year that is not paid out under subsection (c)
shall be available for payment during the subsequent fiscal year.

(2) Determination.–For purposes of paragraph (1), the number of
undocumented aliens in a State under this section shall be determined
based on estimates of the resident illegal alien population residing
in each State prepared by the Statistics Division of the Immigration
and Naturalization Service as of October 1992 (or as of such later
date if such date is at least 1 year before the beginning of the
fiscal year involved).

(c) Use of Funds.–From the allotments made under subsection (b),
the Secretary shall pay to each State amounts the State demonstrates
were paid by the State (or by a political subdivision of the State)
for emergency health services furnished to undocumented aliens.

(d) State Defined.–For purposes of this section, the term State”
includes the District of Columbia.

(e) State Entitlement.–This section constitutes budget authority
in advance of appropriations Acts and represents the obligation of
the Federal Government to provide for the payment to States of
amounts provided under this section.


SEC. 4724. ELIMINATION OF WASTE, FRAUD, AND ABUSE.

(a) Ban on Spending for Nonhealth Related Items.–Section 1903(i)
(42 U.S.C. 1396b(i)) is amended– (1) in paragraphs (2) and (16), by
striking the period at the end and inserting “; or”; (2) in
paragraphs (10)(B), (11), and (13), by adding or” at the end; and (3)
by inserting after paragraph (16), the following: (17) with respect
to any amount expended for roads, bridges, stadiums, or any other
item or service not covered under a State plan under this title.”.

(b) Surety Bond Requirement for Home Health Agencies.– (1) In
general.–Section 1903(i) (42 U.S.C. 1396b(i)), as amended by
subsection (a), is amended– (A) in paragraph (17), by striking the
period at the end and inserting “; or”; and (B) by inserting after
paragraph (17), the following: (18) with respect to any amount
expended for home health care services provided by an agency or
organization unless the agency or organization provides the State
agency on a continuing basis a surety bond in a form specified by the
Secretary under paragraph (7) of section 1861(o) and in an amount
that is not less than $50,000 or such comparable surety bond as the
Secretary may permit under the last sentence of such section.”.

(2) Effective date.–The amendments made by paragraph (1) shall
apply to home health care services furnished on or after January 1,
1998.

(c) Conflict of Interest Safeguards.– (1) In general.–Section
1902(a)(4)(C) (42 U.S.C. 1396a(a)(4)(C)) is amended– (A) by striking
“and (C)” and inserting “(C)”; (B) by striking “local officer or
employee” and inserting “local officer, employee, or independent
contractor”; (C) by striking “such an officer or employee” the first
2 places it appears and inserting “such an officer, employee, or
contractor”; and (D) by inserting before the semicolon the following:
, and (D) that each State or local officer, employee, or independent
contractor who is responsible for selecting, awarding, or otherwise
obtaining items and services under the State plan shall be subject to
safeguards against conflicts of interest that are at least as
stringent as the safeguards that apply under section 27 of the Office
of Federal Procurement Policy Act (41 U.S.C. 423) to persons
described in subsection (a)(2) of such section of that Act”.

(2) Effective date.–The amendments made by paragraph (1) shall
take effect on January 1, 1998.

(d) Authority To Refuse To Enter Into Medicaid Agreements With
Individuals or Entities Convicted of Felonies.–Section 1902(a)(23)
(42 U.S.C. 1396(a)) is amended– (1) by striking “except as provided
in subsection (g) and in section 1915 and except in the case of
Puerto Rico, the Virgin Islands, and Guam,”; and (2) by inserting
before the semicolon at the end the following: , except as provided
in subsection (g) and in section 1915, except that this paragraph
shall not apply in the case of Puerto Rico, the Virgin Islands, and
Guam, and except that nothing in this paragraph shall be construed as
requiring a State to provide medical assistance for such services
furnished by a person or entity convicted of a felony under Federal
or State law for an offense which the State agency determines is
inconsistent with the best interests of beneficiaries under the State
plan”.

