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[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 520 Introduced in Senate (IS)]

<DOC>

115th CONGRESS
  1st Session
                                 S. 520

  To amend title XIX of the Social Security Act to reform payment to 
                   States under the Medicaid program.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             March 2, 2017

  Mr. Cassidy introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
  To amend title XIX of the Social Security Act to reform payment to 
                   States under the Medicaid program.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicaid Accountability and Care Act 
of 2017''.

SEC. 2. MEDICAID PAYMENT REFORM.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended by inserting after section 1903 the following 
section:

``SEC. 1903A. REFORMED PAYMENT TO STATES.

    ``(a) Reformed Payment System.--
            ``(1) In general.--For quarters beginning on or after the 
        implementation date (as defined in subsection (k)(1)), in lieu 
        of amounts otherwise payable to a State under this title 
        (including any payments attributable to section 1923), except 
        as otherwise provided in this section, the amount payable to 
        such State shall be equal to the sum of the following:
                    ``(A) Adjusted aggregate beneficiary-based 
                amount.--The aggregate beneficiary-based amount 
                specified in subsection (b) for the quarter and the 
                State, adjusted under subsection (e).
                    ``(B) Chronic care quality bonus.--The amount (if 
                any) of the chronic care quality bonus payment 
                specified in subsection (f) for the quarter for the 
                State.
            ``(2) Requirement of state share.--
                    ``(A) In general.--A State shall make, from non-
                Federal funds, expenditures in an amount equal to its 
                State share (as determined under subparagraph (B)) for 
                a quarter for items, services, and other costs for 
                which, but for paragraph (1), Federal funds would have 
                been payable under this title.
                    ``(B) State share.--The State share for a State for 
                a quarter in a fiscal year is equal to the product of--
                            ``(i) the aggregate beneficiary-based 
                        amount specified in subsection (b) for the 
                        quarter and the State; and
                            ``(ii) the ratio of--
                                    ``(I) the State percentage 
                                described in subparagraph (D)(ii) for 
                                such State and fiscal year; to
                                    ``(II) the Federal percentage 
                                described in subparagraph (D)(i) for 
                                such State and fiscal year.
                    ``(C) Nonpayment for failure to pay state share.--
                            ``(i) In general.--If a State fails to 
                        expend the amount required under subparagraph 
                        (A) for a quarter in a fiscal year, the amount 
                        payable to the State under paragraph (1) shall 
                        be reduced by the product of the amount by 
                        which the State payment is less than the State 
                        share and the ratio of--
                                    ``(I) the Federal percentage 
                                described in subparagraph (D)(i) for 
                                such State and fiscal year; to
                                    ``(II) the State percentage 
                                described in subparagraph (D)(ii) for 
                                such State and fiscal year.
                            ``(ii) Grace period.--A State shall not be 
                        considered to have failed to provide payment of 
                        its required State share for a quarter under 
                        subparagraph (A) if the aggregate State payment 
                        towards the State's required State share for 
                        the 4-quarter period beginning with such 
                        quarter exceeds the required State share amount 
                        for such 4-quarter period.
                    ``(D) Federal and state percentages.--In this 
                paragraph, with respect to a State and a fiscal year:
                            ``(i) Federal percentage.--The Federal 
                        percentage described in this clause is 75 
                        percent or, if higher, the Federal medical 
                        assistance percentage for such State for such 
                        fiscal year.
                            ``(ii) State percentage.--The State 
                        percentage described in this clause is 100 
                        percent minus the Federal percentage described 
                        in clause (i).
                    ``(E) Rules for crediting toward state share.--
                            ``(i) General limitation to matchable 
                        expenditures.--A payment for expenditures shall 
                        not be counted toward the State share under 
                        subparagraph (A) unless Federal payments may be 
                        used for such expenditures consistent with 
                        paragraph (3)(B).
                            ``(ii) Further limitations on allowable 
                        expenditures.--A payment for expenditures shall 
                        not be counted towards the State share under 
                        subparagraph (A) if the expenditure is for any 
                        of the following:
                                    ``(I) Abortion.--Expenditures for 
                                an abortion.
                                    ``(II) Intergovernmental 
                                transfers.--An expenditure that is 
                                attributable to an intergovernmental 
                                transfer.
                                    ``(III) Certified public 
                                expenditures.--An expenditure that is 
                                attributable to certified public 
                                expenditures.
                            ``(iii) Crediting fraud and abuse 
                        recoveries.--Amounts recovered by a State 
                        through the operation of its Medicaid fraud and 
                        abuse control unit described in section 1903(q) 
                        shall be fully counted toward the State share 
                        under subparagraph (A).
                    ``(F) Construction.--Nothing in the paragraph shall 
                be construed as preventing a State from expending, from 
                non-Federal funds, an amount under this title in excess 
                of the amount of the State share.
                    ``(G) Determination based upon submitted claims.--
                In applying this paragraph with respect to expenditures 
                of a State for a quarter, the determination of the 
                expenditures for such State for such quarter shall be 
                made after the end of the period (which, as of the date 
                of the enactment of this section, is 2 years) for which 
                the Secretary accepts claims for payment under this 
                title with respect to such quarter.
