I 

113TH CONGRESS 

1ST SESSION H. R. 1853 

To amend title XIX of the Social Security Act to reform payment to States 

under the Medicaid program. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 7, 2013 

Mr. CASSIDY introduced the following bill; which was referred to the 

Committee on Energy and Commerce 

A BILL 

To amend title XIX of the Social Security Act to reform 

payment to States under the Medicaid program. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Medicaid Account5 ability and Care Act of 2013’’. 

6 SEC. 2. MEDICAID PAYMENT REFORM. 

7 (a) IN GENERAL.—Title XIX of the Social Security 

8 Act (42 U.S.C. 1396 et seq.) is amended by inserting after 

9 section 1903 the following section: 


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1 ‘‘SEC. 1903A. REFORMED PAYMENT TO STATES. 

2 ‘‘(a) REFORMED PAYMENT SYSTEM.— 

3 ‘‘(1) IN GENERAL.—For quarters beginning on 

4 or after the implementation date (as defined in sub5 section (k)(1)), in lieu of amounts otherwise payable 

6 to a State under this title (including any payments 

7 attributable to section 1923), except as otherwise 

8 provided in this section, the amount payable to such 

9 State shall be equal to the sum of the following: 

10 ‘‘(A) ADJUSTED AGGREGATE BENE11 FICIARY-BASED AMOUNT.—The aggregate bene12 ficiary-based amount specified in subsection (b) 

13 for the quarter and the State, adjusted under 

14 subsection (e). 

15 ‘‘(B) CHRONIC CARE QUALITY BONUS.— 

16 The amount (if any) of the chronic care quality 

17 bonus payment specified in subsection (f) for 

18 the quarter for the State. 

19 ‘‘(2) REQUIREMENT OF STATE SHARE.— 

20 ‘‘(A) IN GENERAL.—A State shall make, 

21 from non-Federal funds, expenditures in an 

22 amount equal to its State share (as determined 

23 under subparagraph (B)) for a quarter for 

24 items, services, and other costs for which, but 

25 for paragraph (1), Federal funds would have 

26 been payable under this title. 


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1 ‘‘(B) STATE SHARE.—The State share for 

2 a State for a quarter in a fiscal year is equal 

3 to the product of— 

4 ‘‘(i) the aggregate beneficiary-based 

5 amount specified in subsection (b) for the 

6 quarter and the State; and 

7 ‘‘(ii) the ratio of— 

8 ‘‘(I) the State percentage de9 scribed in subparagraph (D)(ii) for 

10 such State and fiscal year; to 

11 ‘‘(II) the Federal percentage de12 scribed in subparagraph (D)(i) for 

13 such State and fiscal year. 

14 ‘‘(C) NONPAYMENT FOR FAILURE TO PAY

15 STATE SHARE.— 

16 ‘‘(i) IN GENERAL.—If a State fails to 

17 expend the amount required under sub18 paragraph (A) for a quarter in a fiscal 

19 year, the amount payable to the State 

20 under paragraph (1) shall be reduced by 

21 the product of the amount by which the 

22 State payment is less than the State share 

23 and the ratio of— 


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1 ‘‘(I) the Federal percentage de2 scribed in subparagraph (D)(i) for 

3 such State and fiscal year; to 

4 ‘‘(II) the State percentage de5 scribed in subparagraph (D)(ii) for 

6 such State and fiscal year. 

7 ‘‘(ii) GRACE PERIOD.—A State shall 

8 not be considered to have failed to provide 

9 payment of its required State share for a 

10 quarter under subparagraph (A) if the ag11 gregate State payment towards the State’s 

12 required State share for the 4-quarter pe13 riod beginning with such quarter exceeds 

14 the required State share amount for such 

15 4-quarter period. 

16 ‘‘(D) FEDERAL AND STATE PERCENT17 AGES.—In this paragraph, with respect to a 

18 State and a fiscal year: 

19 ‘‘(i) FEDERAL PERCENTAGE.—The 

20 Federal percentage described in this clause 

21 is 75 percent or, if higher, the Federal 

22 medical assistance percentage for such 

23 State for such fiscal year. 

24 ‘‘(ii) STATE PERCENTAGE.—The State 

25 percentage described in this clause is 100 


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1 percent minus the Federal percentage de2 scribed in clause (i). 

3 ‘‘(E) RULES FOR CREDITING TOWARD

4 STATE SHARE.— 

5 ‘‘(i) GENERAL LIMITATION TO MATCH6 ABLE EXPENDITURES.—A payment for ex7 penditures shall not be counted toward the 

8 State share under subparagraph (A) unless 

9 Federal payments may be used for such 

10 expenditures consistent with paragraph 

11 (3)(B). 

12 ‘‘(ii) FURTHER LIMITATIONS ON AL13 LOWABLE EXPENDITURES.—A payment for 

14 expenditures shall not be counted towards 

15 the State share under subparagraph (A) if 

16 the expenditure is for any of the following: 

17 ‘‘(I) ABORTION.—Expenditures 

18 for an abortion. 

19 ‘‘(II) INTERGOVERNMENTAL

20 TRANSFERS.—An expenditure that is 

21 attributable to an intergovernmental 

22 transfer. 

23 ‘‘(III) CERTIFIED PUBLIC EX24 PENDITURES.—An expenditure that is 


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1 attributable to certified public expend2 itures. 

3 ‘‘(iii) CREDITING FRAUD AND ABUSE

4 RECOVERIES.—Amounts recovered by a 

5 State through the operation of its Medicaid 

6 fraud and abuse control unit described in 

7 section 1903(q) shall be fully counted to8 ward the State share under subparagraph 

9 (A). 

10 ‘‘(F) CONSTRUCTION.—Nothing in the 

11 paragraph shall be construed as preventing a 

12 State from expending, from non-Federal funds, 

13 an amount under this title in excess of the 

14 amount of the State share. 

15 ‘‘(G) DETERMINATION BASED UPON SUB16 MITTED CLAIMS.—In applying this paragraph 

17 with respect to expenditures of a State for a 

18 quarter, the determination of the expenditures 

19 for such State for such quarter shall be made 

20 after the end of the period (which, as of the 

21 date of the enactment of this section, is 2 

22 years) for which the Secretary accepts claims 

23 for payment under this title with respect to 

24 such quarter. 

