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[House Report 114-734]
[From the U.S. Government Publishing Office]

114th Congress     }                                    {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session        }                                    {      114-734

======================================================================

 
       SPECIAL NEEDS TRUST FAIRNESS AND MEDICAID IMPROVEMENT ACT

                                _______
                                

 September 9, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Mr. Upton, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 670]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 670) to amend title XIX of the Social Security 
Act to extend the Medicaid rules regarding supplemental needs 
trusts for Medicaid beneficiaries to trusts established by 
those beneficiaries, and for other purposes, having considered 
the same, report favorably thereon with an amendment and 
recommend that the bill as amended do pass.

                            C O N T E N T S

                                                                   Page
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     3
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     4
Committee Oversight Findings.....................................     4
Statement of General Performance Goals and Objectives............     4
New Budget Authority, Entitlement Authority, and Tax Expenditures     4
Earmark, Limited Tax Benefits, and Limited Tariff Benefits.......     5
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     5
Federal Mandates Statement.......................................     5
Duplication of Federal Programs..................................     5
Disclosure of Directed Rule Makings..............................     5
Advisory Committee Statement.....................................     5
Applicability to Legislative Branch..............................     5
Section-by-Section Analysis of the Legislation...................     6
Changes in Existing Law Made by the Bill, as Reported............     6

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Special Needs Trust 
Fairness and Medicaid Improvement Act''.
  (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Fairness in Medicaid supplemental needs trusts.
Sec. 3. Medicaid coverage of tobacco cessation services for mothers of 
newborns.
Sec. 4. Eliminating Federal financial participation with respect to 
expenditures under Medicaid for agents used for cosmetic purposes or 
hair growth.
Sec. 5. Medicaid Improvement Fund.

SEC. 2. FAIRNESS IN MEDICAID SUPPLEMENTAL NEEDS TRUSTS.

  (a) In General.--Section 1917(d)(4)(A) of the Social Security Act (42 
U.S.C. 1396p(d)(4)(A)) is amended by inserting ``the individual,'' 
after ``for the benefit of such individual by''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to trusts established on or after the date of the enactment of this 
Act.

SEC. 3. MEDICAID COVERAGE OF TOBACCO CESSATION SERVICES FOR MOTHERS OF 
                    NEWBORNS.

  (a) In General.--Section 1905(bb) of the Social Security Act (42 
U.S.C. 1396d(bb)) is amended by adding at the end the following new 
paragraph:
  ``(4) A woman shall continue to be treated as described in this 
subsection as a pregnant woman through the end of the 1-year period 
beginning on the date of the birth of a child of the woman.''.
  (b) Conforming Amendments.--
          (1) Subsections (a)(2)(B) and (b)(2)(B) of section 1916 of 
        the Social Security Act (42 U.S.C. 1396o) are each amended by 
        inserting ``(and women described in section 1905(bb) as 
        pregnant women pursuant to paragraph (4) of such section)'' 
        after ``tobacco cessation by pregnant women''.
          (2) Section 1927(d)(2)(F) of the Social Security Act (42 
        U.S.C. 1396r-8(d)(2)(F)) is amended by inserting ``(and women 
        described in section 1905(bb) as pregnant women pursuant to 
        paragraph (4) of such section)'' after ``pregnant women''.
  (c) Effective Date.--
          (1) In general.--Subject to paragraph (2), the amendments 
        made by this section shall apply with respect to items and 
        services furnished on or after the date that is two years after 
        the date of the enactment of this Act.
          (2) Exception for state legislation.--In the case of a State 
        plan under title XIX of the Social Security Act, which the 
        Secretary of Health and Human Services determines requires 
        State legislation in order for the plan to meet any requirement 
        imposed by amendments made by this section, the plan shall not 
        be regarded as failing to comply with the requirements of such 
        title solely on the basis of its failure to meet such an 
        additional requirement before the first day of the first 
        calendar quarter beginning after the close of the first regular 
        session of the State legislature that begins after the 
        effective date specified in paragraph (1). For purposes of the 
        previous sentence, in the case of a State that has a 2-year 
        legislative session, each year of the session shall be 
        considered to be a separate regular session of the State 
        legislature.
  (d) Report.--Not later than two years after the date of the enactment 
of this Act, the Inspector General of the Department of Health and 
Human Services shall submit to Congress a report that assesses the use 
of the tobacco cessation service benefit under the Medicaid program. 
Such report shall include an assessment of--
          (1) the extent that States are encouraging the use of such 
        benefit, such as through promotion of beneficiary and provider 
        awareness of such benefit; and
          (2) gaps in the delivery of such benefit.

SEC. 4. ELIMINATING FEDERAL FINANCIAL PARTICIPATION WITH RESPECT TO 
                    EXPENDITURES UNDER MEDICAID FOR AGENTS USED FOR 
                    COSMETIC PURPOSES OR HAIR GROWTH.

  (a) In General.--Section 1903(i)(21) of the Social Security Act (42 
U.S.C. 1396b(i)(21)) is amended by inserting ``section 1927(d)(2)(C) 
(relating to drugs when used for cosmetic purposes or hair growth), 
except where medically necessary, and'' after ``drugs described in''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
with respect to calendar quarters beginning on or after the date of the 
enactment of this Act.

SEC. 5. MEDICAID IMPROVEMENT FUND.

  Section 1941(b) of the Social Security Act (42 U.S.C. 1396w-1(b)) is 
amended--
          (1) in paragraph (2)--
                  (A) by striking ``under paragraph (1)'' and inserting 
                ``under this subsection''; and
                  (B) by redesignating such paragraph as paragraph (3); 
                and
          (2) by inserting after paragraph (1) the following new 
        paragraph:
          ``(2) Additional funding.--In addition to any funds otherwise 
        made available to the Fund, there shall be available to the 
        Fund, for expenditures from the Fund--
                  ``(A) for fiscal year 2021, $10,000,000, to remain 
                available until expended; and
                  ``(B) for fiscal year 2022, $14,000,000, to remain 
                available until expended.''.

                          Purpose and Summary

    H.R. 670, the Special Needs Trust Fairness and Medicaid 
Improvement Act, would extend the Medicaid special needs trust 
exception to allow non-elderly individuals with disabilities to 
establish a special needs trust on their own behalf. If 
enacted, special needs trusts established by a non-elderly, 
disabled individual would no longer be considered an asset in 
determining that individual's eligibility for Medicaid. In 
addition, the bill would extend Medicaid coverage of tobacco 
cessation services to mothers of newborns for the first year of 
the infant's life. To offset the cost of these polices, the 
bill would prohibit Federal financial participation under 
Medicaid for drugs used for cosmetic purposes or hair growth, 
except where medically necessary. The bill would also make 
available $10 million in 2021, and an additional $14 million in 
2022, in the Medicaid Improvement Fund.

                  Background and Need for Legislation

    Under Federal law, most trusts are counted as an asset in 
determining Medicaid eligibility for aged and disabled 
individuals and are subject to asset transfer rules. However, 
certain types of trusts are exempt and not counted as an asset 
for Medicaid eligibility determination. Specifically, Medicaid 
does not count certain special-needs trusts and pooled trusts 
as assets. Asset transfer rules do not apply to these trust 
types. This exception is commonly referred to as the ``special 
needs trust exception.''
    In order for a trust to qualify under the special needs 
trust exception, a trust must contain the assets of an 
individual under age 65 (i.e., non-elderly individual) who 
meets the statutory definition of disability. Such trusts must 
be used to provide funding for certain expenditures that 
supplement Medicaid benefits, subject to certain limitations. 
Special needs trusts allow non-elderly individuals with 
disabilities to maintain their eligibility for Medicaid. When 
the beneficiary dies, the State receives the remaining proceeds 
of the trust equal to any amounts paid for medical assistance 
provided under the State Medicaid program. Under current law, 
only parents, grandparents, legal guardians, or a court can 
establish a special needs trust on behalf of a non-elderly 
disabled individual. H.R. 670 would allow non-elderly 
individuals with disabilities to set up special needs trust for 
themselves without requiring them to get a court order.
    The Centers for Medicare and Medicaid Services (CMS) has 
said that ``cigarette smoking is one of the greatest drivers of 
adverse health outcomes and costs for state Medicaid 
programs.'' By investing in comprehensive tobacco cessation 
programs, CMS notes that States have reduced smoking rates and 
health care costs and have improved health outcomes. CMS's 
review of available literature has led the agency to conclude 
that ``tobacco treatment is one of the most cost-effective 
preventive services with as much as a $2-$3 return on every 
dollar invested.''
    Under current law, State Medicaid programs are required to 
cover tobacco cessation services for pregnant women. H.R. 670 
would extend tobacco cessation benefits to the mothers of 
newborns, helping more women make healthy choices to improve 
their health and the health of their child. The bill would also 
require the Department of Health and Human Service's Office of 
Inspector General to report on the use of tobacco cessation 
services under Medicaid.
    Finally, to offset the costs of these policies, H.R. 670 
would prohibit Federal financial participation for drugs used 
for cosmetic purposes or hair growth, except where medically 
necessary, with savings placed in the Medicaid Improvement 
Fund.

                                Hearings

    The Subcommittee on Health held a hearing on H.R. 670 on 
September 18, 2015. The Subcommittee received testimony from:
           Michael Boyle, M.D., Vice President of 
        Therapeutics Development, The Cystic Fibrosis 
        Foundation;
           Tim Clontz, Senior Vice President for Health 
        Services, Cone Health; and
           Rick Courtney, President, Special Needs 
        Alliance.

                        Committee Consideration

    On July 12, 13, and 14, 2016, the full Committee on Energy 
and Commerce met in open markup session and ordered H.R. 670, 
as amended, favorably reported to the House by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken in connection with ordering 
H.R. 670 reported.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee held a hearing and made 
findings that are reflected in this report.

         Statement of General Performance Goals and Objectives

    The objective of H.R. 670 is to allow non-elderly 
individuals with disabilities to create a special needs trust 
on their own behalf and to provide for tobacco cessation 
benefits for mothers of newborns during the first year of the 
baby's life.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
670 would result in no new or increased budget authority, 
entitlement authority, or tax expenditures or revenues.

       Earmark, Limited Tax Benefits, and Limited Tariff Benefits

    In compliance with clause 9(e), 9(f), and 9(g) of rule XXI 
of the Rules of the House of Representatives, the Committee 
finds that H.R. 670 contains no earmarks, limited tax benefits, 
or limited tariff benefits.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974. At the 
time this report was filed, the estimate was not available.

                  Congressional Budget Office Estimate

    At the time this report was filed, the cost estimate 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 1974 
was not available.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                    Duplication of Federal Programs

    No provision of H.R. 670 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that enacting H.R. 670 specifically 
directs to be completed no rule making within the meaning of 5 
U.S.C. 551.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation

Section 1. Short title; table of contents

    This section provides the short title of the ``Special 
Needs Trust Fairness and Medicaid Improvement Act'' and a table 
of contents.

Section 2. Fairness in medicaid supplemental needs trusts

    This section would, effective upon enactment, extend the 
special needs trust exception for non-elderly individuals with 
disabilities to trusts established by such individuals on their 
own behalf.

Section 3. Medicaid coverage of tobacco cessation services for mothers 
        of newborns

    This section would, effective two years after enactment, 
require States to provide Medicaid coverage of tobacco 
cessation services to beneficiaries who are mothers of newborns 
for the first year of the infant's life. The section would also 
require the Inspector General of the Department of Health and 
Human Services to issue a report, not later than two years 
after enactment, that assesses the use of the existing tobacco 
cessation benefit for pregnant women under Medicaid.

Section 4. Eliminating federal matching for medicaid expenditures on 
        drugs used for cosmetic purposes or hair growth

    This section would prohibit Federal financial participation 
for drugs used for cosmetic purposes or hair growth, except 
where medically necessary. This policy takes effect for 
calendar quarters beginning on or after the date of enactment.

Section 5. Medicaid improvement fund

    This section would make available, until expended, $10 
million in 2021, and an additional $14 million in 2022, in the 
Medicaid Improvement Fund.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

                          SOCIAL SECURITY ACT

           *       *       *       *       *       *       *
TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