            ``(3) Use of federal payments.--
                    ``(A) Application of medicaid limitations.--A State 
                may only use Federal payments received under paragraph 
                (1) for expenditures for which Federal funds would have 
                been payable under this title but for this section.
                    ``(B) Limitation for certain eligibles.--
                            ``(i) Application of 100 percent federal 
                        poverty line limit on eligibility.--Subject to 
                        clause (iii), a State may not use such Federal 
                        payments to provide medical assistance for an 
                        individual who has an income (as determined 
                        under clause (ii)) that exceeds 100 percent of 
                        the poverty line (as defined in section 
                        2110(c)(5)) applicable to a family of the size 
                        involved.
                            ``(ii) Determination of income using 
                        modified adjusted gross income without any 5 
                        percent increase.--In determining income for 
                        purposes of clause (i) under section 
                        1902(e)(14) (relating to modified adjusted 
                        gross income), the following rules shall apply:
                                    ``(I) Application of spend down.--
                                The State shall take into account the 
                                costs incurred for medical care or for 
                                any other type of remedial care 
                                recognized under State law in the same 
                                manner and to the same extent that such 
                                State takes such costs into account for 
                                purposes of section 1902(a)(17).
                                    ``(II) Disregard of 5 percent 
                                increase.--Subparagraph (I) of section 
                                1902(e)(14) (relating to a 5 percent 
                                reduction) shall not apply.
                            ``(iii) Exception.--Clause (i) shall not 
                        apply to an individual who is--
                                    ``(I) a woman described in clause 
                                (i) of section 1903(v)(4)(A);
                                    ``(II) a child who is an individual 
                                described in clause (i) of section 
                                1905(a);
                                    ``(III) enrolled in a State plan 
                                under this title as of the date of the 
                                enactment of this section for the 
                                period of continuous enrollment; or
                                    ``(IV) described in section 
                                1902(e)(14)(D) (relating to modified 
                                adjusted gross income).
                            ``(iv) Clarification related to community 
                        spouse.--Nothing in this subparagraph shall 
                        supersede the application of section 1924 
                        (related to community spouse income and 
                        assets).
            ``(4) Exceptions for pass-through payments.--
                    ``(A) In general.--Paragraph (1) shall not apply, 
                and amounts shall continue to be payable under this 
                title (and not under this subsection), in the case of 
                the following payments (and related administrative 
                costs and expenditures):
                            ``(i) Payments to territories.--Payments to 
                        a State other than the 50 States and the 
                        District of Columbia.
                            ``(ii) Medicare cost sharing.--Payments 
                        attributable to Medicare cost sharing under 
                        section 1905(p).
                            ``(iii) Pediatric vaccines.--Payments 
                        attributable to section 1928.
                            ``(iv) Emergency services for certain 
                        individuals.--Payments for treatment of 
                        emergency medical conditions attributable to 
                        the application of section 1903(v)(2).
                            ``(v) Indian health care facilities.--
                        Payments for medical assistance described in 
                        the third sentence of section 1905(b).
                            ``(vi) Employer-sponsored insurance 
                        (esi).--Payments for medical assistance 
                        attributable to payments to employers for 
                        employer-sponsored health benefits coverage.
                            ``(vii) Other populations with limited 
                        benefit coverage.--Other payments that are 
                        determined by the Secretary to be related to a 
                        specified population for which the medical 
                        assistance under this title is limited and does 
                        not include any inpatient, nursing facility, or 
                        long-term care services.
                    ``(B) Certain expenses.--Paragraph (1) shall not 
                apply, and amounts shall continue to be payable under 
                this title (and not under this subsection), in the case 
                of the following:
                            ``(i) Administration of medicare 
                        prescription drug benefit.--Expenditures 
                        described in section 1935(b) (relating to 
                        administration of the Medicare prescription 
                        drug benefit).
                            ``(ii) Payments for hit bonuses.--Payments 
                        under section 1903(a)(3)(F) (relating to 
                        payments to encourage the adoption and use of 
                        certified EHR technology).
                            ``(iii) Payments for design, development, 
                        and installation of mmis and eligibility 
                        systems.--Payments under subparagraphs (A)(i) 
                        and (H)(i) of section 1903(a)(3) for 
                        expenditures for design, development, and 
                        installation of the Medicaid management 
                        information systems and mechanized verification 
                        and information retrieval systems (related to 
                        eligibility).
            ``(5) Payment of amounts.--
                    ``(A) In general.--Except as the Secretary may 
                otherwise provide, amounts shall be payable to a State 
                under this subsection in the same manner as amounts are 
                payable under subsection (d) of section 1903 to a State 
                under subsection (a) of such section.
                    ``(B) Information and forms.--
                            ``(i) Submission.--As a condition of 
                        receiving payment under this subsection, a 
                        State shall submit such information, in such 
                        form, and manner, as the Secretary shall 
                        specify, including information necessary to 
                        make the computations under subsections 
                        (c)(2)(C) and (e).
                            ``(ii) Uniform reporting.--The Secretary 
                        shall develop such forms as may be needed to 
                        assure a system of uniform reporting of such 
                        information across States.