25 ‘‘(3) USE OF FEDERAL PAYMENTS.— 


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1 ‘‘(A) APPLICATION OF MEDICAID LIMITA2 TIONS.—A State may only use Federal pay3 ments received under subsection (a) for expend4 itures for which Federal funds would have been 

5 payable under this title but for this section. 

6 ‘‘(B) LIMITATION FOR CERTAIN ELIGI7 BLES.— 

8 ‘‘(i) APPLICATION OF 100 PERCENT

9 FEDERAL POVERTY LINE LIMIT ON ELIGI10 BILITY.—Subject to clause (iii), a State 

11 may not use such Federal payments to 

12 provide medical assistance for an indi13 vidual who has an income (as determined 

14 under clause (ii)) that exceeds 100 percent 

15 of the poverty line (as defined in section 

16 2110(c)(5)) applicable to a family of the 

17 size involved. 

18 ‘‘(ii) DETERMINATION OF INCOME

19 USING MODIFIED ADJUSTED GROSS IN20 COME WITHOUT ANY 5 PERCENT IN21 CREASE.—In determining income for pur22 poses of clause (i) under section 

23 1902(e)(14) (relating to modified adjusted 

24 gross income), the following rules shall 

25 apply: 


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1 ‘‘(I) APPLICATION OF SPEND

2 DOWN.—The State shall take into ac3 count the costs incurred for medical 

4 care or for any other type of remedial 

5 care recognized under State law in the 

6 same manner and to the same extent 

7 that such State takes such costs into 

8 account for purposes of section 

9 1902(a)(17). 

10 ‘‘(II) DISREGARD OF 5 PERCENT

11 INCREASE.—Subparagraph (I) of sec12 tion 1902(e)(14) (relating to a 5 per13 cent reduction) shall not apply. 

14 ‘‘(iii) EXCEPTION.—Clause (i) shall 

15 not apply to an individual who is— 

16 ‘‘(I) a woman described in clause 

17 (i) of section 1903(v)(4)(A); 

18 ‘‘(II) a child who is an individual 

19 described in clause (i) of section 

20 1905(a); 

21 ‘‘(III) enrolled in a State plan 

22 under this title as of the date of the 

23 enactment of this section for the pe24 riod of continuous enrollment; or 


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1 ‘‘(IV) described in section 

2 1902(e)(14)(D) (relating to modified 

3 adjusted gross income). 

4 ‘‘(iv) CLARIFICATION RELATED TO

5 COMMUNITY SPOUSE.—Nothing in this 

6 subparagraph shall supersede the applica7 tion of section 1924 (related to community 

8 spouse income and assets). 

9 ‘‘(4) EXCEPTIONS FOR PASS-THROUGH PAY10 MENTS.— 

11 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

12 not apply, and amounts shall continue to be 

13 payable under this title (and not under sub14 section (a)), in the case of the following pay15 ments (and related administrative costs and ex16 penditures): 

17 ‘‘(i) PAYMENTS TO TERRITORIES.— 

18 Payments to a State other than the 50 

19 States and the District of Columbia. 

20 ‘‘(ii) MEDICARE COST SHARING.— 

21 Payments attributable to Medicare cost 

22 sharing under section 1905(p). 

23 ‘‘(iii) PEDIATRIC VACCINES.—Pay24 ments attributable to section 1928. 


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1 ‘‘(iv) EMERGENCY SERVICES FOR CER2 TAIN INDIVIDUALS.—Payments for treat3 ment of emergency medical conditions at4 tributable to the application of section 

5 1903(v)(2). 

6 ‘‘(v) INDIAN HEALTH CARE FACILI7 TIES.—Payments for medical assistance 

8 described in the third sentence of section 

9 1905(b). 

10 ‘‘(vi) EMPLOYER-SPONSORED INSUR11 ANCE (ESI).—Payments for medical assist12 ance attributable to payments to employers 

13 for employer-sponsored health benefits cov14 erage. 

15 ‘‘(vii) OTHER POPULATIONS WITH

16 LIMITED BENEFIT COVERAGE.—Other pay17 ments that are determined by the Sec18 retary to be related to a specified popu19 lation for which the medical assistance 

20 under this title is limited and does not in21 clude any inpatient, nursing facility, or 

22 long-term care services. 

23 ‘‘(B) CERTAIN EXPENSES.—Paragraph (1) 

24 shall not apply, and amounts shall continue to 


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1 be payable under this title (and not under sub2 section (a)), in the case of the following: 

3 ‘‘(i) ADMINISTRATION OF MEDICARE

4 PRESCRIPTION DRUG BENEFIT.—Expendi5 tures described in section 1935(b) (relating 

6 to administration of the Medicare prescrip7 tion drug benefit). 

8 ‘‘(ii) PAYMENTS FOR HIT BONUSES.— 

9 Payments under section 1903(a)(3)(F) (re10 lating to payments to encourage the adop11 tion and use of certified EHR technology). 

12 ‘‘(iii) PAYMENTS FOR DESIGN, DEVEL13 OPMENT, AND INSTALLATION OF MMIS AND

14 ELIGIBILITY SYSTEMS.—Payments under 

15 subparagraphs (A)(i) and (H)(i) of section 

16 1903(a)(3) for expenditures for design, de17 velopment, and installation of the Medicaid 

18 management information systems and 

19 mechanized verification and information 

20 retrieval systems (related to eligibility). 

21 ‘‘(5) PAYMENT OF AMOUNTS.— 

22 ‘‘(A) IN GENERAL.—Except as the Sec23 retary may otherwise provide, amounts shall be 

24 payable to a State under subsection (a) in the 

25 same manner as amounts are payable under 


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1 subsection (d) of section 1903 to a State under 

2 subsection (a) of such section. 

3 ‘‘(B) INFORMATION AND FORMS.— 

4 ‘‘(i) SUBMISSION.—As a condition of 

5 receiving payment under subsection (a), a 

6 State shall submit such information, in 

7 such form, and manner, as the Secretary 

8 shall specify, including information nec9 essary to make the computations under 

10 subsections (c)(2)(C) and (e). 