(e) Monitoring Payments for Dual Eligibles.–The Administrator of
the Health Care Financing Administration shall develop mechanisms to
improve the monitoring of, and to prevent, inappropriate payments
under the medicaid program under title XIX of the Social Security Act
(42 U.S.C. 1396 et seq.) in the case of individuals who are dually
eligible for benefits under such program and under the medicare
program under title XVIII of such Act (42 U.S.C. 1395 et seq.).

(f) Beneficiary and Program Protection Against Waste, Fraud, and
Abuse.–Section 1902(a) (42 U.S.C. 1396a(a)) is amended– (1) by
striking “and” at the end of paragraph (62); (2) by striking the
period at the end of paragraph (63) and inserting “; and”; and (3) by
inserting after paragraph (63) the following: (64) provide, not later
than 1 year after the date of the enactment of this paragraph, a
mechanism to receive reports from beneficiaries and others and
compile data concerning alleged instances of waste, fraud, and abuse
relating to the operation of this title;”.

(g) Disclosure of Information and Surety Bond Requirement for
Suppliers of Durable Medical Equipment.– (1) Requirement.–Section
1902(a) (42 U.S.C. 1396a(a)), as amended by subsection (f), is
amended– (A) by striking “and” at the end of paragraph (63); (B) by
striking the period at the end of paragraph (64) and inserting “;
and”; and (C) by inserting after paragraph (64) the following: (65)
provide that the State shall issue provider numbers for all suppliers
of medical assistance consisting of durable medical equipment, as
defined in section 1861(n), and the State shall not issue or renew
such a supplier number for any such supplier unless– (A)(i) full and
complete information as to the identity of each person with an
ownership or control interest (as defined in section 1124(a)(3)) in
the supplier or in any subcontractor (as defined by the Secretary in
regulations) in which the supplier directly or indirectly has a 5
percent or more ownership interest; and (ii) to the extent determined
to be feasible under regulations of the Secretary, the name of any
disclosing entity (as defined in section 1124(a)(2)) with respect to
which a person with such an ownership or control interest in the
supplier is a person with such an ownership or control interest in
the disclosing entity; and (B) a surety bond in a form specified by
the Secretary under section 1834(a)(16)(B) and in an amount that is
not less than $50,000 or such comparable surety bond as the Secretary
may permit under the second sentence of such section.”.

(2) Effective date.–The amendments made by paragraph (1) shall
apply to suppliers of medical assistance consisting of durable
medical equipment furnished on or after January 1, 1998.


SEC. 4725. INCREASED FMAPS.

(a) Alaska.–Notwithstanding the first sentence of section 1905(b)
of the Social Security Act (42 U.S.C. 1396d(b)), the Federal medical
assistance percentage determined under such sentence for Alaska shall
be 59.8 percent but only with respect to– (1) items and services
furnished under a State plan under title XIX or under a State child
health plan under title XXI of such Act during fiscal years 1998,
1999, and 2000; (2) payments made on a capitation or other risk-basis
under such titles for coverage occurring during such period; and (3)
payments under title XIX of such Act attributable to DSH allotments
for such State determined under section 1923(f) of such Act (42
U.S.C. 1396r-4(f)) for such fiscal years.

(b) District of Columbia.– (1) In general.–The first sentence of
section 1905(b) (42 U.S.C. 1396d(b)) is amended– (A) by striking
“and (2)” and inserting “, (2)”, and (B) by inserting before the
period at the end the following: , and (3) for purposes of this title
and title XXI, the Federal medical assistance percentage for the
District of Columbia shall be 70 percent”.

(2) Effective date.–The amendments made by paragraph (1) shall
apply to– (A) items and services furnished on or after October 1,
1997; (B) payments made on a capitation or other risk-basis for
coverage occurring on or after such date; and (C) payments
attributable to DSH allotments for such States determined under
section 1923(f) of such Act (42 U.S.C. 1396r- 4(f)) for fiscal years
beginning with fiscal year 1998.


SEC. 4726. INCREASE IN PAYMENT LIMITATION FOR TERRITORIES.