                    ``(C) Required reporting of information on medical 
                loss ratios for managed care.--The information required 
                to be reported under subparagraph (B)(i) shall include 
                information on the medical loss ratio with respect to 
                coverage provided under each Medicaid managed care plan 
                with a contract with the State under section 1903(m) or 
                1932.
    ``(b) Aggregate Beneficiary-Based Amount.--
            ``(1) In general.--The aggregate beneficiary-based amount 
        specified in this subsection for a State for a quarter is equal 
        to the sum of the products, for each of the categories of 
        Medicaid beneficiaries specified in paragraph (2), of the 
        following:
                    ``(A) Beneficiary-based quarterly amount.--The 
                beneficiary-based quarterly amount for such category 
                computed under subsection (c) for such State for such 
                quarter.
                    ``(B) Number of individuals in category.--Subject 
                to subsection (d), the average number of Medicaid 
                beneficiaries enrolled in such category in the State in 
                such quarter.
            ``(2) Categories.--The categories specified in this 
        paragraph are the following:
                    ``(A) Elderly.--A category of Medicaid 
                beneficiaries who are 65 years of age or older.
                    ``(B) Blind or disabled.--A category of Medicaid 
                beneficiaries not described in subparagraph (A) who are 
                described in section 1937(a)(2)(B)(ii).
                    ``(C) Children.--A category of Medicaid 
                beneficiaries not described in subparagraph (B) who are 
                under 21 years of age.
                    ``(D) Other adults.--A category of any Medicaid 
                beneficiaries who are not described in a previous 
                subparagraph of this paragraph.
    ``(c) Computation of Per Beneficiary, Per Category Quarterly 
Amount.--
            ``(1) In general.--For a State, for each category of 
        beneficiary for a quarter--
                    ``(A) First reform year.--For quarters in the first 
                reform year (as defined in subsection (k)(2)), the 
                beneficiary-based quarterly amount is equal to \1/4\ of 
                the base average per beneficiary Federal payments for 
                such State for such category determined under paragraph 
                (2), increased by a factor that reflects the sum of the 
                following:
                            ``(i) Historical medical care component of 
                        cpi through previous reform year.--The 
                        percentage increase in the historical medical 
                        care component of the Consumer Price Index for 
                        all urban consumers (U.S. city average) from 
                        the midpoint of the base fiscal year (as 
                        defined in paragraph (6)) to the midpoint of 
                        the fiscal year preceding the first reform 
                        year.
                            ``(ii) Projected medical care component of 
                        cpi for the first reform year.--The percentage 
                        increase in the projected medical care 
                        component of the Consumer Price Index for all 
                        urban consumers (U.S. city average) from the 
                        midpoint of the previous fiscal year referred 
                        to in clause (i) to the midpoint of the first 
                        reform year.
                    ``(B) Second and third reform years.--The 
                beneficiary-based quarterly amount for a State for a 
                category for quarters in the second reform year or the 
                third reform year is equal to the beneficiary-based 
                quarterly amount under this paragraph for such State 
                and category for the previous reform year increased by 
                the per beneficiary percentage increase (as defined in 
                subparagraph (E)) for such category and reform year.
                    ``(C) Fourth through tenth reform years.--The 
                beneficiary-based quarterly amount for a State for a 
                category for quarters in a reform year beginning with 
                the fourth reform year and ending with the tenth reform 
                year is--
                            ``(i) in the case of a State that is a high 
                        per beneficiary State or a low per beneficiary 
                        State (as defined in paragraph (4)(B)(iii)) for 
                        the category, the amount determined under 
                        clause (i) or (ii) of paragraph (4)(B) for such 
                        State, category, and reform year; or
                            ``(ii) in the case of any other State, the 
                        beneficiary-based quarterly amount under this 
                        paragraph for such State and category for the 
                        previous reform year increased by the per 
                        beneficiary percentage increase for such 
                        category and reform year.
                    ``(D) Eleventh reform year and subsequent reform 
                years.--The beneficiary-based quarterly amount for a 
                State for a category for quarters in a reform year 
                beginning with the eleventh reform year is equal to the 
                beneficiary-based quarterly amount under this paragraph 
                for such State and category for the previous reform 
                year increased by the per beneficiary percentage 
                increase for such category and reform year.
                    ``(E) Annual percentage increase beginning with 
                second reform year.--For purposes of this subsection, 
                the term `per beneficiary percentage increase' means, 
                for a reform year, the sum of--
                            ``(i) the projected percentage change in 
                        nominal gross domestic product from the 
                        midpoint of the previous reform year to the 
                        midpoint of the reform year for which the 
                        percentage increase is being applied; and
                            ``(ii) one percentage point.
            ``(2) Base per beneficiary, per category amount for each 
        state.--
                    ``(A) Average per category.--
                            ``(i) In general.--The Secretary shall 
                        determine, consistent with this paragraph and 
                        paragraph (3), a base per beneficiary, per 
                        category amount for each of the 50 States and 
                        the District of Columbia equal to the average 
                        amount, per Medicaid beneficiary, of Federal 
                        payments under this title, including payments 
                        attributable to disproportionate share hospital 
                        payments under section 1923, for each of the 
                        categories of beneficiaries under subsection 
                        (b)(2) for the base fiscal year for each of the 
                        50 States and the District of Columbia.
                            ``(ii) Best available data.--The 
                        determination under clause (i) shall initially 
                        be estimated by the Secretary, based upon the 
                        best available data at the time the 
                        determination is made.