           *       *       *       *       *       *       *

                           PAYMENT TO STATES

  Sec. 1903. (a) From the sums appropriated therefor, the 
Secretary (except as otherwise provided in this section) shall 
pay to each State which has a plan approved under this title, 
for each quarter, beginning with the quarter commencing January 
1, 1966--
          (1) an amount equal to the Federal medical assistance 
        percentage (as defined in section 1905(b), subject to 
        subsections (g) and (j) of this section and subsection 
        1923(f)) of the total amount expended during such 
        quarter as medical assistance under the State plan; 
        plus
          (2)(A) an amount equal to 75 per centum of so much of 
        the sums expended during such quarter (as found 
        necessary by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to compensation or training of skilled professional 
        medical personnel, and staff directly supporting such 
        personnel, of the State agency or any other public 
        agency; plus
          (B) notwithstanding paragraph (1) or subparagraph 
        (A), with respect to amounts expended for nursing aide 
        training and competency evaluation programs, and 
        competency evaluation programs, described in section 
        1919(e)(1) (including the costs for nurse aides to 
        complete such competency evaluation programs), 
        regardless of whether the programs are provided in or 
        outside nursing facilities or of the skill of the 
        personnel involved in such programs, an amount equal to 
        50 percent (or, for calendar quarters beginning on or 
        after July 1, 1988, and before October 1, 1990, the 
        lesser of 90 percent or the Federal medical assistance 
        percentage plus 25 percentage points) of so much of the 
        sums expended during such quarter (as found necessary 
        by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to such programs; plus
          (C) an amount equal to 75 percent of so much of the 
        sums expended during such quarter (as found necessary 
        by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to preadmission screening and resident review 
        activities conducted by the State under section 
        1919(e)(7); plus
          (D) for each calendar quarter during--
                  (i) fiscal year 1991, an amount equal to 90 
                percent,
                  (ii) fiscal year 1992, an amount equal to 85 
                percent,
                  (iii) fiscal year 1993, an amount equal to 80 
                percent, and
                  (iv) fiscal year 1994 and thereafter, an 
                amount equal to 75 percent,
        of so much of the sums expended during such quarter (as 
        found necessary by the Secretary for the proper and 
        efficient administration of the State plan) as are 
        attributable to State activities under section 1919(g); 
        plus
          (E) an amount equal to 75 percent of so much of the 
        sums expended during such quarter (as found necessary 
        by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to translation or interpretation services in connection 
        with the enrollment of, retention of, and use of 
        services under this title by, children of families for 
        whom English is not the primary language; plus
          (3) an amount equal to--
                  (A)(i) 90 per centum of so much of the sums 
                expended during such quarter as are 
                attributable to the design, development, or 
                installation of such mechanized claims 
                processing and information retrieval systems as 
                the Secretary determines are likely to provide 
                more efficient, economical, and effective 
                administration of the plan and to be compatible 
                with the claims processing and information 
                retrieval systems utilized in the 
                administration of title XVIII, including the 
                State's share of the cost of installing such a 
                system to be used jointly in the administration 
                of such State's plan and the plan of any other 
                State approved under this title,
                  (ii) 90 per centum of so much of the sums 
                expended during any such quarter in the fiscal 
                year ending June 30, 1972, or the fiscal year 
                ending June 30, 1973, as are attributable to 
                the design, development, or installation of 
                cost determination systems for State-owned 
                general hospitals (except that the total amount 
                paid to all States under this clause for either 
                such fiscal year shall not exceed $150,000), 
                and
                  (iii) an amount equal to the Federal medical 
                assistance percentage (as defined in section 
                1905(b)) of so much of the sums expended during 
                such quarter (as found necessary by the 
                Secretary for the proper and efficient 
                administration of the State plan) as are 
                attributable to such developments or 
                modifications of systems of the type described 
                in clause (i) as are necessary for the 
                efficient collection and reporting on child 
                health measures; and
                  (B) 75 per centum of so much of the sums 
                expended during such quarter as are 
                attributable to the operation of systems 
                (whether such systems are operated directly by 
                the State or by another person under a contract 
                with the State) of the type described in 
                subparagraph (A)(i) (whether or not designed, 
                developed, or installed with assistance under 
                such subparagraph) which are approved by the 
                Secretary and which include provision for 
                prompt written notice to each individual who is 
                furnished services covered by the plan, or to 
                each individual in a sample group of 
                individuals who are furnished such services, of 
                the specific services (other than confidential 
                services) so covered, the name of the person or 
                persons furnishing the services, the date or 
                dates on which the services were furnished, and 
                the amount of the payment or payments made 
                under the plan on account of the services; and
                  (C)(i) 75 per centum of the sums expended 
                with respect to costs incurred during such 
                quarter (as found necessary by the Secretary 
                for the proper and efficient administration of 
                the State plan) as are attributable to the 
                performance of medical and utilization review 
                by a utilization and quality control peer 
                review organization or by an entity which meets 
                the requirements of section 1152, as determined 
                by the Secretary, under a contract entered into 
                under section 1902(d); and
                  (ii) 75 percent of the sums expended with 
                respect to costs incurred during such quarter 
                (as found necessary by the Secretary for the 
                proper and efficient administration of the 
                State plan) as are attributable to the 
                performance of independent external reviews 
                conducted under section 1932(c)(2); and
                  (D) 75 percent of so much of the sums 
                expended by the State plan during a quarter in 
                1991, 1992, or 1993, as the Secretary 
                determines is attributable to the statewide 
                adoption of a drug use review program which 
                conforms to the requirements of section 
                1927(g);
                  (E) 50 percent of the sums expended with 
                respect to costs incurred during such quarter 
                as are attributable to providing--
                          (i) services to identify and educate 
                        individuals who are likely to be 
                        eligible for medical assistance under 
                        this title and who have Sickle Cell 
                        Disease or who are carriers of the 
                        sickle cell gene, including education 
                        regarding how to identify such 
                        individuals; or
                          (ii) education regarding the risks of 
                        stroke and other complications, as well 
                        as the prevention of stroke and other 
                        complications, in individuals who are 
                        likely to be eligible for medical 
                        assistance under this title and who 
                        have Sickle Cell Disease; and
                  (F)(i) 100 percent of so much of the sums 
                expended during such quarter as are 
                attributable to payments to Medicaid providers 
                described in subsection (t)(1) to encourage the 
                adoption and use of certified EHR technology; 
                and
                  (ii) 90 percent of so much of the sums 
                expended during such quarter as are 
                attributable to payments for reasonable 
                administrative expenses related to the 
                administration of payments described in clause 
                (i) if the State meets the condition described 
                in subsection (t)(9); plus
                  (H)(i) 90 percent of the sums expended during 
                the quarter as are attributable to the design, 
                development, or installation of such mechanized 
                verification and information retrieval systems 
                as the Secretary determines are necessary to 
                implement section 1902(ee) (including a system 
                described in paragraph (2)(B) thereof), and
                  (ii) 75 percent of the sums expended during 
                the quarter as are attributable to the 
                operation of systems to which clause (i) 
                applies, plus
          (4) an amount equal to 100 percent of the sums 
        expended during the quarter which are attributable to 
        the costs of the implementation and operation of the 
        immigration status verification system described in 
        section 1137(d); plus
          (5) an amount equal to 90 per centum of the sums 
        expended during such quarter which are attributable to 
        the offering, arranging, and furnishing (directly or on 
        a contract basis) of family planning services and 
        supplies;
          (6) subject to subsection (b)(3), an amount equal 
        to--
                  (A) 90 per centum of the sums expended during 
                such a quarter within the twelve-quarter period 
                beginning with the first quarter in which a 
                payment is made to the State pursuant to this 
                paragraph, and
                  (B) 75 per centum of the sums expended during 
                each succeeding calendar quarter,
        with respect to costs incurred during such quarter (as 
        found necessary by the Secretary for the elimination of 
        fraud in the provision and administration of medical 
        assistance provided under the State plan) which are 
        attributable to the establishment and operation of 
        (including the training of personnel employed by) a 
        State medicaid fraud control unit (described in 
        subsection (q)); plus
          (7) subject to section 1919(g)(3)(B), an amount equal 
        to 50 per centum of the remainder of the amounts 
        expended during such quarter as found necessary by the 
        Secretary for the proper and efficient administration 
        of the State plan.
  (b)(1) Notwithstanding the preceding provisions of this 
section, the amount determined under subsection (a)(1) for any 
State for any quarter beginning after December 31, 1969, shall 
not take into account any amounts expended as medical 
assistance with respect to individuals aged 65 or over and 
disabled individuals entitled to hospital insurance benefits 
under title XVIII which would not have been so expended if the 
individuals involved had been enrolled in the insurance program 
established by part B of title XVIII, other than amounts 
expended under provisions of the plan of such State required by 
section 1902(a)(34).
  (2) For limitation on Federal participation for capital 
expenditures which are out of conformity with a comprehensive 
plan of a State or areawide planning agency, see section 1122.
  (3) The amount of funds which the Secretary is otherwise 
obligated to pay a State during a quarter under subsection 
(a)(6) may not exceed the higher of--
          (A) $125,000, or
          (B) one-quarter of 1 per centum of the sums expended 
        by the Federal, State, and local governments during the 
        previous quarter in carrying out the State's plan under 
        this title.
  (4) Amounts expended by a State for the use of an enrollment 
broker in marketing medicaid managed care organizations and 
other managed care entities to eligible individuals under this 
title shall be considered, for purposes of subsection (a)(7), 
to be necessary for the proper and efficient administration of 
the State plan but only if the following conditions are met 
with respect to the broker:
          (A) The broker is independent of any such entity and 
        of any health care providers (whether or not any such 
        provider participates in the State plan under this 
        title) that provide coverage of services in the same 
        State in which the broker is conducting enrollment 
        activities.
          (B) No person who is an owner, employee, consultant, 
        or has a contract with the broker either has any direct 
        or indirect financial interest with such an entity or 
        health care provider or has been excluded from 
        participation in the program under this title or title 
        XVIII or debarred by any Federal agency, or subject to 
        a civil money penalty under this Act.
  (5) Notwithstanding the preceding provisions of this section, 
the amount determined under subsection (a)(1) for any State 
shall be decreased in a quarter by the amount of any health 
care related taxes (described in section 1902(w)(3)(A)) that 
are imposed on a hospital described in subsection (w)(3)(F) in 
that quarter.
  (c) Nothing in this title shall be construed as prohibiting 
or restricting, or authorizing the Secretary to prohibit or 
restrict, payment under subsection (a) for medical assistance 
for covered services furnished to a child with a disability 
because such services are included in the child's 
individualized education program established pursuant to part B 
of the Individuals with Disabilities Education Act or furnished 
to an infant or toddler with a disability because such services 
are included in the child's individualized family service plan 
adopted pursuant to part C of such Act.
  (d)(1) Prior to the beginning of each quarter, the Secretary 
shall estimate the amount to which a State will be entitled 
under subsections (a) and (b) for such quarter, such estimates 
to be based on (A) a report filed by the State containing its 
estimate of the total sum to be expended in such quarter in 
accordance with the provisions of such subsections, and stating 
the amount appropriated or made available by the State and its 
political subdivisions for such expenditures in such quarter, 
and if such amount is less than the State's proportionate share 
of the total sum of such estimated expenditures, the source or 
sources from which the difference is expected to be derived, 
and (B) such other investigation as the Secretary may find 
necessary.
  (2)(A) The Secretary shall then pay to the State, in such 
installments as he may determine, the amount so estimated, 
reduced or increased to the extent of any overpayment or 
underpayment which the Secretary determines was made under this 
section to such State for any prior quarter and with respect to 
which adjustment has not already been made under this 
subsection.
  (B) Expenditures for which payments were made to the State 
under subsection (a) shall be treated as an overpayment to the 
extent that the State or local agency administering such plan 
has been reimbursed for such expenditures by a third party 
pursuant to the provisions of its plan in compliance with 
section 1902(a)(25).
  (C) For purposes of this subsection, when an overpayment is 
discovered, which was made by a State to a person or other 
entity, the State shall have a period of 1 year in which to 
recover or attempt to recover such overpayment before 
adjustment is made in the Federal payment to such State on 
account of such overpayment. Except as otherwise provided in 
subparagraph (D), the adjustment in the Federal payment shall 
be made at the end of the 1-year period, whether or not 
recovery was made.
  (D)(i) In any case where the State is unable to recover a 
debt which represents an overpayment (or any portion thereof) 
made to a person or other entity on account of such debt having 
been discharged in bankruptcy or otherwise being uncollectable, 
no adjustment shall be made in the Federal payment to such 
State on account of such overpayment (or portion thereof).
  (ii) In any case where the State is unable to recover a debt 
which represents an overpayment (or any portion thereof) made 
to a person or other entity due to fraud within 1 year of 
discovery because there is not a final determination of the 
amount of the overpayment under an administrative or judicial 
process (as applicable), including as a result of a judgment 
being under appeal, no adjustment shall be made in the Federal 
payment to such State on account of such overpayment (or 
portion thereof) before the date that is 30 days after the date 
on which a final judgment (including, if applicable, a final 
determination on an appeal) is made.
  (3)(A) The pro rata share to which the United States is 
equitably entitled, as determined by the Secretary, of the net 
amount recovered during any quarter by the State or any 
political subdivision thereof with respect to medical 
assistance furnished under the State plan shall be considered 
an overpayment to be adjusted under this subsection.
  (B)(i) Subparagraph (A) and paragraph (2)(B) shall not apply 
to any amount recovered or paid to a State as part of the 
comprehensive settlement of November 1998 between manufacturers 
of tobacco products, as defined in section 5702(d) of the 
Internal Revenue Code of 1986, and State Attorneys General, or 
as part of any individual State settlement or judgment reached 
in litigation initiated or pursued by a State against one or 
more such manufacturers.
  (ii) Except as provided in subsection (i)(19), a State may 
use amounts recovered or paid to the State as part of a 
comprehensive or individual settlement, or a judgment, 
described in clause (i) for any expenditures determined 
appropriate by the State.
  (4) Upon the making of any estimate by the Secretary under 
this subsection, any appropriations available for payments 
under this section shall be deemed obligated.
  (5) In any case in which the Secretary estimates that there 
has been an overpayment under this section to a State on the 
basis of a claim by such State that has been disallowed by the 
Secretary under section 1116(d), and such State disputes such 
disallowance, the amount of the Federal payment in controversy 
shall, at the option of the State, be retained by such State or 
recovered by the Secretary pending a final determination with 
respect to such payment amount. If such final determination is 
to the effect that any amount was properly disallowed, and the 
State chose to retain payment of the amount in controversy, the 
Secretary shall offset, from any subsequent payments made to 
such State under this title, an amount equal to the proper 
amount of the disallowance plus interest on such amount 
disallowed for the period beginning on the date such amount was 
disallowed and ending on the date of such final determination 
at a rate (determined by the Secretary) based on the average of 
the bond equivalent of the weekly 90-day treasury bill auction 
rates during such period.
  (6)(A) Each State (as defined in subsection (w)(7)(D)) shall 
include, in the first report submitted under paragraph (1) 
after the end of each fiscal year, information related to--
          (i) provider-related donations made to the State or 
        units of local government during such fiscal year, and
          (ii) health care related taxes collected by the State 
        or such units during such fiscal year.
  (B) Each State shall include, in the first report submitted 
under paragraph (1) after the end of each fiscal year, 
information related to the total amount of payment adjustments 
made, and the amount of payment adjustments made to individual 
providers (by provider), under section 1923(c) during such 
fiscal year.
  (e) A State plan approved under this title may include, as a 
cost with respect to hospital services under the plan under 
this title, periodic expenditures made to reflect transitional 
allowances established with respect to a hospital closure or 
conversion under section 1884.
  (f)(1)(A) Except as provided in paragraph (4), payment under 
the preceding provisions of this section shall not be made with 
respect to any amount expended as medical assistance in a 
calendar quarter, in any State, for any member of a family the 
annual income of which exceeds the applicable income limitation 
determined under this paragraph.
  (B)(i) Except as provided in clause (ii) of this 
subparagraph, the applicable income limitation with respect to 
any family is the amount determined, in accordance with 
standards prescribed by the Secretary, to be equivalent to 
133\1/3\ percent of the highest amount which would ordinarily 
be paid to a family of the same size without any income or 
resources, in the form of money payments, under the plan of the 
State approved under part A of title IV of this Act.
  (ii) If the Secretary finds that the operation of a uniform 
maximum limits payments to families of more than one size, he 
may adjust the amount otherwise determined under clause (i) to 
take account of families of different sizes.
  (C) The total amount of any applicable income limitation 
determined under subparagraph (B) shall, if it is not a 
multiple of $100 or such other amount as the Secretary may 
prescribe, be rounded to the next higher multiple of $100 or 
such other amount, as the case may be.
  (2)(A) In computing a family's income for purposes of 
paragraph (1), there shall be excluded any costs (whether in 
the form of insurance premiums or otherwise and regardless of 
whether such costs are reimbursed under another public program 
of the State or political subdivision thereof) incurred by such 
family for medical care or for any other type of remedial care 
recognized under State law or, (B) notwithstanding section 1916 
at State option, an amount paid by such family, at the family's 
option, to the State, provided that the amount, when combined 
with costs incurred in prior months, is sufficient when 
excluded from the family's income to reduce such family's 
income below the applicable income limitation described in 
paragraph (1). The amount of State expenditures for which 
medical assistance is available under subsection (a)(1) will be 
reduced by amounts paid to the State pursuant to this 
subparagraph.
  (3) For purposes of paragraph (1)(B), in the case of a family 
consisting of only one individual, the ``highest amount which 
would ordinarily be paid'' to such family under the State's 
plan approved under part A of title IV of this Act shall be the 
amount determined by the State agency (on the basis of 
reasonable relationship to the amounts payable under such plan 
to families consisting of two or more persons) to be the amount 
of the aid which would ordinarily be payable under such plan to 
a family (without any income or resources) consisting of one 
person if such plan provided for aid to such a family.
  (4) The limitations on payment imposed by the preceding 
provisions of this subsection shall not apply with respect to 
any amount expended by a State as medical assistance for any 
individual described in section 1902(a)(10)(A)(i)(III), 
1902(a)(10)(A)(i)(IV), 1902(a)(10)(A)(i)(V), 
1902(a)(10)(A)(i)(VI), 1902(a)(10)(A)(i)(VII), 
1902(a)(10)(A)(i)(VIII),1902(a)(10)(A)(i)(IX), 
1902(a)(10)(A)(ii)(IX), 1902(a)(10)(A)(ii)(X), 
1902(a)(10)(A)(ii)(XIII), 1902(a)(10)(A)(ii)(XIV), or 
1902(a)(10)(A)(ii)(XV), 1902(a)(10)(A)(ii)(XVI), 
1902(a)(10)(A)(ii)(XVII), 1902(a)(10)(A)(ii)(XVIII), 
1902(a)(10)(A)(ii)(XIX), 1902(a)(10)(A)(ii)(XX), 
1902(a)(10)(A)(ii)(XXI), 1902(a)(10)(A)(ii)(XXII), 1905(p)(1) 
or for any individual--
          (A) who is receiving aid or assistance under any plan 
        of the State approved under title I, X, XIV or XVI, or 
        part A of title IV, or with respect to whom 
        supplemental security income benefits are being paid 
        under title XVI, or
          (B) who is not receiving such aid or assistance, and 
        with respect to whom such benefits are not being paid, 
        but (i) is eligible to receive such aid or assistance, 
        or to have such benefits paid with respect to him, or 
        (ii) would be eligible to receive such aid or 
        assistance, or to have such benefits paid with respect 
        to him if he were not in a medical institution, or
          (C) with respect to whom there is being paid, or who 
        is eligible, or would be eligible if he were not in a 
        medical institution, to have paid with respect to him, 
        a State supplementary payment and is eligible for 
        medical assistance equal in amount, duration, and scope 
        to the medical assistance made available to individuals 
        described in section 1902(a)(10)(A), or who is a PACE 
        program eligible individual enrolled in a PACE program 
        under section 1934, but only if the income of such 
        individual (as determined under section 1612, but 
        without regard to subsection (b) thereof) does not 
        exceed 300 percent of the supplemental security income 
        benefit rate established by section 1611(b)(1),
at the time of the provision of the medical assistance giving 
rise to such expenditure.
  (g)(1) Subject to paragraph (3), with respect to amounts paid 
for the following services furnished under the State plan after 
June 30, 1973 (other than services furnished pursuant to a 
contract with a health maintenance organization as defined in 
section 1876 or which is a qualified health maintenance 
organization (as defined in section 1310(d) of the Public 
Health Service Act)), the Federal medical assistance percentage 
shall be decreased as follows: After an individual has received 
inpatient hospital services or services in an intermediate care 
facility for the mentally retarded for 60 days or inpatient 
mental hospital services for 90 days (whether or not such days 
are consecutive), during any fiscal year, the Federal medical 
assistance percentage with respect to amounts paid for any such 
care furnished thereafter to such individual shall be decreased 
by a per centum thereof (determined under paragraph (5)) unless 
the State agency responsible for the administration of the plan 
makes a showing satisfactory to the Secretary that, with 
respect to each calendar quarter for which the State submits a 
request for payment at the full Federal medical assistance 
percentage for amounts paid for inpatient hospital services or 
services in an intermediate care facility for the mentally 
retarded furnished beyond 60 days (or inpatient mental hospital 
services furnished beyond 90 days), such State has an effective 
program of medical review of the care of patients in mental 
hospitals and intermediate care facilities for the mentally 
retarded pursuant to paragraphs (26) and (31) of section 
1902(a) whereby the professional management of each case is 
reviewed and evaluated at least annually by independent 
professional review teams. In determining the number of days on 
which an individual has received services described in this 
subsection, there shall not be counted any days with respect to 
which such individual is entitled to have payments made (in 
whole or in part) on his behalf under section 1812.
  (2) The Secretary shall, as part of his validation procedures 
under this subsection, conduct timely sample onsite surveys of 
private and public institutions in which recipients of medical 
assistance may receive care and services under a State plan 
approved under this title, and his findings with respect to 
such surveys (as well as the showings of the State agency 
required under this subsection) shall be made available for 
public inspection.
  (3)(A) No reduction in the Federal medical assistance 
percentage of a State otherwise required to be imposed under 
this subsection shall take effect--
          (i) if such reduction is due to the State's 
        unsatisfactory or invalid showing made with respect to 
        a calendar quarter beginning before January 1, 1977;
          (ii) before January 1, 1978;
          (iii) unless a notice of such reduction has been 
        provided to the State at least 30 days before the date 
        such reduction takes effect; or
          (iv) due to the State's unsatisfactory or invalid 
        showing made with respect to a calendar quarter 
        beginning after September 30, 1977, unless notice of 
        such reduction has been provided to the State no later 
        than the first day of the fourth calendar quarter 
        following the calendar quarter with respect to which 
        such showing was made.
  (B) The Secretary shall waive application of any reduction in 
the Federal medical assistance percentage of a State otherwise 
required to be imposed under paragraph (1) because a showing by 
the State, made under such paragraph with respect to a calendar 
quarter ending after January 1, 1977, and before January 1, 
1978, is determined to be either unsatisfactory under such 
paragraph or invalid under paragraph (2), if the Secretary 
determines that the State's showing made under paragraph (1) 
with respect to any calendar quarter ending on or before 
December 31, 1978, is satisfactory under such paragraph and is 
valid under paragraph (2).
  (4)(A) The Secretary may not find the showing of a State, 
with respect to a calendar quarter under paragraph (1), to be 
satisfactory if the showing is submitted to the Secretary later 
than the 30th day after the last day of the calendar quarter, 
unless the State demonstrates to the satisfaction of the 
Secretary good cause for not meeting such deadline.
  (B) The Secretary shall find a showing of a State, with 
respect to a calendar quarter under paragraph (1), to be 
satisfactory under such paragraph with respect to the 
requirement that the State conduct annual onsite inspections in 
mental hospitals and intermediate care facilities for the 
mentally retarded under paragraphs (26) and (31) of section 
1902(a), if the showing demonstrates that the State has 
conducted such an onsite inspection during the 12-month period 
ending on the last date of the calendar quarter--
          (i) in each of not less than 98 per centum of the 
        number of such hospitals and facilities requiring such 
        inspection, and
          (ii) in every such hospital or facility which has 200 
        or more beds,
and that, with respect to such hospitals and facilities not 
inspected within such period, the State has exercised good 
faith and due diligence in attempting to conduct such 
inspection, or if the State demonstrates to the satisfaction of 
the Secretary that it would have made such a showing but for 
failings of a technical nature only.
  (5) In the case of a State's unsatisfactory or invalid 
showing made with respect to a type of facility or 
institutional services in a calendar quarter, the per centum 
amount of the reduction of the State's Federal medical 
assistance percentage for that type of services under paragraph 
(1) is equal to 33\1/3\ per centum multiplied by a fraction, 
the denominator of which is equal to the total number of 
patients receiving that type of services in that quarter under 
the State plan in facilities or institutions for which a 
showing was required to be made under this subsection, and the 
numerator of which is equal to the number of such patients 
receiving such type of services in that quarter in those 
facilities or institutions for which a satisfactory and valid 
showing was not made for that calendar quarter.
  (6)(A) Recertifications required under section 1902(a)(44) 
shall be conducted at least every 60 days in the case of 
inpatient hospital services.
  (B) Such recertifications in the case of services in an 
intermediate care facility for the mentally retarded shall be 
conducted at least--
          (i) 60 days after the date of the initial 
        certification,
          (ii) 180 days after the date of the initial 
        certification,
          (iii) 12 months after the date of the initial 
        certification,
          (iv) 18 months after the date of the initial 
        certification,
          (v) 24 months after the date of the initial 
        certification, and
          (vi) every 12 months thereafter.
  (C) For purposes of determining compliance with the schedule 
established by this paragraph, a recertification shall be 
considered to have been done on a timely basis if it was 
performed not later than 10 days after the date the 
recertification was otherwise required and the State 
establishes good cause why the physician or other person making 
such recertification did not meet such schedule.
  (i) Payment under the preceding provisions of this section 
shall not be made--
          (1) for organ transplant procedures unless the State 
        plan provides for written standards respecting the 
        coverage of such procedures and unless such standards 
        provide that--
                  (A) similarly situated individuals are 
                treated alike; and
                  (B) any restriction, on the facilities or 
                practitioners which may provide such 
                procedures, is consistent with the 
                accessibility of high quality care to 
                individuals eligible for the procedures under 
                the State plan; or
          (2) with respect to any amount expended for an item 
        or service (other than an emergency item or service, 
        not including items or services furnished in an 
        emergency room of a hospital) furnished--
                  (A) under the plan by any individual or 
                entity during any period when the individual or 
                entity is excluded from participation under 
                title V, XVIII, or XX or under this title 
                pursuant to section 1128, 1128A, 1156, or 
                1842(j)(2),
                  (B) at the medical direction or on the 
                prescription of a physician, during the period 
                when such physician is excluded from 
                participation under title V, XVIII, or XX or 
                under this title pursuant to section 1128, 
                1128A, 1156, or 1842(j)(2) and when the person 
                furnishing such item or service knew or had 
                reason to know of the exclusion (after a 
                reasonable time period after reasonable notice 
                has been furnished to the person); or
                  (C) by any individual or entity to whom the 
                State has failed to suspend payments under the 
                plan during any period when there is pending an 
                investigation of a credible allegation of fraud 
                against the individual or entity, as determined 
                by the State in accordance with regulations 
                promulgated by the Secretary for purposes of 
                section 1862(o) and this subparagraph, unless 
                the State determines in accordance with such 
                regulations there is good cause not to suspend 
                such payments; or
          (3) with respect to any amount expended for inpatient 
        hospital services furnished under the plan (other than 
        amounts attributable to the special situation of a 
        hospital which serves a disproportionate number of low 
        income patients with special needs) to the extent that 
        such amount exceeds the hospital's customary charges 
        with respect to such services or (if such services are 
        furnished under the plan by a public institution free 
        of charge or at nominal charges to the public) exceeds 
        an amount determined on the basis of those items 
        (specified in regulations prescribed by the Secretary) 
        included in the determination of such payment which the 
        Secretary finds will provide fair compensation to such 
        institution for such services; or
          (4) with respect to any amount expended for care or 
        services furnished under the plan by a hospital unless 
        such hospital has in effect a utilization review plan 
        which meets the requirements imposed by section 1861(k) 
        for purposes of title XVIII; and if such hospital has 
        in effect such a utilization review plan for purposes 
        of title XVIII, such plan shall serve as the plan 
        required by this subsection (with the same standards 
        and procedures and the same review committee or group) 
        as a condition of payment under this title; the 
        Secretary is authorized to waive the requirements of 
        this paragraph if the State agency demonstrates to his 
        satisfaction that it has in operation utilization 
        review procedures which are superior in their 
        effectiveness to the procedures required under section 
        1861(k); or
          (5) with respect to any amount expended for any drug 
        product for which payment may not be made under part B 
        of title XVIII because of section 1862(c); or
          (6) with respect to any amount expended for inpatient 
        hospital tests (other than in emergency situations) not 
        specifically ordered by the attending physician or 
        other responsible practitioner; or
          (7) with respect to any amount expended for clinical 
        diagnostic laboratory tests performed by a physician, 
        independent laboratory, or hospital, to the extent such 
        amount exceeds the amount that would be recognized 
        under section 1833(h) for such tests performed for an 
        individual enrolled under part B of title XVIII; or
          (8) with respect to any amount expended for medical 
        assistance (A) for nursing facility services to 
        reimburse (or otherwise compensate) a nursing facility 
        for payment of a civil money penalty imposed under 
        section 1919(h) or (B) for home and community care to 
        reimburse (or otherwise compensate) a provider of such 
        care for payment of a civil money penalty imposed under 
        this title or title XI or for legal expenses in defense 
        of an exclusion or civil money penalty under this title 
        or title XI if there is no reasonable legal ground for 
        the provider's case; or
          (10)(A) with respect to covered outpatient drugs 
        unless there is a rebate agreement in effect under 
        section 1927 with respect to such drugs or unless 
        section 1927(a)(3) applies,
          (B) with respect to any amount expended for an 
        innovator multiple source drug (as defined in section 
        1927(k)) dispensed on or after July 1, 1991, if, under 
        applicable State law, a less expensive multiple source 
        drug could have been dispensed, but only to the extent 
        that such amount exceeds the upper payment limit for 
        such multiple source drug;
                  (C) with respect to covered outpatient drugs 
                described in section 1927(a)(7), unless 
                information respecting utilization data and 
                coding on such drugs that is required to be 
                submitted under such section is submitted in 
                accordance with such section, and
          (D) with respect to any amount expended for 
        reimbursement to a pharmacy under this title for the 
        ingredient cost of a covered outpatient drug for which 
        the pharmacy has already received payment under this 
        title (other than with respect to a reasonable 
        restocking fee for such drug); or
          (11) with respect to any amount expended for 
        physicians' services furnished on or after the first 
        day of the first quarter beginning more than 60 days 
        after the date of establishment of the physician 
        identifier system under section 1902(x), unless the 
        claim for the services includes the unique physician 
        identifier provided under such system; or
          (13) with respect to any amount expended to reimburse 
        (or otherwise compensate) a nursing facility for 
        payment of legal expenses associated with any action 
        initiated by the facility that is dismissed on the 
        basis that no reasonable legal ground existed for the 
        institution of such action; or
          (14) with respect to any amount expended on 
        administrative costs to carry out the program under 
        section 1928; or
          (15) with respect to any amount expended for a 
        single-antigen vaccine and its administration in any 
        case in which the administration of a combined-antigen 
        vaccine was medically appropriate (as determined by the 
        Secretary); or
          (16) with respect to any amount expended for which 
        funds may not be used under the Assisted Suicide 
        Funding Restriction Act of 1997; or
          (17) with respect to any amount expended for roads, 
        bridges, stadiums, or any other item or service not 
        covered under a State plan under this title; or
          (18) with respect to any amount expended for home 
        health care services provided by an agency or 
        organization unless the agency or organization provides 
        the State agency on a continuing basis a surety bond in 
        a form specified by the Secretary under paragraph (7) 
        of section 1861(o) and in an amount that is not less 
        than $50,000 or such comparable surety bond as the 
        Secretary may permit under the last sentence of such 
        section; or
          (19) with respect to any amount expended on 
        administrative costs to initiate or pursue litigation 
        described in subsection (d)(3)(B);
          (20) with respect to amounts expended for medical 
        assistance provided to an individual described in 
        subclause (XV) or (XVI) of section 1902(a)(10)(A)(ii) 
        for a fiscal year unless the State demonstrates to the 
        satisfaction of the Secretary that the level of State 
        funds expended for such fiscal year for programs to 
        enable working individuals with disabilities to work 
        (other than for such medical assistance) is not less 
        than the level expended for such programs during the 
        most recent State fiscal year ending before the date of 
        the enactment of this paragraph;
          (21) with respect to amounts expended for covered 
        outpatient drugs described in section 1927(d)(2)(C) 
        (relating to drugs when used for cosmetic purposes or 
        hair growth), except where medically necessary, and 
        section 1927(d)(2)(K) (relating to drugs when used for 
        treatment of sexual or erectile dysfunction);
          (22) with respect to amounts expended for medical 
        assistance for an individual who declares under section 
        1137(d)(1)(A) to be a citizen or national of the United 
        States for purposes of establishing eligibility for 
        benefits under this title, unless the requirement of 
        section 1902(a)(46)(B) is met;
          (23) with respect to amounts expended for medical 
        assistance for covered outpatient drugs (as defined in 
        section 1927(k)(2)) for which the prescription was 
        executed in written (and non-electronic) form unless 
        the prescription was executed on a tamper-resistant 
        pad;
          (24) if a State is required to implement an asset 
        verification program under section 1940 and fails to 
        implement such program in accordance with such section, 
        with respect to amounts expended by such State for 
        medical assistance for individuals subject to asset 
        verification under such section, unless--
                  (A) the State demonstrates to the Secretary's 
                satisfaction that the State made a good faith 
                effort to comply;
                  (B) not later than 60 days after the date of 
                a finding that the State is in noncompliance, 
                the State submits to the Secretary (and the 
                Secretary approves) a corrective action plan to 
                remedy such noncompliance; and
                  (C) not later than 12 months after the date 
                of such submission (and approval), the State 
                fulfills the terms of such corrective action 
                plan;
          (25) with respect to any amounts expended for medical 
        assistance for individuals for whom the State does not 
        report enrollee encounter data (as defined by the 
        Secretary) to the Medicaid Statistical Information 
        System (MSIS) in a timely manner (as determined by the 
        Secretary);
          (26) with respect to any amounts expended for medical 
        assistance for individuals described in subclause 
        (VIII) of subsection (a)(10)(A)(i) other than medical 
        assistance provided through benchmark coverage 
        described in section 1937(b)(1) or benchmark equivalent 
        coverage described in section 1937(b)(2); or
          (27) with respect to any amounts expended by the 
        State on the basis of a fee schedule for items 
        described in section 1861(n) and furnished on or after 
        January 1, 2019, as determined in the aggregate with 
        respect to each class of such items as defined by the 
        Secretary, in excess of the aggregate amount, if any, 
        that would be paid for such items within such class on 
        a fee-for-service basis under the program under part B 
        of title XVIII, including, as applicable, under a 
        competitive acquisition program under section 1847 in 
        an area of the State.
Nothing in paragraph (1) shall be construed as permitting a 
State to provide services under its plan under this title that 
are not reasonable in amount, duration, and scope to achieve 
their purpose. Paragraphs (1), (2), (16), (17), and (18) shall 
apply with respect to items or services furnished and amounts 
expended by or through a managed care entity (as defined in 
section 1932(a)(1)(B)) in the same manner as such paragraphs 
apply to items or services furnished and amounts expended 
directly by the State.
  (j) Notwithstanding the preceding provisions of this section, 
the amount determined under subsection (a)(1) for any State for 
any quarter shall be adjusted in accordance with section 1914.
  (k) The Secretary is authorized to provide at the request of 
any State (and without cost to such State) such technical and 
actuarial assistance as may be necessary to assist such State 
to contract with any medicaid managed care organization which 
meets the requirements of subsection (m) of this section for 
the purpose of providing medical care and services to 