Section 1108 (42 U.S.C. 1308) is amended– (1) in subsection (f),
by striking “The” and inserting “Subject to subsection (g), the”; and
(2) by adding at the end the following: (g) Medicaid Payments to
Territories for Fiscal Year 1998 and Thereafter.– (1) Fiscal year
1998.–With respect to fiscal year 1998, the amounts otherwise
determined for Puerto Rico, the Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa under subsection (f) for such
fiscal year shall be increased by the following amounts: (A) For
Puerto Rico, $30,000,000.

(B) For the Virgin Islands, $750,000.

(C) For Guam, $750,000.

(D) For the Northern Mariana Islands, $500,000.

(E) For American Samoa, $500,000.

(2) Fiscal year 1999 and thereafter.–Notwithstanding subsection
(f), with respect to fiscal year 1999 and any fiscal year thereafter,
the total amount certified by the Secretary under title XIX for
payment to– (A) Puerto Rico shall not exceed the sum of the amount
provided in this subsection for the preceding fiscal year increased
by the percentage increase in the medical care component of the
Consumer Price Index for all urban consumers (as published by the
Bureau of Labor Statistics) for the 12- month period ending in March
preceding the beginning of the fiscal year, rounded to the nearest
$100,000; (B) the Virgin Islands shall not exceed the sum of the
amount provided in this subsection for the preceding fiscal year
increased by the percentage increase referred to in subparagraph (A),
rounded to the nearest $10,000; (C) Guam shall not exceed the sum of
the amount provided in this subsection for the preceding fiscal year
increased by the percentage increase referred to in subparagraph (A),
rounded to the nearest $10,000; (D) the Northern Mariana Islands
shall not exceed the sum of the amount provided in this subsection
for the preceding fiscal year increased by the percentage increase
referred to in subparagraph (A), rounded to the nearest $10,000; and
(E) American Samoa shall not exceed the sum of the amount provided in
this subsection for the preceding fiscal year increased by the
percentage increase referred to in subparagraph (A), rounded to the
nearest $10,000.”.


CHAPTER 4–ELIGIBILITY

SEC. 4731. STATE OPTION OF CONTINUOUS ELIGIBILITY FOR 12 MONTHS;
CLARIFICATION OF STATE OPTION TO COVER CHILDREN.

(a) Continuous Eligibility Option.–Section 1902(e) (42 U.S.C.
1396a(e)) is amended by adding at the end the following new
paragraph: (12) At the option of the State, the plan may provide that
an individual who is under an age specified by the State (not to
exceed 19 years of age) and who is determined to be eligible for
benefits under a State plan approved under this title under
subsection (a)(10)(A) shall remain eligible for those benefits until
the earlier of– (A) the end of a period (not to exceed 12 months)
following the determination; or (B) the time that the individual
exceeds that age.”.

(b) Clarification of State Option To Cover All Children Under 19
Years of Age.–Section 1902(l)(1)(D) (42 U.S.C. 1396a(l)(1)(D)) is
amended by inserting “(or, at the option of a State, after any
earlier date)” after “children born after September 30, 1983”.

(c) Effective Date.–The amendments made by this section shall
apply to medical assistance for items and services furnished on or
after October 1, 1997.


SEC. 4732. PAYMENT OF PART B PREMIUMS.

(a) Eligibility.–Section 1902(a)(10)(E) (42 U.S.C.
1396a(a)(10)(E)) is amended– (1) by striking “and” at the end of
clause (ii); and (2) by inserting after clause (iii) the following:
(iv) subject to sections 1933 and 1905(p)(4), for making medical
assistance available (but only for premiums payable with respect to
months during the period beginning with January 1998, and ending with
December 2002)– (I) for medicare cost-sharing described in section
1905(p)(3)(A)(ii) for individuals who would be qualified medicare
beneficiaries described in section 1905(p)(1) but for the fact that
their income exceeds the income level established by the State under
section 1905(p)(2) and is at least 120 percent, but less than 135
percent, of the official poverty line (referred to in such section)
for a family of the size involved and who are not otherwise eligible
for medical assistance under the State plan, and (II) for the portion
of medicare cost-sharing described in section 1905(p)(3)(A)(ii) that
is attributable to the operation of the amendments made by (and
subsection (e)(3) of) section 4611 of the Balanced Budget Act of 1997
for individuals who would be described in subclause (I) if ‘135
percent’ and ‘175 percent’ were substituted for ‘120 percent’ and
‘135 percent’ respectively; and”.