                            ``(iii) Updates.--The determination under 
                        clause (i) shall be updated by the Secretary on 
                        an annual basis based upon improved data. The 
                        Secretary shall adjust the amounts under 
                        subsection (a)(1)(A) to reflect changes in the 
                        amounts so determined based on such updates.
                    ``(B) Exclusion of pass-through payments.--In 
                computing base per beneficiary, per category amounts 
                under subparagraph (A)(i) the Secretary shall exclude 
                payments described in subsection (a)(4).
                    ``(C) Standardization.--
                            ``(i) In general.--In computing each such 
                        amount, the Secretary shall standardize the 
                        amount in order to remove the variation 
                        attributable to the following:
                                    ``(I) Risk factors.--Such risk 
                                factors as age, health and disability 
                                status (including high cost medical 
                                conditions), gender, institutional 
                                status, and such other factors as the 
                                Secretary determines to be appropriate, 
                                so as to ensure actuarial equivalence.
                                    ``(II) Geographic.--Variations in 
                                costs on a county-by-county basis.
                            ``(ii) Method of standardization.--
                                    ``(I) Consultation in development 
                                of risk standardization.--In developing 
                                the methodology for risk 
                                standardization for purposes of clause 
                                (i)(I), the Secretary shall consult 
                                with the Medicaid and CHIP Payment and 
                                Access Commission, the Medicare Payment 
                                Advisory Commission, and the National 
                                Association of Medicaid Directors.
                                    ``(II) Method for risk 
                                standardization.--In carrying out 
                                clause (i)(I), the Secretary may apply 
                                the hierarchal condition category 
                                methodology under section 
                                1853(a)(1)(C). If the Secretary uses 
                                such methodology, the Secretary shall 
                                adjust the application of such 
                                methodology to take into account the 
                                differences in services provided under 
                                this title compared to title XVIII, 
                                such as the coverage of long term care, 
                                pregnancy, and pediatric services.
                                    ``(III) Method for geographic 
                                standardization.--The Secretary shall 
                                apply the standardization under clause 
                                (i)(II) in a manner similar to that 
                                applied under section 
                                1853(c)(4)(A)(iii).
                            ``(iii) Application on a national, budget 
                        neutral basis.--The standardization under 
                        clause (i) shall be designed and implemented on 
                        a uniform national basis and shall be budget 
                        neutral so as to not result in any aggregate 
                        change in payments under subsection (a).
                            ``(iv) Response to new risk.--Subject to 
                        clause (iii), the Secretary may adjust the 
                        standardization under clause (i) to respond 
                        promptly to new instances of communicable 
                        diseases and other public health hazards.
                            ``(v) Reference to application of risk 
                        adjustment.--For rules related to the 
                        application of risk adjustment to amounts under 
                        subsection (a)(1)(A), see subsection (e).
                    ``(D) Adjustment for temporary fmap increases.--In 
                computing each base per beneficiary, per category 
                amounts under subparagraph (A)(i) the Secretary shall 
                disregard portions of payments that are attributable to 
                a temporary increase in the Federal matching rates, 
                including those attributable to the following:
                            ``(i) PPACA disaster fmap.--Section 
                        1905(aa).
                            ``(ii) ARRA.--Section 5001 of the American 
                        Recovery and Reinvestment Act of 2009 (42 
                        U.S.C. 1396d note).
                            ``(iii) Extraordinary employer pension 
                        contribution.--Section 614 of the Children's 
                        Health Insurance Program Reauthorization Act of 
                        2009 (42 U.S.C. 1396d note).
            ``(3) Allocation of nonmedical assistance payments.--The 
        Secretary shall establish rules for the allocation of payments 
        under this title (other than those payments described in 
        paragraph (1) or (5) of section 1903(a) and including such 
        payments attributable to section 1923)--
                    ``(A) among different categories of beneficiaries; 
                and
                    ``(B) between payments included under subsection 
                (a)(1) and payments described in subsection (a)(4).
            ``(4) Transition to a corridor around the national 
        average.--
                    ``(A) Determination of national average base per 
                beneficiary, per category amount.--Subject to 
                subparagraph (C), the Secretary shall determine a 
                national average base per beneficiary, per category 
                amount equal to the average of the base per 
                beneficiary, per category amounts for each of the 50 
                States and the District of Columbia determined under 
                paragraph (2), weighted by the average number of 
                beneficiaries in each such category and State as 
                determined by the Secretary consistent with subsection 
                (d) for the base fiscal year.