individuals who are entitled to medical assistance under this 
title.
  (m)(1)(A) The term ``medicaid managed care organization'' 
means a health maintenance organization, an eligible 
organization with a contract under section 1876 or a 
Medicare+Choice organization with a contract under part C of 
title XVIII, a provider sponsored organization, or any other 
public or private organization, which meets the requirement of 
section 1902(w) and--
          (i) makes services it provides to individuals 
        eligible for benefits under this title accessible to 
        such individuals, within the area served by the 
        organization, to the same extent as such services are 
        made accessible to individuals (eligible for medical 
        assistance under the State plan) not enrolled with the 
        organization, and
          (ii) has made adequate provision against the risk of 
        insolvency, which provision is satisfactory to the 
        State, meets the requirements of subparagraph (C)(i) 
        (if applicable), and which assures that individuals 
        eligible for benefits under this title are in no case 
        held liable for debts of the organization in case of 
        the organization's insolvency.
An organization that is a qualified health maintenance 
organization (as defined in section 1310(d) of the Public 
Health Service Act) is deemed to meet the requirements of 
clauses (i) and (ii).
  (B) The duties and functions of the Secretary, insofar as 
they involve making determinations as to whether an 
organization is a medicaid managed care organization within the 
meaning of subparagraph (A), shall be integrated with the 
administration of section 1312 (a) and (b) of the Public Health 
Service Act.
  (C)(i) Subject to clause (ii), a provision meets the 
requirements of this subparagraph for an organization if the 
organization meets solvency standards established by the State 
for private health maintenance organizations or is licensed or 
certified by the State as a risk-bearing entity.
  (ii) Clause (i) shall not apply to an organization if--
          (I) the organization is not responsible for the 
        provision (directly or through arrangements with 
        providers of services) of inpatient hospital services 
        and physicians' services;
          (II) the organization is a public entity;
          (III) the solvency of the organization is guaranteed 
        by the State; or
          (IV) the organization is (or is controlled by) one or 
        more Federally-qualified health centers and meets 
        solvency standards established by the State for such an 
        organization.
For purposes of subclause (IV), the term ``control'' means the 
possession, whether direct or indirect, of the power to direct 
or cause the direction of the management and policies of the 
organization through membership, board representation, or an 
ownership interest equal to or greater than 50.1 percent.
  (2)(A) Except as provided in subparagraphs (B), (C), and (G), 
no payment shall be made under this title to a State with 
respect to expenditures incurred by it for payment (determined 
under a prepaid capitation basis or under any other risk basis) 
for services provided by any entity (including a health 
insuring organization) which is responsible for the provision 
(directly or through arrangements with providers of services) 
of inpatient hospital services and any other service described 
in paragraph (2), (3), (4), (5), or (7) of section 1905(a) or 
for the provision of any three or more of the services 
described in such paragraphs unless--
          (i) the Secretary has determined that the entity is a 
        medicaid managed care organization organization as 
        defined in paragraph (1);
          (iii) such services are provided for the benefit of 
        individuals eligible for benefits under this title in 
        accordance with a contract between the State and the 
        entity under which prepaid payments to the entity are 
        made on an actuarially sound basis and under which the 
        Secretary must provide prior approval for contracts 
        providing for expenditures in excess of $1,000,000 for 
        1998 and, for a subsequent year, the amount established 
        under this clause for the previous year increased by 
        the percentage increase in the consumer price index for 
        all urban consumers over the previous year;
          (iv) such contract provides that the Secretary and 
        the State (or any person or organization designated by 
        either) shall have the right to audit and inspect any 
        books and records of the entity (and of any 
        subcontractor) that pertain (I) to the ability of the 
        entity to bear the risk of potential financial losses, 
        or (II) to services performed or determinations of 
        amounts payable under the contract;
          (v) such contract provides that in the entity's 
        enrollment, reenrollment, or disenrollment of 
        individuals who are eligible for benefits under this 
        title and eligible to enroll, reenroll, or disenroll 
        with the entity pursuant to the contract, the entity 
        will not discriminate among such individuals on the 
        basis of their health status or requirements for health 
        care services;
          (vi) such contract (I) permits individuals who have 
        elected under the plan to enroll with the entity for 
        provision of such benefits to terminate such enrollment 
        in accordance with section 1932(a)(4), and (II) 
        provides for notification in accordance with such 
        section of each such individual, at the time of the 
        individual's enrollment, of such right to terminate 
        such enrollment;
          (vii) such contract provides that, in the case of 
        medically necessary services which were provided (I) to 
        an individual enrolled with the entity under the 
        contract and entitled to benefits with respect to such 
        services under the State's plan and (II) other than 
        through the organization because the services were 
        immediately required due to an unforeseen illness, 
        injury, or condition, either the entity or the State 
        provides for reimbursement with respect to those 
        services,
          (viii) such contract provides for disclosure of 
        information in accordance with section 1124 and 
        paragraph (4) of this subsection;
          (ix) such contract provides, in the case of an entity 
        that has entered into a contract for the provision of 
        services with a Federally-qualified health center or a 
        rural health clinic, that the entity shall provide 
        payment that is not less than the level and amount of 
        payment which the entity would make for the services if 
        the services were furnished by a provider which is not 
        a Federally-qualified health center or a rural health 
        clinic;
          (x) any physician incentive plan that it operates 
        meets the requirements described in section 1876(i)(8);
          (xi) such contract provides for maintenance of 
        sufficient patient encounter data to identify the 
        physician who delivers services to patients and for the 
        provision of such data to the State at a frequency and 
        level of detail to be specified by the Secretary;
          (xii) such contract, and the entity complies with the 
        applicable requirements of section 1932; and
                  (xiii) such contract provides that (I) 
                covered outpatient drugs dispensed to 
                individuals eligible for medical assistance who 
                are enrolled with the entity shall be subject 
                to the same rebate required by the agreement 
                entered into under section 1927 as the State is 
                subject to and that the State shall collect 
                such rebates from manufacturers, (II) 
                capitation rates paid to the entity shall be 
                based on actual cost experience related to 
                rebates and subject to the Federal regulations 
                requiring actuarially sound rates, and (III) 
                the entity shall report to the State, on such 
                timely and periodic basis as specified by the 
                Secretary in order to include in the 
                information submitted by the State to a 
                manufacturer and the Secretary under section 
                1927(b)(2)(A), information on the total number 
                of units of each dosage form and strength and 
                package size by National Drug Code of each 
                covered outpatient drug dispensed to 
                individuals eligible for medical assistance who 
                are enrolled with the entity and for which the 
                entity is responsible for coverage of such drug 
                under this subsection (other than covered 
                outpatient drugs that under subsection (j)(1) 
                of section 1927 are not subject to the 
                requirements of that section) and such other 
                data as the Secretary determines necessary to 
                carry out this subsection.
  (B) Subparagraph (A) except with respect to clause (ix) of 
subparagraph (A), does not apply with respect to payments under 
this title to a State with respect to expenditures incurred by 
it for payment for services provided by an entity which--
          (i)(I) received a grant of at least $100,000 in the 
        fiscal year ending June 30, 1976, under section 
        329(d)(1)(A) or 330(d)(1) of the Public Health Service 
        Act, and for the period beginning July 1, 1976, and 
        ending on the expiration of the period for which 
        payments are to be made under this title has been the 
        recipient of a grant under either such section; and
          (II) provides to its enrollees, on a prepaid 
        capitation risk basis or on any other risk basis, all 
        of the services and benefits described in paragraphs 
        (1), (2), (3), (4)(C), and (5) of section 1905(a) and, 
        to the extent required by section 1902(a)(10)(D) to be 
        provided under a State plan for medical assistance, the 
        services and benefits described in paragraph (7) of 
        section 1905(a); or
          (ii) is a nonprofit primary health care entity 
        located in a rural area (as defined by the Appalachian 
        Regional Commission)--
                  (I) which received in the fiscal year ending 
                June 30, 1976, at least $100,000 (by grant, 
                subgrant, or subcontract) under the Appalachian 
                Regional Development Act of 1965, and
                  (II) for the period beginning July 1, 1976, 
                and ending on the expiration of the period for 
                which payments are to be made under this title 
                either has been the recipient of a grant, 
                subgrant, or subcontract under such Act or has 
                provided services under a contract (initially 
                entered into during a year in which the entity 
                was the recipient of such a grant, subgrant, or 
                subcontract) with a State agency under this 
                title on a prepaid capitation risk basis or on 
                any other risk basis; or
          (iii) which has contracted with the single State 
        agency for the provision of services (but not including 
        inpatient hospital services) to persons eligible under 
        this title on a prepaid risk basis prior to 1970.
  (G) In the case of an entity which is receiving (and has 
received during the previous two years) a grant of at least 
$100,000 under section 329(d)(1)(A) or 330(d)(1) of the Public 
Health Service Act or is receiving (and has received during the 
previous two years) at least $100,000 (by grant, subgrant, or 
subcontract) under the Appalachian Regional Development Act of 
1965, clause (i) of subparagraph (A) shall not apply.
  (H) In the case of an individual who--
          (i) in a month is eligible for benefits under this 
        title and enrolled with a medicaid managed care 
        organization with a contract under this paragraph or 
        with a primary care case manager with a contract 
        described in section 1905(t)(3),
          (ii) in the next month (or in the next 2 months) is 
        not eligible for such benefits, but
          (iii) in the succeeding month is again eligible for 
        such benefits,
the State plan, subject to subparagraph (A)(vi), may enroll the 
individual for that succeeding month with the organization 
described in clause (i) if the organization continues to have a 
contract under this paragraph with the State or with the 
manager described in such clause if the manager continues to 
have a contract described in section 1905(t)(3) with the State.
  (4)(A) Each medicaid managed care organization which is not a 
qualified health maintenance organization (as defined in 
section 1310(d) of the Public Health Service Act) must report 
to the State and, upon request, to the Secretary, the Inspector 
General of the Department of Health and Human Services, and the 
Comptroller General a description of transactions between the 
organization and a party in interest (as defined in section 
1318(b) of such Act), including the following transactions:
          (i) Any sale or exchange, or leasing of any property 
        between the organization and such a party.
          (ii) Any furnishing for consideration of goods, 
        services (including management services), or facilities 
        between the organization and such a party, but not 
        including salaries paid to employees for services 
        provided in the normal course of their employment.
          (iii) Any lending of money or other extension of 
        credit between the organization and such a party.
The State or Secretary may require that information reported 
respecting an organization which controls, or is controlled by, 
or is under common control with, another entity be in the form 
of a consolidated financial statement for the organization and 
such entity.
  (B) Each organization shall make the information reported 
pursuant to subparagraph (A) available to its enrollees upon 
reasonable request.
  (5)(A) If the Secretary determines that an entity with a 
contract under this subsection--
          (i) fails substantially to provide medically 
        necessary items and services that are required (under 
        law or under the contract) to be provided to an 
        individual covered under the contract, if the failure 
        has adversely affected (or has substantial likelihood 
        of adversely affecting) the individual;
          (ii) imposes premiums on individuals enrolled under 
        this subsection in excess of the premiums permitted 
        under this title;
          (iii) acts to discriminate among individuals in 
        violation of the provision of paragraph (2)(A)(v), 
        including expulsion or refusal to re-enroll an 
        individual or engaging in any practice that would 
        reasonably be expected to have the effect of denying or 
        discouraging enrollment (except as permitted by this 
        subsection) by eligible individuals with the 
        organization whose medical condition or history 
        indicates a need for substantial future medical 
        services;
          (iv) misrepresents or falsifies information that is 
        furnished--
                  (I) to the Secretary or the State under this 
                subsection, or
                  (II) to an individual or to any other entity 
                under this subsection, or
          (v) fails to comply with the requirements of section 
        1876(i)(8),
the Secretary may provide, in addition to any other remedies 
available under law, for any of the remedies described in 
subparagraph (B).
  (B) The remedies described in this subparagraph are--
          (i) civil money penalties of not more than $25,000 
        for each determination under subparagraph (A), or, with 
        respect to a determination under clause (iii) or 
        (iv)(I) of such subparagraph, of not more than $100,000 
        for each such determination, plus, with respect to a 
        determination under subparagraph (A)(ii), double the 
        excess amount charged in violation of such subparagraph 
        (and the excess amount charged shall be deducted from 
        the penalty and returned to the individual concerned), 
        and plus, with respect to a determination under 
        subparagraph (A)(iii), $15,000 for each individual not 
        enrolled as a result of a practice described in such 
        subparagraph, or
          (ii) denial of payment to the State for medical 
        assistance furnished under the contract under this 
        subsection for individuals enrolled after the date the 
        Secretary notifies the organization of a determination 
        under subparagraph (A) and until the Secretary is 
        satisfied that the basis for such determination has 
        been corrected and is not likely to recur.
The provisions of section 1128A (other than subsections (a) and 
(b)) shall apply to a civil money penalty under clause (i) in 
the same manner as such provisions apply to a penalty or 
proceeding under section 1128A(a).
  (6)(A) For purposes of this subsection and section 
1902(e)(2)(A), in the case of the State of New Jersey, the term 
``contract'' shall be deemed to include an undertaking by the 
State agency, in the State plan under this title, to operate a 
program meeting all requirements of this subsection.
  (B) The undertaking described in subparagraph (A) must 
provide--
          (i) for the establishment of a separate entity 
        responsible for the operation of a program meeting the 
        requirements of this subsection, which entity may be a 
        subdivision of the State agency administering the State 
        plan under this title;
          (ii) for separate accounting for the funds used to 
        operate such program; and
          (iii) for setting the capitation rates and any other 
        payment rates for services provided in accordance with 
        this subsection using a methodology satisfactory to the 
        Secretary designed to ensure that total Federal 
        matching payments under this title for such services 
        will be lower than the matching payments that would be 
        made for the same services, if provided under the State 
        plan on a fee for service basis to an actuarially 
        equivalent population.
  (C) The undertaking described in subparagraph (A) shall be 
subject to approval (and annual re-approval) by the Secretary 
in the same manner as a contract under this subsection.
  (D) The undertaking described in subparagraph (A) shall not 
be eligible for a waiver under section 1915(b).
  (o) Notwithstanding the preceding provisions of this section, 
no payment shall be made to a State under the preceding 
provisions of this section for expenditures for medical 
assistance provided for an individual under its State plan 
approved under this title to the extent that a private insurer 
(as defined by the Secretary by regulation and including a 
group health plan (as defined in section 607(1) of the Employee 
Retirement Income Security Act of 1974), a service benefit 
plan, and a health maintenance organization) would have been 
obligated to provide such assistance but for a provision of its 
insurance contract which has the effect of limiting or 
excluding such obligation because the individual is eligible 
for or is provided medical assistance under the plan.
  (p)(1) When a political subdivision of a State makes, for the 
State of which it is a political subdivision, or one State 
makes, for another State, the enforcement and collection of 
rights of support or payment assigned under section 1912, 
pursuant to a cooperative arrangement under such section 
(either within or outside of such State), there shall be paid 
to such political subdivision or such other State from amounts 
which would otherwise represent the Federal share of payments 
for medical assistance provided to the eligible individuals on 
whose behalf such enforcement and collection was made, an 
amount equal to 15 percent of any amount collected which is 
attributable to such rights of support or payment.
  (2) Where more than one jurisdiction is involved in such 
enforcement or collection, the amount of the incentive payment 
determined under paragraph (1) shall be allocated among the 
jurisdictions in a manner to be prescribed by the Secretary.
  (q) For the purposes of this section, the term ``State 
medicaid fraud control unit'' means a single identifiable 
entity of the State government which the Secretary certifies 
(and annually recertifies) as meeting the following 
requirements:
          (1) The entity (A) is a unit of the office of the 
        State Attorney General or of another department of 
        State government which possesses statewide authority to 
        prosecute individuals for criminal violations, (B) is 
        in a State the constitution of which does not provide 
        for the criminal prosecution of individuals by a 
        statewide authority and has formal procedures, approved 
        by the Secretary, that (i) assure its referral of 
        suspected criminal violations relating to the program 
        under this title to the appropriate authority or 
        authorities in the State for prosecution and (ii) 
        assure its assistance of, and coordination with, such 
        authority or authorities in such prosecutions, or (C) 
        has a formal working relationship with the office of 
        the State Attorney General and has formal procedures 
        (including procedures for its referral of suspected 
        criminal violations to such office) which are approved 
        by the Secretary and which provide effective 
        coordination of activities between the entity and such 
        office with respect to the detection, investigation, 
        and prosecution of suspected criminal violations 
        relating to the program under this title.
          (2) The entity is separate and distinct from the 
        single State agency that administers or supervises the 
        administration of the State plan under this title.
          (3) The entity's function is conducting a statewide 
        program for the investigation and prosecution of 
        violations of all applicable State laws regarding any 
        and all aspects of fraud in connection with (A) any 
        aspect of the provision of medical assistance and the 
        activities of providers of such assistance under the 
        State plan under this title; and (B) upon the approval 
        of the Inspector General of the relevant Federal 
        agency, any aspect of the provision of health care 
        services and activities of providers of such services 
        under any Federal health care program (as defined in 
        section 1128B(f)(1)), if the suspected fraud or 
        violation of law in such case or investigation is 
        primarily related to the State plan under this title.
          (4)(A) The entity has--
                  (i) procedures for reviewing complaints of 
                abuse or neglect of patients in health care 
                facilities which receive payments under the 
                State plan under this title;
                  (ii) at the option of the entity, procedures 
                for reviewing complaints of abuse or neglect of 
                patients residing in board and care facilities; 
                and
                  (iii) procedures for acting upon such 
                complaints under the criminal laws of the State 
                or for referring such complaints to other State 
                agencies for action.
          (B) For purposes of this paragraph, the term ``board 
        and care facility'' means a residential setting which 
        receives payment (regardless of whether such payment is 
        made under the State plan under this title) from or on 
        behalf of two or more unrelated adults who reside in 
        such facility, and for whom one or both of the 
        following is provided:
                  (i) Nursing care services provided by, or 
                under the supervision of, a registered nurse, 
                licensed practical nurse, or licensed nursing 
                assistant.
                  (ii) A substantial amount of personal care 
                services that assist residents with the 
                activities of daily living, including personal 
                hygiene, dressing, bathing, eating, toileting, 
                ambulation, transfer, positioning, self-
                medication, body care, travel to medical 
                services, essential shopping, meal preparation, 
                laundry, and housework.
          (5) The entity provides for the collection, or 
        referral for collection to a single State agency, of 
        overpayments that are made under the State plan or 
        under any Federal health care program (as so defined) 
        to health care facilities and that are discovered by 
        the entity in carrying out its activities. All funds 
        collected in accordance with this paragraph shall be 
        credited exclusively to, and available for expenditure 
        under, the Federal health care program (including the 
        State plan under this title) that was subject to the 
        activity that was the basis for the collection.
          (6) The entity employs such auditors, attorneys, 
        investigators, and other necessary personnel and is 
        organized in such a manner as is necessary to promote 
        the effective and efficient conduct of the entity's 
        activities.
          (7) The entity submits to the Secretary an 
        application and annual reports containing such 
        information as the Secretary determines, by regulation, 
        to be necessary to determine whether the entity meets 
        the other requirements of this subsection.
  (r)(1) In order to receive payments under subsection (a) for 
use of automated data systems in administration of the State 
plan under this title, a State must, in addition to meeting the 
requirements of paragraph (3), have in operation mechanized 
claims processing and information retrieval systems that meet 
the requirements of this subsection and that the Secretary has 
found--
          (A) are adequate to provide efficient, economical, 
        and effective administration of such State plan;
          (B) are compatible with the claims processing and 
        information retrieval systems used in the 
        administration of title XVIII, and for this purpose--
                  (i) have a uniform identification coding 
                system for providers, other payees, and 
                beneficiaries under this title or title XVIII;
                  (ii) provide liaison between States and 
                carriers and intermediaries with agreements 
                under title XVIII to facilitate timely exchange 
                of appropriate data;
                  (iii) provide for exchange of data between 
                the States and the Secretary with respect to 
                persons sanctioned under this title or title 
                XVIII; and
                  (iv) effective for claims filed on or after 
                October 1, 2010, incorporate compatible 
                methodologies of the National Correct Coding 
                Initiative administered by the Secretary (or 
                any successor initiative to promote correct 
                coding and to control improper coding leading 
                to inappropriate payment) and such other 
                methodologies of that Initiative (or such other 
                national correct coding methodologies) as the 
                Secretary identifies in accordance with 
                paragraph (4);
          (C) are capable of providing accurate and timely 
        data;
          (D) are complying with the applicable provisions of 
        part C of title XI;
          (E) are designed to receive provider claims in 
        standard formats to the extent specified by the 
        Secretary; and
          (F) effective for claims filed on or after January 1, 
        1999, provide for electronic transmission of claims 
        data in the format specified by the Secretary and 
        consistent with the Medicaid Statistical Information 
        System (MSIS) (including detailed individual enrollee 
        encounter data and other information that the Secretary 
        may find necessary and including, for data submitted to 
        the Secretary on or after January 1, 2010, data 
        elements from the automated data system that the 
        Secretary determines to be necessary for program 
        integrity, program oversight, and administration, at 
        such frequency as the Secretary shall determine).
  (2) In order to meet the requirements of this paragraph, 
mechanized claims processing and information retrieval systems 
must meet the following requirements:
          (A) The systems must be capable of developing 
        provider, physician, and patient profiles which are 
        sufficient to provide specific information as to the 
        use of covered types of services and items, including 
        prescribed drugs.
          (B) The State must provide that information on 
        probable fraud or abuse which is obtained from, or 
        developed by, the systems, is made available to the 
        State's medicaid fraud control unit (if any) certified 
        under subsection (q) of this section.
          (C) The systems must meet all performance standards 
        and other requirements for initial approval developed 
        by the Secretary.
  (3) In order to meet the requirements of this paragraph, a 
State must have in operation an eligibility determination 
system which provides for data matching through the Public 
Assistance Reporting Information System (PARIS) facilitated by 
the Secretary (or any successor system), including matching 
with medical assistance programs operated by other States.
  (4) For purposes of paragraph (1)(B)(iv), the Secretary shall 
do the following:
          (A) Not later than September 1, 2010:
                  (i) Identify those methodologies of the 
                National Correct Coding Initiative administered 
                by the Secretary (or any successor initiative 
                to promote correct coding and to control 
                improper coding leading to inappropriate 
                payment) which are compatible to claims filed 
                under this title.
                  (ii) Identify those methodologies of such 
                Initiative (or such other national correct 
                coding methodologies) that should be 
                incorporated into claims filed under this title 
                with respect to items or services for which 
                States provide medical assistance under this 
                title and no national correct coding 
                methodologies have been established under such 
                Initiative with respect to title XVIII.
                  (iii) Notify States of--
                          (I) the methodologies identified 
                        under subparagraphs (A) and (B) (and of 
                        any other national correct coding 
                        methodologies identified under 
                        subparagraph (B)); and
                          (II) how States are to incorporate 
                        such methodologies into claims filed 
                        under this title.
          (B) Not later than March 1, 2011, submit a report to 
        Congress that includes the notice to States under 
        clause (iii) of subparagraph (A) and an analysis 
        supporting the identification of the methodologies made 
        under clauses (i) and (ii) of subparagraph (A).
  (s) Notwithstanding the preceding provisions of this section, 
no payment shall be made to a State under this section for 
expenditures for medical assistance under the State plan 
consisting of a designated health service (as defined in 
subsection (h)(6) of section 1877) furnished to an individual 
on the basis of a referral that would result in the denial of 
payment for the service under title XVIII if such title 
provided for coverage of such service to the same extent and 
under the same terms and conditions as under the State plan, 
and subsections (f) and (g)(5) of such section shall apply to a 
provider of such a designated health service for which payment 
may be made under this title in the same manner as such 
subsections apply to a provider of such a service for which 
payment may be made under such title.
  (t)(1) For purposes of subsection (a)(3)(F), the payments 
described in this paragraph to encourage the adoption and use 
of certified EHR technology are payments made by the State in 
accordance with this subsection --
          (A) to Medicaid providers described in paragraph 
        (2)(A) not in excess of 85 percent of net average 
        allowable costs (as defined in paragraph (3)(E)) for 
        certified EHR technology (and support services 
        including maintenance and training that is for, or is 
        necessary for the adoption and operation of, such 
        technology) with respect to such providers; and
          (B) to Medicaid providers described in paragraph 
        (2)(B) not in excess of the maximum amount permitted 
        under paragraph (5) for the provider involved.
  (2) In this subsection and subsection (a)(3)(F), the term 
``Medicaid provider'' means--
          (A) an eligible professional (as defined in paragraph 
        (3)(B))--
                  (i) who is not hospital-based and has at 
                least 30 percent of the professional's patient 
                volume (as estimated in accordance with a 
                methodology established by the Secretary) 
                attributable to individuals who are receiving 
                medical assistance under this title;
                  (ii) who is not described in clause (i), who 
                is a pediatrician, who is not hospital-based, 
                and who has at least 20 percent of the 
                professional's patient volume (as estimated in 
                accordance with a methodology established by 
                the Secretary) attributable to individuals who 
                are receiving medical assistance under this 
                title; and
                  (iii) who practices predominantly in a 
                Federally qualified health center or rural 
                health clinic and has at least 30 percent of 
                the professional's patient volume (as estimated 
                in accordance with a methodology established by 
                the Secretary) attributable to needy 
                individuals (as defined in paragraph (3)(F)); 
                and
          (B)(i) a children's hospital, or
          (ii) an acute-care hospital that is not described in 
        clause (i) and that has at least 10 percent of the 
        hospital's patient volume (as estimated in accordance 
        with a methodology established by the Secretary) 
        attributable to individuals who are receiving medical 
        assistance under this title.
An eligible professional shall not qualify as a Medicaid 
provider under this subsection unless any right to payment 
under sections 1848(o) and 1853(l) with respect to the eligible 
professional has been waived in a manner specified by the 
Secretary. For purposes of calculating patient volume under 
subparagraph (A)(iii), insofar as it is related to 
uncompensated care, the Secretary may require the adjustment of 
such uncompensated care data so that it would be an appropriate 
proxy for charity care, including a downward adjustment to 
eliminate bad debt data from uncompensated care. In applying 
subparagraphs (A) and (B)(ii), the methodology established by 
the Secretary for patient volume shall include individuals 
enrolled in a Medicaid managed care plan (under section 1903(m) 
or section 1932).
  (3) In this subsection and subsection (a)(3)(F):
          (A) The term ``certified EHR technology'' means a 
        qualified electronic health record (as defined in 
        3000(13) of the Public Health Service Act) that is 
        certified pursuant to section 3001(c)(5) of such Act as 
        meeting standards adopted under section 3004 of such 
        Act that are applicable to the type of record involved 
        (as determined by the Secretary, such as an ambulatory 
        electronic health record for office-based physicians or 
        an inpatient hospital electronic health record for 
        hospitals).
          (B) The term ``eligible professional'' means a--
                  (i) physician;
                  (ii) dentist;
                  (iii) certified nurse mid-wife;
                  (iv) nurse practitioner; and
                  (v) physician assistant insofar as the 
                assistant is practicing in a rural health 
                clinic that is led by a physician assistant or 
                is practicing in a Federally qualified health 
                center that is so led.
          (C) The term ``average allowable costs'' means, with 
        respect to certified EHR technology of Medicaid 
        providers described in paragraph (2)(A) for--
                  (i) the first year of payment with respect to 
                such a provider, the average costs for the 
                purchase and initial implementation or upgrade 
                of such technology (and support services 
                including training that is for, or is necessary 
                for the adoption and initial operation of, such 
                technology) for such providers, as determined 
                by the Secretary based upon studies conducted 
                under paragraph (4)(C); and
                  (ii) a subsequent year of payment with 
                respect to such a provider, the average costs 
                not described in clause (i) relating to the 
                operation, maintenance, and use of such 
                technology for such providers, as determined by 
                the Secretary based upon studies conducted 
                under paragraph (4)(C).
          (D) The term ``hospital-based'' means, with respect 
        to an eligible professional, a professional (such as a 
        pathologist, anesthesiologist, or emergency physician) 
        who furnishes substantially all of the individual's 
        professional services in a hospital inpatient or 
        emergency room setting and through the use of the 
        facilities and equipment, including qualified 
        electronic health records, of the hospital. The 
        determination of whether an eligible professional is a 
        hospital-based eligible professional shall be made on 
        the basis of the site of service (as defined by the 
        Secretary) and without regard to any employment or 
        billing arrangement between the eligible professional 
        and any other provider.
          (E) The term ``net average allowable costs'' means, 
        with respect to a Medicaid provider described in 
        paragraph (2)(A), average allowable costs reduced by 
        the average payment the Secretary estimates will be 
        made to such Medicaid providers (determined on a 
        percentage or other basis for such classes or types of 
        providers as the Secretary may specify) from other 
        sources (other than under this subsection, or by the 
        Federal government or a State or local government) that 
        is directly attributable to payment for certified EHR 
        technology or support services described in 
        subparagraph (C).
          (F) The term ``needy individual'' means, with respect 
        to a Medicaid provider, an individual--
                  (i) who is receiving assistance under this 
                title;
                  (ii) who is receiving assistance under title 
                XXI;
                  (iii) who is furnished uncompensated care by 
                the provider; or
                  (iv) for whom charges are reduced by the 
                provider on a sliding scale basis based on an 
                individual's ability to pay.
  (4)(A) With respect to a Medicaid provider described in 
paragraph (2)(A), subject to subparagraph (B), in no case 
shall--
                  (i) the net average allowable costs under 
                this subsection for the first year of payment 
                (which may not be later than 2016), which is 
                intended to cover the costs described in 
                paragraph (3)(C)(i), exceed $25,000 (or such 
                lesser amount as the Secretary determines based 
                on studies conducted under subparagraph (C));
                  (ii) the net average allowable costs under 
                this subsection for a subsequent year of 
                payment, which is intended to cover costs 
                described in paragraph (3)(C)(ii), exceed 
                $10,000; and
                  (iii) payments be made for costs described in 
                clause (ii) after 2021 or over a period of 
                longer than 5 years.
  (B) In the case of Medicaid provider described in paragraph 
(2)(A)(ii), the dollar amounts specified in subparagraph (A) 
shall be \2/3\ of the dollar amounts otherwise specified.
  (C) For the purposes of determining average allowable costs 
under this subsection, the Secretary shall study the average 
costs to Medicaid providers described in paragraph (2)(A) of 
purchase and initial implementation and upgrade of certified 
EHR technology described in paragraph (3)(C)(i) and the average 
costs to such providers of operations, maintenance, and use of 
such technology described in paragraph (3)(C)(ii). In 
determining such costs for such providers, the Secretary may 
utilize studies of such amounts submitted by States.
  (5)(A) In no case shall the payments described in paragraph 
(1)(B) with respect to a Medicaid provider described in 
paragraph (2)(B) exceed--
          (i) in the aggregate the product of--
                          (I) the overall hospital EHR amount 
                        for the provider computed under 
                        subparagraph (B); and
                          (II) the Medicaid share for such 
                        provider computed under subparagraph 
                        (C);
          (ii) in any year 50 percent of the product described 
        in clause (i); and
          (iii) in any 2-year period 90 percent of such 
        product.
  (B) For purposes of this paragraph, the overall hospital EHR 
amount, with respect to a Medicaid provider, is the sum of the 
applicable amounts specified in section 1886(n)(2)(A) for such 
provider for the first 4 payment years (as estimated by the 
Secretary) determined as if the Medicare share specified in 
clause (ii) of such section were 1. The Secretary shall 
establish, in consultation with the State, the overall hospital 
EHR amount for each such Medicaid provider eligible for 
payments under paragraph (1)(B). For purposes of this 
subparagraph in computing the amounts under section 
1886(n)(2)(C) for payment years after the first payment year, 
the Secretary shall assume that in subsequent payment years 
discharges increase at the average annual rate of growth of the 
most recent 3 years for which discharge data are available per 
year.
  (C) The Medicaid share computed under this subparagraph, for 
a Medicaid provider for a period specified by the Secretary, 
shall be calculated in the same manner as the Medicare share 
under section 1886(n)(2)(D) for such a hospital and period, 
except that there shall be substituted for the numerator under 
clause (i) of such section the amount that is equal to the 
number of inpatient-bed-days (as established by the Secretary) 
which are attributable to individuals who are receiving medical 
assistance under this title and who are not described in 
section 1886(n)(2)(D)(i). In computing inpatient-bed-days under 
the previous sentence, the Secretary shall take into account 
inpatient-bed-days attributable to inpatient-bed-days that are 
paid for individuals enrolled in a Medicaid managed care plan 
(under section 1903(m) or section 1932).
  (D) In no case may the payments described in paragraph (1)(B) 
with respect to a Medicaid provider described in paragraph 
(2)(B) be paid--
          (i) for any year beginning after 2016 unless the 
        provider has been provided payment under paragraph 
        (1)(B) for the previous year; and
          (ii) over a period of more than 6 years of payment.
  (6) Payments described in paragraph (1) are not in accordance 
with this subsection unless the following requirements are met:
          (A)(i) The State provides assurances satisfactory to 
        the Secretary that amounts received under subsection 
        (a)(3)(F) with respect to payments to a Medicaid 
        provider are paid, subject to clause (ii), directly to 
        such provider (or to an employer or facility to which 
        such provider has assigned payments) without any 
        deduction or rebate.
          (ii) Amounts described in clause (i) may also be paid 
        to an entity promoting the adoption of certified EHR 
        technology, as designated by the State, if 
        participation in such a payment arrangement is 
        voluntary for the eligible professional involved and if 
        such entity does not retain more than 5 percent of such 
        payments for costs not related to certified EHR 
        technology (and support services including maintenance 
        and training) that is for, or is necessary for the 
        operation of, such technology.
          (B) A Medicaid provider described in paragraph (2)(A) 
        is responsible for payment of the remaining 15 percent 
        of the net average allowable cost and shall be 
        determined to have met such responsibility to the 
        extent that the payment to the Medicaid provider is not 
        in excess of 85 percent of the net average allowable 
        cost.
          (C)(i) Subject to clause (ii), with respect to 
        payments to a Medicaid provider--
                  (I) for the first year of payment to the 
                Medicaid provider under this subsection, the 
                Medicaid provider demonstrates that it is 
                engaged in efforts to adopt, implement, or 
                upgrade certified EHR technology; and
                  (II) for a year of payment, other than the 
                first year of payment to the Medicaid provider 
                under this subsection, the Medicaid provider 
                demonstrates meaningful use of certified EHR 
                technology through a means that is approved by 
                the State and acceptable to the Secretary, and 
                that may be based upon the methodologies 
                applied under section 1848(o) or 1886(n).
          (ii) In the case of a Medicaid provider who has 
        completed adopting, implementing, or upgrading such 
        technology prior to the first year of payment to the 
        Medicaid provider under this subsection, clause (i)(I) 
        shall not apply and clause (i)(II) shall apply to each 
        year of payment to the Medicaid provider under this 
        subsection, including the first year of payment.
          (D) To the extent specified by the Secretary, the 
        certified EHR technology is compatible with State or 
        Federal administrative management systems.
For purposes of subparagraph (B), a Medicaid provider described 
in paragraph (2)(A) may accept payments for the costs described 
in such subparagraph from a State or local government. For 
purposes of subparagraph (C), in establishing the means 
described in such subparagraph, which may include clinical 
quality reporting to the State, the State shall ensure that 
