To amend title XIX of the Social Security Act to permit States to include, at their option, certain long-term care services under their medicaid plans.

Amends title XIX (Medicaid) of the Social Security Act to authorize the Secretary of Health and Human Services to waive the application of certain Medicaid requirements in up to ten States which choose to provide long-term care pursuant to joint, State-sponsored public and private financing arrangements. Sets durational and fiscal limitations on such programs. Directs the Secretary to report to the Congress, by January 1, 1999, on the effectiveness of such programs.