                    ``(B) Transition adjustment.--
                            ``(i) High per beneficiary states.--In the 
                        case of a high per beneficiary State (as 
                        defined in clause (iii)(I)) for a category, the 
                        beneficiary-based quarterly amount for such 
                        State and category for a quarter in a reform 
                        year (beginning with the fourth reform year and 
                        ending with the tenth reform year) is equal to 
                        the sum of--
                                    ``(I) the product of the State-
                                specific factor for such reform year 
                                (as defined in clause (iv)) and the 
                                beneficiary-based quarterly amount that 
                                would otherwise be determined under 
                                paragraph (1) for such State and 
                                category if the State were a State 
                                described in clause (ii) of paragraph 
                                (1)(C), instead of a State described in 
                                clause (i) of such paragraph; and
                                    ``(II) the product of 1 minus the 
                                State-specific factor for such reform 
                                year and the beneficiary-based 
                                quarterly amount that would otherwise 
                                be determined under paragraph (1) for a 
                                State and category if the base per 
                                beneficiary, per category amount 
                                determined under paragraph (2) for the 
                                State and category were equal to 110 
                                percent of the national average base 
                                per beneficiary, per category amount 
                                determined under subparagraph (A) for 
                                such category.
                            ``(ii) Low per beneficiary states.--In the 
                        case of a low per beneficiary State (as defined 
                        in clause (iii)(II)) for a category, the 
                        beneficiary-based quarterly amount for such 
                        State and category for a quarter in a reform 
                        year (beginning with the fourth reform year and 
                        ending with the tenth reform year) is equal to 
                        the sum of--
                                    ``(I) the product of the State-
                                specific factor for such reform year 
                                and the beneficiary-based quarterly 
                                amount that would otherwise be 
                                determined under paragraph (1) for such 
                                State and category if the State were a 
                                State described in clause (ii) of 
                                paragraph (1)(C), instead of a State 
                                described in clause (i) of such 
                                paragraph; and
                                    ``(II) the product of 1 minus the 
                                State-specific factor for such reform 
                                year and the beneficiary-based 
                                quarterly amount that would otherwise 
                                be determined under paragraph (1) for a 
                                State and category if the base per 
                                beneficiary, per category amount 
                                determined under paragraph (2) for the 
                                State and category were equal to 90 
                                percent of the national average base 
                                per beneficiary, per category amount 
                                determined under subparagraph (A) for 
                                such category.
                            ``(iii) High and low per beneficiary states 
                        defined.--In this subparagraph:
                                    ``(I) High per beneficiary state.--
                                The term `high per beneficiary State' 
                                means, with respect to a category, a 
                                State for which the base per 
                                beneficiary, per category amount 
                                determined under paragraph (2) for such 
                                category is greater than 110 percent of 
                                the national average base per 
                                beneficiary, per category amount 
                                determined under subparagraph (A) for 
                                such category.
                                    ``(II) Low per beneficiary state.--
                                The term `low per beneficiary State' 
                                means, with respect to a category, a 
                                State for which the base per 
                                beneficiary, per category amount 
                                determined under paragraph (2) for such 
                                category is less than 90 percent of the 
                                national average base per beneficiary, 
                                per category amount determined under 
                                subparagraph (A) for such category.
                            ``(iv) State-specific factor.--In this 
                        subparagraph, the term `State-specific factor' 
                        means--
                                    ``(I) for the fourth reform year, 
                                \7/8\; and
                                    ``(II) for a subsequent reform 
                                year, the State-specific factor under 
                                this clause for the previous reform 
                                year minus \1/8.\
                    ``(C) No additional expenditures.--
                            ``(i) Determination of increase in federal 
                        expenditures.--For each category for each 
                        reform year (beginning with the fourth reform 
                        year and ending with the tenth reform year), 
                        the Secretary shall determine whether the 
                        application of this paragraph--
                                    ``(I) to the category for the 
                                reform year will result in an aggregate 
                                increase in the aggregate Federal 
                                expenditures under subsection (a); and
                                    ``(II) to all the categories for 
                                the reform year will result in a net 
                                aggregate increase in the aggregate 
                                Federal expenditures under subsection 
                                (a).
                            ``(ii) Adjustment.--If the Secretary 
                        determines under clause (i)(II) that the 
                        application of this paragraph to all the 
                        categories for a reform year will result in a 
                        net aggregate increase in the aggregate Federal 
                        expenditures under subsection (a), the 
                        Secretary shall reduce the national average 
                        base per beneficiary, per category amount 
                        computed under subparagraph (A) for each of the 
                        categories determined under clause (i)(I) for 
                        which there will be an aggregate increase in 
                        the aggregate Federal expenditures under 
                        subsection (a) by such uniform percentage as 
                        will ensure that there is no net aggregate 
                        Federal expenditure increase described in 
                        clause (i)(II) for the reform year.
            ``(5) Reports on per beneficiary rates; appeals.--
                    ``(A) Report to states.--Not later than 8 months 
                after the date of the enactment of this section, the 
                Secretary shall submit to each State the Secretary's 
                initial determination of--
                            ``(i) the base per beneficiary, per 
                        category amounts under paragraph (2) for such 
                        State; and
                            ``(ii) the national average base per 
                        beneficiary, per category amounts under 
                        paragraph (4)(A).
                    ``(B) Opportunity to appeal.--Not later than 3 
                months after the date a State receives notice of the 
                Secretary's initial determination of such base per 
                beneficiary, per category amounts for such State under 
                subparagraph (A)(i), the State may file with the 
                Secretary, in a form and manner specified by the 
                Secretary, an appeal of such determination.