11 ‘‘(ii) UNIFORM REPORTING.—The 

12 Secretary shall develop such forms as may 

13 be needed to assure a system of uniform 

14 reporting of such information across 

15 States. 

16 ‘‘(C) REQUIRED REPORTING OF INFORMA17 TION ON MEDICAL LOSS RATIOS FOR MANAGED

18 CARE.—The information required to be reported 

19 under subparagraph (B)(i) shall include infor20 mation on the medical loss ratio with respect to 

21 coverage provided under each Medicaid man22 aged care plan with a contract with the State 

23 under section 1903(m) or 1932. 

24 ‘‘(b) AGGREGATE BENEFICIARY-BASED AMOUNT.— 


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1 ‘‘(1) IN GENERAL.—The aggregate beneficiary2 based amount specified in this subsection for a State 

3 for a quarter is equal to the sum of the products, 

4 for each of the categories of Medicaid beneficiaries 

5 specified in paragraph (2), of the following: 

6 ‘‘(A) BENEFICIARY-BASED QUARTERLY

7 AMOUNT.—The beneficiary-based quarterly 

8 amount for such category computed under sub9 section (c) for such State for such quarter. 

10 ‘‘(B) NUMBER OF INDIVIDUALS IN CAT11 EGORY.—Subject to subsection (d), the average 

12 number of Medicaid beneficiaries enrolled in 

13 such category in the State in such quarter. 

14 ‘‘(2) CATEGORIES.—The categories specified in 

15 this paragraph are the following: 

16 ‘‘(A) ELDERLY.—A category of Medicaid 

17 beneficiaries who are 65 years of age or older. 

18 ‘‘(B) BLIND OR DISABLED.—A category of 

19 Medicaid beneficiaries not described in subpara20 graph (A) who are described in section 

21 1937(a)(2)(B)(ii). 

22 ‘‘(C) CHILDREN.—A category of Medicaid 

23 beneficiaries not described in subparagraph (B) 

24 who are under 21 years of age. 


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1 ‘‘(D) OTHER ADULTS.—A category of any 

2 Medicaid beneficiaries who are not described in 

3 a previous subparagraph of this paragraph. 

4 ‘‘(c) COMPUTATION OF PER BENEFICIARY, PER CAT5 EGORY QUARTERLY AMOUNT.— 

6 ‘‘(1) IN GENERAL.—For a State, for each cat7 egory of beneficiary for a quarter— 

8 ‘‘(A) FIRST REFORM YEAR.—For quarters 

9 in the first reform year (as defined in sub10 section (k)(2)), the beneficiary-based quarterly 

amount is equal to 1 11 ⁄4 of the base average per 

12 beneficiary Federal payments for such State for 

13 such category determined under paragraph (2), 

14 increased by a factor that reflects the sum of 

15 the following: 

16 ‘‘(i) HISTORICAL MEDICAL CARE COM17 PONENT OF CPI THROUGH PREVIOUS RE18 FORM YEAR.—The percentage increase in 

19 the historical medical care component of 

20 the Consumer Price Index for all urban 

21 consumers (U.S. city average) from the 

22 midpoint of the base fiscal year (as defined 

23 in paragraph (6)) to the midpoint of the 

24 fiscal year preceding the first reform year. 


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1 ‘‘(ii) PROJECTED MEDICAL CARE COM2 PONENT OF CPI FOR THE FIRST REFORM

3 YEAR.—The percentage increase in the 

4 projected medical care component of the 

5 Consumer Price Index for all urban con6 sumers (U.S. city average) from the mid7 point of the previous fiscal year referred to 

8 in clause (i) to the midpoint of the first re9 form year. 

10 ‘‘(B) SECOND AND THIRD REFORM

11 YEARS.—The beneficiary-based quarterly 

12 amount for a State for a category for quarters 

13 in the second reform year or the third reform 

14 year is equal to the beneficiary-based quarterly 

15 amount under this paragraph for such State 

16 and category for the previous reform year in17 creased by the per beneficiary percentage in18 crease (as defined in subparagraph (E)) for 

19 such category and reform year. 

20 ‘‘(C) FOURTH THROUGH TENTH REFORM

21 YEARS.—The beneficiary-based quarterly 

22 amount for a State for a category for quarters 

23 in a reform year beginning with the fourth re24 form year and ending with the tenth reform 

25 year is— 


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1 ‘‘(i) in the case of a State that is a 

2 high per beneficiary State or a low per 

3 beneficiary State (as defined in paragraph 

4 (4)(B)(iii)) for the category, the amount 

5 determined under clause (i) or (ii) of para6 graph (4)(B) for such State, category, and 

7 reform year; or 

8 ‘‘(ii) in the case of any other State, 

9 the beneficiary-based quarterly amount 

10 under this paragraph for such State and 

11 category for the previous reform year in12 creased by the per beneficiary percentage 

13 increase for such category and reform 

14 year. 

15 ‘‘(D) ELEVENTH REFORM YEAR AND SUB16 SEQUENT REFORM YEARS.—The beneficiary17 based quarterly amount for a State for a cat18 egory for quarters in a reform year beginning 

19 with the eleventh reform year is equal to the 

20 beneficiary-based quarterly amount under this 

21 paragraph for such State and category for the 

22 previous reform year increased by the per bene23 ficiary percentage increase for such category 

24 and reform year. 


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1 ‘‘(E) ANNUAL PERCENTAGE INCREASE BE2 GINNING WITH SECOND REFORM YEAR.—For 

3 purposes of this subsection, the term ‘per bene4 ficiary percentage increase’ means, for a reform 

5 year, the sum of— 

6 ‘‘(i) the projected percentage change 

7 in nominal gross domestic product from 

8 the midpoint of the previous reform year to 

9 the midpoint of the reform year for which 

10 the percentage increase is being applied; 

11 and 

12 ‘‘(ii) one percentage point. 