populations with unique needs, such as children, are 
appropriately addressed.
  (7) With respect to Medicaid providers described in paragraph 
(2)(A), the Secretary shall ensure coordination of payment with 
respect to such providers under sections 1848(o) and 1853(l) 
and under this subsection to assure no duplication of funding. 
Such coordination shall include, to the extent practicable, a 
data matching process between State Medicaid agencies and the 
Centers for Medicare & Medicaid Services using national 
provider identifiers. For such purposes, the Secretary may 
require the submission of such data relating to payments to 
such Medicaid providers as the Secretary may specify.
  (8) In carrying out paragraph (6)(C), the State and Secretary 
shall seek, to the maximum extent practicable, to avoid 
duplicative requirements from Federal and State governments to 
demonstrate meaningful use of certified EHR technology under 
this title and title XVIII. In doing so, the Secretary may deem 
satisfaction of requirements for such meaningful use for a 
payment year under title XVIII to be sufficient to qualify as 
meaningful use under this subsection. The Secretary may also 
specify the reporting periods under this subsection in order to 
carry out this paragraph.
  (9) In order to be provided Federal financial participation 
under subsection (a)(3)(F)(ii), a State must demonstrate to the 
satisfaction of the Secretary, that the State--
          (A) is using the funds provided for the purposes of 
        administering payments under this subsection, including 
        tracking of meaningful use by Medicaid providers;
          (B) is conducting adequate oversight of the program 
        under this subsection, including routine tracking of 
        meaningful use attestations and reporting mechanisms; 
        and
          (C) is pursuing initiatives to encourage the adoption 
        of certified EHR technology to promote health care 
        quality and the exchange of health care information 
        under this title, subject to applicable laws and 
        regulations governing such exchange.
  (10) The Secretary shall periodically submit reports to the 
Committee on Energy and Commerce of the House of 
Representatives and the Committee on Finance of the Senate on 
status, progress, and oversight of payments described in 
paragraph (1), including steps taken to carry out paragraph 
(7). Such reports shall also describe the extent of adoption of 
certified EHR technology among Medicaid providers resulting 
from the provisions of this subsection and any improvements in 
health outcomes, clinical quality, or efficiency resulting from 
such adoption.
  (u)(1)(A) Notwithstanding subsection (a)(1), if the ratio of 
a State's erroneous excess payments for medical assistance (as 
defined in subparagraph (D)) to its total expenditures for 
medical assistance under the State plan approved under this 
title exceeds 0.03, for the period consisting of the third and 
fourth quarters of fiscal year 1983, or for any full fiscal 
year thereafter, then the Secretary shall make no payment for 
such period or fiscal year with respect to so much of such 
erroneous excess payments as exceeds such allowable error rate 
of 0.03.
  (B) The Secretary may waive, in certain limited cases, all or 
part of the reduction required under subparagraph (A) with 
respect to any State if such State is unable to reach the 
allowable error rate for a period or fiscal year despite a good 
faith effort by such State.
  (C) In estimating the amount to be paid to a State under 
subsection (d), the Secretary shall take into consideration the 
limitation on Federal financial participation imposed by 
subparagraph (A) and shall reduce the estimate he makes under 
subsection (d)(1), for purposes of payment to the State under 
subsection (d)(3), in light of any expected erroneous excess 
payments for medical assistance (estimated in accordance with 
such criteria, including sampling procedures, as he may 
prescribe and subject to subsequent adjustment, if necessary, 
under subsection (d)(2)).
  (D)(i) For purposes of this subsection, the term ``erroneous 
excess payments for medical assistance'' means the total of--
          (I) payments under the State plan with respect to 
        ineligible individuals and families, and
          (II) overpayments on behalf of eligible individuals 
        and families by reason of error in determining the 
        amount of expenditures for medical care required of an 
        individual or family as a condition of eligibility.
  (ii) In determining the amount of erroneous excess payments 
for medical assistance to an ineligible individual or family 
under clause (i)(I), if such ineligibility is the result of an 
error in determining the amount of the resources of such 
individual or family, the amount of the erroneous excess 
payment shall be the smaller of (I) the amount of the payment 
with respect to such individual or family, or (II) the 
difference between the actual amount of such resources and the 
allowable resource level established under the State plan.
  (iii) In determining the amount of erroneous excess payments 
for medical assistance to an individual or family under clause 
(i)(II), the amount of the erroneous excess payment shall be 
the smaller of (I) the amount of the payment on behalf of the 
individual or family, or (II) the difference between the actual 
amount incurred for medical care by the individual or family 
and the amount which should have been incurred in order to 
establish eligibility for medical assistance.
  (iv) In determining the amount of erroneous excess payments, 
there shall not be included any error resulting from a failure 
of an individual to cooperate or give correct information with 
respect to third-party liability as required under section 
1912(a)(1)(C) or 402(a)(26)(C) or with respect to payments made 
in violation of section 1906.
  (v) In determining the amount of erroneous excess payments, 
there shall not be included any erroneous payments made for 
ambulatory prenatal care provided during a presumptive 
eligibility period (as defined in section 1920(b)(1)), for 
items and services described in subsection (a) of section 1920A 
provided to a child during a presumptive eligibility period 
under such section, for medical assistance provided to an 
individual described in subsection (a) of section 1920B during 
a presumptive eligibility period under such section, or for 
medical assistance provided to an individual during a 
presumptive eligibility period resulting from a determination 
of presumptive eligibility made by a hospital that elects under 
section 1902(a)(47)(B) to be a qualified entity for such 
purpose.
  (E) For purposes of subparagraph (D), there shall be 
excluded, in determining both erroneous excess payments for 
medical assistance and total expenditures for medical 
assistance--
          (i) payments with respect to any individual whose 
        eligibility therefor was determined exclusively by the 
        Secretary under an agreement pursuant to section 1634 
        and such other classes of individuals as the Secretary 
        may by regulation prescribe whose eligibility was 
        determined in part under such an agreement; and
          (ii) payments made as the result of a technical 
        error.
  (2) The State agency administering the plan approved under 
this title shall, at such times and in such form as the 
Secretary may specify, provide information on the rates of 
erroneous excess payments made (or expected, with respect to 
future periods specified by the Secretary) in connection with 
its administration of such plan, together with any other data 
he requests that are reasonably necessary for him to carry out 
the provisions of this subsection.
  (3)(A) If a State fails to cooperate with the Secretary in 
providing information necessary to carry out this subsection, 
the Secretary, directly or through contractual or such other 
arrangements as he may find appropriate, shall establish the 
error rates for that State on the basis of the best data 
reasonably available to him and in accordance with such 
techniques for sampling and estimating as he finds appropriate.
  (B) In any case in which it is necessary for the Secretary to 
exercise his authority under subparagraph (A) to determine a 
State's error rates for a fiscal year, the amount that would 
otherwise be payable to such State under this title for 
quarters in such year shall be reduced by the costs incurred by 
the Secretary in making (directly or otherwise) such 
determination.
  (4) This subsection shall not apply with respect to Puerto 
Rico, Guam, the Virgin Islands, the Northern Mariana Islands, 
or American Samoa.
  (v)(1) Notwithstanding the preceding provisions of this 
section, except as provided in paragraphs (2) and (4), no 
payment may be made to a State under this section for medical 
assistance furnished to an alien who is not lawfully admitted 
for permanent residence or otherwise permanently residing in 
the United States under color of law.
  (2) Payment shall be made under this section for care and 
services that are furnished to an alien described in paragraph 
(1) only if--
          (A) such care and services are necessary for the 
        treatment of an emergency medical condition of the 
        alien,
          (B) such alien otherwise meets the eligibility 
        requirements for medical assistance under the State 
        plan approved under this title (other than the 
        requirement of the receipt of aid or assistance under 
        title IV, supplemental security income benefits under 
        title XVI, or a State supplementary payment), and
          (C) such care and services are not related to an 
        organ transplant procedure.
  (3) For purposes of this subsection, the term ``emergency 
medical condition'' means a medical condition (including 
emergency labor and delivery) manifesting itself by acute 
symptoms of sufficient severity (including severe pain) such 
that the absence of immediate medical attention could 
reasonably be expected to result in--
          (A) placing the patient's health in serious jeopardy,
          (B) serious impairment to bodily functions, or
          (C) serious dysfunction of any bodily organ or part.
  (4)(A) A State may elect (in a plan amendment under this 
title) to provide medical assistance under this title, 
notwithstanding sections 401(a), 402(b), 403, and 421 of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996, to children and pregnant women who are lawfully 
residing in the United States (including battered individuals 
described in section 431(c) of such Act) and who are otherwise 
eligible for such assistance, within either or both of the 
following eligibility categories:
          (i) Pregnant women.--Women during pregnancy (and 
        during the 60-day period beginning on the last day of 
        the pregnancy).
          (ii) Children.--Individuals under 21 years of age, 
        including optional targeted low-income children 
        described in section 1905(u)(2)(B).
  (B) In the case of a State that has elected to provide 
medical assistance to a category of aliens under subparagraph 
(A), no debt shall accrue under an affidavit of support against 
any sponsor of such an alien on the basis of provision of 
assistance to such category and the cost of such assistance 
shall not be considered as an unreimbursed cost.
  (C) As part of the State's ongoing eligibility 
redetermination requirements and procedures for an individual 
provided medical assistance as a result of an election by the 
State under subparagraph (A), a State shall verify that the 
individual continues to lawfully reside in the United States 
using the documentation presented to the State by the 
individual on initial enrollment. If the State cannot 
successfully verify that the individual is lawfully residing in 
the United States in this manner, it shall require that the 
individual provide the State with further documentation or 
other evidence to verify that the individual is lawfully 
residing in the United States.
  (w)(1)(A) Notwithstanding the previous provisions of this 
section, for purposes of determining the amount to be paid to a 
State (as defined in paragraph (7)(D)) under subsection (a)(1) 
for quarters in any fiscal year, the total amount expended 
during such fiscal year as medical assistance under the State 
plan (as determined without regard to this subsection) shall be 
reduced by the sum of any revenues received by the State (or by 
a unit of local government in the State) during the fiscal 
year--
          (i) from provider-related donations (as defined in 
        paragraph (2)(A)), other than--
                  (I) bona fide provider-related donations (as 
                defined in paragraph (2)(B)), and
                  (II) donations described in paragraph (2)(C);
          (ii) from health care related taxes (as defined in 
        paragraph (3)(A)), other than broad-based health care 
        related taxes (as defined in paragraph (3)(B));
          (iii) from a broad-based health care related tax, if 
        there is in effect a hold harmless provision (described 
        in paragraph (4)) with respect to the tax; or
          (iv) only with respect to State fiscal years (or 
        portions thereof) occurring on or after January 1, 
        1992, and before October 1, 1995, from broad-based 
        health care related taxes to the extent the amount of 
        such taxes collected exceeds the limit established 
        under paragraph (5).
  (B) Notwithstanding the previous provisions of this section, 
for purposes of determining the amount to be paid to a State 
under subsection (a)(7) for all quarters in a Federal fiscal 
year (beginning with fiscal year 1993), the total amount 
expended during the fiscal year for administrative expenditures 
under the State plan (as determined without regard to this 
subsection) shall be reduced by the sum of any revenues 
received by the State (or by a unit of local government in the 
State) during such quarters from donations described in 
paragraph (2)(C), to the extent the amount of such donations 
exceeds 10 percent of the amounts expended under the State plan 
under this title during the fiscal year for purposes described 
in paragraphs (2), (3), (4), (6), and (7) of subsection (a).
  (C)(i) Except as otherwise provided in clause (ii), 
subparagraph (A)(i) shall apply to donations received on or 
after January 1, 1992.
  (ii) Subject to the limits described in clause (iii) and 
subparagraph (E), subparagraph (A)(i) shall not apply to 
donations received before the effective date specified in 
subparagraph (F) if such donations are received under programs 
in effect or as described in State plan amendments or related 
documents submitted to the Secretary by September 30, 1991, and 
applicable to State fiscal year 1992, as demonstrated by State 
plan amendments, written agreements, State budget 
documentation, or other documentary evidence in existence on 
that date.
  (iii) In applying clause (ii) in the case of donations 
received in State fiscal year 1993, the maximum amount of such 
donations to which such clause may be applied may not exceed 
the total amount of such donations received in the 
corresponding period in State fiscal year 1992 (or not later 
than 5 days after the last day of the corresponding period).
  (D)(i) Except as otherwise provided in clause (ii), 
subparagraphs (A)(ii) and (A)(iii) shall apply to taxes 
received on or after January 1, 1992.
  (ii) Subparagraphs (A)(ii) and (A)(iii) shall not apply to 
impermissible taxes (as defined in clause (iii)) received 
before the effective date specified in subparagraph (F) to the 
extent the taxes (including the tax rate or base) were in 
effect, or the legislation or regulations imposing such taxes 
were enacted or adopted, as of November 22, 1991.
  (iii) In this subparagraph and subparagraph (E), the term 
``impermissible tax'' means a health care related tax for which 
a reduction may be made under clause (ii) or (iii) of 
subparagraph (A).
  (E)(i) In no case may the total amount of donations and taxes 
permitted under the exception provided in subparagraphs (C)(ii) 
and (D)(ii) for the portion of State fiscal year 1992 occurring 
during calendar year 1992 exceed the limit under paragraph (5) 
minus the total amount of broad-based health care related taxes 
received in the portion of that fiscal year.
  (ii) In no case may the total amount of donations and taxes 
permitted under the exception provided in subparagraphs (C)(ii) 
and (D)(ii) for State fiscal year 1993 exceed the limit under 
paragraph (5) minus the total amount of broad-based health care 
related taxes received in that fiscal year.
  (F) In this paragraph in the case of a State--
          (i) except as provided in clause (iii), with a State 
        fiscal year beginning on or before July 1, the 
        effective date is October 1, 1992,
          (ii) except as provided in clause (iii), with a State 
        fiscal year that begins after July 1, the effective 
        date is January 1, 1993, or
          (iii) with a State legislature which is not scheduled 
        to have a regular legislative session in 1992, with a 
        State legislature which is not scheduled to have a 
        regular legislative session in 1993, or with a 
        provider-specific tax enacted on November 4, 1991, the 
        effective date is July 1, 1993.
  (2)(A) In this subsection (except as provided in paragraph 
(6)), the term ``provider-related donation'' means any donation 
or other voluntary payment (whether in cash or in kind) made 
(directly or indirectly) to a State or unit of local government 
by--
          (i) a health care provider (as defined in paragraph 
        (7)(B)),
          (ii) an entity related to a health care provider (as 
        defined in paragraph (7)(C)), or
          (iii) an entity providing goods or services under the 
        State plan for which payment is made to the State under 
        paragraph (2), (3), (4), (6), or (7) of subsection (a).
  (B) For purposes of paragraph (1)(A)(i)(I), the term ``bona 
fide provider-related donation'' means a provider-related 
donation that has no direct or indirect relationship (as 
determined by the Secretary) to payments made under this title 
to that provider, to providers furnishing the same class of 
items and services as that provider, or to any related entity, 
as established by the State to the satisfaction of the 
Secretary. The Secretary may by regulation specify types of 
provider-related donations described in the previous sentence 
that will be considered to be bona fide provider-related 
donations.
  (C) For purposes of paragraph (1)(A)(i)(II), donations 
described in this subparagraph are funds expended by a 
hospital, clinic, or similar entity for the direct cost 
(including costs of training and of preparing and distributing 
outreach materials) of State or local agency personnel who are 
stationed at the hospital, clinic, or entity to determine the 
eligibility of individuals for medical assistance under this 
title and to provide outreach services to eligible or 
potentially eligible individuals.
  (3)(A) In this subsection (except as provided in paragraph 
(6)), the term ``health care related tax'' means a tax (as 
defined in paragraph (7)(F)) that--
          (i) is related to health care items or services, or 
        to the provision of, the authority to provide, or 
        payment for, such items or services, or
          (ii) is not limited to such items or services but 
        provides for treatment of individuals or entities that 
        are providing or paying for such items or services that 
        is different from the treatment provided to other 
        individuals or entities.
In applying clause (i), a tax is considered to relate to health 
care items or services if at least 85 percent of the burden of 
such tax falls on health care providers.
  (B) In this subsection, the term ``broad-based health care 
related tax'' means a health care related tax which is imposed 
with respect to a class of health care items or services (as 
described in paragraph (7)(A)) or with respect to providers of 
such items or services and which, except as provided in 
subparagraphs (D), (E), and (F)--
          (i) is imposed at least with respect to all items or 
        services in the class furnished by all non-Federal, 
        nonpublic providers in the State (or, in the case of a 
        tax imposed by a unit of local government, the area 
        over which the unit has jurisdiction) or is imposed 
        with respect to all non-Federal, nonpublic providers in 
        the class; and
          (ii) is imposed uniformly (in accordance with 
        subparagraph (C)).
  (C)(i) Subject to clause (ii), for purposes of subparagraph 
(B)(ii), a tax is considered to be imposed uniformly if--
          (I) in the case of a tax consisting of a licensing 
        fee or similar tax on a class of health care items or 
        services (or providers of such items or services), the 
        amount of the tax imposed is the same for every 
        provider providing items or services within the class;
          (II) in the case of a tax consisting of a licensing 
        fee or similar tax imposed on a class of health care 
        items or services (or providers of such services) on 
        the basis of the number of beds (licensed or otherwise) 
        of the provider, the amount of the tax is the same for 
        each bed of each provider of such items or services in 
        the class;
          (III) in the case of a tax based on revenues or 
        receipts with respect to a class of items or services 
        (or providers of items or services) the tax is imposed 
        at a uniform rate for all items and services (or 
        providers of such items of services) in the class on 
        all the gross revenues or receipts, or net operating 
        revenues, relating to the provision of all such items 
        or services (or all such providers) in the State (or, 
        in the case of a tax imposed by a unit of local 
        government within the State, in the area over which the 
        unit has jurisdiction); or
          (IV) in the case of any other tax, the State 
        establishes to the satisfaction of the Secretary that 
        the tax is imposed uniformly.
  (ii) Subject to subparagraphs (D) and (E), a tax imposed with 
respect to a class of health care items and services is not 
considered to be imposed uniformly if the tax provides for any 
credits, exclusions, or deductions which have as their purpose 
or effect the return to providers of all or a portion of the 
tax paid in a manner that is inconsistent with subclauses (I) 
and (II) of subparagraph (E)(ii) or provides for a hold 
harmless provision described in paragraph (4).
  (D) A tax imposed with respect to a class of health care 
items and services is considered to be imposed uniformly--
          (i) notwithstanding that the tax is not imposed with 
        respect to items or services (or the providers thereof) 
        for which payment is made under a State plan under this 
        title or title XVIII, or
          (ii) in the case of a tax described in subparagraph 
        (C)(i)(III), notwithstanding that the tax provides for 
        exclusion (in whole or in part) of revenues or receipts 
        from a State plan under this title or title XVIII.
  (E)(i) A State may submit an application to the Secretary 
requesting that the Secretary treat a tax as a broad-based 
health care related tax, notwithstanding that the tax does not 
apply to all health care items or services in class (or all 
providers of such items and services), provides for a credit, 
deduction, or exclusion, is not applied uniformly, or otherwise 
does not meet the requirements of subparagraph (B) or (C). 
Permissible waivers may include exemptions for rural or sole-
community providers.
  (ii) The Secretary shall approve such an application if the 
State establishes to the satisfaction of the Secretary that--
          (I) the net impact of the tax and associated 
        expenditures under this title as proposed by the State 
        is generally redistributive in nature, and
          (II) the amount of the tax is not directly correlated 
        to payments under this title for items or services with 
        respect to which the tax is imposed.
The Secretary shall by regulation specify types of credits, 
exclusions, and deductions that will be considered to meet the 
requirements of this subparagraph.
  (F) In no case shall a tax not qualify as a broad-based 
health care related tax under this paragraph because it does 
not apply to a hospital that is described in section 501(c)(3) 
of the Internal Revenue Code of 1986 and exempt from taxation 
under section 501(a) of such Code and that does not accept 
payment under the State plan under this title or under title 
XVIII.
  (4) For purposes of paragraph (1)(A)(iii), there is in effect 
a hold harmless provision with respect to a broad-based health 
care related tax imposed with respect to a class of items or 
services if the Secretary determines that any of the following 
applies:
          (A) The State or other unit of government imposing 
        the tax provides (directly or indirectly) for a payment 
        (other than under this title) to taxpayers and the 
        amount of such payment is positively correlated either 
        to the amount of such tax or to the difference between 
        the amount of the tax and the amount of payment under 
        the State plan.
          (B) All or any portion of the payment made under this 
        title to the taxpayer varies based only upon the amount 
        of the total tax paid.
          (C)(i) The State or other unit of government imposing 
        the tax provides (directly or indirectly) for any 
        payment, offset, or waiver that guarantees to hold 
        taxpayers harmless for any portion of the costs of the 
        tax.
          (ii) For purposes of clause (i), a determination of 
        the existence of an indirect guarantee shall be made 
        under paragraph (3)(i) of section 433.68(f) of title 
        42, Code of Federal Regulations, as in effect on 
        November 1, 2006, except that for portions of fiscal 
        years beginning on or after January 1, 2008, and before 
        October 1, 2011, ``5.5 percent'' shall be substituted 
        for ``6 percent'' each place it appears.
The provisions of this paragraph shall not prevent use of the 
tax to reimburse health care providers in a class for 
expenditures under this title nor preclude States from relying 
on such reimbursement to justify or explain the tax in the 
legislative process.
  (5)(A) For purposes of this subsection, the limit under this 
subparagraph with respect to a State is an amount equal to 25 
percent (or, if greater, the State base percentage, as defined 
in subparagraph (B)) of the non-Federal share of the total 
amount expended under the State plan during a State fiscal year 
(or portion thereof), as it would be determined pursuant to 
paragraph (1)(A) without regard to paragraph (1)(A)(iv).
  (B)(i) In subparagraph (A), the term ``State base 
percentage'' means, with respect to a State, an amount 
(expressed as a percentage) equal to--
          (I) the total of the amount of health care related 
        taxes (whether or not broad-based) and the amount of 
        provider-related donations (whether or not bona fide) 
        projected to be collected (in accordance with clause 
        (ii)) during State fiscal year 1992, divided by
          (II) the non-Federal share of the total amount 
        estimated to be expended under the State plan during 
        such State fiscal year.
  (ii) For purposes of clause (i)(I), in the case of a tax that 
is not in effect throughout State fiscal year 1992 or the rate 
(or base) of which is increased during such fiscal year, the 
Secretary shall project the amount to be collected during such 
fiscal year as if the tax (or increase) were in effect during 
the entire State fiscal year.
  (C)(i) The total amount of health care related taxes under 
subparagraph (B)(i)(I) shall be determined by the Secretary 
based on only those taxes (including the tax rate or base) 
which were in effect, or for which legislation or regulations 
imposing such taxes were enacted or adopted, as of November 22, 
1991.
  (ii) The amount of provider-related donations under 
subparagraph (B)(i)(I) shall be determined by the Secretary 
based on programs in effect on September 30, 1991, and 
applicable to State fiscal year 1992, as demonstrated by State 
plan amendments, written agreements, State budget 
documentation, or other documentary evidence in existence on 
that date.
  (iii) The amount of expenditures described in subparagraph 
(B)(i)(II) shall be determined by the Secretary based on the 
best data available as of the date of the enactment of this 
subsection.
  (6)(A) Notwithstanding the provisions of this subsection, the 
Secretary may not restrict States' use of funds where such 
funds are derived from State or local taxes (or funds 
appropriated to State university teaching hospitals) 
transferred from or certified by units of government within a 
State as the non-Federal share of expenditures under this 
title, regardless of whether the unit of government is also a 
health care provider, except as provided in section 1902(a)(2), 
unless the transferred funds are derived by the unit of 
government from donations or taxes that would not otherwise be 
recognized as the non-Federal share under this section.
  (B) For purposes of this subsection, funds the use of which 
the Secretary may not restrict under subparagraph (A) shall not 
be considered to be a provider-related donation or a health 
care related tax.
  (7) For purposes of this subsection:
          (A) Each of the following shall be considered a 
        separate class of health care items and services:
                  (i) Inpatient hospital services.
                  (ii) Outpatient hospital services.
                  (iii) Nursing facility services (other than 
                services of intermediate care facilities for 
                the mentally retarded).
                  (iv) Services of intermediate care facilities 
                for the mentally retarded.
                  (v) Physicians' services.
                  (vi) Home health care services.
                  (vii) Outpatient prescription drugs.
                  (viii) Services of managed care organizations 
                (including health maintenance organizations, 
                preferred provider organizations, and such 
                other similar organizations as the Secretary 
                may specify by regulation).
                  (ix) Such other classification of health care 
                items and services consistent with this 
                subparagraph as the Secretary may establish by 
                regulation.
          (B) The term ``health care provider'' means an 
        individual or person that receives payments for the 
        provision of health care items or services.
          (C) An entity is considered to be ``related'' to a 
        health care provider if the entity--
                  (i) is an organization, association, 
                corporation or partnership formed by or on 
                behalf of health care providers;
                  (ii) is a person with an ownership or control 
                interest (as defined in section 1124(a)(3)) in 
                the provider;
                  (iii) is the employee, spouse, parent, child, 
                or sibling of the provider (or of a person 
                described in clause (ii)); or
                  (iv) has a similar, close relationship (as 
                defined in regulations) to the provider.
          (D) The term ``State'' means only the 50 States and 
        the District of Columbia but does not include any State 
        whose entire program under this title is operated under 
        a waiver granted under section 1115.
          (E) The ``State fiscal year'' means, with respect to 
        a specified year, a State fiscal year ending in that 
        specified year.
          (F) The term ``tax'' includes any licensing fee, 
        assessment, or other mandatory payment, but does not 
        include payment of a criminal or civil fine or penalty 
        (other than a fine or penalty imposed in lieu of or 
        instead of a fee, assessment, or other mandatory 
        payment).
          (G) The term ``unit of local government'' means, with 
        respect to a State, a city, county, special purpose 
        district, or other governmental unit in the State.
  (x)(1) For purposes of section 1902(a)(46)(B)(i), the 
requirement of this subsection is, with respect to an 
individual declaring to be a citizen or national of the United 
States, that, subject to paragraph (2), there is presented 
satisfactory documentary evidence of citizenship or nationality 
(as defined in paragraph (3)) of the individual.
  (2) The requirement of paragraph (1) shall not apply to an 
individual declaring to be a citizen or national of the United 
States who is eligible for medical assistance under this 
title--
          (A) and is entitled to or enrolled for benefits under 
        any part of title XVIII;
          (B) and is receiving--
                  (i) disability insurance benefits under 
                section 223 or monthly insurance benefits under 
                section 202 based on such individual's 
                disability (as defined in section 223(d)); or
                  (ii) supplemental security income benefits 
                under title XVI;
          (C) and with respect to whom--
                  (i) child welfare services are made available 
                under part B of title IV on the basis of being 
                a child in foster care; or
                  (ii) adoption or foster care assistance is 
                made available under part E of title IV;
          (D) pursuant to the application of section 1902(e)(4) 
        (and, in the case of an individual who is eligible for 
        medical assistance on such basis, the individual shall 
        be deemed to have provided satisfactory documentary 
        evidence of citizenship or nationality and shall not be 
        required to provide further documentary evidence on any 
        date that occurs during or after the period in which 
        the individual is eligible for medical assistance on 
        such basis); or
          (E) on such basis as the Secretary may specify under 
        which satisfactory documentary evidence of citizenship 
        or nationality has been previously presented.
  (3)(A) For purposes of this subsection, the term 
``satisfactory documentary evidence of citizenship or 
nationality'' means--
          (i) any document described in subparagraph (B); or
          (ii) a document described in subparagraph (C) and a 
        document described in subparagraph (D).
  (B) The following are documents described in this 
subparagraph:
          (i) A United States passport.
          (ii) Form N-550 or N-570 (Certificate of 
        Naturalization).
          (iii) Form N-560 or N-561 (Certificate of United 
        States Citizenship).
          (iv) A valid State-issued driver's license or other 
        identity document described in section 274A(b)(1)(D) of 
        the Immigration and Nationality Act, but only if the 
        State issuing the license or such document requires 
        proof of United States citizenship before issuance of 
        such license or document or obtains a social security 
        number from the applicant and verifies before 
        certification that such number is valid and assigned to 
        the applicant who is a citizen.
          (v)(I) Except as provided in subclause (II), a 
        document issued by a federally recognized Indian tribe 
        evidencing membership or enrollment in, or affiliation 
        with, such tribe (such as a tribal enrollment card or 
        certificate of degree of Indian blood).
          (II) With respect to those federally recognized 
        Indian tribes located within States having an 
        international border whose membership includes 
        individuals who are not citizens of the United States, 
        the Secretary shall, after consulting with such tribes, 
        issue regulations authorizing the presentation of such 
        other forms of documentation (including tribal 
        documentation, if appropriate) that the Secretary 
        determines to be satisfactory documentary evidence of 
        citizenship or nationality for purposes of satisfying 
        the requirement of this subsection.
          (vi) Such other document as the Secretary may 
        specify, by regulation, that provides proof of United 
        States citizenship or nationality and that provides a 
        reliable means of documentation of personal identity.
  (C) The following are documents described in this 
subparagraph:
          (i) A certificate of birth in the United States.
          (ii) Form FS-545 or Form DS-1350 (Certification of 
        Birth Abroad).
          (iii) Form I-197 (United States Citizen 
        Identification Card).
          (iv) Form FS-240 (Report of Birth Abroad of a Citizen 
        of the United States).
          (v) Such other document (not described in 
        subparagraph (B)(iv)) as the Secretary may specify that 
        provides proof of United States citizenship or 
        nationality.
  (D) The following are documents described in this 
subparagraph:
          (i) Any identity document described in section 
        274A(b)(1)(D) of the Immigration and Nationality Act.
          (ii) Any other documentation of personal identity of 
        such other type as the Secretary finds, by regulation, 
        provides a reliable means of identification.
  (E) A reference in this paragraph to a form includes a 
reference to any successor form.
  (4) In the case of an individual declaring to be a citizen or 
national of the United States with respect to whom a State 
requires the presentation of satisfactory documentary evidence 
of citizenship or nationality under section 1902(a)(46)(B)(i), 
the individual shall be provided at least the reasonable 
opportunity to present satisfactory documentary evidence of 
citizenship or nationality under this subsection as is provided 
under clauses (i) and (ii) of section 1137(d)(4)(A) to an 
individual for the submittal to the State of evidence 
indicating a satisfactory immigration status.
  (5) Nothing in subparagraph (A) or (B) of section 
1902(a)(46), the preceding paragraphs of this subsection, or 
the Deficit Reduction Act of 2005, including section 6036 of 
such Act, shall be construed as changing the requirement of 
section 1902(e)(4) that a child born in the United States to an 
alien mother for whom medical assistance for the delivery of 
such child is available as treatment of an emergency medical 
condition pursuant to subsection (v) shall be deemed eligible 
for medical assistance during the first year of such child's 
life.
  (y) Payments for Establishment of Alternate Non-Emergency 
Services Providers.--
          (1) Payments.--In addition to the payments otherwise 
        provided under subsection (a), subject to paragraph 
        (2), the Secretary shall provide for payments to States 
        under such subsection for the establishment of 
        alternate non-emergency service providers (as defined 
        in section 1916A(e)(5)(B)), or networks of such 
        providers.
          (2) Limitation.--The total amount of payments under 
        this subsection shall not exceed $50,000,000 during the 
        4-year period beginning with 2006. This subsection 
        constitutes budget authority in advance of 
        appropriations Acts and represents the obligation of 
        the Secretary to provide for the payment of amounts 
        provided under this subsection.
          (3) Preference.--In providing for payments to States 
        under this subsection, the Secretary shall provide 
        preference to States that establish, or provide for, 
        alternate non-emergency services providers or networks 
        of such providers that--
                  (A) serve rural or underserved areas where 
                beneficiaries under this title may not have 
                regular access to providers of primary care 
                services; or
                  (B) are in partnership with local community 
                hospitals.
          (4) Form and manner of payment.--Payment to a State 
        under this subsection shall be made only upon the 
        filing of such application in such form and in such 
        manner as the Secretary shall specify. Payment to a 
        State under this subsection shall be made in the same 
        manner as other payments under section 1903(a).
  (z) Medicaid Transformation Payments.--
          (1) In general.--In addition to the payments provided 
        under subsection (a), subject to paragraph (4), the 
        Secretary shall provide for payments to States for the 
        adoption of innovative methods to improve the 
        effectiveness and efficiency in providing medical 
        assistance under this title.
          (2) Permissible uses of funds.--The following are 
        examples of innovative methods for which funds provided 
        under this subsection may be used:
                  (A) Methods for reducing patient error rates 
                through the implementation and use of 
                electronic health records, electronic clinical 
                decision support tools, or e-prescribing 
                programs.
                  (B) Methods for improving rates of collection 
                from estates of amounts owed under this title.
                  (C) Methods for reducing waste, fraud, and 
                abuse under the program under this title, such 
                as reducing improper payment rates as measured 
                by annual payment error rate measurement (PERM) 
                project rates.
                  (D) Implementation of a medication risk 
                management program as part of a drug use review 
                program under section 1927(g).
                  (E) Methods in reducing, in clinically 
                appropriate ways, expenditures under this title 
                for covered outpatient drugs, particularly in 
                the categories of greatest drug utilization, by 
                increasing the utilization of generic drugs 
                through the use of education programs and other 
                incentives to promote greater use of generic 
                drugs.
                  (F) Methods for improving access to primary 
                and specialty physician care for the uninsured 
                using integrated university-based hospital and 
                clinic systems.
          (3) Application; terms and conditions.--
                  (A) In general.--No payments shall be made to 
                a State under this subsection unless the State 
                applies to the Secretary for such payments in a 
                form, manner, and time specified by the 
                Secretary.
                  (B) Terms and conditions.--Such payments are 
                made under such terms and conditions consistent 
                with this subsection as the Secretary 
                prescribes.
                  (C) Annual report.--Payment to a State under 
                this subsection is conditioned on the State 
                submitting to the Secretary an annual report on 
                the programs supported by such payment. Such 
                report shall include information on--
                          (i) the specific uses of such 
                        payment;
                          (ii) an assessment of quality 
                        improvements and clinical outcomes 
                        under such programs; and
                          (iii) estimates of cost savings 
                        resulting from such programs.
          (4) Funding.--
                  (A) Limitation on funds.--The total amount of 
                payments under this subsection shall be equal 
                to, and shall not exceed--
                          (i) $75,000,000 for fiscal year 2007; 
                        and
                          (ii) $75,000,000 for fiscal year 
                        2008.
                This subsection constitutes budget authority in 
                advance of appropriations Acts and represents 
                the obligation of the Secretary to provide for 
                the payment of amounts provided under this 
                subsection.
                  (B) Allocation of funds.--The Secretary shall 
                specify a method for allocating the funds made 
                available under this subsection among States. 
                Such method shall provide preference for States 
                that design programs that target health 
                providers that treat significant numbers of 
                Medicaid beneficiaries. Such method shall 
                provide that not less than 25 percent of such 
                funds shall be allocated among States the 
                population of which (as determined according to 
                data collected by the United States Census 
                Bureau) as of July 1, 2004, was more than 105 
                percent of the population of the respective 
                State (as so determined) as of April 1, 2000.
                  (C) Form and manner of payment.--Payment to a 
                State under this subsection shall be made in 
                the same manner as other payments under section 
                1903(a). There is no requirement for State 
                matching funds to receive payments under this 
                subsection.
          (5) Medication risk management program.--
                  (A) In general.--For purposes of this 
                subsection, the term ``medication risk 
                management program'' means a program for 
                targeted beneficiaries that ensures that 
                covered outpatient drugs are appropriately used 
                to optimize therapeutic outcomes through 
                improved medication use and to reduce the risk 
                of adverse events.
                  (B) Elements.--Such program may include the 
                following elements:
                          (i) The use of established principles 
                        and standards for drug utilization 
                        review and best practices to analyze 
                        prescription drug claims of targeted 
                        beneficiaries and identify outlier 
                        physicians.
                          (ii) On an ongoing basis provide 
                        outlier physicians--
                                  (I) a comprehensive pharmacy 
                                claims history for each 
                                targeted beneficiary under 
                                their care;
                                  (II) information regarding 
                                the frequency and cost of 
                                relapses and hospitalizations 
                                of targeted beneficiaries under 
                                the physician's care; and
                                  (III) applicable best 
                                practice guidelines and 
                                empirical references.
                          (iii) Monitor outlier physician's 
                        prescribing, such as failure to refill, 
                        dosage strengths, and provide 
                        incentives and information to encourage 
                        the adoption of best clinical 
                        practices.
                  (C) Targeted beneficiaries.--For purposes of 
                this paragraph, the term ``targeted 
                beneficiaries'' means Medicaid eligible 
                beneficiaries who are identified as having high 
                prescription drug costs and medical costs, such 
                as individuals with behavioral disorders or 
                multiple chronic diseases who are taking 
                multiple medications.