                    ``(C) Determination on appeal.--Not later than 3 
                months after receiving such an appeal, the Secretary 
                shall make a final determination on such amounts for 
                such State. If no such appeal is received for a State, 
                the Secretary's initial determination under 
                subparagraph (A)(i) shall become final.
            ``(6) Base fiscal year defined.--In this section, the term 
        `base fiscal year' means the latest fiscal year, ending before 
        the date of the enactment of this section, for which the 
        Secretary determines that adequate data are available to make 
        the computations required under this subsection.
    ``(d) Not Counting Individuals To Account for Excluded Payments.--
Under rules specified by the Secretary, individuals shall not be 
counted as Medicaid beneficiaries for purposes of subsection (b)(1)(B) 
and subsection (c)(2)(A) in proportion to the extent that such 
individuals are receiving medical assistance for which payments 
described under subsection (a)(4)(A) are made.
    ``(e) Risk Adjustment.--
            ``(1) In general.--The amount under subsection (a)(1)(A) 
        shall be adjusted under this subsection in an appropriate 
        manner, specified by the Secretary and consistent with 
        paragraph (2), to take into account--
                    ``(A) the factors described in subsection 
                (c)(2)(C)(i)(I) within a category of beneficiaries; and
                    ``(B) variations in costs on a county-by-county 
                basis for medical assistance and administrative 
                expenses.
            ``(2) Method of adjustment.--
                    ``(A) In general.--The adjustments under paragraph 
                (1) shall be made in a manner similar to the manner in 
                which similar adjustments are made under subsection 
                (c)(2)(C) and consistent with the requirements of 
                clause (iii) of such subsection and subparagraph (B).
                    ``(B) Biannual update of risk adjustment 
                methodology.--In applying clause (i)(I) of subsection 
                (c)(2)(C) for purposes of subparagraph (A), the 
                Secretary shall, in consultation with the entities 
                described in clause (ii)(I) of such subsection, update 
                the risk adjustment methodology applied as appropriate 
                not less often than every 2 years.
    ``(f) Chronic Care Quality Bonus Payments.--
            ``(1) Determination of bonus payments.--If the Secretary 
        determines that, based on the reports under paragraph (5), with 
        respect to categories of chronic disease for which chronic care 
        performance targets had been established under paragraph (3) 
        for each category of Medicaid beneficiaries specified under 
        subsection (b)(2) such targets have been met by a State for a 
        reform year, the Secretary shall make an additional payment to 
        such State in the amount specified in paragraph (6) for each 
        quarter in the succeeding reform year. Such payments shall be 
        made in a manner specified by the Secretary and may only be 
        used consistent with subsection (a)(3).
            ``(2) Identification of categories of chronic disease.--The 
        Secretary shall determine the categories of chronic disease for 
        which bonus payments may be available under this subsection for 
        each category of Medicaid beneficiaries.
            ``(3) Adoption of quality measurement system and 
        identification of performance targets.--
                    ``(A) System and data.--With respect to the 
                categories of chronic disease under paragraph (2), the 
                Secretary shall adopt a quality measurement system that 
                uses data described in paragraph (4) and is similar to 
                the Five-Star Quality Rating System used to indicate 
                the performance of Medicare Advantage plans under part 
                C of title XVIII.
                    ``(B) Targets.--Using such system and data, the 
                Secretary shall establish for each reform year the 
                chronic care performance targets for purposes of the 
                payments under paragraph (1). Such performance targets 
                shall be established in consultation with States, 
                associations representing individuals with chronic 
                illnesses, entities providing treatment to such 
                individuals for such chronic illnesses, and other 
                stakeholders, including the National Association of 
                Medicaid Directors and the National Governors 
                Association.
            ``(4) Data to be used.--The data to be used under paragraph 
        (3) shall include--
                    ``(A) data collected through methods such as--
                            ``(i) the `Healthcare Effectiveness Data 
                        and Information Set' (also known as `HEDIS') 
                        (or an appropriate successor performance 
                        measurement tool);
                            ``(ii) the `Consumer Assessment of 
                        Healthcare Providers and Systems' (also known 
                        as `CAHPS') (or an appropriate successor 
                        performance measurement tool); and
                            ``(iii) the `Health Outcomes Survey' (also 
                        known as `HOS') (or an appropriate successor 
                        performance measurement tool); and
                    ``(B) other data collected by the State.
            ``(5) Reports.--
                    ``(A) In general.--Each State shall collect, 
                analyze, and report to the Secretary, at a frequency 
                and in a manner to be established by the Secretary, 
                data described in paragraph (4) that permit the 
                Secretary to monitor the State's performance relative 
                to the chronic care performance targets established 
                under paragraph (3).
                    ``(B) Review and verification.--The Secretary may 
                review the data collected by the State under 
                subparagraph (A) to verify the State's analysis of such 
                data with respect to the performance targets under 
                paragraph (3).