(b) Conforming Amendment.–Section 1905(b) (42 U.S.C. 1396d(b)) is
amended by striking “The term” and inserting “Subject to section
1933(d), the term”.

(c) Terms and Conditions of Coverage.–Title XIX (42 U.S.C. 1395
et seq.), as amended by section 4701(a), is amended by redesignating
section 1933 as section 1934 and by inserting after section 1932 the
following new section:

~ state
coverage of medicare cost-sharing for additional low-income medicare
beneficiaries
~

Sec. 1933. (a) In General.–A State plan under this title shall
provide, under section 1902(a)(10)(E)(iv) and subject to the
succeeding provisions of this section and through a plan amendment,
for medical assistance for payment of the cost of medicare
cost-sharing described in such section on behalf of all individuals
described in such section (in this section referred to as ‘qualifying
individuals’) who are selected to receive such assistance under
subsection (b).

(b) Selection of Qualifying Individuals.–A State shall select
qualifying individuals, and provide such individuals with assistance,
under this section consistent with the following: (1) All qualifying
individuals may apply.–The State shall permit all qualifying
individuals to apply for assistance during a calendar year.

(2) Selection on first-come, first-served basis.– (A) In
general.–For each calendar year (beginning with 1998), from (and to
the extent of) the amount of the allocation under subsection (c) for
the State for the fiscal year ending in such calendar year, the State
shall select qualifying individuals who apply for the assistance in
the order in which they apply.

(B) Carryover.–For calendar years after 1998, the State shall
give preference to individuals who were provided such assistance (or
other assistance described in section 1902(a)(10)(E)) in the last
month of the previous year and who continue to be (or become)
qualifying individuals.

(3) Limit on number of individuals based on allocation.–The State
shall limit the number of qualifying individuals selected with
respect to assistance in a calendar year so that the aggregate amount
of such assistance provided to such individuals in such year is
estimated to be equal to (but not exceed) the State’s allocation
under subsection (c) for the fiscal year ending in such calendar
year.

(4) Receipt of assistance during duration of year.–If a
qualifying individual is selected to receive assistance under this
section for a month in year, the individual is entitled to receive
such assistance for the remainder of the year if the individual
continues to be a qualifying individual. The fact that an individual
is selected to receive assistance under this section at any time
during a year does not entitle the individual to continued assistance
for any succeeding year.

(c) Allocation.– (1) Total allocation.–The total amount
available for allocation under this section for– (A) fiscal year
1998 is $200,000,000; (B) fiscal year 1999 is $250,000,000; (C)
fiscal year 2000 is $300,000,000; (D) fiscal year 2001 is
$350,000,000; and (E) fiscal year 2002 is $400,000,000.

(2) Allocation to states.–The Secretary shall provide for the
allocation of the total amount described in paragraph (1) for a
fiscal year, among the States that executed a plan amendment in
accordance with subsection (a), based upon the Secretary’s estimate
of the ratio of– (A) an amount equal to the sum of– (i) twice the
total number of individuals described in section
1902(a)(10)(E)(iv)(I) in the State, and (ii) the total number of
individuals described in section 1902(a)(10)(E)(iv)(II) in the State;
to (B) the sum of the amounts computed under subparagraph (A) for all
eligible States.

(d) Applicable FMAP.–With respect to assistance described in
section 1902(a)(10)(E)(iv) furnished in a State for calendar quarters
in a calendar year — (1) to the extent that such assistance does not
exceed the State’s allocation under subsection (c) for the fiscal
year ending in the calendar year, the Federal medical assistance
percentage shall be equal to 100 percent; and (2) to the extent that
such assistance exceeds such allocation, the Federal medical
assistance percentage is 0 percent.