13 ‘‘(2) BASE PER BENEFICIARY, PER CATEGORY

14 AMOUNT FOR EACH STATE.— 

15 ‘‘(A) AVERAGE PER CATEGORY.— 

16 ‘‘(i) IN GENERAL.—The Secretary 

17 shall determine, consistent with this para18 graph and paragraph (3), a base per bene19 ficiary, per category amount for each of 

20 the 50 States and the District of Columbia 

21 equal to the average amount, per Medicaid 

22 beneficiary, of Federal payments under 

23 this title, including payments attributable 

24 to disproportionate share hospital pay25 ments under section 1923, for each of the 


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1 categories of beneficiaries under subsection 

2 (b)(2) for the base fiscal year for each of 

3 the 50 States and the District of Colum4 bia. 

5 ‘‘(ii) BEST AVAILABLE DATA.—The 

6 determination under clause (i) shall ini7 tially be estimated by the Secretary, based 

8 upon the best available data at the time 

9 the determination is made. 

10 ‘‘(iii) UPDATES.—The determination 

11 under clause (i) shall be updated by the 

12 Secretary on an annual basis based upon 

13 improved data. The Secretary shall adjust 

14 the amounts under subsection (a)(1)(A) to 

15 reflect changes in the amounts so deter16 mined based on such updates. 

17 ‘‘(B) EXCLUSION OF PASS-THROUGH PAY18 MENTS.—In computing base per beneficiary, 

19 per category amounts under subparagraph 

20 (A)(i) the Secretary shall exclude payments de21 scribed in subsection (a)(4). 

22 ‘‘(C) STANDARDIZATION.— 

23 ‘‘(i) IN GENERAL.—In computing each 

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1 ardize the amount in order to remove the 

2 variation attributable to the following: 

3 ‘‘(I) RISK FACTORS.—Such risk 

4 factors as age, health and disability 

5 status (including high cost medical 

6 conditions), gender, institutional sta7 tus, and such other factors as the 

8 Secretary determines to be appro9 priate, so as to ensure actuarial 

10 equivalence. 

11 ‘‘(II) GEOGRAPHIC.—Variations 

12 in costs on a county-by-county basis. 

13 ‘‘(ii) METHOD OF STANDARDIZA14 TION.— 

15 ‘‘(I) CONSULTATION IN DEVEL16 OPMENT OF RISK STANDARDIZA17 TION.—In developing the methodology 

18 for risk standardization for purposes 

19 of clause (i)(I), the Secretary shall 

20 consult with the Medicaid and CHIP 

21 Payment and Access Commission, the 

22 Medicare Payment Advisory Commis23 sion, and the National Association of 

24 Medicaid Directors. 


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1 ‘‘(II) METHOD FOR RISK STAND2 ARDIZATION.—In carrying out clause 

3 (i)(I), the Secretary may apply the 

4 hierarchal condition category method5 ology under section 1853(a)(1)(C). If 

6 the Secretary uses such methodology, 

7 the Secretary shall adjust the applica8 tion of such methodology to take into 

9 account the differences in services 

10 provided under this title compared to 

11 title XVIII, such as the coverage of 

12 long term care, pregnancy, and pedi13 atric services. 

14 ‘‘(III) METHOD FOR GEOGRAPHIC

15 STANDARDIZATION.—The Secretary 

16 shall apply the standardization under 

17 clause (i)(II) in a manner similar to 

18 that applied under section 

19 1853(c)(4)(A)(iii). 

20 ‘‘(iii) APPLICATION ON A NATIONAL, 

21 BUDGET NEUTRAL BASIS.—The standard22 ization under clause (i) shall be designed 

23 and implemented on a uniform national 

24 basis and shall be budget neutral so as to 


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1 not result in any aggregate change in pay2 ments under subsection (a). 

3 ‘‘(iv) RESPONSE TO NEW RISK.—Sub4 ject to clause (iii), the Secretary may ad5 just the standardization under clause (i) to 

6 respond promptly to new instances of com7 municable diseases and other public health 

8 hazards. 

9 ‘‘(v) REFERENCE TO APPLICATION OF

10 RISK ADJUSTMENT.—For rules related to 

11 the application of risk adjustment to 

12 amounts under subsection (a)(1)(A), see 

13 subsection (e). 

14 ‘‘(D) ADJUSTMENT FOR TEMPORARY FMAP

15 INCREASES.—In computing each base per bene16 ficiary, per category amounts under subpara17 graph (A)(i) the Secretary shall disregard por18 tions of payments that are attributable to a 

19 temporary increase in the Federal matching 

20 rates, including those attributable to the fol21 lowing: 

22 ‘‘(i) PPACA DISASTER FMAP.—Sec23 tion 1905(aa). 


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1 ‘‘(ii) ARRA.—Section 5001 of the 

2 American Recovery and Reinvestment Act 

3 of 2009 (42 U.S.C. 1396d note). 

4 ‘‘(iii) EXTRAORDINARY EMPLOYER

5 PENSION CONTRIBUTION.—Section 614 of 

6 the Children’s Health Insurance Program 

7 Reauthorization Act of 2009 (42 U.S.C. 

8 1396d note). 

9 ‘‘(3) ALLOCATION OF NONMEDICAL ASSISTANCE

10 PAYMENTS.—The Secretary shall establish rules for 

11 the allocation of payments under this title (other 

12 than those payments described in paragraph (1) or 

13 (5) of section 1903(a) and including such payments 

14 attributable to section 1923)— 

15 ‘‘(A) among different categories of bene16 ficiaries; and 

17 ‘‘(B) between payments included under 

18 subsection (a)(1) and payments described in 

19 subsection (a)(4). 

20 ‘‘(4) TRANSITION TO A CORRIDOR AROUND THE

21 NATIONAL AVERAGE.— 

22 ‘‘(A) DETERMINATION OF NATIONAL AVER23 AGE BASE PER BENEFICIARY, PER CATEGORY

24 AMOUNT.—Subject to subparagraph (C), the 

25 Secretary shall determine a national average 


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1 base per beneficiary, per category amount equal 

2 to the average of the base per beneficiary, per 

3 category amounts for each of the 50 States and 

4 the District of Columbia determined under 

5 paragraph (2), weighted by the average number 

6 of beneficiaries in each such category and State 

7 as determined by the Secretary consistent with 

8 subsection (d) for the base fiscal year. 