           *       *       *       *       *       *       *

                              DEFINITIONS

  Sec. 1905. For purposes of this title--
  (a) The term ``medical assistance'' means payment of part or 
all of the cost of the following care and services or the care 
and services themselves, or both (if provided in or after the 
third month before the month in which the recipient makes 
application for assistance or, in the case of medicare cost-
sharing with respect to a qualified medicare beneficiary 
described in subsection (p)(1), if provided after the month in 
which the individual becomes such a beneficiary) for 
individuals, and, with respect to physicians' or dentists' 
services, at the option of the State, to individuals (other 
than individuals with respect to whom there is being paid, or 
who are eligible, or would be eligible if they were not in a 
medical institution, to have paid with respect to them a State 
supplementary payment and are eligible for medical assistance 
equal in amount, duration, and scope to the medical assistance 
made available to individuals described in section 
1902(a)(10)(A)) not receiving aid or assistance under any plan 
of the State approved under title I, X, XIV, or XVI, or part A 
of title IV, and with respect to whom supplemental security 
income benefits are not being paid under title XVI, who are--
          (i) under the age of 21, or, at the option of the 
        State, under the age of 20, 19, or 18 as the State may 
        choose,
          (ii) relatives specified in section 406(b)(1) with 
        whom a child is living if such child is (or would, if 
        needy, be) a dependent child under part A of title IV,
          (iii) 65 years of age or older,
          (iv) blind, with respect to States eligible to 
        participate in the State plan program established under 
        title XVI,
          (v) 18 years of age or older and permanently and 
        totally disabled, with respect to States eligible to 
        participate in the State plan program established under 
        title XVI,
          (vi) persons essential (as described in the second 
        sentence of this subsection) to individuals receiving 
        aid or assistance under State plans approved under 
        title I, X, XIV, or XVI,
          (vii) blind or disabled as defined in section 1614, 
        with respect to States not eligible to participate in 
        the State plan program established under title XVI,
          (viii) pregnant women,
          (ix) individuals provided extended benefits under 
        section 1925,
          (x) individuals described in section 1902(u)(1),
          (xi) individuals described in section 1902(z)(1),
          (xii) employed individuals with a medically improved 
        disability (as defined in subsection (v)),
          (xiii) individuals described in section 1902(aa),
          (xiv) individuals described in section 
        1902(a)(10)(A)(i)(VIII) or 1902(a)(10)(A)(i)(IX),
          (xv) individuals described in section 
        1902(a)(10)(A)(ii)(XX),
                          (xvi) individuals described in 
                        section 1902(ii), or
          (xvii) individuals who are eligible for home and 
        community-based services under needs-based criteria 
        established under paragraph (1)(A) of section 1915(i), 
        or who are eligible for home and community-based 
        services under paragraph (6) of such section, and who 
        will receive home and community-based services pursuant 
        to a State plan amendment under such subsection,
but whose income and resources are insufficient to meet all of 
such cost--
          (1) inpatient hospital services (other than services 
        in an institution for mental diseases);
          (2)(A) outpatient hospital services, (B) consistent 
        with State law permitting such services, rural health 
        clinic services (as defined in subsection (l)(1)) and 
        any other ambulatory services which are offered by a 
        rural health clinic (as defined in subsection (l)(1)) 
        and which are otherwise included in the plan, and (C) 
        Federally-qualified health center services (as defined 
        in subsection (l)(2)) and any other ambulatory services 
        offered by a Federally-qualified health center and 
        which are otherwise included in the plan;
          (3) other laboratory and X-ray services;
          (4)(A) nursing facility services (other than services 
        in an institution for mental diseases) for individuals 
        21 years of age or older; (B) early and periodic 
        screening, diagnostic, and treatment services (as 
        defined in subsection (r)) for individuals who are 
        eligible under the plan and are under the age of 21; 
        (C) family planning services and supplies furnished 
        (directly or under arrangements with others) to 
        individuals of child-bearing age (including minors who 
        can be considered to be sexually active) who are 
        eligible under the State plan and who desire such 
        services and supplies; and (D) counseling and 
        pharmacotherapy for cessation of tobacco use by 
        pregnant women (as defined in subsection (bb));
          (5)(A) physicians' services furnished by a physician 
        (as defined in section 1861(r)(1)), whether furnished 
        in the office, the patient's home, a hospital, or a 
        nursing facility, or elsewhere, and (B) medical and 
        surgical services furnished by a dentist (described in 
        section 1861(r)(2)) to the extent such services may be 
        performed under State law either by a doctor of 
        medicine or by a doctor of dental surgery or dental 
        medicine and would be described in clause (A) if 
        furnished by a physician (as defined in section 
        1861(r)(1));
          (6) medical care, or any other type of remedial care 
        recognized under State law, furnished by licensed 
        practitioners within the scope of their practice as 
        defined by State law;
          (7) home health care services;
          (8) private duty nursing services;
          (9) clinic services furnished by or under the 
        direction of a physician, without regard to whether the 
        clinic itself is administered by a physician, including 
        such services furnished outside the clinic by clinic 
        personnel to an eligible individual who does not reside 
        in a permanent dwelling or does not have a fixed home 
        or mailing address;
          (10) dental services;
          (11) physical therapy and related services;
          (12) prescribed drugs, dentures, and prosthetic 
        devices; and eyeglasses prescribed by a physician 
        skilled in diseases of the eye or by an optometrist, 
        whichever the individual may select;
          (13) other diagnostic, screening, preventive, and 
        rehabilitative services, including--
                  (A) any clinical preventive services that are 
                assigned a grade of A or B by the United States 
                Preventive Services Task Force;
                  (B) with respect to an adult individual, 
                approved vaccines recommended by the Advisory 
                Committee on Immunization Practices (an 
                advisory committee established by the 
                Secretary, acting through the Director of the 
                Centers for Disease Control and Prevention) and 
                their administration; and
                  (C) any medical or remedial services 
                (provided in a facility, a home, or other 
                setting) recommended by a physician or other 
                licensed practitioner of the healing arts 
                within the scope of their practice under State 
                law, for the maximum reduction of physical or 
                mental disability and restoration of an 
                individual to the best possible functional 
                level;
          (14) inpatient hospital services and nursing facility 
        services for individuals 65 years of age or over in an 
        institution for mental diseases;
          (15) services in an intermediate care facility for 
        the mentally retarded (other than in an institution for 
        mental diseases) for individuals who are determined, in 
        accordance with section 1902(a)(31), to be in need of 
        such care;
          (16) effective January 1, 1973, inpatient psychiatric 
        hospital services for individuals under age 21, as 
        defined in subsection (h);
          (17) services furnished by a nurse-midwife (as 
        defined in section 1861(gg)) which the nurse-midwife is 
        legally authorized to perform under State law (or the 
        State regulatory mechanism provided by State law), 
        whether or not the nurse-midwife is under the 
        supervision of, or associated with, a physician or 
        other health care provider, and without regard to 
        whether or not the services are performed in the area 
        of management of the care of mothers and babies 
        throughout the maternity cycle;
          (18) hospice care (as defined in subsection (o));
          (19) case management services (as defined in section 
        1915(g)(2)) and TB-related services described in 
        section 1902(z)(2)(F);
          (20) respiratory care services (as defined in section 
        1902(e)(9)(C));
          (21) services furnished by a certified pediatric 
        nurse practitioner or certified family nurse 
        practitioner (as defined by the Secretary) which the 
        certified pediatric nurse practitioner or certified 
        family nurse practitioner is legally authorized to 
        perform under State law (or the State regulatory 
        mechanism provided by State law), whether or not the 
        certified pediatric nurse practitioner or certified 
        family nurse practitioner is under the supervision of, 
        or associated with, a physician or other health care 
        provider;
          (22) home and community care (to the extent allowed 
        and as defined in section 1929) for functionally 
        disabled elderly individuals;
          (23) community supported living arrangements services 
        (to the extent allowed and as defined in section 1930);
          (24) personal care services furnished to an 
        individual who is not an inpatient or resident of a 
        hospital, nursing facility, intermediate care facility 
        for the mentally retarded, or institution for mental 
        disease that are (A) authorized for the individual by a 
        physician in accordance with a plan of treatment or (at 
        the option of the State) otherwise authorized for the 
        individual in accordance with a service plan approved 
        by the State, (B) provided by an individual who is 
        qualified to provide such services and who is not a 
        member of the individual's family, and (C) furnished in 
        a home or other location;
          (25) primary care case management services (as 
        defined in subsection (t));
          (26) services furnished under a PACE program under 
        section 1934 to PACE program eligible individuals 
        enrolled under the program under such section;
          (27) subject to subsection (x), primary and secondary 
        medical strategies and treatment and services for 
        individuals who have Sickle Cell Disease;
          (28) freestanding birth center services (as defined 
        in subsection (l)(3)(A)) and other ambulatory services 
        that are offered by a freestanding birth center (as 
        defined in subsection (l)(3)(B)) and that are otherwise 
        included in the plan; and
          (29) any other medical care, and any other type of 
        remedial care recognized under State law, specified by 
        the Secretary,
except as otherwise provided in paragraph (16), such term does 
not include--
          (A) any such payments with respect to care or 
        services for any individual who is an inmate of a 
        public institution (except as a patient in a medical 
        institution); or
          (B) any such payments with respect to care or 
        services for any individual who has not attained 65 
        years of age and who is a patient in an institution for 
        mental diseases.
For purposes of clause (vi) of the preceding sentence, a person 
shall be considered essential to another individual if such 
person is the spouse of and is living with such individual, the 
needs of such person are taken into account in determining the 
amount of aid or assistance furnished to such individual (under 
a State plan approved under title I, X, XIV, or XVI), and such 
person is determined, under such a State plan, to be essential 
to the well-being of such individual. The payment described in 
the first sentence may include expenditures for medicare cost-
sharing and for premiums under part B of title XVIII for 
individuals who are eligible for medical assistance under the 
plan and (A) are receiving aid or assistance under any plan of 
the State approved under title I, X, XIV, or XVI, or part A of 
title IV, or with respect to whom supplemental security income 
benefits are being paid under title XVI, or (B) with respect to 
whom there is being paid a State supplementary payment and are 
eligible for medical assistance equal in amount, duration, and 
scope to the medical assistance made available to individuals 
described in section 1902(a)(10)(A), and, except in the case of 
individuals 65 years of age or older and disabled individuals 
entitled to health insurance benefits under title XVIII who are 
not enrolled under part B of title XVIII, other insurance 
premiums for medical or any other type of remedial care or the 
cost thereof. No service (including counseling) shall be 
excluded from the definition of ``medical assistance'' solely 
because it is provided as a treatment service for alcoholism or 
drug dependency.
  (b) Subject to subsections (y), (z), and (aa) and section 
1933(d), the term ``Federal medical assistance percentage'' for 
any State shall be 100 per centum less the State percentage; 
and the State percentage shall be that percentage which bears 
the same ratio to 45 per centum as the square of the per capita 
income of such State bears to the square of the per capita 
income of the continental United States (including Alaska) and 
Hawaii; except that (1) the Federal medical assistance 
percentage shall in no case be less than 50 per centum or more 
than 83 per centum, (2) the Federal medical assistance 
percentage for Puerto Rico, the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa shall be 55 
percent, (3) for purposes of this title and title XXI, the 
Federal medical assistance percentage for the District of 
Columbia shall be 70 percent, (4) the Federal medical 
assistance percentage shall be equal to the enhanced FMAP 
described in section 2105(b) with respect to medical assistance 
provided to individuals who are eligible for such assistance 
only on the basis of section 1902(a)(10)(A)(ii)(XVIII), and (5) 
in the case of a State that provides medical assistance for 
services and vaccines described in subparagraphs (A) and (B) of 
subsection (a)(13), and prohibits cost-sharing for such 
services and vaccines, the Federal medical assistance 
percentage, as determined under this subsection and subsection 
(y) (without regard to paragraph (1)(C) of such subsection), 
shall be increased by 1 percentage point with respect to 
medical assistance for such services and vaccines and for items 
and services described in subsection (a)(4)(D). The Federal 
medical assistance percentage for any State shall be determined 
and promulgated in accordance with the provisions of section 
1101(a)(8)(B). Notwithstanding the first sentence of this 
section, the Federal medical assistance percentage shall be 100 
per centum with respect to amounts expended as medical 
assistance for services which are received through an Indian 
Health Service facility whether operated by the Indian Health 
Service or by an Indian tribe or tribal organization (as 
defined in section 4 of the Indian Health Care Improvement 
Act). Notwithstanding the first sentence of this subsection, in 
the case of a State plan that meets the condition described in 
subsection (u)(1), with respect to expenditures (other than 
expenditures under section 1923) described in subsection 
(u)(2)(A) or subsection (u)(3) for the State for a fiscal year, 
and that do not exceed the amount of the State's available 
allotment under section 2104, the Federal medical assistance 
percentage is equal to the enhanced FMAP described in section 
2105(b).
  (c) For definition of the term ``nursing facility'', see 
section 1919(a).
  (d) The term ``intermediate care facility for the mentally 
retarded'' means an institution (or distinct part thereof) for 
the mentally retarded or persons with related conditions if--
          (1) the primary purpose of such institution (or 
        distinct part thereof) is to provide health or 
        rehabilitative services for mentally retarded 
        individuals and the institution meets such standards as 
        may be prescribed by the Secretary;
          (2) the mentally retarded individual with respect to 
        whom a request for payment is made under a plan 
        approved under this title is receiving active treatment 
        under such a program; and
          (3) in the case of a public institution, the State or 
        political subdivision responsible for the operation of 
        such institution has agreed that the non-Federal 
        expenditures in any calendar quarter prior to January 
        1, 1975, with respect to services furnished to patients 
        in such institution (or distinct part thereof) in the 
        State will not, because of payments made under this 
        title, be reduced below the average amount expended for 
        such services in such institution in the four quarters 
        immediately preceding the quarter in which the State in 
        which such institution is located elected to make such 
        services available under its plan approved under this 
        title.
  (e) In the case of any State the State plan of which (as 
approved under this title)--
          (1) does not provide for the payment of services 
        (other than services covered under section 1902(a)(12)) 
        provided by an optometrist; but
          (2) at a prior period did provide for the payment of 
        services referred to in paragraph (1);
the term ``physicians' services'' (as used in subsection 
(a)(5)) shall include services of the type which an optometrist 
is legally authorized to perform where the State plan 
specifically provides that the term ``physicians' services'', 
as employed in such plan, includes services of the type which 
an optometrist is legally authorized to perform, and shall be 
reimbursed whether furnished by a physician or an optometrist.
  (f) For purposes of this title, the term ``nursing facility 
services'' means services which are or were required to be 
given an individual who needs or needed on a daily basis 
nursing care (provided directly by or requiring the supervision 
of nursing personnel) or other rehabilitation services which as 
a practical matter can only be provided in a nursing facility 
on an inpatient basis.
  (g) If the State plan includes provision of chiropractors' 
services, such services include only--
          (1) services provided by a chiropractor (A) who is 
        licensed as such by the State and (B) who meets uniform 
        minimum standards promulgated by the Secretary under 
        section 1861(r)(5); and
          (2) services which consist of treatment by means of 
        manual manipulation of the spine which the chiropractor 
        is legally authorized to perform by the State.
  (h)(1) For purposes of paragraph (16) of subsection (a), the 
term ``inpatient psychiatric hospital services for individuals 
under age 21'' includes only--
          (A) inpatient services which are provided in an 
        institution (or distinct part thereof) which is a 
        psychiatric hospital as defined in section 1861(f) or 
        in another inpatient setting that the Secretary has 
        specified in regulations;
          (B) inpatient services which, in the case of any 
        individual (i) involve active treatment which meets 
        such standards as may be prescribed in regulations by 
        the Secretary, and (ii) a team, consisting of 
        physicians and other personnel qualified to make 
        determinations with respect to mental health conditions 
        and the treatment thereof, has determined are necessary 
        on an inpatient basis and can reasonably be expected to 
        improve the condition, by reason of which such services 
        are necessary, to the extent that eventually such 
        services will no longer be necessary; and
          (C) inpatient services which, in the case of any 
        individual, are provided prior to (i) the date such 
        individual attains age 21, or (ii) in the case of an 
        individual who was receiving such services in the 
        period immediately preceding the date on which he 
        attained age 21, (I) the date such individual no longer 
        requires such services, or (II) if earlier, the date 
        such individual attains age 22;
  (2) Such term does not include services provided during any 
calendar quarter under the State plan of any State if the total 
amount of the funds expended, during such quarter, by the State 
(and the political subdivisions thereof) from non-Federal funds 
for inpatient services included under paragraph (1), and for 
active psychiatric care and treatment provided on an outpatient 
basis for eligible mentally ill children, is less than the 
average quarterly amount of the funds expended, during the 4-
quarter period ending December 31, 1971, by the State (and the 
political subdivisions thereof) from non-Federal funds for such 
services.
  (i) The term ``institution for mental diseases'' means a 
hospital, nursing facility, or other institution of more than 
16 beds, that is primarily engaged in providing diagnosis, 
treatment, or care of persons with mental diseases, including 
medical attention, nursing care, and related services.
  (j) The term ``State supplementary payment'' means any cash 
payment made by a State on a regular basis to an individual who 
is receiving supplemental security income benefits under title 
XVI or who would but for his income be eligible to receive such 
benefits, as assistance based on need in supplementation of 
such benefits (as determined by the Commissioner of Social 
Security), but only to the extent that such payments are made 
with respect to an individual with respect to whom supplemental 
security income benefits are payable under title XVI, or would 
but for his income be payable under that title.
  (k) Increased supplemental security income benefits payable 
pursuant to section 211 of Public Law 93-66 shall not be 
considered supplemental security income benefits payable under 
title XVI.
  (l)(1) The terms ``rural health clinic services'' and ``rural 
health clinic'' have the meanings given such terms in section 
1861(aa), except that (A) clause (ii) of section 1861(aa)(2) 
shall not apply to such terms, and (B) the physician 
arrangement required under section 1861(aa)(2)(B) shall only 
apply with respect to rural health clinic services and, with 
respect to other ambulatory care services, the physician 
arrangement required shall be only such as may be required 
under the State plan for those services.
  (2)(A) The term ``Federally-qualified health center 
services'' means services of the type described in 
subparagraphs (A) through (C) of section 1861(aa)(1) when 
furnished to an individual as an patient of a Federally-
qualified health center and, for this purpose, any reference to 
a rural health clinic or a physician described in section 
1861(aa)(2)(B) is deemed a reference to a Federally-qualified 
health center or a physician at the center, respectively.
  (B) The term ``Federally-qualified health center'' means an 
entity which--
          (i) is receiving a grant under section 330 of the 
        Public Health Service Act,
          (ii)(I) is receiving funding from such a grant under 
        a contract with the recipient of such a grant, and
          (II) meets the requirements to receive a grant under 
        section 330 of such Act,
          (iii) based on the recommendation of the Health 
        Resources and Services Administration within the Public 
        Health Service, is determined by the Secretary to meet 
        the requirements for receiving such a grant, including 
        requirements of the Secretary that an entity may not be 
        owned, controlled, or operated by another entity, or
          (iv) was treated by the Secretary, for purposes of 
        part B of title XVIII, as a comprehensive Federally 
        funded health center as of January 1, 1990;
and includes an outpatient health program or facility operated 
by a tribe or tribal organization under the Indian Self-
Determination Act (Public Law 93-638) or by an urban Indian 
organization receiving funds under title V of the Indian Health 
Care Improvement Act for the provision of primary health 
services. In applying clause (ii), the Secretary may waive any 
requirement referred to in such clause for up to 2 years for 
good cause shown.
  (3)(A) The term ``freestanding birth center services'' means 
services furnished to an individual at a freestanding birth 
center (as defined in subparagraph (B)) at such center.
  (B) The term ``freestanding birth center'' means a health 
facility--
          (i) that is not a hospital;
          (ii) where childbirth is planned to occur away from 
        the pregnant woman's residence;
          (iii) that is licensed or otherwise approved by the 
        State to provide prenatal labor and delivery or 
        postpartum care and other ambulatory services that are 
        included in the plan; and
          (iv) that complies with such other requirements 
        relating to the health and safety of individuals 
        furnished services by the facility as the State shall 
        establish.
  (C) A State shall provide separate payments to providers 
administering prenatal labor and delivery or postpartum care in 
a freestanding birth center (as defined in subparagraph (B)), 
such as nurse midwives and other providers of services such as 
birth attendants recognized under State law, as determined 
appropriate by the Secretary. For purposes of the preceding 
sentence, the term ``birth attendant'' means an individual who 
is recognized or registered by the State involved to provide 
health care at childbirth and who provides such care within the 
scope of practice under which the individual is legally 
authorized to perform such care under State law (or the State 
regulatory mechanism provided by State law), regardless of 
whether the individual is under the supervision of, or 
associated with, a physician or other health care provider. 
Nothing in this subparagraph shall be construed as changing 
State law requirements applicable to a birth attendant.
  (m)(1) Subject to paragraph (2), the term ``qualified family 
member'' means an individual (other than a qualified pregnant 
woman or child, as defined in subsection (n)) who is a member 
of a family that would be receiving aid under the State plan 
under part A of title IV pursuant to section 407 if the State 
had not exercised the option under section 407(b)(2)(B)(i).
  (2) No individual shall be a qualified family member for any 
period after September 30, 1998.
  (n) The term ``qualified pregnant woman or child'' means--
          (1) a pregnant woman who--
                  (A) would be eligible for aid to families 
                with dependent children under part A of title 
                IV (or would be eligible for such aid if 
                coverage under the State plan under part A of 
                title IV included aid to families with 
                dependent children of unemployed parents 
                pursuant to section 407) if her child had been 
                born and was living with her in the month such 
                aid would be paid, and such pregnancy has been 
                medically verified;
                  (B) is a member of a family which would be 
                eligible for aid under the State plan under 
                part A of title IV pursuant to section 407 if 
                the plan required the payment of aid pursuant 
                to such section; or
                  (C) otherwise meets the income and resources 
                requirements of a State plan under part A of 
                title IV; and
          (2) a child who has not attained the age of 19, who 
        was born after September 30, 1983 (or such earlier date 
        as the State may designate), and who meets the income 
        and resources requirements of the State plan under part 
        A of title IV.
  (o)(1)(A) Subject to subparagraphs (B) and (C), the term 
``hospice care'' means the care described in section 
1861(dd)(1) furnished by a hospice program (as defined in 
section 1861(dd)(2)) to a terminally ill individual who has 
voluntarily elected (in accordance with paragraph (2)) to have 
payment made for hospice care instead of having payment made 
for certain benefits described in section 1812(d)(2)(A) and for 
which payment may otherwise be made under title XVIII and 
intermediate care facility services under the plan. For 
purposes of such election, hospice care may be provided to an 
individual while such individual is a resident of a skilled 
nursing facility or intermediate care facility, but the only 
payment made under the State plan shall be for the hospice 
care.
  (B) For purposes of this title, with respect to the 
definition of hospice program under section 1861(dd)(2), the 
Secretary may allow an agency or organization to make the 
assurance under subparagraph (A)(iii) of such section without 
taking into account any individual who is afflicted with 
acquired immune deficiency syndrome (AIDS).
  (C) A voluntary election to have payment made for hospice 
care for a child (as defined by the State) shall not constitute 
a waiver of any rights of the child to be provided with, or to 
have payment made under this title for, services that are 
related to the treatment of the child's condition for which a 
diagnosis of terminal illness has been made.
  (2) An individual's voluntary election under this subsection 
--
          (A) shall be made in accordance with procedures that 
        are established by the State and that are consistent 
        with the procedures established under section 
        1812(d)(2);
          (B) shall be for such a period or periods (which need 
        not be the same periods described in section 
        1812(d)(1)) as the State may establish; and
          (C) may be revoked at any time without a showing of 
        cause and may be modified so as to change the hospice 
        program with respect to which a previous election was 
        made.
  (3) In the case of an individual--
          (A) who is residing in a nursing facility or 
        intermediate care facility for the mentally retarded 
        and is receiving medical assistance for services in 
        such facility under the plan,
          (B) who is entitled to benefits under part A of title 
        XVIII and has elected, under section 1812(d), to 
        receive hospice care under such part, and
          (C) with respect to whom the hospice program under 
        such title and the nursing facility or intermediate 
        care facility for the mentally retarded have entered 
        into a written agreement under which the program takes 
        full responsibility for the professional management of 
        the individual's hospice care and the facility agrees 
        to provide room and board to the individual,
instead of any payment otherwise made under the plan with 
respect to the facility's services, the State shall provide for 
payment to the hospice program of an amount equal to the 
additional amount determined in section 1902(a)(13)(B) and, if 
the individual is an individual described in section 
1902(a)(10)(A), shall provide for payment of any coinsurance 
amounts imposed under section 1813(a)(4).
  (p)(1) The term ``qualified medicare beneficiary'' means an 
individual--
          (A) who is entitled to hospital insurance benefits 
        under part A of title XVIII (including an individual 
        entitled to such benefits pursuant to an enrollment 
        under section 1818, but not including an individual 
        entitled to such benefits only pursuant to an 
        enrollment under section 1818A),
          (B) whose income (as determined under section 1612 
        for purposes of the supplemental security income 
        program, except as provided in paragraph (2)(D)) does 
        not exceed an income level established by the State 
        consistent with paragraph (2), and
          (C) whose resources (as determined under section 1613 
        for purposes of the supplemental security income 
        program) do not exceed twice the maximum amount of 
        resources that an individual may have and obtain 
        benefits under that program or, effective beginning 
        with January 1, 2010, whose resources (as so 
        determined) do not exceed the maximum resource level 
        applied for the year under subparagraph (D) of section 
        1860D-14(a)(3) (determined without regard to the life 
        insurance policy exclusion provided under subparagraph 
        (G) of such section) applicable to an individual or to 
        the individual and the individual's spouse (as the case 
        may be).
  (2)(A) The income level established under paragraph (1)(B) 
shall be at least the percent provided under subparagraph (B) 
(but not more than 100 percent) of the official poverty line 
(as defined by the Office of Management and Budget, and revised 
annually in accordance with section 673(2) of the Omnibus 
Budget Reconciliation Act of 1981) applicable to a family of 
the size involved.
  (B) Except as provided in subparagraph (C), the percent 
provided under this clause, with respect to eligibility for 
medical assistance on or after--
          (i) January 1, 1989, is 85 percent,
          (ii) January 1, 1990, is 90 percent, and
          (iii) January 1, 1991, is 100 percent.
  (C) In the case of a State which has elected treatment under 
section 1902(f) and which, as of January 1, 1987, used an 
income standard for individuals age 65 or older which was more 
restrictive than the income standard established under the 
supplemental security income program under title XVI, the 
percent provided under subparagraph (B), with respect to 
eligibility for medical assistance on or after--
          (i) January 1, 1989, is 80 percent,
          (ii) January 1, 1990, is 85 percent,
          (iii) January 1, 1991, is 95 percent, and
          (iv) January 1, 1992, is 100 percent.
  (D)(i) In determining under this subsection the income of an 
individual who is entitled to monthly insurance benefits under 
title II for a transition month (as defined in clause (ii)) in 
a year, such income shall not include any amounts attributable 
to an increase in the level of monthly insurance benefits 
payable under such title which have occurred pursuant to 
section 215(i) for benefits payable for months beginning with 
December of the previous year.
  (ii) For purposes of clause (i), the term ``transition 
month'' means each month in a year through the month following 
the month in which the annual revision of the official poverty 
line, referred to in subparagraph (A), is published.
  (3) The term ``medicare cost-sharing'' means (subject to 
section 1902(n)(2)) the following costs incurred with respect 
to a qualified medicare beneficiary, without regard to whether 
the costs incurred were for items and services for which 
medical assistance is otherwise available under the plan:
          (A)(i) premiums under section 1818 or 1818A, and
          (ii) premiums under section 1839,
          (B) Coinsurance under title XVIII (including 
        coinsurance described in section 1813).
          (C) Deductibles established under title XVIII 
        (including those described in section 1813 and section 
        1833(b)).
          (D) The difference between the amount that is paid 
        under section 1833(a) and the amount that would be paid 
        under such section if any reference to ``80 percent'' 
        therein were deemed a reference to ``100 percent''.
Such term also may include, at the option of a State, premiums 
for enrollment of a qualified medicare beneficiary with an 
eligible organization under section 1876.
  (4) Notwithstanding any other provision of this title, in the 
case of a State (other than the 50 States and the District of 
Columbia)--
          (A) the requirement stated in section 1902(a)(10)(E) 
        shall be optional, and
          (B) for purposes of paragraph (2), the State may 
        substitute for the percent provided under subparagraph 
        (B) of such paragraph or 1902(a)(10)(E)(iii) any 
        percent.
In the case of any State which is providing medical assistance 
to its residents under a waiver granted under section 1115, the 
Secretary shall require the State to meet the requirement of 
section 1902(a)(10)(E) in the same manner as the State would be 
required to meet such requirement if the State had in effect a 
plan approved under this title.
  (5)(A) The Secretary shall develop and distribute to States a 
simplified application form for use by individuals (including 
both qualified medicare beneficiaries and specified low-income 
medicare beneficiaries) in applying for medical assistance for 
medicare cost-sharing under this title in the States which 
elect to use such form. Such form shall be easily readable by 
applicants and uniform nationally. The Secretary shall provide 
for the translation of such application form into at least the 
10 languages (other than English) that are most often used by 
individuals applying for hospital insurance benefits under 
section 226 or 226A and shall make the translated forms 
available to the States and to the Commissioner of Social 
Security.
  (B) In developing such form, the Secretary shall consult with 
beneficiary groups and the States.
  (6) For provisions relating to outreach efforts to increase 
awareness of the availability of medicare cost-sharing, see 
section 1144.
  (q) The term ``qualified severely impaired individual'' means 
an individual under age 65--
          (1) who for the month preceding the first month to 
        which this subsection applies to such individual--
                  (A) received (i) a payment of supplemental 
                security income benefits under section 1611(b) 
                on the basis of blindness or disability, (ii) a 
                supplementary payment under section 1616 of 
                this Act or under section 212 of Public Law 93-
                66 on such basis, (iii) a payment of monthly 
                benefits under section 1619(a), or (iv) a 
                supplementary payment under section 1616(c)(3), 
                and
                  (B) was eligible for medical assistance under 
                the State plan approved under this title; and
          (2) with respect to whom the Commissioner of Social 
        Security determines that--
                  (A) the individual continues to be blind or 
                continues to have the disabling physical or 
                mental impairment on the basis of which he was 
                found to be under a disability and, except for 
                his earnings, continues to meet all non-
                disability-related requirements for eligibility 
                for benefits under title XVI,
                  (B) the income of such individual would not, 
                except for his earnings, be equal to or in 
                excess of the amount which would cause him to 
                be ineligible for payments under section 
                1611(b) (if he were otherwise eligible for such 
                payments),
                  (C) the lack of eligibility for benefits 
                under this title would seriously inhibit his 
                ability to continue or obtain employment, and
                  (D) the individual's earnings are not 
                sufficient to allow him to provide for himself 
                a reasonable equivalent of the benefits under 
                title XVI (including any federally administered 
                State supplementary payments), this title, and 
                publicly funded attendant care services 
                (including personal care assistance) that would 
                be available to him in the absence of such 
                earnings.
        In the case of an individual who is eligible for 
        medical assistance pursuant to section 1619(b) in June, 
        1987, the individual shall be a qualified severely 
        impaired individual for so long as such individual 
        meets the requirements of paragraph (2).
  (r) The term ``early and periodic screening, diagnostic, and 
treatment services'' means the following items and services:
          (1) Screening services--
                  (A) which are provided--
                          (i) at intervals which meet 
                        reasonable standards of medical and 
                        dental practice, as determined by the 
                        State after consultation with 
                        recognized medical and dental 
                        organizations involved in child health 
                        care and, with respect to immunizations 
                        under subparagraph (B)(iii), in 
                        accordance with the schedule referred 
                        to in section 1928(c)(2)(B)(i) for 
                        pediatric vaccines, and
                          (ii) at such other intervals, 
                        indicated as medically necessary, to 
                        determine the existence of certain 
                        physical or mental illnesses or 
                        conditions; and
                  (B) which shall at a minimum include--
                          (i) a comprehensive health and 
                        developmental history (including 
                        assessment of both physical and mental 
                        health development),
                          (ii) a comprehensive unclothed 
                        physical exam,
                          (iii) appropriate immunizations 
                        (according to the schedule referred to 
                        in section 1928(c)(2)(B)(i) for 
                        pediatric vaccines) according to age 
                        and health history,
                          (iv) laboratory tests (including lead 
                        blood level assessment appropriate for 
                        age and risk factors), and
                          (v) health education (including 
                        anticipatory guidance).
          (2) Vision services--
                  (A) which are provided--
                          (i) at intervals which meet 
                        reasonable standards of medical 
                        practice, as determined by the State 
                        after consultation with recognized 
                        medical organizations involved in child 
                        health care, and
                          (ii) at such other intervals, 
                        indicated as medically necessary, to 
                        determine the existence of a suspected 
                        illness or condition; and
                  (B) which shall at a minimum include 
                diagnosis and treatment for defects in vision, 
                including eyeglasses.
          (3) Dental services--
                  (A) which are provided--
                          (i) at intervals which meet 
                        reasonable standards of dental 
                        practice, as determined by the State 
                        after consultation with recognized 
                        dental organizations involved in child 
                        health care, and
                          (ii) at such other intervals, 
                        indicated as medically necessary, to 
                        determine the existence of a suspected 
                        illness or condition; and
                  (B) which shall at a minimum include relief 
                of pain and infections, restoration of teeth, 
                and maintenance of dental health.
          (4) Hearing services--
                  (A) which are provided--
                          (i) at intervals which meet 
                        reasonable standards of medical 
                        practice, as determined by the State 
                        after consultation with recognized 
                        medical organizations involved in child 
                        health care, and
                          (ii) at such other intervals, 
                        indicated as medically necessary, to 
                        determine the existence of a suspected 
                        illness or condition; and
                  (B) which shall at a minimum include 
                diagnosis and treatment for defects in hearing, 
                including hearing aids.
          (5) Such other necessary health care, diagnostic 
        services, treatment, and other measures described in 
        section 1905(a) to correct or ameliorate defects and 
        physical and mental illnesses and conditions discovered 
        by the screening services, whether or not such services 
        are covered under the State plan.
Nothing in this title shall be construed as limiting providers 
of early and periodic screening, diagnostic, and treatment 
services to providers who are qualified to provide all of the 
items and services described in the previous sentence or as 
preventing a provider that is qualified under the plan to 
furnish one or more (but not all) of such items or services 
from being qualified to provide such items and services as part 
of early and periodic screening, diagnostic, and treatment 
services. The Secretary shall, not later than July 1, 1990, and 
every 12 months thereafter, develop and set annual 
participation goals for each State for participation of 
individuals who are covered under the State plan under this 
title in early and periodic screening, diagnostic, and 
treatment services.
  (s) The term ``qualified disabled and working individual'' 
means an individual--
          (1) who is entitled to enroll for hospital insurance 
        benefits under part A of title XVIII under section 
        1818A (as added by 6012 of the Omnibus Budget 
        Reconciliation Act of 1989);
          (2) whose income (as determined under section 1612 
        for purposes of the supplemental security income 
        program) does not exceed 200 percent of the official 
        poverty line (as defined by the Office of Management 
        and Budget and revised annually in accordance with 
        section 673(2) of the Omnibus Budget Reconciliation Act 
        of 1981) applicable to a family of the size involved;
          (3) whose resources (as determined under section 1613 
        for purposes of the supplemental security income 
        program) do not exceed twice the maximum amount of 
        resources that an individual or a couple (in the case 
        of an individual with a spouse) may have and obtain 
        benefits for supplemental security income benefits 
        under title XVI; and
          (4) who is not otherwise eligible for medical 
        assistance under this title.
  (t)(1) The term ``primary care case management services'' 
means case-management related services (including locating, 
coordinating, and monitoring of health care services) provided 
by a primary care case manager under a primary care case 
management contract.
  (2) The term ``primary care case manager'' means any of the 
following that provides services of the type described in 
paragraph (1) under a contract referred to in such paragraph:
          (A) A physician, a physician group practice, or an 
        entity employing or having other arrangements with 
        physicians to provide such services.
          (B) At State option--
                  (i) a nurse practitioner (as described in 
                section 1905(a)(21));
                  (ii) a certified nurse-midwife (as defined in 
                section 1861(gg)); or
                  (iii) a physician assistant (as defined in 
                section 1861(aa)(5)).
  (3) The term ``primary care case management contract'' means 
a contract between a primary care case manager and a State 
under which the manager undertakes to locate, coordinate, and 
monitor covered primary care (and such other covered services 
as may be specified under the contract) to all individuals 
enrolled with the manager, and which--
          (A) provides for reasonable and adequate hours of 
        operation, including 24-hour availability of 
        information, referral, and treatment with respect to 
        medical emergencies;
          (B) restricts enrollment to individuals residing 
        sufficiently near a service delivery site of the 
        manager to be able to reach that site within a 
        reasonable time using available and affordable modes of 
        transportation;
          (C) provides for arrangements with, or referrals to, 
        sufficient numbers of physicians and other appropriate 
        health care professionals to ensure that services under 
        the contract can be furnished to enrollees promptly and 
        without compromise to quality of care;
          (D) prohibits discrimination on the basis of health 
        status or requirements for health care services in 
        enrollment, disenrollment, or reenrollment of 
        individuals eligible for medical assistance under this 
        title;
          (E) provides for a right for an enrollee to terminate 
        enrollment in accordance with section 1932(a)(4); and
          (F) complies with the other applicable provisions of 
        section 1932.
  (4) For purposes of this subsection, the term ``primary 
care'' includes all health care services customarily provided 
in accordance with State licensure and certification laws and 
regulations, and all laboratory services customarily provided 
by or through, a general practitioner, family medicine 
physician, internal medicine physician, obstetrician/
gynecologist, or pediatrician.
  (u)(1) The conditions described in this paragraph for a State 
plan are as follows:
          (A) The State is complying with the requirement of 
        section 2105(d)(1).
          (B) The plan provides for such reporting of 
        information about expenditures and payments 
        attributable to the operation of this subsection as the 
        Secretary deems necessary in order to carry out the 
        fourth sentence of subsection (b).
  (2)(A) For purposes of subsection (b), the expenditures 
described in this subparagraph are expenditures for medical 
assistance for optional targeted low-income children described 
in subparagraph (B).
  (B) For purposes of this paragraph, the term ``optional 
targeted low-income child'' means a targeted low-income child 
as defined in section 2110(b)(1) (determined without regard to 
that portion of subparagraph (C) of such section concerning 
eligibility for medical assistance under this title) who would 
not qualify for medical assistance under the State plan under 
this title as in effect on March 31, 1997 (but taking into 
account the expansion of age of eligibility effected through 
the operation of section 1902(l)(1)(D)). Such term excludes any 
child eligible for medical assistance only by reason of section 
1902(a)(10)(A)(ii)(XIX).
  (3) For purposes of subsection (b), the expenditures 
described in this paragraph are expenditures for medical 
assistance for children who are born before October 1, 1983, 
and who would be described in section 1902(l)(1)(D) if they had 
been born on or after such date, and who are not eligible for 
such assistance under the State plan under this title based on 
such State plan as in effect as of March 31, 1997.
  (4) The limitations on payment under subsections (f) and (g) 
of section 1108 shall not apply to Federal payments made under 
section 1903(a)(1) based on an enhanced FMAP described in 
section 2105(b).
  (v)(1) The term ``employed individual with a medically 
improved disability'' means an individual who--
          (A) is at least 16, but less than 65, years of age;
          (B) is employed (as defined in paragraph (2));
          (C) ceases to be eligible for medical assistance 
        under section 1902(a)(10)(A)(ii)(XV) because the 
        individual, by reason of medical improvement, is 
        determined at the time of a regularly scheduled 
        continuing disability review to no longer be eligible 
        for benefits under section 223(d) or 1614(a)(3); and
          (D) continues to have a severe medically determinable 
        impairment, as determined under regulations of the 
        Secretary.
  (2) For purposes of paragraph (1), an individual is 
considered to be ``employed'' if the individual--
          (A) is earning at least the applicable minimum wage 
        requirement under section 6 of the Fair Labor Standards 
        Act (29 U.S.C. 206) and working at least 40 hours per 
        month; or
          (B) is engaged in a work effort that meets 
        substantial and reasonable threshold criteria for hours 
        of work, wages, or other measures, as defined by the 
        State and approved by the Secretary.'
  (w)(1) For purposes of this title, the term ``independent 
foster care adolescent'' means an individual--
          (A) who is under 21 years of age;
          (B) who, on the individual's 18th birthday, was in 
        foster care under the responsibility of a State; and
          (C) whose assets, resources, and income do not exceed 
        such levels (if any) as the State may establish 
        consistent with paragraph (2).
  (2) The levels established by a State under paragraph (1)(C) 
may not be less than the corresponding levels applied by the 
State under section 1931(b).
  (3) A State may limit the eligibility of independent foster 
care adolescents under section 1902(a)(10)(A)(ii)(XVII) to 
those individuals with respect to whom foster care maintenance 
payments or independent living services were furnished under a 
program funded under part E of title IV before the date the 
individuals attained 18 years of age.
  (x) For purposes of subsection (a)(27), the strategies, 
treatment, and services described in that subsection include 
the following:
          (1) Chronic blood transfusion (with deferoxamine 
        chelation) to prevent stroke in individuals with Sickle 
        Cell Disease who have been identified as being at high 
        risk for stroke.
          (2) Genetic counseling and testing for individuals 
        with Sickle Cell Disease or the sickle cell trait to 
        allow health care professionals to treat such 
        individuals and to prevent symptoms of Sickle Cell 
        Disease.
          (3) Other treatment and services to prevent 
        individuals who have Sickle Cell Disease and who have 
        had a stroke from having another stroke.
  (y) Increased FMAP for Medical Assistance for Newly Eligible 
Mandatory Individuals.--
          (1) Amount of increase.--Notwithstanding subsection 
        (b), the Federal medical assistance percentage for a 
        State that is one of the 50 States or the District of 
        Columbia, with respect to amounts expended by such 
        State for medical assistance for newly eligible 
        individuals described in subclause (VIII) of section 
        1902(a)(10)(A)(i), shall be equal to--
                  (A) 100 percent for calendar quarters in 
                2014, 2015, and 2016;
                  (B) 95 percent for calendar quarters in 2017;
                  (C) 94 percent for calendar quarters in 2018;
                  (D) 93 percent for calendar quarters in 2019; 
                and
                  (E) 90 percent for calendar quarters in 2020 
                and each year thereafter.
          (2) Definitions.--In this subsection:
                  (A) Newly eligible.--The term ``newly 
                eligible'' means, with respect to an individual 
                described in subclause (VIII) of section 
                1902(a)(10)(A)(i), an individual who is not 
                under 19 years of age (or such higher age as 
                the State may have elected) and who, as of 
                December 1, 2009, is not eligible under the 
                State plan or under a waiver of the plan for 
                full benefits or for benchmark coverage 
                described in subparagraph (A), (B), or (C) of 
                section 1937(b)(1) or benchmark equivalent 
                coverage described in section 1937(b)(2) that 
                has an aggregate actuarial value that is at 
                least actuarially equivalent to benchmark 
                coverage described in subparagraph (A), (B), or 
                (C) of section 1937(b)(1), or is eligible but 
                not enrolled (or is on a waiting list) for such 
                benefits or coverage through a waiver under the 
                plan that has a capped or limited enrollment 
                that is full.
                  (B) Full benefits.--The term ``full 
                benefits'' means, with respect to an 
                individual, medical assistance for all services 
                covered under the State plan under this title 
                that is not less in amount, duration, or scope, 
                or is determined by the Secretary to be 
                substantially equivalent, to the medical 
                assistance available for an individual 
                described in section 1902(a)(10)(A)(i).
  (z) Equitable Support for Certain States.--
          (1)(A) During the period that begins on January 1, 
        2014, and ends on December 31, 2015, notwithstanding 
        subsection (b), the Federal medical assistance 
        percentage otherwise determined under subsection (b) 
        with respect to a fiscal year occurring during that 
        period shall be increased by 2.2 percentage points for 
        any State described in subparagraph (B) for amounts 
        expended for medical assistance for individuals who are 
        not newly eligible (as defined in subsection (y)(2)) 
        individuals described in subclause (VIII) of section 
        1902(a)(10)(A)(i).
          (B) For purposes of subparagraph (A), a State 
        described in this subparagraph is a State that--
                  (i) is an expansion State described in 
                paragraph (3);
                  (ii) the Secretary determines will not 
                receive any payments under this title on the 
                basis of an increased Federal medical 
                assistance percentage under subsection (y) for 
                expenditures for medical assistance for newly 
                eligible individuals (as so defined); and
                  (iii) has not been approved by the Secretary 
                to divert a portion of the DSH allotment for a 
                State to the costs of providing medical 
                assistance or other health benefits coverage 
                under a waiver that is in effect on July 2009.
          (2)(A) For calendar quarters in 2014 and each year 
        thereafter, the Federal medical assistance percentage 
        otherwise determined under subsection (b) for an 
        expansion State described in paragraph (3) with respect 
        to medical assistance for individuals described in 
        section 1902(a)(10)(A)(i)(VIII) who are nonpregnant 
        childless adults with respect to whom the State may 
        require enrollment in benchmark coverage under section 
        1937 shall be equal to the percent specified in 
        subparagraph (B)(i) for such year.
          (B)(i) The percent specified in this subparagraph for 
        a State for a year is equal to the Federal medical 
        assistance percentage (as defined in the first sentence 
        of subsection (b)) for the State increased by a number 
        of percentage points equal to the transition percentage 
        (specified in clause (ii) for the year) of the number 
        of percentage points by which--
                  (I) such Federal medical assistance 
                percentage for the State, is less than
                  (II) the percent specified in subsection 
                (y)(1) for the year.
          (ii) The transition percentage specified in this 
        clause for--
                  (I) 2014 is 50 percent;
                  (II) 2015 is 60 percent;
                  (III) 2016 is 70 percent;
                  (IV) 2017 is 80 percent;
                  (V) 2018 is 90 percent; and
                  (VI) 2019 and each subsequent year is 100 
                percent.
          (3) A State is an expansion State if, on the date of 
        the enactment of the Patient Protection and Affordable 
        Care Act, the State offers health benefits coverage 
        statewide to parents and nonpregnant, childless adults 
        whose income is at least 100 percent of the poverty 
        line, that includes inpatient hospital services, is not 
        dependent on access to employer coverage, employer 
        contribution, or employment and is not limited to 
        premium assistance, hospital-only benefits, a high 
        deductible health plan, or alternative benefits under a 
        demonstration program authorized under section 1938. A 
        State that offers health benefits coverage to only 
        parents or only nonpregnant childless adults described 
        in the preceding sentence shall not be considered to be 
        an expansion State.
  (aa)(1) Notwithstanding subsection (b), beginning January 1, 
2011, the Federal medical assistance percentage for a fiscal 
year for a disaster-recovery FMAP adjustment State shall be 
equal to the following:
          (A) In the case of the first fiscal year (or part of 
        a fiscal year) for which this subsection applies to the 
        State, the State's regular FMAP shall be increased by 
        50 percent of the number of percentage points by which 
        the State's regular FMAP for such fiscal year is less 
        than the Federal medical assistance percentage 
        determined for the State for the preceding fiscal year 
        after the application of only subsection (a) of section 
        5001 of Public Law 111-5 (if applicable to the 
        preceding fiscal year) and without regard to this 
        subsection, subsections (y) and (z), and subsections 
        (b) and (c) of section 5001 of Public Law 111-5.
          (B) In the case of the second or any succeeding 
        fiscal year for which this subsection applies to the 
        State, the State's regular FMAP for such fiscal year 
        shall be increased by 25 percent (or 50 percent in the 
        case of fiscal year 2013) of the number of percentage 
        points by which the State's regular FMAP for such 
        fiscal year is less than the Federal medical assistance 
        percentage received by the State during the preceding 
        fiscal year.
  (2) In this subsection, the term ``disaster-recovery FMAP 
adjustment State'' means a State that is one of the 50 States 
or the District of Columbia, for which, at any time during the 
preceding 7 fiscal years, the President has declared a major 
disaster under section 401 of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act and determined as a result 
of such disaster that every county or parish in the State 
warrant individual and public assistance or public assistance 
from the Federal Government under such Act and for which--
          (A) in the case of the first fiscal year (or part of 
        a fiscal year) for which this subsection applies to the 
        State, the State's regular FMAP for the fiscal year is 
        less than the Federal medical assistance percentage 
        determined for the State for the preceding fiscal year 
        after the application of only subsection (a) of section 
        5001 of Public Law 111-5 (if applicable to the 
        preceding fiscal year) and without regard to this 
        subsection, subsections (y) and (z), and subsections 
        (b) and (c) of section 5001 of Public Law 111-5, by at 
        least 3 percentage points; and
          (B) in the case of the second or any succeeding 
        fiscal year for which this subsection applies to the 
        State, the State's regular FMAP for the fiscal year is 
        less than the Federal medical assistance percentage 
        determined for the State for the preceding fiscal year 
        under this subsection by at least 3 percentage points.
  (3) In this subsection, the term ``regular FMAP'' means, for 
each fiscal year for which this subsection applies to a State, 
the Federal medical assistance percentage that would otherwise 
apply to the State for the fiscal year, as determined under 
subsection (b) and without regard to this subsection, 
subsections (y) and (z), and section 10202 of the Patient 
Protection and Affordable Care Act.
  (4) The Federal medical assistance percentage determined for 
a disaster-recovery FMAP adjustment State under paragraph (1) 
shall apply for purposes of this title (other than with respect 
to disproportionate share hospital payments described in 
section 1923 and payments under this title that are based on 
the enhanced FMAP described in 2105(b)) and shall not apply 
with respect to payments under title IV (other than under part 
E of title IV) or payments under title XXI.
  (bb)(1) For purposes of this title, the term ``counseling and 
pharmacotherapy for cessation of tobacco use by pregnant 
women'' means diagnostic, therapy, and counseling services and 
pharmacotherapy (including the coverage of prescription and 
nonprescription tobacco cessation agents approved by the Food 
and Drug Administration) for cessation of tobacco use by 
pregnant women who use tobacco products or who are being 
treated for tobacco use that is furnished--
          (A) by or under the supervision of a physician; or
          (B) by any other health care professional who--
                  (i) is legally authorized to furnish such 
                services under State law (or the State 
                regulatory mechanism provided by State law) of 
                the State in which the services are furnished; 
                and
                  (ii) is authorized to receive payment for 
                other services under this title or is 
                designated by the Secretary for this purpose.
  (2) Subject to paragraph (3), such term is limited to--
          (A) services recommended with respect to pregnant 
        women in ``Treating Tobacco Use and Dependence: 2008 
        Update: A Clinical Practice Guideline'', published by 
        the Public Health Service in May 2008, or any 
        subsequent modification of such Guideline; and
          (B) such other services that the Secretary recognizes 
        to be effective for cessation of tobacco use by 
        pregnant women.
  (3) Such term shall not include coverage for drugs or 
biologicals that are not otherwise covered under this title.
  (4) A woman shall continue to be treated as described in this 
subsection as a pregnant woman through the end of the 1-year 
period beginning on the date of the birth of a child of the 
woman.
  (cc) Requirement for Certain States.--Notwithstanding 
subsections (y), (z), and (aa), in the case of a State that 
requires political subdivisions within the State to contribute 
toward the non-Federal share of expenditures required under the 
State plan under section 1902(a)(2), the State shall not be 
eligible for an increase in its Federal medical assistance 
percentage under such subsections if it requires that political 
subdivisions pay a greater percentage of the non-Federal share 
of such expenditures, or a greater percentage of the non-
Federal share of payments under section 1923, than the 
respective percentages that would have been required by the 
State under the State plan under this title, State law, or 
both, as in effect on December 31, 2009, and without regard to 
any such increase. Voluntary contributions by a political 
subdivision to the non-Federal share of expenditures under the 
State plan under this title or to the non-Federal share of 
payments under section 1923, shall not be considered to be 
required contributions for purposes of this subsection. The 
treatment of voluntary contributions, and the treatment of 
contributions required by a State under the State plan under 
this title, or State law, as provided by this subsection, shall 
also apply to the increases in the Federal medical assistance 
percentage under section 5001 of the American Recovery and 
Reinvestment Act of 2009.
  (dd) Increased FMAP for Additional Expenditures for Primary 
Care Services.--Notwithstanding subsection (b), with respect to 
the portion of the amounts expended for medical assistance for 
services described in section 1902(a)(13)(C) furnished on or 
after January 1, 2013, and before January 1, 2015, that is 
attributable to the amount by which the minimum payment rate 
required under such section (or, by application, section 
1932(f)) exceeds the payment rate applicable to such services 
under the State plan as of July 1, 2009, the Federal medical 
assistance percentage for a State that is one of the 50 States 
or the District of Columbia shall be equal to 100 percent. The 
preceding sentence does not prohibit the payment of Federal 
financial participation based on the Federal medical assistance 
percentage for amounts in excess of those specified in such 
sentence.