            ``(6) Amount of bonus payments.--
                    ``(A) In general.--Subject to subparagraphs (B) and 
                (C), with respect to each category of Medicaid 
                beneficiaries, in the case of a State that the 
                Secretary determines, based on the chronic care 
                performance targets set under paragraph (3) for a 
                reform year for such category, performs--
                            ``(i) in the top five States in such 
                        category, subject to subparagraph (C)(ii), the 
                        amount of the bonus for each quarter in the 
                        succeeding reform year shall be 10 percent of 
                        the payment amount otherwise paid to the State 
                        under subsection (a) for individuals enrolled 
                        under the plan within such category;
                            ``(ii) in the next five States in such 
                        category, subject to subparagraph (C)(ii), the 
                        amount of the bonus for each such quarter shall 
                        be 5 percent of the payment amount otherwise 
                        paid to the State under subsection (a) for 
                        individuals enrolled under the plan within such 
                        category;
                            ``(iii) in the next five States in such 
                        category, subject to clauses (i) and (iii) of 
                        subparagraph (C), the amount of the bonus for 
                        each such quarter shall be 3 percent of the 
                        payment amount otherwise paid to the State 
                        under subsection (a) for individuals enrolled 
                        under the plan within such category;
                            ``(iv) in the next five States in such 
                        category, subject to clauses (i) and (iii) of 
                        subparagraph (C), the amount of the bonus for 
                        each such quarter shall be 2 percent of the 
                        payment amount otherwise paid to the State 
                        under subsection (a) for individuals enrolled 
                        under the plan within such category; and
                            ``(v) in the next five States in such 
                        category, subject to clauses (i) and (iii) of 
                        subparagraph (C), the amount of the bonus for 
                        each such quarter shall be 1 percent of the 
                        payment amount otherwise paid to the State 
                        under subsection (a) for individuals enrolled 
                        under the plan within such category.
                    ``(B) Aggregate annual limit for each category of 
                medicaid beneficiaries.--
                            ``(i) In general.--In no case may the 
                        aggregate amount of bonuses under this 
                        subsection for quarters in a reform year for a 
                        category of Medicaid beneficiaries exceed the 
                        limit specified in clause (ii) for the reform 
                        year.
                            ``(ii) Limit.--The limit specified in this 
                        clause--
                                    ``(I) for the second reform year is 
                                equal to $250,000,000; or
                                    ``(II) for a subsequent reform year 
                                is equal to the limit specified in this 
                                clause for the previous reform year 
                                increased by the per beneficiary 
                                percentage increase determined under 
                                paragraph (1)(E) of subsection (c).
                    ``(C) Limitation and proration of bonuses based on 
                application of aggregate limit.--
                            ``(i) No bonus for third or subsequent 
                        tiers unless aggregate limit not reached on 
                        first two tiers.--No bonus shall be payable 
                        under clause (iii), (iv), or (v) of 
                        subparagraph (A) for a category of Medicaid 
                        beneficiaries for a quarter in a reform year 
                        unless the aggregate amount of bonuses under 
                        clauses (i) and (ii) of such subparagraph for 
                        such category and reform year is less than the 
                        limit specified in subparagraph (B)(ii) for the 
                        reform year.
                            ``(ii) Proration for first two tiers.--If 
                        the aggregate amount of bonuses under clauses 
                        (i) and (ii) of subparagraph (A) for a category 
                        of Medicaid beneficiaries for quarters in a 
                        reform year exceeds the limit specified in 
                        subparagraph (B)(ii) for the reform year, the 
                        amount of each such bonus shall be prorated in 
                        a manner so the aggregate amount of such 
                        bonuses is equal to such limit.
                            ``(iii) Proration for next three tiers.--If 
                        the aggregate amount of bonuses under clauses 
                        (i) and (ii) of subparagraph (A) for a category 
                        of Medicaid beneficiaries for quarters in a 
                        reform year is less than the limit specified in 
                        subparagraph (B)(ii) for the reform year, but 
                        the aggregate amount of bonuses under clauses 
                        (i) through (v) of subparagraph (A) for the 
                        category and such quarters in the reform year 
                        exceeds the limit specified in subparagraph 
                        (B)(ii) for the reform year, the amount of each 
                        bonus in clauses (iii), (iv), and (v) of 
                        subparagraph (A) shall be prorated in a manner 
                        so the aggregate amount of all the bonuses 
                        under subparagraph (A) is equal to such limit.
    ``(g) State Option for Receiving Medicare Payments for Full-Benefit 
Dual Eligible Individuals.--
            ``(1) In general.--Under this subsection a State may elect 
        for quarters beginning on or after the implementation date in a 
        reform year to receive payment from the Secretary under 
        paragraph (3). As a condition of receiving such payment, the 
        State shall agree to provide to full-benefit dual eligible 
        individuals eligible for medical assistance under the State 
        plan--
                    ``(A) the medical assistance to which such eligible 
                individuals would otherwise be entitled under this 
                title; and
                    ``(B) any items and services which such eligible 
                individuals would otherwise receive under title XVIII.
            ``(2) Provider payment requirement.--
                    ``(A) In general.--A State electing the option 
                under this subsection shall provide payment to health 
                care providers for the items and services described 
                under paragraph (1)(B) at a rate that is not less than 
                the rate at which payments would be made to such 
                providers for such items and services under title 
                XVIII.