9 ‘‘(B) TRANSITION ADJUSTMENT.— 

10 ‘‘(i) HIGH PER BENEFICIARY

11 STATES.—In the case of a high per bene12 ficiary State (as defined in clause (iii)(I)) 

13 for a category, the beneficiary-based quar14 terly amount for such State and category 

15 for a quarter in a reform year (beginning 

16 with the fourth reform year and ending 

17 with the tenth reform year) is equal to the 

18 sum of— 

19 ‘‘(I) the product of the State-spe20 cific factor for such reform year (as 

21 defined in clause (iv)) and the bene22 ficiary-based quarterly amount that 

23 would otherwise be determined under 

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1 scribed in clause (ii) of paragraph 

2 (1)(C), instead of a State described in 

3 clause (i) of such paragraph; and 

4 ‘‘(II) the product of 1 minus the 

5 State-specific factor for such reform 

6 year and the beneficiary-based quar7 terly amount that would otherwise be 

8 determined under paragraph (1) for a 

9 State and category if the base per 

10 beneficiary, per category amount de11 termined under paragraph (2) for the 

12 State and category were equal to 110 

13 percent of the national average base 

14 per beneficiary, per category amount 

15 determined under subparagraph (A) 

16 for such category. 

17 ‘‘(ii) LOW PER BENEFICIARY

18 STATES.—In the case of a low per bene19 ficiary State (as defined in clause (iii)(II)) 

20 for a category, the beneficiary-based quar21 terly amount for such State and category 

22 for a quarter in a reform year (beginning 

23 with the fourth reform year and ending 

24 with the tenth reform year) is equal to the 

25 sum of— 


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1 ‘‘(I) the product of the State-spe2 cific factor for such reform year and 

3 the beneficiary-based quarterly 

4 amount that would otherwise be deter5 mined under paragraph (1) for such 

6 State and category if the State were 

7 a State described in clause (ii) of 

8 paragraph (1)(C), instead of a State 

9 described in clause (i) of such para10 graph; and 

11 ‘‘(II) the product of 1 minus the 

12 State-specific factor for such reform 

13 year and the beneficiary-based quar14 terly amount that would otherwise be 

15 determined under paragraph (1) for a 

16 State and category if the base per 

17 beneficiary, per category amount de18 termined under paragraph (2) for the 

19 State and category were equal to 90 

20 percent of the national average base 

21 per beneficiary, per category amount 

22 determined under subparagraph (A) 

23 for such category. 


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1 ‘‘(iii) HIGH AND LOW PER BENE2 FICIARY STATES DEFINED.—In this sub3 paragraph: 

4 ‘‘(I) HIGH PER BENEFICIARY

5 STATE.—The term ‘high per bene6 ficiary State’ means, with respect to a 

7 category, a State for which the base 

8 per beneficiary, per category amount 

9 determined under paragraph (2) for 

10 such category is greater than 110 per11 cent of the national average base per 

12 beneficiary, per category amount de13 termined under subparagraph (A) for 

14 such category. 

15 ‘‘(II) LOW PER BENEFICIARY

16 STATE.—The term ‘low per bene17 ficiary State’ means, with respect to a 

18 category, a State for which the base 

19 per beneficiary, per category amount 

20 determined under paragraph (2) for 

21 such category is less than 90 percent 

22 of the national average base per bene23 ficiary, per category amount deter24 mined under subparagraph (A) for 

25 such category. 


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1 ‘‘(iv) STATE-SPECIFIC FACTOR.—In 

2 this subparagraph, the term ‘State-specific 

3 factor’ means— 

4 ‘‘(I) for the fourth reform year, 

7 5 ⁄8; and 

6 ‘‘(II) for a subsequent reform 

7 year, the State-specific factor under 

8 this clause for the previous reform 

year minus 1 9 ⁄8.

10 ‘‘(C) NO ADDITIONAL EXPENDITURES.— 

11 ‘‘(i) DETERMINATION OF INCREASE IN

12 FEDERAL EXPENDITURES.—For each cat13 egory for each reform year (beginning with 

14 the fourth reform year and ending with the 

15 tenth reform year), the Secretary shall de16 termine whether the application of this 

17 paragraph— 

18 ‘‘(I) to the category for the re19 form year will result in an aggregate 

20 increase in the aggregate Federal ex21 penditures under subsection (a); and 

22 ‘‘(II) to all the categories for the 

23 reform year will result in a net aggre24 gate increase in the aggregate Federal 

25 expenditures under subsection (a). 


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1 ‘‘(ii) ADJUSTMENT.—If the Secretary 

2 determines under clause (i)(II) that the 

3 application of this paragraph to all the cat4 egories for a reform year will result in a 

5 net aggregate increase in the aggregate 

6 Federal expenditures under subsection (a), 

7 the Secretary shall reduce the national av8 erage base per beneficiary, per category 

9 amount computed under subparagraph (A) 

10 for each of the categories determined 

11 under clause (i)(I) for which there will be 

12 an aggregate increase in the aggregate 

13 Federal expenditures under subsection (a) 

14 by such uniform percentage as will ensure 

15 that there is no net aggregate Federal ex16 penditure increase described in clause 

17 (i)(II) for the reform year. 

18 ‘‘(5) REPORTS ON PER BENEFICIARY RATES; 

19 APPEALS.— 

20 ‘‘(A) REPORT TO STATES.—Not later than 

21 8 months after the date of the enactment of 

22 this section, the Secretary shall submit to each 

23 State the Secretary’s initial determination of— 


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1 ‘‘(i) the base per beneficiary, per cat2 egory amounts under paragraph (2) for 

3 such State; and 

4 ‘‘(ii) the national average base per 

5 beneficiary, per category amounts under 

6 paragraph (4)(A). 

7 ‘‘(B) OPPORTUNITY TO APPEAL.—Not 

8 later than 3 months after the date a State re9 ceives notice of the Secretary’s initial deter10 mination of such base per beneficiary, per cat11 egory amounts for such State under subpara12 graph (A)(i), the State may file with the Sec13 retary, in a form and manner specified by the 

14 Secretary, an appeal of such determination. 

15 ‘‘(C) DETERMINATION ON APPEAL.—Not 

16 later than 3 months after receiving such an ap17 peal, the Secretary shall make a final deter18 mination on such amounts for such State. If no 

19 such appeal is received for a State, the Sec20 retary’s initial determination under subpara21 graph (A)(i) shall become final. 