           *       *       *       *       *       *       *

use of enrollment fees, premiums, deductions, cost sharing, and similar 
                                charges

  Sec. 1916. (a) Subject to subsections (g), (i), and (j), the 
State plan shall provide that in the case of individuals 
described in subparagraph (A) or (E)(i) of section 1902(a)(10) 
who are eligible under the plan--
          (1) no enrollment fee, premium, or similar charge 
        will be imposed under the plan (except for a premium 
        imposed under subsection (c));
          (2) no deduction, cost sharing or similar charge will 
        be imposed under the plan with respect to--
                  (A) services furnished to individuals under 
                18 years of age (and, at the option of the 
                State, individuals under 21, 20, or 19 years of 
                age, or any reasonable category of individuals 
                18 years of age or over),
                  (B) services furnished to pregnant women, if 
                such services relate to the pregnancy or to any 
                other medical condition which may complicate 
                the pregnancy, and counseling and 
                pharmacotherapy for cessation of tobacco use by 
                pregnant women (as defined in section 1905(bb)) 
                and covered outpatient drugs (as defined in 
                subsection (k)(2) of section 1927 and including 
                nonprescription drugs described in subsection 
                (d)(2) of such section) that are prescribed for 
                purposes of promoting, and when used to 
                promote, tobacco cessation by pregnant women 
                (and women described in section 1905(bb) as 
                pregnant women pursuant to paragraph (4) of 
                such section) in accordance with the Guideline 
                referred to in section 1905(bb)(2)(A) (or, at 
                the option of the State, any services furnished 
                to pregnant women),
                  (C) services furnished to any individual who 
                is an inpatient in a hospital, nursing 
                facility, intermediate care facility for the 
                mentally retarded, or other medical 
                institution, if such individual is required, as 
                a condition of receiving services in such 
                institution under the State plan, to spend for 
                costs of medical care all but a minimal amount 
                of his income required for personal needs,
                  (D) emergency services (as defined by the 
                Secretary), family planning services and 
                supplies described in section 1905(a)(4)(C), or
                  (E) services furnished to an individual who 
                is receiving hospice care (as defined in 
                section 1905(o)); and
          (3) any deduction, cost sharing, or similar charge 
        imposed under the plan with respect to other such 
        individuals or other care and services will be nominal 
        in amount (as determined by the Secretary in 
        regulations which shall, if the definition of 
        ``nominal'' under the regulations in effect on July 1, 
        1982 is changed, take into account the level of cash 
        assistance provided in such State and such other 
        criteria as the Secretary determines to be 
        appropriate); except that a deduction, cost-sharing, or 
        similar charge of up to twice the nominal amount 
        established for outpatient services may be imposed by a 
        State under a waiver granted by the Secretary for 
        services received at a hospital emergency room if the 
        services are not emergency services (referred to in 
        paragraph (2)(D)) and the State has established to the 
        satisfaction of the Secretary that individuals eligible 
        for services under the plan have actually available and 
        accessible to them alternative sources of nonemergency, 
        outpatient services.
  (b) The State plan shall provide that in the case of 
individuals other than those described in subparagraph (A) or 
(E) of section 1902(a)(10) who are eligible under the plan--
          (1) there may be imposed an enrollment fee, premium, 
        or similar charge, which (as determined in accordance 
        with standards prescribed by the Secretary) is related 
        to the individual's income,
          (2) no deduction, cost sharing, or similar charge 
        will be imposed under the plan with respect to--
                  (A) services furnished to individuals under 
                18 years of age (and, at the option of the 
                State, individuals under 21, 20, or 19 years of 
                age, or any reasonable category of individuals 
                18 years of age or over),
                  (B) services furnished to pregnant women, if 
                such services relate to the pregnancy or to any 
                other medical condition which may complicate 
                the pregnancy, and counseling and 
                pharmacotherapy for cessation of tobacco use by 
                pregnant women (as defined in section 1905(bb)) 
                and covered outpatient drugs (as defined in 
                subsection (k)(2) of section 1927 and including 
                nonprescription drugs described in subsection 
                (d)(2) of such section) that are prescribed for 
                purposes of promoting, and when used to 
                promote, tobacco cessation by pregnant women 
                (and women described in section 1905(bb) as 
                pregnant women pursuant to paragraph (4) of 
                such section) in accordance with the Guideline 
                referred to in section 1905(bb)(2)(A) (or, at 
                the option of the State, any services furnished 
                to pregnant women),
                  (C) services furnished to any individual who 
                is an inpatient in a hospital, nursing 
                facility, intermediate care facility for the 
                mentally retarded, or other medical 
                institution, if such individual is required, as 
                a condition of receiving services in such 
                institution under the State plan, to spend for 
                costs of medical care all but a minimal amount 
                of his income required for personal needs,
                  (D) emergency services (as defined by the 
                Secretary), family planning services and 
                supplies described in section 1905(a)(4)(C), or
                  (E) services furnished to an individual who 
                is receiving hospice care (as defined in 
                section 1905(o)); and
          (3) any deduction, cost sharing, or similar charge 
        imposed under the plan with respect to other such 
        individuals or other care and services will be nominal 
        in amount (as determined by the Secretary in 
        regulations which shall, if the definition of 
        ``nominal'' under the regulations in effect on July 1, 
        1982 is changed, take into account the level of cash 
        assistance provided in such State and such other 
        criteria as the Secretary determines to be 
        appropriate); except that a deduction, cost-sharing, or 
        similar charge of up to twice the nominal amount 
        established for outpatient services may be imposed by a 
        State under a waiver granted by the Secretary for 
        services received at a hospital emergency room if the 
        services are not emergency services (referred to in 
        paragraph (2)(D)) and the State has established to the 
        satisfaction of the Secretary that individuals eligible 
        for services under the plan have actually available and 
        accessible to them alternative sources of nonemergency, 
        outpatient services.
  (c)(1) The State plan of a State may at the option of the 
State provide for imposing a monthly premium (in an amount that 
does not exceed the limit established under paragraph (2)) with 
respect to an individual described in subparagraph (A) or (B) 
of section 1902(l)(1) who is receiving medical assistance on 
the basis of section 1902(a)(10)(A)(ii)(IX) and whose family 
income (as determined in accordance with the methodology 
specified in section 1902(l)(3)) equals or exceeds 150 percent 
of the income official poverty line (as defined by the Office 
of Management and Budget, and revised annually in accordance 
with section 673(2) of the Omnibus Budget Reconciliation Act of 
1981) applicable to a family of the size involved.
  (2) In no case may the amount of any premium imposed under 
paragraph (1) exceed 10 percent of the amount by which the 
family income (less expenses for the care of a dependent child) 
of an individual exceeds 150 percent of the line described in 
paragraph (1).
  (3) A State shall not require prepayment of a premium imposed 
pursuant to paragraph (1) and shall not terminate eligibility 
of an individual for medical assistance under this title on the 
basis of failure to pay any such premium until such failure 
continues for a period of not less than 60 days. The State may 
waive payment of any such premium in any case where the State 
determines that requiring such payment would create an undue 
hardship.
  (4) A State may permit State or local funds available under 
other programs to be used for payment of a premium imposed 
under paragraph (1). Payment of a premium with such funds shall 
not be counted as income to the individual with respect to whom 
such payment is made.
  (d) With respect to a qualified disabled and working 
individual described in section 1905(s) whose income (as 
determined under paragraph (3) of that section) exceeds 150 
percent of the official poverty line referred to in that 
paragraph, the State plan of a State may provide for the 
charging of a premium (expressed as a percentage of the 
medicare cost-sharing described in section 1905(p)(3)(A)(i) 
provided with respect to the individual) according to a sliding 
scale under which such percentage increases from 0 percent to 
100 percent, in reasonable increments (as determined by the 
Secretary), as the individual's income increases from 150 
percent of such poverty line to 200 percent of such poverty 
line.
  (e) The State plan shall require that no provider 
participating under the State plan may deny care or services to 
an individual eligible for such care or services under the plan 
on account of such individual's inability to pay a deduction, 
cost sharing, or similar charge. The requirements of this 
subsection shall not extinguish the liability of the individual 
to whom the care or services were furnished for payment of the 
deduction, cost sharing, or similar charge.
  (f) No deduction, cost sharing, or similar charge may be 
imposed under any waiver authority of the Secretary, except as 
provided in subsections (a)(3) and (b)(3) and section 1916A, 
unless such waiver is for a demonstration project which the 
Secretary finds after public notice and opportunity for 
comment--
          (1) will test a unique and previously untested use of 
        copayments,
          (2) is limited to a period of not more than two 
        years,
          (3) will provide benefits to recipients of medical 
        assistance which can reasonably be expected to be 
        equivalent to the risks to the recipients,
          (4) is based on a reasonable hypothesis which the 
        demonstration is designed to test in a methodologically 
        sound manner, including the use of control groups of 
        similar recipients of medical assistance in the area, 
        and
          (5) is voluntary, or makes provision for assumption 
        of liability for preventable damage to the health of 
        recipients of medical assistance resulting from 
        involuntary participation.
  (g) With respect to individuals provided medical assistance 
only under subclause (XV) or (XVI) of section 
1902(a)(10)(A)(ii)--
          (1) a State may (in a uniform manner for individuals 
        described in either such subclause)--
                  (A) require such individuals to pay premiums 
                or other cost-sharing charges set on a sliding 
                scale based on income that the State may 
                determine; and
                  (B) require payment of 100 percent of such 
                premiums for such year in the case of such an 
                individual who has income for a year that 
                exceeds 250 percent of the income official 
                poverty line (referred to in subsection (c)(1)) 
                applicable to a family of the size involved, 
                except that in the case of such an individual 
                who has income for a year that does not exceed 
                450 percent of such poverty line, such 
                requirement may only apply to the extent such 
                premiums do not exceed 7.5 percent of such 
                income; and
          (2) such State shall require payment of 100 percent 
        of such premiums for a year by such an individual whose 
        adjusted gross income (as defined in section 62 of the 
        Internal Revenue Code of 1986) for such year exceeds 
        $75,000, except that a State may choose to subsidize 
        such premiums by using State funds which may not be 
        federally matched under this title.
In the case of any calendar year beginning after 2000, the 
dollar amount specified in paragraph (2) shall be increased in 
accordance with the provisions of section 215(i)(2)(A)(ii).
  (h) In applying this section and subsections (c) and (e) of 
section 1916A, with respect to cost sharing that is ``nominal'' 
in amount, the Secretary shall increase such ``nominal'' 
amounts for each year (beginning with 2006) by the annual 
percentage increase in the medical care component of the 
consumer price index for all urban consumers (U.S. city 
average) as rounded up in an appropriate manner.
  (i)(1) With respect to disabled children provided medical 
assistance under section 1902(a)(10)(A)(ii)(XIX), subject to 
paragraph (2), a State may (in a uniform manner for such 
children) require the families of such children to pay monthly 
premiums set on a sliding scale based on family income.
  (2) A premium requirement imposed under paragraph (1) may 
only apply to the extent that--
          (A) in the case of a disabled child described in that 
        paragraph whose family income--
                  (i) does not exceed 200 percent of the 
                poverty line, the aggregate amount of such 
                premium and any premium that the parent is 
                required to pay for family coverage under 
                section 1902(cc)(2)(A)(i) and other cost-
                sharing charges do not exceed 5 percent of the 
                family's income; and
                  (ii) exceeds 200, but does not exceed 300, 
                percent of the poverty line, the aggregate 
                amount of such premium and any premium that the 
                parent is required to pay for family coverage 
                under section 1902(cc)(2)(A)(i) and other cost-
                sharing charges do not exceed 7.5 percent of 
                the family's income; and
          (B) the requirement is imposed consistent with 
        section 1902(cc)(2)(A)(ii)(I).
  (3) A State shall not require prepayment of a premium imposed 
pursuant to paragraph (1) and shall not terminate eligibility 
of a child under section 1902(a)(10)(A)(ii)(XIX) for medical 
assistance under this title on the basis of failure to pay any 
such premium until such failure continues for a period of at 
least 60 days from the date on which the premium became past 
due. The State may waive payment of any such premium in any 
case where the State determines that requiring such payment 
would create an undue hardship.
  (j) No Premiums or Cost Sharing for Indians Furnished Items 
or Services Directly by Indian Health Programs or Through 
Referral Under Contract Health Services.--
          (1) No cost sharing for items or services furnished 
        to indians through indian health programs.--
                  (A) In general.--No enrollment fee, premium, 
                or similar charge, and no deduction, copayment, 
                cost sharing, or similar charge shall be 
                imposed against an Indian who is furnished an 
                item or service directly by the Indian Health 
                Service, an Indian Tribe, Tribal Organization, 
                or Urban Indian Organization or through 
                referral under contract health services for 
                which payment may be made under this title.
                  (B) No reduction in amount of payment to 
                indian health providers.--Payment due under 
                this title to the Indian Health Service, an 
                Indian Tribe, Tribal Organization, or Urban 
                Indian Organization, or a health care provider 
                through referral under contract health services 
                for the furnishing of an item or service to an 
                Indian who is eligible for assistance under 
                such title, may not be reduced by the amount of 
                any enrollment fee, premium, or similar charge, 
                or any deduction, copayment, cost sharing, or 
                similar charge that would be due from the 
                Indian but for the operation of subparagraph 
                (A).
          (2) Rule of construction.--Nothing in this subsection 
        shall be construed as restricting the application of 
        any other limitations on the imposition of premiums or 
        cost sharing that may apply to an individual receiving 
        medical assistance under this title who is an Indian.

