Amends title XVIII (Medicare) of the Social Security Act to revise the formulae for payments to health maintenance organizations and competitive medical plans.

Provides for a metropolitan based system under which: (1) all portions of each metropolitan statistical area in a State are treated as a single Medicare payment area; and (2) all areas in that State that do not fall within a metropolitan statistical area are treated as a single Medicare payment area. Requires the Secretary of Health and Human Services to determine the annual per capita rate of payment for each Medicare payment area by adjusting the adjusted capitation rate for: (1) individuals (not, as currently, a class of individuals) who are enrolled with an eligible organization which has entered into a risk-sharing contract and who are enrolled under Medicare part B (Supplementary Medical Insurance) only; and (2) such risk factors as age, disability status, gender, institutional status, and other appropriate factors so as to ensure actuarial equivalence.

Requires the Secretary to establish a separate rate of payment to an eligible organization with respect to any individual determined to have end-stage renal disease and enrolled with the organization.

Prescribes a general formula for the adjusted capitation rate of a Medicare payment area based on an area-specific adjusted capitation rate and an input-price-adjusted national adjusted capitation rate. Specifies area-specific and national percentages for contract years 1998 through 2001 and after.

Requires the Secretary, upon written request of the Chief Executive Officer of a State for a contract year, to adjust the system under which Medicare payment areas in the State are otherwise determined to a system which: (1) has a single Statewide Medicare payment area; (2) is a metropolitan based system; or (3) consolidates into a single Medicare payment area noncontiguous counties (or equivalent areas) within the State.