22 ‘‘(6) BASE FISCAL YEAR DEFINED.—In this 

23 section, the term ‘base fiscal year’ means the latest 

24 fiscal year, ending before the date of the enactment 

25 of this section, for which the Secretary determines 


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1 that adequate data are available to make the com2 putations required under this subsection. 

3 ‘‘(d) NOT COUNTING INDIVIDUALS TO ACCOUNT FOR

4 EXCLUDED PAYMENTS.—Under rules specified by the 

5 Secretary, individuals shall not be counted as Medicaid 

6 beneficiaries for purposes of subsection (b)(1)(B) and sub7 section (c)(2)(A) in proportion to the extent that such in8 dividuals are receiving medical assistance for which pay9 ments described under subsection (a)(4)(A) are made. 

10 ‘‘(e) RISK ADJUSTMENT.— 

11 ‘‘(1) IN GENERAL.—The amount under sub12 section (a)(1)(A) shall be adjusted under this sub13 section in an appropriate manner, specified by the 

14 Secretary and consistent with paragraph (2), to take 

15 into account— 

16 ‘‘(A) the factors described in subsection 

17 (c)(2)(C)(i)(I) within a category of bene18 ficiaries; and 

19 ‘‘(B) variations in costs on a county-by20 county basis for medical assistance and admin21 istrative expenses. 

22 ‘‘(2) METHOD OF ADJUSTMENT.— 

23 ‘‘(A) IN GENERAL.—The adjustments 

24 under paragraph (1) shall be made in a manner 

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1 ments are made under subsection (c)(2)(C) and 

2 consistent with the requirements of clause (iii) 

3 of such subsection and subparagraph (B). 

4 ‘‘(B) BIANNUAL UPDATE OF RISK ADJUST5 MENT METHODOLOGY.—In applying clause 

6 (i)(I) of subsection (c)(2)(C) for purposes of 

7 subparagraph (A), the Secretary shall, in con8 sultation with the entities described in clause 

9 (ii)(I) of such subsection, update the risk ad10 justment methodology applied as appropriate 

11 not less often than every 2 years. 

12 ‘‘(f) CHRONIC CARE QUALITY BONUS PAYMENTS.— 

13 ‘‘(1) DETERMINATION OF BONUS PAYMENTS.— 

14 If the Secretary determines that, based on the re15 ports under paragraph (5), with respect to cat16 egories of chronic disease for which chronic care per17 formance targets had been established under para18 graph (3) for each category of Medicaid beneficiaries 

19 specified under subsection (b)(2) such targets have 

20 been met by a State for a reform year, the Secretary 

21 shall make an additional payment to such State in 

22 the amount specified in paragraph (6) for each quar23 ter in the succeeding reform year. Such payments 

24 shall be made in a manner specified by the Secretary 


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1 and may only be used consistent with subsection 

2 (a)(3). 

3 ‘‘(2) IDENTIFICATION OF CATEGORIES OF

4 CHRONIC DISEASE.—The Secretary shall determine 

5 the categories of chronic disease for which bonus 

6 payments may be available under this subsection for 

7 each category of Medicaid beneficiaries. 

8 ‘‘(3) ADOPTION OF QUALITY MEASUREMENT

9 SYSTEM AND IDENTIFICATION OF PERFORMANCE

10 TARGETS.— 

11 ‘‘(A) SYSTEM AND DATA.—With respect to 

12 the categories of chronic disease under para13 graph (2), the Secretary shall adopt a quality 

14 measurement system that uses data described 

15 in paragraph (4) and is similar to the Five-Star 

16 Quality Rating System used to indicate the per17 formance of Medicare Advantage plans under 

18 part C of title XVIII. 

19 ‘‘(B) TARGETS.—Using such system and 

20 data, the Secretary shall establish for each re21 form year the chronic care performance targets 

22 for purposes of the payments under paragraph 

23 (1). Such performance targets shall be estab24 lished in consultation with States, associations 

25 representing individuals with chronic illnesses, 


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1 entities providing treatment to such individuals 

2 for such chronic illnesses, and other stake3 holders, including the National Association of 

4 Medicaid Directors and the National Governors 

5 Association. 

6 ‘‘(4) DATA TO BE USED.—The data to be used 

7 under paragraph (3) shall include— 

8 ‘‘(A) data collected through methods such 

9 as— 

10 ‘‘(i) the ‘Healthcare Effectiveness 

11 Data and Information Set’ (also known as 

12 ‘HEDIS’) (or an appropriate successor 

13 performance measurement tool); 

14 ‘‘(ii) the ‘Consumer Assessment of 

15 Healthcare Providers and Systems’ (also 

16 known as ‘CAHPS’) (or an appropriate 

17 successor performance measurement tool); 

18 and 

19 ‘‘(iii) the ‘Health Outcomes Survey’ 

20 (also known as ‘HOS’) (or an appropriate 

21 successor performance measurement tool); 

22 and 

23 ‘‘(B) other data collected by the State. 

24 ‘‘(5) REPORTS.— 


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1 ‘‘(A) IN GENERAL.—Each State shall col2 lect, analyze, and report to the Secretary, at a 

3 frequency and in a manner to be established by 

4 the Secretary, data described in paragraph (4) 

5 that permit the Secretary to monitor the State’s 

6 performance relative to the chronic care per7 formance targets established under paragraph 

8 (3). 

9 ‘‘(B) REVIEW AND VERIFICATION.—The 

10 Secretary may review the data collected by the 

11 State under subparagraph (A) to verify the 

12 State’s analysis of such data with respect to the 

13 performance targets under paragraph (3). 