           *       *       *       *       *       *       *

       liens, adjustments and recoveries, and transfers of assets

  Sec. 1917. (a)(1) No lien may be imposed against the property 
of any individual prior to his death on account of medical 
assistance paid or to be paid on his behalf under the State 
plan, except--
          (A) pursuant to the judgment of a court on account of 
        benefits incorrectly paid on behalf of such individual, 
        or
          (B) in the case of the real property of an 
        individual--
                  (i) who is an inpatient in a nursing 
                facility, intermediate care facility for the 
                mentally retarded, or other medical 
                institution, if such individual is required, as 
                a condition of receiving services in such 
                institution under the State plan, to spend for 
                costs of medical care all but a minimal amount 
                of his income required for personal needs, and
                  (ii) with respect to whom the State 
                determines, after notice and opportunity for a 
                hearing (in accordance with procedures 
                established by the State), that he cannot 
                reasonably be expected to be discharged from 
                the medical institution and to return home,
        except as provided in paragraph (2).
  (2) No lien may be imposed under paragraph (1)(B) on such 
individual's home if--
          (A) the spouse of such individual,
          (B) such individual's child who is under age 21, or 
        (with respect to States eligible to participate in the 
        State program established under title XVI) is blind or 
        permanently and totally disabled, or (with respect to 
        States which are not eligible to participate in such 
        program) is blind or disabled as defined in section 
        1614, or
          (C) a sibling of such individual (who has an equity 
        interest in such home and who was residing in such 
        individual's home for a period of at least one year 
        immediately before the date of the individual's 
        admission to the medical institution),
is lawfully residing in such home.
  (3) Any lien imposed with respect to an individual pursuant 
to paragraph (1)(B) shall dissolve upon that individual's 
discharge from the medical institution and return home.
  (b)(1) No adjustment or recovery of any medical assistance 
correctly paid on behalf of an individual under the State plan 
may be made, except that the State shall seek adjustment or 
recovery of any medical assistance correctly paid on behalf of 
an individual under the State plan in the case of the following 
individuals:
          (A) In the case of an individual described in 
        subsection (a)(1)(B), the State shall seek adjustment 
        or recovery from the individual's estate or upon sale 
        of the property subject to a lien imposed on account of 
        medical assistance paid on behalf of the individual.
          (B) In the case of an individual who was 55 years of 
        age or older when the individual received such medical 
        assistance, the State shall seek adjustment or recovery 
        from the individual's estate, but only for medical 
        assistance consisting of--
                  (i) nursing facility services, home and 
                community-based services, and related hospital 
                and prescription drug services, or
                  (ii) at the option of the State, any items or 
                services under the State plan (but not 
                including medical assistance for medicare cost-
                sharing or for benefits described in section 
                1902(a)(10)(E)).
          (C)(i) In the case of an individual who has received 
        (or is entitled to receive) benefits under a long-term 
        care insurance policy in connection with which assets 
        or resources are disregarded in the manner described in 
        clause (ii), except as provided in such clause, the 
        State shall seek adjustment or recovery from the 
        individual's estate on account of medical assistance 
        paid on behalf of the individual for nursing facility 
        and other long-term care services.
          (ii) Clause (i) shall not apply in the case of an 
        individual who received medical assistance under a 
        State plan of a State which had a State plan amendment 
        approved as of May 14, 1993, and which satisfies clause 
        (iv), or which has a State plan amendment that provides 
        for a qualified State long-term care insurance 
        partnership (as defined in clause (iii)) which provided 
        for the disregard of any assets or resources--
                  (I) to the extent that payments are made 
                under a long-term care insurance policy; or
                  (II) because an individual has received (or 
                is entitled to receive) benefits under a long-
                term care insurance policy.
          (iii) For purposes of this paragraph, the term 
        ``qualified State long-term care insurance 
        partnership'' means an approved State plan amendment 
        under this title that provides for the disregard of any 
        assets or resources in an amount equal to the insurance 
        benefit payments that are made to or on behalf of an 
        individual who is a beneficiary under a long-term care 
        insurance policy if the following requirements are met:
                  (I) The policy covers an insured who was a 
                resident of such State when coverage first 
                became effective under the policy.
                  (II) The policy is a qualified long-term care 
                insurance policy (as defined in section 
                7702B(b) of the Internal Revenue Code of 1986) 
                issued not earlier than the effective date of 
                the State plan amendment.
                  (III) The policy meets the model regulations 
                and the requirements of the model Act specified 
                in paragraph (5).
                  (IV) If the policy is sold to an individual 
                who--
                          (aa) has not attained age 61 as of 
                        the date of purchase, the policy 
                        provides compound annual inflation 
                        protection;
                          (bb) has attained age 61 but has not 
                        attained age 76 as of such date, the 
                        policy provides some level of inflation 
                        protection; and
                          (cc) has attained age 76 as of such 
                        date, the policy may (but is not 
                        required to) provide some level of 
                        inflation protection.
                  (V) The State Medicaid agency under section 
                1902(a)(5) provides information and technical 
                assistance to the State insurance department on 
                the insurance department's role of assuring 
                that any individual who sells a long-term care 
                insurance policy under the partnership receives 
                training and demonstrates evidence of an 
                understanding of such policies and how they 
                relate to other public and private coverage of 
                long-term care.
                  (VI) The issuer of the policy provides 
                regular reports to the Secretary, in accordance 
                with regulations of the Secretary, that include 
                notification regarding when benefits provided 
                under the policy have been paid and the amount 
                of such benefits paid, notification regarding 
                when the policy otherwise terminates, and such 
                other information as the Secretary determines 
                may be appropriate to the administration of 
                such partnerships.
                  (VII) The State does not impose any 
                requirement affecting the terms or benefits of 
                such a policy unless the State imposes such 
                requirement on long-term care insurance 
                policies without regard to whether the policy 
                is covered under the partnership or is offered 
                in connection with such a partnership.
        In the case of a long-term care insurance policy which 
        is exchanged for another such policy, subclause (I) 
        shall be applied based on the coverage of the first 
        such policy that was exchanged. For purposes of this 
        clause and paragraph (5), the term ``long-term care 
        insurance policy'' includes a certificate issued under 
        a group insurance contract.
          (iv) With respect to a State which had a State plan 
        amendment approved as of May 14, 1993, such a State 
        satisfies this clause for purposes of clause (ii) if 
        the Secretary determines that the State plan amendment 
        provides for consumer protection standards which are no 
        less stringent than the consumer protection standards 
        which applied under such State plan amendment as of 
        December 31, 2005.
          (v) The regulations of the Secretary required under 
        clause (iii)(VI) shall be promulgated after 
        consultation with the National Association of Insurance 
        Commissioners, issuers of long-term care insurance 
        policies, States with experience with long-term care 
        insurance partnership plans, other States, and 
        representatives of consumers of long-term care 
        insurance policies, and shall specify the type and 
        format of the data and information to be reported and 
        the frequency with which such reports are to be made. 
        The Secretary, as appropriate, shall provide copies of 
        the reports provided in accordance with that clause to 
        the State involved.
          (vi) The Secretary, in consultation with other 
        appropriate Federal agencies, issuers of long-term care 
        insurance, the National Association of Insurance 
        Commissioners, State insurance commissioners, States 
        with experience with long-term care insurance 
        partnership plans, other States, and representatives of 
        consumers of long-term care insurance policies, shall 
        develop recommendations for Congress to authorize and 
        fund a uniform minimum data set to be reported 
        electronically by all issuers of long-term care 
        insurance policies under qualified State long-term care 
        insurance partnerships to a secure, centralized 
        electronic query and report-generating mechanism that 
        the State, the Secretary, and other Federal agencies 
        can access.
  (2) Any adjustment or recovery under paragraph (1) may be 
made only after the death of the individual's surviving spouse, 
if any, and only at a time--
          (A) when he has no surviving child who is under age 
        21, or (with respect to States eligible to participate 
        in the State program established under title XVI) is 
        blind or permanently and totally disabled, or (with 
        respect to States which are not eligible to participate 
        in such program) is blind or disabled as defined in 
        section 1614; and
          (B) in the case of a lien on an individual's home 
        under subsection (a)(1)(B), when--
                  (i) no sibling of the individual (who was 
                residing in the individual's home for a period 
                of at least one year immediately before the 
                date of the individual's admission to the 
                medical institution), and
                  (ii) no son or daughter of the individual 
                (who was residing in the individual's home for 
                a period of at least two years immediately 
                before the date of the individual's admission 
                to the medical institution, and who establishes 
                to the satisfaction of the State that he or she 
                provided care to such individual which 
                permitted such individual to reside at home 
                rather than in an institution),
        is lawfully residing in such home who has lawfully 
        resided in such home on a continuous basis since the 
        date of the individual's admission to the medical 
        institution.
  (3)(A) The State agency shall establish procedures (in 
accordance with standards specified by the Secretary) under 
which the agency shall waive the application of this subsection 
(other than paragraph (1)(C)) if such application would work an 
undue hardship as determined on the basis of criteria 
established by the Secretary.
  (B) The standards specified by the Secretary under 
subparagraph (A) shall require that the procedures established 
by the State agency under subparagraph (A) exempt income, 
resources, and property that are exempt from the application of 
this subsection as of April 1, 2003, under manual instructions 
issued to carry out this subsection (as in effect on such date) 
because of the Federal responsibility for Indian Tribes and 
Alaska Native Villages. Nothing in this subparagraph shall be 
construed as preventing the Secretary from providing additional 
estate recovery exemptions under this title for Indians.
  (4) For purposes of this subsection, the term ``estate'', 
with respect to a deceased individual--
          (A) shall include all real and personal property and 
        other assets included within the individual's estate, 
        as defined for purposes of State probate law; and
          (B) may include, at the option of the State (and 
        shall include, in the case of an individual to whom 
        paragraph (1)(C)(i) applies), any other real and 
        personal property and other assets in which the 
        individual had any legal title or interest at the time 
        of death (to the extent of such interest), including 
        such assets conveyed to a survivor, heir, or assign of 
        the deceased individual through joint tenancy, tenancy 
        in common, survivorship, life estate, living trust, or 
        other arrangement.
  (5)(A) For purposes of clause (iii)(III), the model 
regulations and the requirements of the model Act specified in 
this paragraph are:
          (i) In the case of the model regulation, the 
        following requirements:
                  (I) Section 6A (relating to guaranteed 
                renewal or noncancellability), other than 
                paragraph (5) thereof, and the requirements of 
                section 6B of the model Act relating to such 
                section 6A.
                  (II) Section 6B (relating to prohibitions on 
                limitations and exclusions) other than 
                paragraph (7) thereof.
                  (III) Section 6C (relating to extension of 
                benefits).
                  (IV) Section 6D (relating to continuation or 
                conversion of coverage).
                  (V) Section 6E (relating to discontinuance 
                and replacement of policies).
                  (VI) Section 7 (relating to unintentional 
                lapse).
                  (VII) Section 8 (relating to disclosure), 
                other than sections 8F, 8G, 8H, and 8I thereof.
                  (VIII) Section 9 (relating to required 
                disclosure of rating practices to consumer).
                  (IX) Section 11 (relating to prohibitions 
                against post-claims underwriting).
                  (X) Section 12 (relating to minimum 
                standards).
                  (XI) Section 14 (relating to application 
                forms and replacement coverage).
                  (XII) Section 15 (relating to reporting 
                requirements).
                  (XIII) Section 22 (relating to filing 
                requirements for marketing).
                  (XIV) Section 23 (relating to standards for 
                marketing), including inaccurate completion of 
                medical histories, other than paragraphs (1), 
                (6), and (9) of section 23C.
                  (XV) Section 24 (relating to suitability).
                  (XVI) Section 25 (relating to prohibition 
                against preexisting conditions and probationary 
                periods in replacement policies or 
                certificates).
                  (XVII) The provisions of section 26 relating 
                to contingent nonforfeiture benefits, if the 
                policyholder declines the offer of a 
                nonforfeiture provision described in paragraph 
                (4).
                  (XVIII) Section 29 (relating to standard 
                format outline of coverage).
                  (XIX) Section 30 (relating to requirement to 
                deliver shopper's guide).
          (ii) In the case of the model Act, the following:
                  (I) Section 6C (relating to preexisting 
                conditions).
                  (II) Section 6D (relating to prior 
                hospitalization).
                  (III) The provisions of section 8 relating to 
                contingent nonforfeiture benefits.
                  (IV) Section 6F (relating to right to 
                return).
                  (V) Section 6G (relating to outline of 
                coverage).
                  (VI) Section 6H (relating to requirements for 
                certificates under group plans).
                  (VII) Section 6J (relating to policy 
                summary).
                  (VIII) Section 6K (relating to monthly 
                reports on accelerated death benefits).
                  (IX) Section 7 (relating to incontestability 
                period).
  (B) For purposes of this paragraph and paragraph (1)(C)--
          (i) the terms ``model regulation'' and ``model Act'' 
        mean the long-term care insurance model regulation, and 
        the long-term care insurance model Act, respectively, 
        promulgated by the National Association of Insurance 
        Commissioners (as adopted as of October 2000);
          (ii) any provision of the model regulation or model 
        Act listed under subparagraph (A) shall be treated as 
        including any other provision of such regulation or Act 
        necessary to implement the provision; and
          (iii) with respect to a long-term care insurance 
        policy issued in a State, the policy shall be deemed to 
        meet applicable requirements of the model regulation or 
        the model Act if the State plan amendment under 
        paragraph (1)(C)(iii) provides that the State insurance 
        commissioner for the State certifies (in a manner 
        satisfactory to the Secretary) that the policy meets 
        such requirements.
  (C) Not later than 12 months after the National Association 
of Insurance Commissioners issues a revision, update, or other 
modification of a model regulation or model Act provision 
specified in subparagraph (A), or of any provision of such 
regulation or Act that is substantively related to a provision 
specified in such subparagraph, the Secretary shall review the 
changes made to the provision, determine whether incorporating 
such changes into the corresponding provision specified in such 
subparagraph would improve qualified State long-term care 
insurance partnerships, and if so, shall incorporate the 
changes into such provision.
  (c)(1)(A) In order to meet the requirements of this 
subsection for purposes of section 1902(a)(18), the State plan 
must provide that if an institutionalized individual or the 
spouse of such an individual (or, at the option of a State, a 
noninstitutionalized individual or the spouse of such an 
individual) disposes of assets for less than fair market value 
on or after the look-back date specified in subparagraph 
(B)(i), the individual is ineligible for medical assistance for 
services described in subparagraph (C)(i) (or, in the case of a 
noninstitutionalized individual, for the services described in 
subparagraph (C)(ii)) during the period beginning on the date 
specified in subparagraph (D) and equal to the number of months 
specified in subparagraph (E).
  (B)(i) The look-back date specified in this subparagraph is a 
date that is 36 months (or, in the case of payments from a 
trust or portions of a trust that are treated as assets 
disposed of by the individual pursuant to paragraph (3)(A)(iii) 
or (3)(B)(ii) of subsection (d) or in the case of any other 
disposal of assets made on or after the date of the enactment 
of the Deficit Reduction Act of 2005, 60 months) before the 
date specified in clause (ii).
  (ii) The date specified in this clause, with respect to--
          (I) an institutionalized individual is the first date 
        as of which the individual both is an institutionalized 
        individual and has applied for medical assistance under 
        the State plan, or
          (II) a noninstitutionalized individual is the date on 
        which the individual applies for medical assistance 
        under the State plan or, if later, the date on which 
        the individual disposes of assets for less than fair 
        market value.
  (C)(i) The services described in this subparagraph with 
respect to an institutionalized individual are the following:
          (I) Nursing facility services.
          (II) A level of care in any institution equivalent to 
        that of nursing facility services.
          (III) Home or community-based services furnished 
        under a waiver granted under subsection (c) or (d) of 
        section 1915.
  (ii) The services described in this subparagraph with respect 
to a noninstitutionalized individual are services (not 
including any services described in clause (i)) that are 
described in paragraph (7), (22), or (24) of section 1905(a), 
and, at the option of a State, other long-term care services 
for which medical assistance is otherwise available under the 
State plan to individuals requiring long-term care.
  (D)(i) In the case of a transfer of asset made before the 
date of the enactment of the Deficit Reduction Act of 2005, the 
date specified in this subparagraph is the first day of the 
first month during or after which assets have been transferred 
for less than fair market value and which does not occur in any 
other periods of ineligibility under this subsection.
  (ii) In the case of a transfer of asset made on or after the 
date of the enactment of the Deficit Reduction Act of 2005, the 
date specified in this subparagraph is the first day of a month 
during or after which assets have been transferred for less 
than fair market value, or the date on which the individual is 
eligible for medical assistance under the State plan and would 
otherwise be receiving institutional level care described in 
subparagraph (C) based on an approved application for such care 
but for the application of the penalty period, whichever is 
later, and which does not occur during any other period of 
ineligibility under this subsection.
  (E)(i) With respect to an institutionalized individual, the 
number of months of ineligibility under this subparagraph for 
an individual shall be equal to--
          (I) the total, cumulative uncompensated value of all 
        assets transferred by the individual (or individual's 
        spouse) on or after the look-back date specified in 
        subparagraph (B)(i), divided by
          (II) the average monthly cost to a private patient of 
        nursing facility services in the State (or, at the 
        option of the State, in the community in which the 
        individual is institutionalized) at the time of 
        application.
  (ii) With respect to a noninstitutionalized individual, the 
number of months of ineligibility under this subparagraph for 
an individual shall not be greater than a number equal to--
          (I) the total, cumulative uncompensated value of all 
        assets transferred by the individual (or individual's 
        spouse) on or after the look-back date specified in 
        subparagraph (B)(i), divided by
          (II) the average monthly cost to a private patient of 
        nursing facility services in the State (or, at the 
        option of the State, in the community in which the 
        individual is institutionalized) at the time of 
        application.
  (iii) The number of months of ineligibility otherwise 
determined under clause (i) or (ii) with respect to the 
disposal of an asset shall be reduced--
          (I) in the case of periods of ineligibility 
        determined under clause (i), by the number of months of 
        ineligibility applicable to the individual under clause 
        (ii) as a result of such disposal, and
          (II) in the case of periods of ineligibility 
        determined under clause (ii), by the number of months 
        of ineligibility applicable to the individual under 
        clause (i) as a result of such disposal.
  (iv) A State shall not round down, or otherwise disregard any 
fractional period of ineligibility determined under clause (i) 
or (ii) with respect to the disposal of assets.
  (F) For purposes of this paragraph, the purchase of an 
annuity shall be treated as the disposal of an asset for less 
than fair market value unless--
          (i) the State is named as the remainder beneficiary 
        in the first position for at least the total amount of 
        medical assistance paid on behalf of the 
        institutionalized individual under this title; or
          (ii) the State is named as such a beneficiary in the 
        second position after the community spouse or minor or 
        disabled child and is named in the first position if 
        such spouse or a representative of such child disposes 
        of any such remainder for less than fair market value.
  (G) For purposes of this paragraph with respect to a transfer 
of assets, the term ``assets'' includes an annuity purchased by 
or on behalf of an annuitant who has applied for medical 
assistance with respect to nursing facility services or other 
long-term care services under this title unless--
          (i) the annuity is--
                  (I) an annuity described in subsection (b) or 
                (q) of section 408 of the Internal Revenue Code 
                of 1986; or
                  (II) purchased with proceeds from--
                          (aa) an account or trust described in 
                        subsection (a), (c), or (p) of section 
                        408 of such Code;
                          (bb) a simplified employee pension 
                        (within the meaning of section 408(k) 
                        of such Code); or
                          (cc) a Roth IRA described in section 
                        408A of such Code; or
          (ii) the annuity--
                  (I) is irrevocable and nonassignable;
                  (II) is actuarially sound (as determined in 
                accordance with actuarial publications of the 
                Office of the Chief Actuary of the Social 
                Security Administration); and
                  (III) provides for payments in equal amounts 
                during the term of the annuity, with no 
                deferral and no balloon payments made.
  (H) Notwithstanding the preceding provisions of this 
paragraph, in the case of an individual (or individual's 
spouse) who makes multiple fractional transfers of assets in 
more than 1 month for less than fair market value on or after 
the applicable look-back date specified in subparagraph (B), a 
State may determine the period of ineligibility applicable to 
such individual under this paragraph by--
          (i) treating the total, cumulative uncompensated 
        value of all assets transferred by the individual (or 
        individual's spouse) during all months on or after the 
        look-back date specified in subparagraph (B) as 1 
        transfer for purposes of clause (i) or (ii) (as the 
        case may be) of subparagraph (E); and
          (ii) beginning such period on the earliest date which 
        would apply under subparagraph (D) to any of such 
        transfers.
  (I) For purposes of this paragraph with respect to a transfer 
of assets, the term ``assets'' includes funds used to purchase 
a promissory note, loan, or mortgage unless such note, loan, or 
mortgage--
          (i) has a repayment term that is actuarially sound 
        (as determined in accordance with actuarial 
        publications of the Office of the Chief Actuary of the 
        Social Security Administration);
          (ii) provides for payments to be made in equal 
        amounts during the term of the loan, with no deferral 
        and no balloon payments made; and
          (iii) prohibits the cancellation of the balance upon 
        the death of the lender.
In the case of a promissory note, loan, or mortgage that does 
not satisfy the requirements of clauses (i) through (iii), the 
value of such note, loan, or mortgage shall be the outstanding 
balance due as of the date of the individual's application for 
medical assistance for services described in subparagraph (C).
  (J) For purposes of this paragraph with respect to a transfer 
of assets, the term ``assets'' includes the purchase of a life 
estate interest in another individual's home unless the 
purchaser resides in the home for a period of at least 1 year 
after the date of the purchase.
  (2) An individual shall not be ineligible for medical 
assistance by reason of paragraph (1) to the extent that--
          (A) the assets transferred were a home and title to 
        the home was transferred to--
                  (i) the spouse of such individual;
                  (ii) a child of such individual who (I) is 
                under age 21, or (II) (with respect to States 
                eligible to participate in the State program 
                established under title XVI) is blind or 
                permanently and totally disabled, or (with 
                respect to States which are not eligible to 
                participate in such program) is blind or 
                disabled as defined in section 1614;
                  (iii) a sibling of such individual who has an 
                equity interest in such home and who was 
                residing in such individual's home for a period 
                of at least one year immediately before the 
                date the individual becomes an 
                institutionalized individual; or
                  (iv) a son or daughter of such individual 
                (other than a child described in clause (ii)) 
                who was residing in such individual's home for 
                a period of at least two years immediately 
                before the date the individual becomes an 
                institutionalized individual, and who (as 
                determined by the State) provided care to such 
                individual which permitted such individual to 
                reside at home rather than in such an 
                institution or facility;
          (B) the assets--
                  (i) were transferred to the individual's 
                spouse or to another for the sole benefit of 
                the individual's spouse,
                  (ii) were transferred from the individual's 
                spouse to another for the sole benefit of the 
                individual's spouse,
                  (iii) were transferred to, or to a trust 
                (including a trust described in subsection 
                (d)(4)) established solely for the benefit of, 
                the individual's child described in 
                subparagraph (A)(ii)(II), or
                  (iv) were transferred to a trust (including a 
                trust described in subsection (d)(4)) 
                established solely for the benefit of an 
                individual under 65 years of age who is 
                disabled (as defined in section 1614(a)(3));
          (C) a satisfactory showing is made to the State (in 
        accordance with regulations promulgated by the 
        Secretary) that (i) the individual intended to dispose 
        of the assets either at fair market value, or for other 
        valuable consideration, (ii) the assets were 
        transferred exclusively for a purpose other than to 
        qualify for medical assistance, or (iii) all assets 
        transferred for less than fair market value have been 
        returned to the individual; or
          (D) the State determines, under procedures 
        established by the State (in accordance with standards 
        specified by the Secretary), that the denial of 
        eligibility would work an undue hardship as determined 
        on the basis of criteria established by the Secretary.
        The procedures established under subparagraph (D) shall 
        permit the facility in which the institutionalized 
        individual is residing to file an undue hardship waiver 
        application on behalf of the individual with the 
        consent of the individual or the personal 
        representative of the individual. While an application 
        for an undue hardship waiver is pending under 
        subparagraph (D) in the case of an individual who is a 
        resident of a nursing facility, if the application 
        meets such criteria as the Secretary specifies, the 
        State may provide for payments for nursing facility 
        services in order to hold the bed for the individual at 
        the facility, but not in excess of payments for 30 
        days.
  (3) For purposes of this subsection, in the case of an asset 
held by an individual in common with another person or persons 
in a joint tenancy, tenancy in common, or similar arrangement, 
the asset (or the affected portion of such asset) shall be 
considered to be transferred by such individual when any action 
is taken, either by such individual or by any other person, 
that reduces or eliminates such individual's ownership or 
control of such asset.
  (4) A State (including a State which has elected treatment 
under section 1902(f)) may not provide for any period of 
ineligibility for an individual due to transfer of resources 
for less than fair market value except in accordance with this 
subsection. In the case of a transfer by the spouse of an 
individual which results in a period of ineligibility for 
medical assistance under a State plan for such individual, a 
State shall, using a reasonable methodology (as specified by 
the Secretary), apportion such period of ineligibility (or any 
portion of such period) among the individual and the 
individual's spouse if the spouse otherwise becomes eligible 
for medical assistance under the State plan.
  (5) In this subsection, the term ``resources'' has the 
meaning given such term in section 1613, without regard to the 
exclusion described in subsection (a)(1) thereof.
  (d)(1) For purposes of determining an individual's 
eligibility for, or amount of, benefits under a State plan 
under this title, subject to paragraph (4), the rules specified 
in paragraph (3) shall apply to a trust established by such 
individual.
  (2)(A) For purposes of this subsection, an individual shall 
be considered to have established a trust if assets of the 
individual were used to form all or part of the corpus of the 
trust and if any of the following individuals established such 
trust other than by will:
          (i) The individual.
          (ii) The individual's spouse.
          (iii) A person, including a court or administrative 
        body, with legal authority to act in place of or on 
        behalf of the individual or the individual's spouse.
          (iv) A person, including any court or administrative 
        body, acting at the direction or upon the request of 
        the individual or the individual's spouse.
  (B) In the case of a trust the corpus of which includes 
assets of an individual (as determined under subparagraph (A)) 
and assets of any other person or persons, the provisions of 
this subsection shall apply to the portion of the trust 
attributable to the assets of the individual.
  (C) Subject to paragraph (4), this subsection shall apply 
without regard to--
          (i) the purposes for which a trust is established,
          (ii) whether the trustees have or exercise any 
        discretion under the trust,
          (iii) any restrictions on when or whether 
        distributions may be made from the trust, or
          (iv) any restrictions on the use of distributions 
        from the trust.
  (3)(A) In the case of a revocable trust--
          (i) the corpus of the trust shall be considered 
        resources available to the individual,
          (ii) payments from the trust to or for the benefit of 
        the individual shall be considered income of the 
        individual, and
          (iii) any other payments from the trust shall be 
        considered assets disposed of by the individual for 
        purposes of subsection (c).
  (B) In the case of an irrevocable trust--
          (i) if there are any circumstances under which 
        payment from the trust could be made to or for the 
        benefit of the individual, the portion of the corpus 
        from which, or the income on the corpus from which, 
        payment to the individual could be made shall be 
        considered resources available to the individual, and 
        payments from that portion of the corpus or income--
                  (I) to or for the benefit of the individual, 
                shall be considered income of the individual, 
                and
                  (II) for any other purpose, shall be 
                considered a transfer of assets by the 
                individual subject to subsection (c); and
          (ii) any portion of the trust from which, or any 
        income on the corpus from which, no payment could under 
        any circumstances be made to the individual shall be 
        considered, as of the date of establishment of the 
        trust (or, if later, the date on which payment to the 
        individual was foreclosed) to be assets disposed by the 
        individual for purposes of subsection (c), and the 
        value of the trust shall be determined for purposes of 
        such subsection by including the amount of any payments 
        made from such portion of the trust after such date.
  (4) This subsection shall not apply to any of the following 
trusts:
          (A) A trust containing the assets of an individual 
        under age 65 who is disabled (as defined in section 
        1614(a)(3)) and which is established for the benefit of 
        such individual by the individual, a parent, 
        grandparent, legal guardian of the individual, or a 
        court if the State will receive all amounts remaining 
        in the trust upon the death of such individual up to an 
        amount equal to the total medical assistance paid on 
        behalf of the individual under a State plan under this 
        title.
          (B) A trust established in a State for the benefit of 
        an individual if--
                  (i) the trust is composed only of pension, 
                Social Security, and other income to the 
                individual (and accumulated income in the 
                trust),
                  (ii) the State will receive all amounts 
                remaining in the trust upon the death of such 
                individual up to an amount equal to the total 
                medical assistance paid on behalf of the 
                individual under a State plan under this title, 
                and
                  (iii) the State makes medical assistance 
                available to individuals described in section 
                1902(a)(10)(A)(ii)(V), but does not make such 
                assistance available to individuals for nursing 
                facility services under section 1902(a)(10)(C).
          (C) A trust containing the assets of an individual 
        who is disabled (as defined in section 1614(a)(3)) that 
        meets the following conditions:
                  (i) The trust is established and managed by a 
                nonprofit association.
                  (ii) A separate account is maintained for 
                each beneficiary of the trust, but, for 
                purposes of investment and management of funds, 
                the trust pools these accounts.
                  (iii) Accounts in the trust are established 
                solely for the benefit of individuals who are 
                disabled (as defined in section 1614(a)(3)) by 
                the parent, grandparent, or legal guardian of 
                such individuals, by such individuals, or by a 
                court.
                  (iv) To the extent that amounts remaining in 
                the beneficiary's account upon the death of the 
                beneficiary are not retained by the trust, the 
                trust pays to the State from such remaining 
                amounts in the account an amount equal to the 
                total amount of medical assistance paid on 
                behalf of the beneficiary under the State plan 
                under this title.
  (5) The State agency shall establish procedures (in 
accordance with standards specified by the Secretary) under 
which the agency waives the application of this subsection with 
respect to an individual if the individual establishes that 
such application would work an undue hardship on the individual 
as determined on the basis of criteria established by the 
Secretary.
  (6) The term ``trust'' includes any legal instrument or 
device that is similar to a trust but includes an annuity only 
to such extent and in such manner as the Secretary specifies.
  (e)(1) In order to meet the requirements of this section for 
purposes of section 1902(a)(18), a State shall require, as a 
condition for the provision of medical assistance for services 
described in subsection (c)(1)(C)(i) (relating to long-term 
care services) for an individual, the application of the 
individual for such assistance (including any recertification 
of eligibility for such assistance) shall disclose a 
description of any interest the individual or community spouse 
has in an annuity (or similar financial instrument, as may be 
specified by the Secretary), regardless of whether the annuity 
is irrevocable or is treated as an asset. Such application or 
recertification form shall include a statement that under 
paragraph (2) the State becomes a remainder beneficiary under 
such an annuity or similar financial instrument by virtue of 
the provision of such medical assistance.
  (2)(A) In the case of disclosure concerning an annuity under 
subsection (c)(1)(F), the State shall notify the issuer of the 
annuity of the right of the State under such subsection as a 
preferred remainder beneficiary in the annuity for medical 
assistance furnished to the individual. Nothing in this 
paragraph shall be construed as preventing such an issuer from 
notifying persons with any other remainder interest of the 
State's remainder interest under such subsection.
  (B) In the case of such an issuer receiving notice under 
subparagraph (A), the State may require the issuer to notify 
the State when there is a change in the amount of income or 
principal being withdrawn from the amount that was being 
withdrawn at the time of the most recent disclosure described 
in paragraph (1). A State shall take such information into 
account in determining the amount of the State's obligations 
for medical assistance or in the individual's eligibility for 
such assistance.
  (3) The Secretary may provide guidance to States on 
categories of transactions that may be treated as a transfer of 
asset for less than fair market value.
  (4) Nothing in this subsection shall be construed as 
preventing a State from denying eligibility for medical 
assistance for an individual based on the income or resources 
derived from an annuity described in paragraph (1).
  (f)(1)(A) Notwithstanding any other provision of this title, 
subject to subparagraphs (B) and (C) of this paragraph and 
paragraph (2), in determining eligibility of an individual for 
medical assistance with respect to nursing facility services or 
other long-term care services, the individual shall not be 
eligible for such assistance if the individual's equity 
interest in the individual's home exceeds $500,000.
  (B) A State may elect, without regard to the requirements of 
section 1902(a)(1) (relating to statewideness) and section 
1902(a)(10)(B) (relating to comparability), to apply 
subparagraph (A) by substituting for ``$500,000'', an amount 
that exceeds such amount, but does not exceed $750,000.
  (C) The dollar amounts specified in this paragraph shall be 
increased, beginning with 2011, from year to year based on the 
percentage increase in the consumer price index for all urban 
consumers (all items; United States city average), rounded to 
the nearest $1,000.
  (2) Paragraph (1) shall not apply with respect to an 
individual if--
          (A) the spouse of such individual, or
          (B) such individual's child who is under age 21, or 
        (with respect to States eligible to participate in the 
        State program established under title XVI) is blind or 
        permanently and totally disabled, or (with respect to 
        States which are not eligible to participate in such 
        program) is blind or disabled as defined in section 
        1614,
is lawfully residing in the individual's home.
  (3) Nothing in this subsection shall be construed as 
preventing an individual from using a reverse mortgage or home 
equity loan to reduce the individual's total equity interest in 
the home.
  (4) The Secretary shall establish a process whereby paragraph 
(1) is waived in the case of a demonstrated hardship.
  (g) Treatment of Entrance Fees of Individuals Residing in 
Continuing Care Retirement Communities.--
          (1) In general.--For purposes of determining an 
        individual's eligibility for, or amount of, benefits 
        under a State plan under this title, the rules 
        specified in paragraph (2) shall apply to individuals 
        residing in continuing care retirement communities or 
        life care communities that collect an entrance fee on 
        admission from such individuals.
          (2) Treatment of entrance fee.--For purposes of this 
        subsection, an individual's entrance fee in a 
        continuing care retirement community or life care 
        community shall be considered a resource available to 
        the individual to the extent that--
                  (A) the individual has the ability to use the 
                entrance fee, or the contract provides that the 
                entrance fee may be used, to pay for care 
                should other resources or income of the 
                individual be insufficient to pay for such 
                care;
                  (B) the individual is eligible for a refund 
                of any remaining entrance fee when the 
                individual dies or terminates the continuing 
                care retirement community or life care 
                community contract and leaves the community; 
                and
                  (C) the entrance fee does not confer an 
                ownership interest in the continuing care 
                retirement community or life care community.
  (h) In this section, the following definitions shall apply:
          (1) The term ``assets'', with respect to an 
        individual, includes all income and resources of the 
        individual and of the individual's spouse, including 
        any income or resources which the individual or such 
        individual's spouse is entitled to but does not receive 
        because of action--
                  (A) by the individual or such individual's 
                spouse,
                  (B) by a person, including a court or 
                administrative body, with legal authority to 
                act in place of or on behalf of the individual 
                or such individual's spouse, or
                  (C) by any person, including any court or 
                administrative body, acting at the direction or 
                upon the request of the individual or such 
                individual's spouse.
          (2) The term ``income'' has the meaning given such 
        term in section 1612.
          (3) The term ``institutionalized individual'' means 
        an individual who is an inpatient in a nursing 
        facility, who is an inpatient in a medical institution 
        and with respect to whom payment is made based on a 
        level of care provided in a nursing facility, or who is 
        described in section 1902(a)(10)(A)(ii)(VI).
          (4) The term ``noninstitutionalized individual'' 
        means an individual receiving any of the services 
        specified in subsection (c)(1)(C)(ii).
          (5) The term ``resources'' has the meaning given such 
        term in section 1613, without regard (in the case of an 
        institutionalized individual) to the exclusion 
        described in subsection (a)(1) of such section.