(e) Limitation on Entitlement.–Except as specifically provided
under this section, nothing in this title shall be construed as
establishing any entitlement of individuals described in section
1902(a)(10)(E)(iv) to assistance described in such section.

(f) Coverage of Costs Through Part B of the Medicare Program.–
For each fiscal year, the Secretary shall provide for the transfer
from the Federal Supplementary Medical Insurance Trust Fund under
section 1841 to the appropriate account in the Treasury that provides
for payments under section 1903(a) with respect to medical assistance
provided under this section, of an amount equivalent to the total of
the amount of payments made under such section that is attributable
to this section and such transfer shall be treated as an expenditure
from such Trust Fund for purposes of section 1839.”.


SEC. 4733. STATE OPTION TO PERMIT WORKERS WITH DISABILITIES TO BUY
INTO MEDICAID.

Section 1902(a)(10)(A)(ii) (42 U.S.C. 1396a(a)(10)(A)(ii)) is
amended– (1) in subclause (XI), by striking “or” at the end; (2) in
subclause (XII), by adding or” at the end; and (3) by adding at the
end the following:

(XIII) who are in families whose income is less than 250 percent
of the income official poverty line (as defined by the Office of
Management and Budget, and revised annually in accordance with
section 673(2) of the Omnibus Budget Reconciliation Act of 1981)
applicable to a family of the size involved, and who but for earnings
in excess of the limit established under section 1905(q)(2)(B), would
be considered to be receiving supplemental security income (subject,
notwithstanding section 1916, to payment of premiums or other
cost-sharing charges (set on a sliding scale based on income) that
the State may determine);”.


SEC. 4734. PENALTY FOR FRAUDULENT ELIGIBILITY.

Section 1128B(a) (42 U.S.C. 1320a-7b(a)), as amended by section
217 of the Health Insurance Portability and Accountability Act of
1996 (Public Law 104-191; 110 Stat. 2008), is amended– (1) by
striking paragraph (6) and inserting the following: (6) for a fee
knowingly and willfully counsels or assists an individual to dispose
of assets (including by any transfer in trust) in order for the
individual to become eligible for medical assistance under a State
plan under title XIX, if disposing of the assets results in the
imposition of a period of ineligibility for such assistance under
section 1917(c),”; and (2) in clause (ii) of the matter following
such paragraph, by striking “failure, or conversion by any other
person” and inserting “failure, conversion, or provision of counsel
or assistance by any other person”.


SEC. 4735. TREATMENT OF CERTAIN SETTLEMENT PAYMENTS.

(a) In General.–Notwithstanding any other provision of law, the
payments described in subsection (b) shall not be considered income
or resources in determining eligibility for, or the amount of
benefits under, a State plan of medical assistance approved under
title XIX of the Social Security Act.

(b) Payments Described.–The payments described in this subsection
are– (1) payments made from any fund established pursuant to a class
settlement in the case of Susan Walker v. Bayer Corporation, et al.,
96-C-5024 (N.D. Ill.); and (2) payments made pursuant to a release of
all claims in a case– (A) that is entered into in lieu of the class
settlement referred to in paragraph (1); and (B) that is signed by
all affected parties in such case on or before the later of– (i)
December 31, 1997, or (ii) the date that is 270 days after the date
on which such release is first sent to the persons (or the legal
representative of such persons) to whom the payment is to be made.


CHAPTER 5–BENEFITS

SEC. 4741. ELIMINATION OF REQUIREMENT TO PAY FOR PRIVATE
INSURANCE.

(a) Repeal of State Plan Provision.–Section 1902(a)(25) (42
U.S.C. 1396a(a)(25)) is amended– (1) by striking subparagraph (G);
and (2) by redesignating subparagraphs (H) and (I) as subparagraphs
(G) and (H), respectively.