14 ‘‘(6) AMOUNT OF BONUS PAYMENTS.— 

15 ‘‘(A) IN GENERAL.—Subject to subpara16 graphs (B) and (C), with respect to each cat17 egory of Medicaid beneficiaries, in the case of 

18 a State that the Secretary determines, based on 

19 the chronic care performance targets set under 

20 paragraph (3) for a reform year for such cat21 egory, performs— 

22 ‘‘(i) in the top five States in such cat23 egory, subject to subparagraph (C)(ii), the 

24 amount of the bonus for each quarter in 

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1 cent of the payment amount otherwise paid 

2 to the State under subsection (a) for indi3 viduals enrolled under the plan within such 

4 category; 

5 ‘‘(ii) in the next five States in such 

6 category, subject to subparagraph (C)(ii), 

7 the amount of the bonus for each such 

8 quarter shall be 5 percent of the payment 

9 amount otherwise paid to the State under 

10 subsection (a) for individuals enrolled 

11 under the plan within such category; 

12 ‘‘(iii) in the next five States in such 

13 category, subject to clauses (i) and (iii) of 

14 subparagraph (C), the amount of the 

15 bonus for each such quarter shall be 3 per16 cent of the payment amount otherwise paid 

17 to the State under subsection (a) for indi18 viduals enrolled under the plan within such 

19 category; 

20 ‘‘(iv) in the next five States in such 

21 category, subject to clauses (i) and (iii) of 

22 subparagraph (C), the amount of the 

23 bonus for each such quarter shall be 2 per24 cent of the payment amount otherwise paid 

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1 viduals enrolled under the plan within such 

2 category; and 

3 ‘‘(v) in the next five States in such 

4 category, subject to clauses (i) and (iii) of 

5 subparagraph (C), the amount of the 

6 bonus for each such quarter shall be 1 per7 cent of the payment amount otherwise paid 

8 to the State under subsection (a) for indi9 viduals enrolled under the plan within such 

10 category. 

11 ‘‘(B) AGGREGATE ANNUAL LIMIT FOR

12 EACH CATEGORY OF MEDICAID BENE13 FICIARIES.— 

14 ‘‘(i) IN GENERAL.—In no case may 

15 the aggregate amount of bonuses under 

16 this subsection for quarters in a reform 

17 year for a category of Medicaid bene18 ficiaries exceed the limit specified in clause 

19 (ii) for the reform year. 

20 ‘‘(ii) LIMIT.—The limit specified in 

21 this clause— 

22 ‘‘(I) for the second reform year is 

23 equal to $250,000,000; or 

24 ‘‘(II) for a subsequent reform 

25 year is equal to the limit specified in 


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1 this clause for the previous reform 

2 year increased by the per beneficiary 

3 percentage increase determined under 

4 paragraph (1)(E) of subsection (c). 

5 ‘‘(C) LIMITATION AND PRORATION OF BO6 NUSES BASED ON APPLICATION OF AGGREGATE

7 LIMIT.— 

8 ‘‘(i) NO BONUS FOR THIRD OR SUBSE9 QUENT TIERS UNLESS AGGREGATE LIMIT

10 NOT REACHED ON FIRST TWO TIERS.—No 

11 bonus shall be payable under clause (iii), 

12 (iv), or (v) of subparagraph (A) for a cat13 egory of Medicaid beneficiaries for a quar14 ter in a reform year unless the aggregate 

15 amount of bonuses under clauses (i) and 

16 (ii) of such subparagraph for such category 

17 and reform year is less than the limit spec18 ified in subparagraph (B)(ii) for the re19 form year. 

20 ‘‘(ii) PRORATION FOR FIRST TWO

21 TIERS.—If the aggregate amount of bo22 nuses under clauses (i) and (ii) of subpara23 graph (A) for a category of Medicaid bene24 ficiaries for quarters in a reform year ex25 ceeds the limit specified in subparagraph 


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1 (B)(ii) for the reform year, the amount of 

2 each such bonus shall be prorated in a 

3 manner so the aggregate amount of such 

4 bonuses is equal to such limit. 

5 ‘‘(iii) PRORATION FOR NEXT THREE

6 TIERS.—If the aggregate amount of bo7 nuses under clauses (i) and (ii) of subpara8 graph (A) for a category of Medicaid bene9 ficiaries for quarters in a reform year is 

10 less than the limit specified in subpara11 graph (B)(ii) for the reform year, but the 

12 aggregate amount of bonuses under clauses 

13 (i) through (v) of subparagraph (A) for the 

14 category and such quarters in the reform 

15 year exceeds the limit specified in subpara16 graph (B)(ii) for the reform year, the 

17 amount of each bonus in clauses (iii), (iv), 

18 and (v) of subparagraph (A) shall be pro19 rated in a manner so the aggregate 

20 amount of all the bonuses under subpara21 graph (A) is equal to such limit. 

22 ‘‘(g) STATE OPTION FOR RECEIVING MEDICARE PAY23 MENTS FOR FULL-BENEFIT DUAL ELIGIBLE INDIVID24 UALS.— 


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1 ‘‘(1) IN GENERAL.—Under this subsection a 

2 State may elect for quarters beginning on or after 

3 the implementation date in a reform year to receive 

4 payment from the Secretary under paragraph (3). 

5 As a condition of receiving such payment, the State 

6 shall agree to provide to full-benefit dual eligible in7 dividuals eligible for medical assistance under the 

8 State plan— 

9 ‘‘(A) the medical assistance to which such 

10 eligible individuals would otherwise be entitled 

11 under this title; and 

12 ‘‘(B) any items and services which such eli13 gible individuals would otherwise receive under 

14 title XVIII. 

15 ‘‘(2) PROVIDER PAYMENT REQUIREMENT.— 

16 ‘‘(A) IN GENERAL.—A State electing the 

17 option under this subsection shall provide pay18 ment to health care providers for the items and 

19 services described under paragraph (1)(B) at a 

20 rate that is not less than the rate at which pay21 ments would be made to such providers for such 

22 items and services under title XVIII. 

23 ‘‘(B) FLEXIBILITY IN PAYMENT METH24 ODS.—Nothing in subparagraph (A) shall be 

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1 ternative payment methodologies (such as bun2 dled payments or the use of accountable care 

3 organizations (as such term is used in section 

4 1899)) for purposes of making payments to 

5 health care providers for items and services pro6 vided to dual eligible individuals in the State 

7 under the option under this subsection. 