                    ``(B) Flexibility in payment methods.--Nothing in 
                subparagraph (A) shall be construed as preventing a 
                State from using alternative payment methodologies 
                (such as bundled payments or the use of accountable 
                care organizations (as such term is used in section 
                1899)) for purposes of making payments to health care 
                providers for items and services provided to dual 
                eligible individuals in the State under the option 
                under this subsection.
            ``(3) Payments to states in lieu of medicare payments.--
        With respect to a full-benefit dual eligible individual, in the 
        case of a State that elects the option under paragraph (1) for 
        quarters in a reform year--
                    ``(A) the Secretary shall not make any payment 
                under title XVIII for items and services furnished to 
                such individual for such quarters; and
                    ``(B) the Secretary shall pay to the State, in 
                addition to the amounts paid to such State under 
                subsection (a), the amount that the Secretary would, 
                but for this subsection, otherwise pay under title 
                XVIII for items and services furnished to such an 
                individual in such State for such quarters.
            ``(4) Full-benefit dual eligible individual defined.--In 
        this subsection, the term `full-benefit dual eligible 
        individual' means an individual who meets the requirements of 
        section 1935(c)(6)(A)(ii).
    ``(h) Audits.--The Secretary shall conduct such audits on the 
number and classification of Medicaid beneficiaries under such 
subsections and expenditures under this section as may be necessary to 
ensure appropriate payments under this section.
    ``(i) Treatment of Waivers.--
            ``(1) No impact on current waivers.--In the case of a 
        waiver of requirements of this title pursuant to section 1115 
        or other law that is in effect as of the date of the enactment 
        of this section, nothing in this section shall be construed to 
        affect such waiver for the period of the waiver as approved as 
        of such date.
            ``(2) Application of budget neutrality to subsequent 
        waivers and renewals taking section into account.--In the case 
        of a waiver of requirements of this title pursuant to section 
        1115 or other law that is approved or renewed after the date of 
        the enactment of this section, to the extent that such approval 
        or renewal is conditioned upon a demonstration of budget 
        neutrality, budget neutrality shall be determined taking into 
        account the application of this section.
    ``(j) Report to Congress.--Not later than January 1 of the second 
reform year, the Secretary shall submit to Congress a report on the 
implementation of this section.
    ``(k) Definitions.--In this section:
            ``(1) Implementation date.--The term `implementation date' 
        means--
                    ``(A) July 1, 2018, if this section is enacted on 
                or before July 1, 2017; or
                    ``(B) July 1, 2019, if this section is enacted 
                after July 1, 2017.
            ``(2) Reform years.--
                    ``(A) The term `reform year' means a fiscal year 
                beginning with the first reform year.
                    ``(B) The term `first reform year' means the fiscal 
                year in which the implementation date occurs.
                    ``(C) The terms `second', `third', and successive 
                similar terms mean, with respect to a reform year, the 
                second, third, or successive reform year, respectively, 
                succeeding the first reform year.''.
    (b) Conforming Amendments.--
            (1) Continued application of clawback provisions.--
                    (A) Continued application.--Subsections (a) and 
                (c)(1)(C) of section 1935 of such Act (42 U.S.C. 1396u-
                5) are each amended by inserting ``or 1903A(a)'' after 
                ``1903(a)''.
                    (B) Technical amendment.--Section 1935(d)(1) of the 
                Social Security Act (42 U.S.C. 1396u-5(d)(1)) is 
                amended by inserting ``except as provided in section 
                1903A(g)'' after ``any other provision of this title''.
            (2) Payment rules under section 1903.--
                    (A) Section 1903(a) of such Act (42 U.S.C. 
                1396b(a)) is amended, in the matter before paragraph 
                (1), by inserting ``and section 1903A'' after ``except 
                as otherwise provided in this section''.
                    (B) Section 1903(d) of such Act (42 U.S.C. 
                1396b(d)) is amended--
                            (i) in paragraph (1), by inserting ``and 
                        under section 1903A'' after ``subsections (a) 
                        and (b)'';
                            (ii) in paragraph (2)--
                                    (I) in subparagraph (A), by 
                                inserting ``or section 1903A'' after 
                                ``was made under this section''; and
                                    (II) in subparagraph (B), by 
                                inserting ``or section 1903A'' after 
                                ``under subsection (a)'';
                            (iii) in paragraph (4)--
                                    (I) by striking ``under this 
                                subsection'' and inserting ``, with 
                                respect to this section or section 
                                1903A, under this subsection''; and
                                    (II) by striking ``under this 
                                section'' and inserting ``under the 
                                respective section''; and
                            (iv) in paragraph (5), by inserting ``or 
                        section 1903A'' after ``overpayment under this 
                        section''.
            (3) Conforming waiver authority.--Section 1115(a)(2)(A) of 
        the Social Security Act (42 U.S.C. 1315(a)(2)(A)) is amended by 
        striking ``or 1903'' and inserting ``1903, or 1903A''.
            (4) Report on additional conforming amendments needed.--Not 
        later than 6 months after the date of the enactment of this 
        Act, the Secretary of Health and Human Services shall submit to 
        Congress a report that includes a description of any additional 
        technical and conforming amendments to law that are required to 
        properly carry out this Act.
                                 <all>
```