(b) Making Provision Optional.–Section 1906 (42 U.S.C. 1396e) is
amended– (1) in subsection (a)– (A) by striking “For purposes of
section 1902(a)(25)(G) and subject to subsection (d), each” and
inserting “Each”; (B) in paragraph (1), by striking “shall” and
inserting “may”; and (C) in paragraph (2), by striking “shall” and
inserting “may”; and (2) by striking subsection (d).

(c) Effective Date.–The amendments made by this section shall
take effect on the date of the enactment of this Act.


SEC. 4742. PHYSICIAN QUALIFICATION REQUIREMENTS.

(a) In General.–Section 1903(i) (42 U.S.C. 1396b(i)) is amended
by striking paragraph (12).

(b) Effective Date.–The amendment made by subsection (a) shall
apply to services furnished on or after the date of the enactment of
this Act.


SEC. 4743. ELIMINATION OF REQUIREMENT OF PRIOR INSTITUTIONALIZATION
WITH RESPECT TO HABILITATION SERVICES FURNISHED UNDER A WAIVER FOR
HOME OR COMMUNITY-BASED SERVICES.

(a) In General.–Section 1915(c)(5) (42 U.S.C. 1396n(c)(5)) is
amended, in the matter preceding subparagraph (A), by striking “,
with respect to individuals who receive such services after discharge
from a nursing facility or intermediate care facility for the
mentally retarded”.

(b) Effective Date.–The amendment made by subsection (a) apply to
services furnished on or after October 1, 1997.


SEC. 4744. STUDY AND REPORT ON EPSDT BENEFIT.

(a) Study.– (1) In general.–The Secretary of Health and Human
Services, in consultation with Governors, directors of State medicaid
programs, the American Academy of Actuaries, and representatives of
appropriate provider and beneficiary organizations, shall conduct a
study of the provision of early and periodic screening, diagnostic,
and treatment services under the medicaid program under title XIX of
the Social Security Act in accordance with the requirements of
section 1905(r) of such Act (42 U.S.C. 1396d(r)).

(2) Required contents.–The study conducted under paragraph (1)
shall include examination of the actuarial value of the provision of
such services under the medicaid program and an examination of the
portions of such actuarial value that are attributable to paragraph
(5) of section 1905(r) of such Act and to the second sentence of such
section.

(b) Report.–Not later than 12 months after the date of the
enactment of this Act, the Secretary of Health and Human Services
shall submit a report to Congress on the results of the study
conducted under subsection (a).


CHAPTER 6–ADMINISTRATION AND
MISCELLANEOUS

SEC. 4751. ELIMINATION OF DUPLICATIVE INSPECTION OF CARE
REQUIREMENTS FOR ICFS/MR AND MENTAL HOSPITALS.

(a) Mental Hospitals.–Section 1902(a)(26) (42 U.S.C.
1396a(a)(26)) is amended– (1) by striking “provide– (A) with
respect to each patient” and inserting “provide, with respect to each
patient”; and (2) by striking subparagraphs (B) and (C).

(b) ICFS/MR.–Section 1902(a)(31) (42 U.S.C. 1396a(a)(31)) is
amended– (1) by striking “provide– (A) with respect to each
patient” and inserting “provide, with respect to each patient”; and
(2) by striking subparagraphs (B) and (C).

(c) Effective Date.–The amendments made by this section take
effect on the date of the enactment of this Act.


SEC. 4752. ALTERNATIVE SANCTIONS FOR NONCOMPLIANT ICFS/MR.

(a) In General.–Section 1902(i)(1)(B) (42 U.S.C. 1396a(i)(1)(B))
is amended by striking “provide” and inserting “establish alternative
remedies if the State demonstrates to the Secretary’s satisfaction
that the alternative remedies are effective in deterring
noncompliance and correcting deficiencies, and may provide”.

(b) Effective Date.–The amendment made by subsection (a) takes
effect on the date of the enactment of this Act.


SEC. 4753. MODIFICATION OF MMIS REQUIREMENTS.