8 ‘‘(3) PAYMENTS TO STATES IN LIEU OF MEDI9 CARE PAYMENTS.—With respect to a full-benefit 

10 dual eligible individual, in the case of a State that 

11 elects the option under paragraph (1) for quarters in 

12 a reform year— 

13 ‘‘(A) the Secretary shall not make any pay14 ment under title XVIII for items and services 

15 furnished to such individual for such quarters; 

16 and 

17 ‘‘(B) the Secretary shall pay to the State, 

18 in addition to the amounts paid to such State 

19 under subsection (a), the amount that the Sec20 retary would, but for this subsection, otherwise 

21 pay under title XVIII for items and services 

22 furnished to such an individual in such State 

23 for such quarters. 

24 ‘‘(4) FULL-BENEFIT DUAL ELIGIBLE INDI25 VIDUAL DEFINED.—In this subsection, the term 


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1 ‘full-benefit dual eligible individual’ means an indi2 vidual who meets the requirements of section 

3 1935(c)(6)(A)(ii). 

4 ‘‘(h) AUDITS.—The Secretary shall conduct such au5 dits on the number and classification of Medicaid bene6 ficiaries under such subsections and expenditures under 

7 this section as may be necessary to ensure appropriate 

8 payments under this section. 

9 ‘‘(i) TREATMENT OF WAIVERS.— 

10 ‘‘(1) NO IMPACT ON CURRENT WAIVERS.—In 

11 the case of a waiver of requirements of this title pur12 suant to section 1115 or other law that is in effect 

13 as of the date of the enactment of this section, noth14 ing in this section shall be construed to affect such 

15 waiver for the period of the waiver as approved as 

16 of such date. 

17 ‘‘(2) APPLICATION OF BUDGET NEUTRALITY TO

18 SUBSEQUENT WAIVERS AND RENEWALS TAKING SEC19 TION INTO ACCOUNT.—In the case of a waiver of re20 quirements of this title pursuant to section 1115 or 

21 other law that is approved or renewed after the date 

22 of the enactment of this section, to the extent that 

23 such approval or renewal is conditioned upon a dem24 onstration of budget neutrality, budget neutrality 


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1 shall be determined taking into account the applica2 tion of this section. 

3 ‘‘(j) REPORT TO CONGRESS.—Not later than Janu4 ary 1 of the second reform year, the Secretary shall submit 

5 to Congress a report on the implementation of this section. 

6 ‘‘(k) DEFINITIONS.—In this section: 

7 ‘‘(1) IMPLEMENTATION DATE.—The term ‘im8 plementation date’ means— 

9 ‘‘(A) July 1, 2015, if this section is en10 acted on or before July 1, 2014; or 

11 ‘‘(B) July 1, 2016, if this section is en12 acted after July 1, 2014. 

13 ‘‘(2) REFORM YEARS.— 

14 ‘‘(A) The term ‘reform year’ means a fiscal 

15 year beginning with the first reform year. 

16 ‘‘(B) The term ‘first reform year’ means 

17 the fiscal year in which the implementation date 

18 occurs. 

19 ‘‘(C) The terms ‘second’, ‘third’, and suc20 cessive similar terms mean, with respect to a 

21 reform year, the second, third, or successive re22 form year, respectively, succeeding the first re23 form year.’’. 

24 (b) CONFORMING AMENDMENTS.— 


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1 (1) CONTINUED APPLICATION OF CLAWBACK

2 PROVISIONS.— 

3 (A) CONTINUED APPLICATION.—Sub4 sections (a) and (c)(1)(C) of section 1935 of 

5 such Act (42 U.S.C. 1396u–5) are each amend6 ed by inserting ‘‘or 1903A(a)’’ after ‘‘1903(a)’’. 

7 (B) TECHNICAL AMENDMENT.—Section 

8 1935(d)(1) of the Social Security Act (42 

9 U.S.C. 1396u–5(d)(1)) is amended by inserting 

10 ‘‘except as provided in section 1903A(g)’’ after 

11 ‘‘any other provision of this title’’. 

12 (2) PAYMENT RULES UNDER SECTION 1903.— 

13 (A) Section 1903(a) of such Act (42 

14 U.S.C. 1396b(a)) is amended, in the matter be15 fore paragraph (1), by inserting ‘‘and section 

16 1903A’’ after ‘‘except as otherwise provided in 

17 this section’’. 

18 (B) Section 1903(d) of such Act (42 

19 U.S.C. 1396b(d)) is amended— 

20 (i) in paragraph (1), by inserting 

21 ‘‘and under section 1903A’’ after ‘‘sub22 sections (a) and (b)’’; 

23 (ii) in paragraph (2)— 


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1 (I) in subparagraph (A), by in2 serting ‘‘or section 1903A’’ after ‘‘was 

3 made under this section’’; and 

4 (II) in subparagraph (B), by in5 serting ‘‘or section 1903A’’ after 

6 ‘‘under subsection (a)’’; 

7 (iii) in paragraph (4)— 

8 (I) by striking ‘‘under this sub9 section’’ and inserting ‘‘, with respect 

10 to this section or section 1903A, 

11 under this subsection’’; and 

12 (II) by striking ‘‘under this sec13 tion’’ and inserting ‘‘under the respec14 tive section’’; and 

15 (iv) in paragraph (5), by inserting ‘‘or 

16 section 1903A’’ after ‘‘overpayment under 

17 this section’’. 

18 (3) CONFORMING WAIVER AUTHORITY.—Section 

19 1115(a)(2)(A) of the Social Security Act (42 U.S.C. 

20 1315(a)(2)(A)) is amended by striking ‘‘or 1903’’ 

21 and inserting ‘‘1903, or 1903A’’. 

22 (4) REPORT ON ADDITIONAL CONFORMING

23 AMENDMENTS NEEDED.—Not later than 6 months 

24 after the date of the enactment of this Act, the Sec25 retary of Health and Human Services shall submit 


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1 to Congress a report that includes a description of 

2 any additional technical and conforming amend3 ments to law that are required to properly carry out 

4 this Act. 

Æ 


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