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

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:

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).

(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".

(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.

(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.

(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.

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.".

(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,".

(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.".

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".

(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).

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.

(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.

(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.

(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.

(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.

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:

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".

(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.

(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.

(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.

(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.

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.".

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.

(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:

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.".

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);".

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".

(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.

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.

(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.

(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.

(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).

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.

(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.

(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.

(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.

(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.

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".

(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.

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".

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.