(a) In General.–Section 1903(r) (42 U.S.C. 1396b(r)) is amended–
(1) by striking all that precedes paragraph (5) and inserting the
following: (r)(1) In order to receive payments under subsection (a)
for use of automated data systems in administration of the State plan
under this title, a State must have in operation mechanized claims
processing and information retrieval systems that meet the
requirements of this subsection and that the Secretary has found–
(A) are adequate to provide efficient, economical, and effective
administration of such State plan; (B) are compatible with the claims
processing and information retrieval systems used in the
administration of title XVIII, and for this purpose– (i) have a
uniform identification coding system for providers, other payees, and
beneficiaries under this title or title XVIII; (ii) provide liaison
between States and carriers and intermediaries with agreements under
title XVIII to facilitate timely exchange of appropriate data; and
(iii) provide for exchange of data between the States and the
Secretary with respect to persons sanctioned under this title or
title XVIII; (C) are capable of providing accurate and timely data;
(D) are complying with the applicable provisions of part C of title
XI; (E) are designed to receive provider claims in standard formats
to the extent specified by the Secretary; and (F) effective for
claims filed on or after January 1, 1999, provide for electronic
transmission of claims data in the format specified by the Secretary
and consistent with the Medicaid Statistical Information System
(MSIS) (including detailed individual enrollee encounter data and
other information that the Secretary may find necessary).”; (2) in
paragraph (5)– (A) by striking subparagraph (B); (B) by striking all
that precedes clause (i) and inserting the following: (2) In order to
meet the requirements of this paragraph, mechanized claims processing
and information retrieval systems must meet the following
requirements:”; (C) in clause (iii), by striking “under paragraph
(6)”; and (D) by redesignating clauses (i) through (iii) as
paragraphs (A) through (C); and (3) by striking paragraphs (6), (7),
and (8).

(b) Conforming Amendments.–Section 1902(a)(25)(A)(ii) (42 U.S.C.
1396a(a)(25)(A)(ii)) is amended by striking all that follows “shall”
and inserting the following: be integrated with, and be monitored as
a part of the Secretary’s review of, the State’s mechanized claims
processing and information retrieval systems required under section
1903(r);”.

(c) Effective Date.–Except as otherwise specifically provided,
the amendments made by this section shall take effect on January 1,
1998.


SEC. 4754. FACILITATING IMPOSITION OF STATE ALTERNATIVE REMEDIES ON
NONCOMPLIANT NURSING FACILITIES.

(a) In General.–Section 1919(h)(3)(D) (42 U.S.C. 1396r(h)(3)(D))
is amended– (1) by inserting “and” at the end of clause (i); (2) by
striking “, and” at the end of clause (ii) and inserting a period;
and (3) by striking clause (iii).

(b) Effective Date.–The amendments made by subsection (a) take
effect on the date of the enactment of this Act.


SEC. 4755. REMOVAL OF NAME FROM NURSE AIDE REGISTRY.

(a) Medicare.–Section 1819(g)(1) (42 U.S.C. 1395i-3(g)(1)) is
amended– (1) by redesignating subparagraph (D) as subparagraph (E),
and (2) by inserting after subparagraph (C) the following: (D)
Removal of name from nurse aide registry.– (i) In general.–In the
case of a finding of neglect under subparagraph (C), the State shall
establish a procedure to permit a nurse aide to petition the State to
have his or her name removed from the registry upon a determination
by the State that–

(I) the employment and personal history of the nurse aide does not
reflect a pattern of abusive behavior or neglect; and (II) the
neglect involved in the original finding was a singular occurrence.

(ii) Timing of determination.–In no case shall a determination on
a petition submitted under clause (i) be made prior to the expiration
of the 1-year period beginning on the date on which the name of the
petitioner was added to the registry under subparagraph (C).”.

(b) Medicaid.–Section 1919(g)(1) (42 U.S.C. 1396r(g)(1)) is
amended– (1) by redesignating subparagraph (D) as subparagraph (E),
and (2) by inserting after subparagraph (C) the following: (D)
Removal of name from nurse aide registry.– (i) In general.–In the
case of a finding of neglect under subparagraph (C), the State shall
establish a procedure to permit a nurse aide to petition the State to
have his or her name removed from the registry upon a determination
by the State that–

(I) the employment and personal history of the nurse aide does not
reflect a pattern of abusive behavior or neglect; and (II) the
neglect involved in the original finding was a singular occurrence.

(ii) Timing of determination.–In no case shall a determination on
a petition submitted under clause (i) be made prior to the expiration
of the 1-year period beginning on the date on which the name of the
petitioner was added to the registry under subparagraph (C).”.

(c) Retroactive Review.–The procedures developed by a State under
the amendments made by subsection (a) and (b) shall permit an
individual to petition for a review of any finding made by a State
under section 1819(g)(1)(C) or 1919(g)(1)(C) of the Social Security
Act (42 U.S.C. 1395i-3(g)(1)(C) or 1396r(g)(1)(C)) after January 1,
1995.


SEC. 4756. MEDICALLY ACCEPTED INDICATION.

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

(III) the DRUGDEX Information System; and”.


SEC. 4757. CONTINUATION OF STATE-WIDE SECTION 1115 MEDICAID WAIVERS.

(a) In General.–Section 1115 (42 U.S.C. 1315) is amended by
adding at the end the following new subsection: (e)(1) The provisions
of this subsection shall apply to the extension of any State-wide
comprehensive demonstration project (in this subsection referred to
as ‘waiver project’) for which a waiver of compliance with
requirements of title XIX is granted under subsection (a).

(2) During the 6-month period ending 1 year before the date the
waiver under subsection (a) with respect to a waiver project would
otherwise expire, the chief executive officer of the State which is
operating the project may submit to the Secretary a written request
for an extension, of up to 3 years, of the project.

(3) If the Secretary fails to respond to the request within 6
months after the date it is submitted, the request is deemed to have
been granted.

(4) If such a request is granted, the deadline for submittal of a
final report under the waiver project is deemed to have been extended
until the date that is 1 year after the date the waiver project would
otherwise have expired.

(5) The Secretary shall release an evaluation of each such project
not later than 1 year after the date of receipt of the final report.

(6) Subject to paragraphs (4) and (7), the extension of a waiver
project under this subsection shall be on the same terms and
conditions (including applicable terms and conditions relating to
quality and access of services, budget neutrality, data and reporting
requirements, and special population protections) that applied to the
project before its extension under this subsection.

(7) If an original condition of approval of a waiver project was
that Federal expenditures under the project not exceed the Federal
expenditures that would otherwise have been made, the Secretary shall
take such steps as may be necessary to ensure that, in the extension
of the project under this subsection, such condition continues to be
met.

In applying the previous sentence, the Secretary shall take into
account the Secretary’s best estimate of rates of change in
expenditures at the time of the extension.”.

(b) Effective Date.–The amendment made by subsection (a) shall
apply to demonstration projects initially approved before, on, or
after the date of the enactment of this Act.


SEC. 4758. EXTENSION OF MORATORIUM.

Section 6408(a)(3) of the Omnibus Budget Reconciliation Act of
1989, as amended by section 13642 of the Omnibus Budget
Reconciliation Act of 1993, is amended by striking “December 31,
1995” and inserting “December 31, 2002”.


SEC. 4759. EXTENSION OF EFFECTIVE DATE FOR STATE LAW AMENDMENT.

In the case of a State plan under title XIX of the Social Security
Act which the Secretary of Health and Human Services determines
requires State legislation in order for the plan to meet the
additional requirements imposed by the amendments made by a provision
of this subtitle, the State plan shall not be regarded as failing to
comply with the requirements of such title solely on the basis of its
failure to meet these additional requirements before the first day of
the first calendar quarter beginning after the close of the first
regular session of the State legislature that begins after the date
of the enactment of this Act. For purposes of the previous sentence,
in the case of a State that has a 2-year legislative session, each
year of the session is considered to be a separate regular session of
the State legislature.


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