           *       *       *       *       *       *       *

                  payment for covered outpatient drugs

  Sec. 1927. (a) Requirement for Rebate Agreement.--
          (1) In general.--In order for payment to be available 
        under section 1903(a) or under part B of title XVIII 
        for covered outpatient drugs of a manufacturer, the 
        manufacturer must have entered into and have in effect 
        a rebate agreement described in subsection (b) with the 
        Secretary, on behalf of States (except that, the 
        Secretary may authorize a State to enter directly into 
        agreements with a manufacturer), and must meet the 
        requirements of paragraph (5) (with respect to drugs 
        purchased by a covered entity on or after the first day 
        of the first month that begins after the date of the 
        enactment of title VI of the Veterans Health Care Act 
        of 1992) and paragraph (6). Any agreement between a 
        State and a manufacturer prior to April 1, 1991, shall 
        be deemed to have been entered into on January 1, 1991, 
        and payment to such manufacturer shall be retroactively 
        calculated as if the agreement between the manufacturer 
        and the State had been entered into on January 1, 1991. 
        If a manufacturer has not entered into such an 
        agreement before March 1, 1991, such an agreement, 
        subsequently entered into, shall become effective as of 
        the date on which the agreement is entered into or, at 
        State option, on any date thereafter on or before the 
        first day of the calendar quarter that begins more than 
        60 days after the date the agreement is entered into.
          (2) Effective date.--Paragraph (1) shall first apply 
        to drugs dispensed under this title on or after January 
        1, 1991.
          (3) Authorizing payment for drugs not covered under 
        rebate agreements.--Paragraph (1), and section 
        1903(i)(10)(A), shall not apply to the dispensing of a 
        single source drug or innovator multiple source drug if 
        (A)(i) the State has made a determination that the 
        availability of the drug is essential to the health of 
        beneficiaries under the State plan for medical 
        assistance; (ii) such drug has been given a rating of 
        1-A by the Food and Drug Administration; and (iii)(I) 
        the physician has obtained approval for use of the drug 
        in advance of its dispensing in accordance with a prior 
        authorization program described in subsection (d), or 
        (II) the Secretary has reviewed and approved the 
        State's determination under subparagraph (A); or (B) 
        the Secretary determines that in the first calendar 
        quarter of 1991, there were extenuating circumstances.
          (4) Effect on existing agreements.--In the case of a 
        rebate agreement in effect between a State and a 
        manufacturer on the date of the enactment of this 
        section, such agreement, for the initial agreement 
        period specified therein, shall be considered to be a 
        rebate agreement in compliance with this section with 
        respect to that State, if the State agrees to report to 
        the Secretary any rebates paid pursuant to the 
        agreement and such agreement provides for a minimum 
        aggregate rebate of 10 percent of the State's total 
        expenditures under the State plan for coverage of the 
        manufacturer's drugs under this title. If, after the 
        initial agreement period, the State establishes to the 
        satisfaction of the Secretary that an agreement in 
        effect on the date of the enactment of this section 
        provides for rebates that are at least as large as the 
        rebates otherwise required under this section, and the 
        State agrees to report any rebates under the agreement 
        to the Secretary, the agreement shall be considered to 
        be a rebate agreement in compliance with the section 
        for the renewal periods of such agreement.
          (5) Limitation on prices of drugs purchased by 
        covered entities.--
                  (A) Agreement with secretary.--A manufacturer 
                meets the requirements of this paragraph if the 
                manufacturer has entered into an agreement with 
                the Secretary that meets the requirements of 
                section 340B of the Public Health Service Act 
                with respect to covered outpatient drugs 
                purchased by a covered entity on or after the 
                first day of the first month that begins after 
                the date of the enactment of this paragraph.
                  (B) Covered entity defined.--In this 
                subsection, the term ``covered entity'' means 
                an entity described in section 340B(a)(4) of 
                the Public Health Service Act.
                  (C) Establishment of alternative mechanism to 
                ensure against duplicate discounts or 
                rebates.--If the Secretary does not establish a 
                mechanism under section 340B(a)(5)(A) of the 
                Public Health Service Act within 12 months of 
                the date of the enactment of such section, the 
                following requirements shall apply:
                          (i) Entities.--Each covered entity 
                        shall inform the single State agency 
                        under section 1902(a)(5) when it is 
                        seeking reimbursement from the State 
                        plan for medical assistance described 
                        in section 1905(a)(12) with respect to 
                        a unit of any covered outpatient drug 
                        which is subject to an agreement under 
                        section 340B(a) of such Act.
                          (ii) State agency.--Each such single 
                        State agency shall provide a means by 
                        which a covered entity shall indicate 
                        on any drug reimbursement claims form 
                        (or format, where electronic claims 
                        management is used) that a unit of the 
                        drug that is the subject of the form is 
                        subject to an agreement under section 
                        340B of such Act, and not submit to any 
                        manufacturer a claim for a rebate 
                        payment under subsection (b) with 
                        respect to such a drug.
                  (D) Effect of subsequent amendments.--In 
                determining whether an agreement under 
                subparagraph (A) meets the requirements of 
                section 340B of the Public Health Service Act, 
                the Secretary shall not take into account any 
                amendments to such section that are enacted 
                after the enactment of title VI of the Veterans 
                Health Care Act of 1992.
                  (E) Determination of compliance.--A 
                manufacturer is deemed to meet the requirements 
                of this paragraph if the manufacturer 
                establishes to the satisfaction of the 
                Secretary that the manufacturer would comply 
                (and has offered to comply) with the provisions 
                of section 340B of the Public Health Service 
                Act (as in effect immediately after the 
                enactment of this paragraph, and would have 
                entered into an agreement under such section 
                (as such section was in effect at such time), 
                but for a legislative change in such section 
                after the date of the enactment of this 
                paragraph.
                  (6) Requirements relating to master 
                agreements for drugs procured by department of 
                veterans affairs and certain other federal 
                agencies.--
                          (A) In general.--A manufacturer meets 
                        the requirements of this paragraph if 
                        the manufacturer complies with the 
                        provisions of section 8126 of title 38, 
                        United States Code, including the 
                        requirement of entering into a master 
                        agreement with the Secretary of 
                        Veterans Affairs under such section.
                          (B) Effect of subsequent 
                        amendments.--In determining whether a 
                        master agreement described in 
                        subparagraph (A) meets the requirements 
                        of section 8126 of title 38, United 
                        States Code, the Secretary shall not 
                        take into account any amendments to 
                        such section that are enacted after the 
                        enactment of title VI of the Veterans 
                        Health Care Act of 1992.
                          (C) Determination of compliance.--A 
                        manufacturer is deemed to meet the 
                        requirements of this paragraph if the 
                        manufacturer establishes to the 
                        satisfaction of the Secretary that the 
                        manufacturer would comply (and has 
                        offered to comply) with the provisions 
                        of section 8126 of title 38, United 
                        States Code (as in effect immediately 
                        after the enactment of this paragraph) 
                        and would have entered into an 
                        agreement under such section (as such 
                        section was in effect at such time), 
                        but for a legislative change in such 
                        section after the date of the enactment 
                        of this paragraph.
          (7) Requirement for submission of utilization data 
        for certain physician administered drugs.--
                  (A) Single source drugs.--In order for 
                payment to be available under section 1903(a) 
                for a covered outpatient drug that is a single 
                source drug that is physician administered 
                under this title (as determined by the 
                Secretary), and that is administered on or 
                after January 1, 2006, the State shall provide 
                for the collection and submission of such 
                utilization data and coding (such as J-codes 
                and National Drug Code numbers) for each such 
                drug as the Secretary may specify as necessary 
                to identify the manufacturer of the drug in 
                order to secure rebates under this section for 
                drugs administered for which payment is made 
                under this title.
                  (B) Multiple source drugs.--
                          (i) Identification of most frequently 
                        physician administered multiple source 
                        drugs.--Not later than January 1, 2007, 
                        the Secretary shall publish a list of 
                        the 20 physician administered multiple 
                        source drugs that the Secretary 
                        determines have the highest dollar 
                        volume of physician administered drugs 
                        dispensed under this title. The 
                        Secretary may modify such list from 
                        year to year to reflect changes in such 
                        volume.
                          (ii) Requirement.--In order for 
                        payment to be available under section 
                        1903(a) for a covered outpatient drug 
                        that is a multiple source drug that is 
                        physician administered (as determined 
                        by the Secretary), that is on the list 
                        published under clause (i), and that is 
                        administered on or after January 1, 
                        2008, the State shall provide for the 
                        submission of such utilization data and 
                        coding (such as J-codes and National 
                        Drug Code numbers) for each such drug 
                        as the Secretary may specify as 
                        necessary to identify the manufacturer 
                        of the drug in order to secure rebates 
                        under this section.
                  (C) Use of ndc codes.--Not later than January 
                1, 2007, the information shall be submitted 
                under subparagraphs (A) and (B)(ii) using 
                National Drug Code codes unless the Secretary 
                specifies that an alternative coding system 
                should be used.
                  (D) Hardship waiver.--The Secretary may delay 
                the application of subparagraph (A) or (B)(ii), 
                or both, in the case of a State to prevent 
                hardship to States which require additional 
                time to implement the reporting system required 
                under the respective subparagraph.
  (b) Terms of Rebate Agreement.--
          (1) Periodic rebates.--
                  (A) In general.--A rebate agreement under 
                this subsection shall require the manufacturer 
                to provide, to each State plan approved under 
                this title, a rebate for a rebate period in an 
                amount specified in subsection (c) for covered 
                outpatient drugs of the manufacturer dispensed 
                after December 31, 1990, for which payment was 
                made under the State plan for such period, 
                including such drugs dispensed to individuals 
                enrolled with a medicaid managed care 
                organization if the organization is responsible 
                for coverage of such drugs. Such rebate shall 
                be paid by the manufacturer not later than 30 
                days after the date of receipt of the 
                information described in paragraph (2) for the 
                period involved.
                  (B) Offset against medical assistance.--
                Amounts received by a State under this section 
                (or under an agreement authorized by the 
                Secretary under subsection (a)(1) or an 
                agreement described in subsection (a)(4)) in 
                any quarter shall be considered to be a 
                reduction in the amount expended under the 
                State plan in the quarter for medical 
                assistance for purposes of section 1903(a)(1).
                  (C) Special rule for increased minimum rebate 
                percentage.--
                          (i) In general.--In addition to the 
                        amounts applied as a reduction under 
                        subparagraph (B), for rebate periods 
                        beginning on or after January 1, 2010, 
                        during a fiscal year, the Secretary 
                        shall reduce payments to a State under 
                        section 1903(a) in the manner specified 
                        in clause (ii), in an amount equal to 
                        the product of--
                                  (I) 100 percent minus the 
                                Federal medical assistance 
                                percentage applicable to the 
                                rebate period for the State; 
                                and
                                  (II) the amounts received by 
                                the State under such 
                                subparagraph that are 
                                attributable (as estimated by 
                                the Secretary based on 
                                utilization and other data) to 
                                the increase in the minimum 
                                rebate percentage effected by 
                                the amendments made by 
                                subsections (a)(1), (b), and 
                                (d) of section 2501 of the 
                                Patient Protection and 
                                Affordable Care Act, taking 
                                into account the additional 
                                drugs included under the 
                                amendments made by subsection 
                                (c) of section 2501 of such 
                                Act.
                        The Secretary shall adjust such payment 
                        reduction for a calendar quarter to the 
                        extent the Secretary determines, based 
                        upon subsequent utilization and other 
                        data, that the reduction for such 
                        quarter was greater or less than the 
                        amount of payment reduction that should 
                        have been made.
                          (ii) Manner of payment reduction.--
                        The amount of the payment reduction 
                        under clause (i) for a State for a 
                        quarter shall be deemed an overpayment 
                        to the State under this title to be 
                        disallowed against the State's regular 
                        quarterly draw for all Medicaid 
                        spending under section 1903(d)(2). Such 
                        a disallowance is not subject to a 
                        reconsideration under section 1116(d).
          (2) State provision of information.--
                  (A) State responsibility.--Each State agency 
                under this title shall report to each 
                manufacturer not later than 60 days after the 
                end of each rebate period and in a form 
                consistent with a standard reporting format 
                established by the Secretary, information on 
                the total number of units of each dosage form 
                and strength and package size of each covered 
                outpatient drug dispensed after December 31, 
                1990, for which payment was made under the plan 
                during the period, including such information 
                reported by each medicaid managed care 
                organization, and shall promptly transmit a 
                copy of such report to the Secretary.
                  (B) Audits.--A manufacturer may audit the 
                information provided (or required to be 
                provided) under subparagraph (A). Adjustments 
                to rebates shall be made to the extent that 
                information indicates that utilization was 
                greater or less than the amount previously 
                specified.
          (3) Manufacturer provision of price information.--
                  (A) In general.--Each manufacturer with an 
                agreement in effect under this section shall 
                report to the Secretary--
                          (i) not later than 30 days after the 
                        last day of each rebate period under 
                        the agreement--
                          (I) on the average manufacturer price 
                        (as defined in subsection (k)(1)) for 
                        covered outpatient drugs for the rebate 
                        period under the agreement (including 
                        for all such drugs that are sold under 
                        a new drug application approved under 
                        section 505(c) of the Federal Food, 
                        Drug, and Cosmetic Act); and
                          (II) for single source drugs and 
                        innovator multiple source drugs 
                        (including all such drugs that are sold 
                        under a new drug application approved 
                        under section 505(c) of the Federal 
                        Food, Drug, and Cosmetic Act), on the 
                        manufacturer's best price (as defined 
                        in subsection (c)(1)(C)) for such drugs 
                        for the rebate period under the 
                        agreement;
                          (ii) not later than 30 days after the 
                        date of entering into an agreement 
                        under this section on the average 
                        manufacturer price (as defined in 
                        subsection (k)(1)) as of October 1, 
                        1990 for each of the manufacturer's 
                        covered outpatient drugs (including for 
                        such drugs that are sold under a new 
                        drug application approved under section 
                        505(c) of the Federal Food, Drug, and 
                        Cosmetic Act); and
                          (iii) for calendar quarters beginning 
                        on or after January 1, 2004, in 
                        conjunction with reporting required 
                        under clause (i) and by National Drug 
                        Code (including package size)--
                                  (I) the manufacturer's 
                                average sales price (as defined 
                                in section 1847A(c)) and the 
                                total number of units specified 
                                under section 1847A(b)(2)(A);
                                  (II) if required to make 
                                payment under section 1847A, 
                                the manufacturer's wholesale 
                                acquisition cost, as defined in 
                                subsection (c)(6) of such 
                                section; and
                                  (III) information on those 
                                sales that were made at a 
                                nominal price or otherwise 
                                described in section 
                                1847A(c)(2)(B);
                        for a drug or biological described in 
                        subparagraph (C), (D), (E), or (G) of 
                        section 1842(o)(1) or section 
                        1881(b)(13)(A)(ii), and, for calendar 
                        quarters beginning on or after January 
                        1, 2007 and only with respect to the 
                        information described in subclause 
                        (III), for covered outpatient drugs.
                          (iv) not later than 30 days after the 
                        last day of each month of a rebate 
                        period under the agreement, on the 
                        manufacturer's total number of units 
                        that are used to calculate the monthly 
                        average manufacturer price for each 
                        covered outpatient drug;
                Information reported under this subparagraph is 
                subject to audit by the Inspector General of 
                the Department of Health and Human Services. 
                Beginning July 1, 2006, the Secretary shall 
                provide on a monthly basis to States under 
                subparagraph (D)(iv) the most recently reported 
                average manufacturer prices for single source 
                drugs and for multiple source drugs and shall, 
                on at least a quarterly basis, update the 
                information posted on the website under 
                subparagraph (D)(v) (relating to the weighted 
                average of the most recently reported monthly 
                average manufacturer prices).
                  (B) Verification surveys of average 
                manufacturer price and manufacturer's average 
                sales price.--The Secretary may survey 
                wholesalers and manufacturers that directly 
                distribute their covered outpatient drugs, when 
                necessary, to verify manufacturer prices and 
                manufacturer's average sales prices (including 
                wholesale acquisition cost) if required to make 
                payment reported under subparagraph (A). The 
                Secretary may impose a civil monetary penalty 
                in an amount not to exceed $100,000 on a 
                wholesaler, manufacturer, or direct seller, if 
                the wholesaler, manufacturer, or direct seller 
                of a covered outpatient drug refuses a request 
                for information about charges or prices by the 
                Secretary in connection with a survey under 
                this subparagraph or knowingly provides false 
                information. The provisions of section 1128A 
                (other than subsections (a) (with respect to 
                amounts of penalties or additional assessments) 
                and (b)) shall apply to a civil money penalty 
                under this subparagraph in the same manner as 
                such provisions apply to a penalty or 
                proceeding under section 1128A(a).
                  (C) Penalties.--
                          (i) Failure to provide timely 
                        information.--In the case of a 
                        manufacturer with an agreement under 
                        this section that fails to provide 
                        information required under subparagraph 
                        (A) on a timely basis, the amount of 
                        the penalty shall be increased by 
                        $10,000 for each day in which such 
                        information has not been provided and 
                        such amount shall be paid to the 
                        Treasury, and, if such information is 
                        not reported within 90 days of the 
                        deadline imposed, the agreement shall 
                        be suspended for services furnished 
                        after the end of such 90-day period and 
                        until the date such information is 
                        reported (but in no case shall such 
                        suspension be for a period of less than 
                        30 days).
                          (ii) False information.--Any 
                        manufacturer with an agreement under 
                        this section that knowingly provides 
                        false information is subject to a civil 
                        money penalty in an amount not to 
                        exceed $100,000 for each item of false 
                        information. Such civil money penalties 
                        are in addition to other penalties as 
                        may be prescribed by law. The 
                        provisions of section 1128A (other than 
                        subsections (a) and (b)) shall apply to 
                        a civil money penalty under this 
                        subparagraph in the same manner as such 
                        provisions apply to a penalty or 
                        proceeding under section 1128A(a).
                  (D) Confidentiality of information.--
                Notwithstanding any other provision of law, 
                information disclosed by manufacturers or 
                wholesalers under this paragraph or under an 
                agreement with the Secretary of Veterans 
                Affairs described in subsection (a)(6)(A)(ii) 
                (other than the wholesale acquisition cost for 
                purposes of carrying out section 1847A) is 
                confidential and shall not be disclosed by the 
                Secretary or the Secretary of Veterans Affairs 
                or a State agency (or contractor therewith) in 
                a form which discloses the identity of a 
                specific manufacturer or wholesaler, prices 
                charged for drugs by such manufacturer or 
                wholesaler, except--
                          (i) as the Secretary determines to be 
                        necessary to carry out this section, to 
                        carry out section 1847A (including the 
                        determination and implementation of the 
                        payment amount), or to carry out 
                        section 1847B,
                          (ii) to permit the Comptroller 
                        General to review the information 
                        provided,
                          (iii) to permit the Director of the 
                        Congressional Budget Office to review 
                        the information provided,
                          (iv) to States to carry out this 
                        title, and
                          (v) to the Secretary to disclose 
                        (through a website accessible to the 
                        public) the weighted average of the 
                        most recently reported monthly average 
                        manufacturer prices and the average 
                        retail survey price determined for each 
                        multiple source drug in accordance with 
                        subsection (f).
                The previous sentence shall also apply to 
                information disclosed under section 1860D-
                2(d)(2) or 1860D-4(c)(2)(E) and drug pricing 
                data reported under the first sentence of 
                section 1860D-31(i)(1).
          (4) Length of agreement.--
                  (A) In general.--A rebate agreement shall be 
                effective for an initial period of not less 
                than 1 year and shall be automatically renewed 
                for a period of not less than one year unless 
                terminated under subparagraph (B).
                  (B) Termination.--
                          (i) By the secretary.--The Secretary 
                        may provide for termination of a rebate 
                        agreement for violation of the 
                        requirements of the agreement or other 
                        good cause shown. Such termination 
                        shall not be effective earlier than 60 
                        days after the date of notice of such 
                        termination. The Secretary shall 
                        provide, upon request, a manufacturer 
                        with a hearing concerning such a 
                        termination, but such hearing shall not 
                        delay the effective date of the 
                        termination.
                          (ii) By a manufacturer.--A 
                        manufacturer may terminate a rebate 
                        agreement under this section for any 
                        reason. Any such termination shall not 
                        be effective until the calendar quarter 
                        beginning at least 60 days after the 
                        date the manufacturer provides notice 
                        to the Secretary.
                          (iii) Effectiveness of termination.--
                        Any termination under this subparagraph 
                        shall not affect rebates due under the 
                        agreement before the effective date of 
                        its termination.
                          (iv) Notice to states.--In the case 
                        of a termination under this 
                        subparagraph, the Secretary shall 
                        provide notice of such termination to 
                        the States within not less than 30 days 
                        before the effective date of such 
                        termination.
                          (v) Application to terminations of 
                        other agreements.--The provisions of 
                        this subparagraph shall apply to the 
                        terminations of agreements described in 
                        section 340B(a)(1) of the Public Health 
                        Service Act and master agreements 
                        described in section 8126(a) of title 
                        38, United States Code.
                  (C) Delay before reentry.--In the case of any 
                rebate agreement with a manufacturer under this 
                section which is terminated, another such 
                agreement with the manufacturer (or a successor 
                manufacturer) may not be entered into until a 
                period of 1 calendar quarter has elapsed since 
                the date of the termination, unless the 
                Secretary finds good cause for an earlier 
                reinstatement of such an agreement.
  (c) Determination of Amount of Rebate.--
          (1) Basic rebate for single source drugs and 
        innovator multiple source drugs.--
                  (A) In general.--Except as provided in 
                paragraph (2), the amount of the rebate 
                specified in this subsection for a rebate 
                period (as defined in subsection (k)(8)) with 
                respect to each dosage form and strength of a 
                single source drug or an innovator multiple 
                source drug shall be equal to the product of--
                          (i) the total number of units of each 
                        dosage form and strength paid for under 
                        the State plan in the rebate period (as 
                        reported by the State); and
                          (ii) subject to subparagraph (B)(ii), 
                        the greater of--
                                  (I) the difference between 
                                the average manufacturer price 
                                and the best price (as defined 
                                in subparagraph (C)) for the 
                                dosage form and strength of the 
                                drug, or
                                  (II) the minimum rebate 
                                percentage (specified in 
                                subparagraph (B)(i)) of such 
                                average manufacturer price,
                        of or the rebate period.
                  (B) Range of rebates required.--
                          (i) Minimum rebate percentage.--For 
                        purposes of subparagraph (A)(ii)(II), 
                        the ``minimum rebate percentage'' for 
                        rebate periods beginning--
                                  (I) after December 31, 1990, 
                                and before October 1, 1992, is 
                                12.5 percent;
                                  (II) after September 30, 
                                1992, and before January 1, 
                                1994, is 15.7 percent;
                                  (III) after December 31, 
                                1993, and before January 1, 
                                1995, is 15.4 percent;
                                  (IV) after December 31, 1994, 
                                and before January 1, 1996, is 
                                15.2 percent;
                                  (V) after December 31, 1995, 
                                and before January 1, 2010 is 
                                15.1 percent;and
                                  (VI) except as provided in 
                                clause (iii), after December 
                                31, 2009, 23.1 percent.
                          (ii) Temporary limitation on maximum 
                        rebate amount.--In no case shall the 
                        amount applied under subparagraph 
                        (A)(ii) for a rebate period beginning--
                                  (I) before January 1, 1992, 
                                exceed 25 percent of the 
                                average manufacturer price; or
                                  (II) after December 31, 1991, 
                                and before January 1, 1993, 
                                exceed 50 percent of the 
                                average manufacturer price.
                          (iii) Minimum rebate percentage for 
                        certain drugs.--
                                  (I) In general.--In the case 
                                of a single source drug or an 
                                innovator multiple source drug 
                                described in subclause (II), 
                                the minimum rebate percentage 
                                for rebate periods specified in 
                                clause (i)(VI) is 17.1 percent.
                                  (II) Drug described.--For 
                                purposes of subclause (I), a 
                                single source drug or an 
                                innovator multiple source drug 
                                described in this subclause is 
                                any of the following drugs:
                                          (aa) A clotting 
                                        factor for which a 
                                        separate furnishing 
                                        payment is made under 
                                        section 1842(o)(5) and 
                                        which is included on a 
                                        list of such factors 
                                        specified and updated 
                                        regularly by the 
                                        Secretary.
                                          (bb) A drug approved 
                                        by the Food and Drug 
                                        Administration 
                                        exclusively for 
                                        pediatric indications.
                  (C) Best price defined.--For purposes of this 
                section--
                          (i) In general.--The term ``best 
                        price'' means, with respect to a single 
                        source drug or innovator multiple 
                        source drug of a manufacturer 
                        (including the lowest price available 
                        to any entity for any such drug of a 
                        manufacturer that is sold under a new 
                        drug application approved under section 
                        505(c) of the Federal Food, Drug, and 
                        Cosmetic Act), the lowest price 
                        available from the manufacturer during 
                        the rebate period to any wholesaler, 
                        retailer, provider, health maintenance 
                        organization, nonprofit entity, or 
                        governmental entity within the United 
                        States, excluding--
                                  (I) any prices charged on or 
                                after October 1, 1992, to the 
                                Indian Health Service, the 
                                Department of Veterans Affairs, 
                                a State home receiving funds 
                                under section 1741 of title 38, 
                                United States Code, the 
                                Department of Defense, the 
                                Public Health Service, or a 
                                covered entity described in 
                                subsection (a)(5)(B) (including 
                                inpatient prices charged to 
                                hospitals described in section 
                                340B(a)(4)(L) of the Public 
                                Health Service Act);
                                  (II) any prices charged under 
                                the Federal Supply Schedule of 
                                the General Services 
                                Administration;
                                  (III) any prices used under a 
                                State pharmaceutical assistance 
                                program;
                                  (IV) any depot prices and 
                                single award contract prices, 
                                as defined by the Secretary, of 
                                any agency of the Federal 
                                Government;
                                  (V) the prices negotiated 
                                from drug manufacturers for 
                                covered discount card drugs 
                                under an endorsed discount card 
                                program under section 1860D-31; 
                                and
                                  (VI) any prices charged which 
                                are negotiated by a 
                                prescription drug plan under 
                                part D of title XVIII, by an 
                                MA-PD plan under part C of such 
                                title with respect to covered 
                                part D drugs or by a qualified 
                                retiree prescription drug plan 
                                (as defined in section 1860D-
                                22(a)(2)) with respect to such 
                                drugs on behalf of individuals 
                                entitled to benefits under part 
                                A or enrolled under part B of 
                                such title, or any discounts 
                                provided by manufacturers under 
                                the Medicare coverage gap 
                                discount program under section 
                                1860D-14A.
                          (ii) Special rules.--The term ``best 
                        price''--
                                  (I) shall be inclusive of 
                                cash discounts, free goods that 
                                are contingent on any purchase 
                                requirement, volume discounts, 
                                and rebates (other than rebates 
                                under this section);
                                  (II) shall be determined 
                                without regard to special 
                                packaging, labeling, or 
                                identifiers on the dosage form 
                                or product or package;
                                  (III) shall not take into 
                                account prices that are merely 
                                nominal in amount; and
                          (IV) in the case of a manufacturer 
                        that approves, allows, or otherwise 
                        permits any other drug of the 
                        manufacturer to be sold under a new 
                        drug application approved under section 
                        505(c) of the Federal Food, Drug, and 
                        Cosmetic Act, shall be inclusive of the 
                        lowest price for such authorized drug 
                        available from the manufacturer during 
                        the rebate period to any manufacturer, 
                        wholesaler, retailer, provider, health 
                        maintenance organization, nonprofit 
                        entity, or governmental entity within 
                        the United States, excluding those 
                        prices described in subclauses (I) 
                        through (IV) of clause (i).
                          (iii) Application of auditing and 
                        recordkeeping requirements.--With 
                        respect to a covered entity described 
                        in section 340B(a)(4)(L) of the Public 
                        Health Service Act, any drug purchased 
                        for inpatient use shall be subject to 
                        the auditing and recordkeeping 
                        requirements described in section 
                        340B(a)(5)(C) of the Public Health 
                        Service Act.
                  (D) Limitation on sales at a nominal price.--
                          (i) In general.--For purposes of 
                        subparagraph (C)(ii)(III) and 
                        subsection (b)(3)(A)(iii)(III), only 
                        sales by a manufacturer of covered 
                        outpatient drugs at nominal prices to 
                        the following shall be considered to be 
                        sales at a nominal price or merely 
                        nominal in amount:
                                  (I) A covered entity 
                                described in section 340B(a)(4) 
                                of the Public Health Service 
                                Act.
                                  (II) An intermediate care 
                                facility for the mentally 
                                retarded.
                                  (III) A State-owned or 
                                operated nursing facility.
                                  (IV) An entity that--
                                          (aa) is described in 
                                        section 501(c)(3) of 
                                        the Internal Revenue 
                                        Code of 1986 and exempt 
                                        from tax under section 
                                        501(a) of such Act or 
                                        is State-owned or 
                                        operated; and
                                          (bb) would be a 
                                        covered entity 
                                        described in section 
                                        340(B)(a)(4) of the 
                                        Public Health Service 
                                        Act insofar as the 
                                        entity provides the 
                                        same type of services 
                                        to the same type of 
                                        populations as a 
                                        covered entity 
                                        described in such 
                                        section provides, but 
                                        does not receive 
                                        funding under a 
                                        provision of law 
                                        referred to in such 
                                        section;
                                  (V) A public or nonprofit 
                                entity, or an entity based at 
                                an institution of higher 
                                learning whose primary purpose 
                                is to provide health care 
                                services to students of that 
                                institution, that provides a 
                                service or services described 
                                under section 1001(a) of the 
                                Public Health Service Act, 42 
                                U.S.C. 300.
                                  (VI) Any other facility or 
                                entity that the Secretary 
                                determines is a safety net 
                                provider to which sales of such 
                                drugs at a nominal price would 
                                be appropriate based on the 
                                factors described in clause 
                                (ii).
                          (ii) Factors.--The factors described 
                        in this clause with respect to a 
                        facility or entity are the following:
                                  (I) The type of facility or 
                                entity.
                                  (II) The services provided by 
                                the facility or entity.
                                  (III) The patient population 
                                served by the facility or 
                                entity.
                                  (IV) The number of other 
                                facilities or entities eligible 
                                to purchase at nominal prices 
                                in the same service area.
                          (iii) Nonapplication.--Clause (i) 
                        shall not apply with respect to sales 
                        by a manufacturer at a nominal price of 
                        covered outpatient drugs pursuant to a 
                        master agreement under section 8126 of 
                        title 38, United States Code.
                          (iv) Rule of Construction.--Nothing 
                        in this subparagraph shall be construed 
                        to alter any existing statutory or 
                        regulatory prohibition on services with 
                        respect to an entity described in 
                        clause (i)(IV), including the 
                        prohibition set forth in section 1008 
                        of the Public Health Service Act.
          (2) Additional rebate for single source and innovator 
        multiple source drugs.--
                  (A) In general.--The amount of the rebate 
                specified in this subsection for a rebate 
                period, with respect to each dosage form and 
                strength of a single source drug or an 
                innovator multiple source drug, shall be 
                increased by an amount equal to the product 
                of--
                          (i) the total number of units of such 
                        dosage form and strength dispensed 
                        after December 31, 1990, for which 
                        payment was made under the State plan 
                        for the rebate period; and
                          (ii) the amount (if any) by which--
                                  (I) the average manufacturer 
                                price for the dosage form and 
                                strength of the drug for the 
                                period, exceeds
                                  (II) the average manufacturer 
                                price for such dosage form and 
                                strength for the calendar 
                                quarter beginning July 1, 1990 
                                (without regard to whether or 
                                not the drug has been sold or 
                                transferred to an entity, 
                                including a division or 
                                subsidiary of the manufacturer, 
                                after the first day of such 
                                quarter), increased by the 
                                percentage by which the 
                                consumer price index for all 
                                urban consumers (United States 
                                city average) for the month 
                                before the month in which the 
                                rebate period begins exceeds 
                                such index for September 1990.
                  (B) Treatment of subsequently approved 
                drugs.--In the case of a covered outpatient 
                drug approved by the Food and Drug 
                Administration after October 1, 1990, clause 
                (ii)(II) of subparagraph (A) shall be applied 
                by substituting ``the first full calendar 
                quarter after the day on which the drug was 
                first marketed'' for ``the calendar quarter 
                beginning July 1, 1990'' and ``the month prior 
                to the first month of the first full calendar 
                quarter after the day on which the drug was 
                first marketed'' for ``September 1990''.
                  (C) Treatment of new formulations.--In the 
                case of a drug that is a line extension of a 
                single source drug or an innovator multiple 
                source drug that is an oral solid dosage form, 
                the rebate obligation with respect to such drug 
                under this section shall be the amount computed 
                under this section for such new drug or, if 
                greater, the product of--
                          (i) the average manufacturer price of 
                        the line extension of a single source 
                        drug or an innovator multiple source 
                        drug that is an oral solid dosage form;
                          (ii) the highest additional rebate 
                        (calculated as a percentage of average 
                        manufacturer price) under this section 
                        for any strength of the original single 
                        source drug or innovator multiple 
                        source drug; and
                          (iii) the total number of units of 
                        each dosage form and strength of the 
                        line extension product paid for under 
                        the State plan in the rebate period (as 
                        reported by the State).
                In this subparagraph, the term ``line 
                extension'' means, with respect to a drug, a 
                new formulation of the drug, such as an 
                extended release formulation.
                  (D) Maximum rebate amount.--In no case shall 
                the sum of the amounts applied under paragraph 
                (1)(A)(ii) and this paragraph with respect to 
                each dosage form and strength of a single 
                source drug or an innovator multiple source 
                drug for a rebate period beginning after 
                December 31, 2009, exceed 100 percent of the 
                average manufacturer price of the drug.
          (3) Rebate for other drugs.--
                  (A) In general.--Except as provided in 
                subparagraph (C), the amount of the rebate paid 
                to a State for a rebate period with respect to 
                each dosage form and strength of covered 
                outpatient drugs (other than single source 
                drugs and innovator multiple source drugs) 
                shall be equal to the product of--
                          (i) the applicable percentage (as 
                        described in subparagraph (B)) of the 
                        average manufacturer price for the 
                        dosage form and strength for the rebate 
                        period, and
                          (ii) the total number of units of 
                        such dosage form and strength dispensed 
                        after December 31, 1990, for which 
                        payment was made under the State plan 
                        for the rebate period.
                  (B) Applicable percentage defined.--For 
                purposes of subparagraph (A)(i), the 
                ``applicable percentage'' for rebate periods 
                beginning--
                          (i) before January 1, 1994, is 10 
                        percent,
                          (ii) after December 31, 1993, and 
                        before January 1, 2010, is 11 percent; 
                        and
                          (iii) after December 31, 2009, is 13 
                        percent.
                  (C) Additional rebate.--
                          (i) In general.--The amount of the 
                        rebate specified in this paragraph for 
                        a rebate period, with respect to each 
                        dosage form and strength of a covered 
                        outpatient drug other than a single 
                        source drug or an innovator multiple 
                        source drug of a manufacturer, shall be 
                        increased in the manner that the rebate 
                        for a dosage form and strength of a 
                        single source drug or an innovator 
                        multiple source drug is increased under 
                        subparagraphs (A) and (D) of paragraph 
                        (2), except as provided in clause (ii).
                          (ii) Special rules for application of 
                        provision.--In applying subparagraphs 
                        (A) and (D) of paragraph (2) under 
                        clause (i)--
                                  (I) the reference in 
                                subparagraph (A)(i) of such 
                                paragraph to ``1990'' shall be 
                                deemed a reference to ``2014'';
                                  (II) subject to clause (iii), 
                                the reference in subparagraph 
                                (A)(ii) of such paragraph to 
                                ``the calendar quarter 
                                beginning July 1, 1990'' shall 
                                be deemed a reference to ``the 
                                calendar quarter beginning July 
                                1, 2014''; and
                                  (III) subject to clause 
                                (iii), the reference in 
                                subparagraph (A)(ii) of such 
                                paragraph to ``September 1990'' 
                                shall be deemed a reference to 
                                ``September 2014'';
                                  (IV) the references in 
                                subparagraph (D) of such 
                                paragraph to ``paragraph 
                                (1)(A)(ii)'', ``this 
                                paragraph'', and ``December 31, 
                                2009'' shall be deemed 
                                references to ``subparagraph 
                                (A)'', ``this subparagraph'', 
                                and ``December 31, 2014'', 
                                respectively; and
                                  (V) any reference in such 
                                paragraph to a ``single source 
                                drug or an innovator multiple 
                                source drug'' shall be deemed 
                                to be a reference to a drug to 
                                which clause (i) applies.
                          (iii) Special rule for certain 
                        noninnovator multiple source drugs.--In 
                        applying paragraph (2)(A)(ii)(II) under 
                        clause (i) with respect to a covered 
                        outpatient drug that is first marketed 
                        as a drug other than a single source 
                        drug or an innovator multiple source 
                        drug after April 1, 2013, such 
                        paragraph shall be applied--
                                  (I) by substituting ``the 
                                applicable quarter'' for ``the 
                                calendar quarter beginning July 
                                1, 1990''; and
                                  (II) by substituting ``the 
                                last month in such applicable 
                                quarter'' for ``September 
                                1990''.
                          (iv) Applicable quarter defined.--In 
                        this subsection, the term ``applicable 
                        quarter'' means, with respect to a drug 
                        described in clause (iii), the fifth 
                        full calendar quarter after which the 
                        drug is marketed as a drug other than a 
                        single source drug or an innovator 
                        multiple source drug.
  (d) Limitations on Coverage of Drugs.--
          (1) Permissible restrictions.--(A) A State may 
        subject to prior authorization any covered outpatient 
        drug. Any such prior authorization program shall comply 
        with the requirements of paragraph (5).
          (B) A State may exclude or otherwise restrict 
        coverage of a covered outpatient drug if--
                  (i) the prescribed use is not for a medically 
                accepted indication (as defined in subsection 
                (k)(6));
                  (ii) the drug is contained in the list 
                referred to in paragraph (2);
                  (iii) the drug is subject to such 
                restrictions pursuant to an agreement between a 
                manufacturer and a State authorized by the 
                Secretary under subsection (a)(1) or in effect 
                pursuant to subsection (a)(4); or
                  (iv) the State has excluded coverage of the 
                drug from its formulary established in 
                accordance with paragraph (4).
          (2) List of drugs subject to restriction.--The 
        following drugs or classes of drugs, or their medical 
        uses, may be excluded from coverage or otherwise 
        restricted:
                  (A) Agents when used for anorexia, weight 
                loss, or weight gain.
                  (B) Agents when used to promote fertility.
                  (C) Agents when used for cosmetic purposes or 
                hair growth.
                  (D) Agents when used for the symptomatic 
                relief of cough and colds.
                  (E) Prescription vitamins and mineral 
                products, except prenatal vitamins and fluoride 
                preparations.
                  (F) Nonprescription drugs, except, in the 
                case of pregnant women (and women described in 
                section 1905(bb) as pregnant women pursuant to 
                paragraph (4) of such section) when recommended 
                in accordance with the Guideline referred to in 
                section 1905(bb)(2)(A), agents approved by the 
                Food and Drug Administration under the over-
                the-counter monograph process for purposes of 
                promoting, and when used to promote, tobacco 
                cessation.
                  (G) Covered outpatient drugs which the 
                manufacturer seeks to require as a condition of 
                sale that associated tests or monitoring 
                services be purchased exclusively from the 
                manufacturer or its designee.
                  (H) Agents when used for the treatment of 
                sexual or erectile dysfunction, unless such 
                agents are used to treat a condition, other 
                than sexual or erectile dysfunction, for which 
                the agents have been approved by the Food and 
                Drug Administration.
          (3) Update of drug listings.--The Secretary shall, by 
        regulation, periodically update the list of drugs or 
        classes of drugs described in paragraph (2) or their 
        medical uses, which the Secretary has determined, based 
        on data collected by surveillance and utilization 
        review programs of State medical assistance programs, 
        to be subject to clinical abuse or inappropriate use.
          (4) Requirements for formularies.--A State may 
        establish a formulary if the formulary meets the 
        following requirements:
                  (A) The formulary is developed by a committee 
                consisting of physicians, pharmacists, and 
                other appropriate individuals appointed by the 
                Governor of the State (or, at the option of the 
                State, the State's drug use review board 
                established under subsection (g)(3)).
                  (B) Except as provided in subparagraph (C), 
                the formulary includes the covered outpatient 
                drugs of any manufacturer which has entered 
                into and complies with an agreement under 
                subsection (a) (other than any drug excluded 
                from coverage or otherwise restricted under 
                paragraph (2)).
                  (C) A covered outpatient drug may be excluded 
                with respect to the treatment of a specific 
                disease or condition for an identified 
                population (if any) only if, based on the 
                drug's labeling (or, in the case of a drug the 
                prescribed use of which is not approved under 
                the Federal Food, Drug, and Cosmetic Act but is 
                a medically accepted indication, based on 
                information from the appropriate compendia 
                described in subsection (k)(6)), the excluded 
                drug does not have a significant, clinically 
                meaningful therapeutic advantage in terms of 
                safety, effectiveness, or clinical outcome of 
                such treatment for such population over other 
                drugs included in the formulary and there is a 
                written explanation (available to the public) 
                of the basis for the exclusion.
                  (D) The State plan permits coverage of a drug 
                excluded from the formulary (other than any 
                drug excluded from coverage or otherwise 
                restricted under paragraph (2)) pursuant to a 
                prior authorization program that is consistent 
                with paragraph (5).
                  (E) The formulary meets such other 
                requirements as the Secretary may impose in 
                order to achieve program savings consistent 
                with protecting the health of program 
                beneficiaries.
        A prior authorization program established by a State 
        under paragraph (5) is not a formulary subject to the 
        requirements of this paragraph.
          (5) Requirements of prior authorization programs.--A 
        State plan under this title may require, as a condition 
        of coverage or payment for a covered outpatient drug 
        for which Federal financial participation is available 
        in accordance with this section, with respect to drugs 
        dispensed on or after July 1, 1991, the approval of the 
        drug before its dispensing for any medically accepted 
        indication (as defined in subsection (k)(6)) only if 
        the system providing for such approval--
                  (A) provides response by telephone or other 
                telecommunication device within 24 hours of a 
                request for prior authorization; and
                  (B) except with respect to the drugs on the 
                list referred to in paragraph (2), provides for 
                the dispensing of at least 72-hour supply of a 
                covered outpatient prescription drug in an 
                emergency situation (as defined by the 
                Secretary).
          (6) Other permissible restrictions.--A State may 
        impose limitations, with respect to all such drugs in a 
        therapeutic class, on the minimum or maximum quantities 
        per prescription or on the number of refills, if such 
        limitations are necessary to discourage waste, and may 
        address instances of fraud or abuse by individuals in 
        any manner authorized under this Act.
          (7) Non-excludable drugs.--The following drugs or 
        classes of drugs, or their medical uses, shall not be 
        excluded from coverage:
                  (A) Agents when used to promote smoking 
                cessation, including agents approved by the 
                Food and Drug Administration under the over-
                the-counter monograph process for purposes of 
                promoting, and when used to promote, tobacco 
                cessation.
                  (B) Barbiturates.
                  (C) Benzodiazepines.
  (e) Treatment of Pharmacy Reimbursement Limits.--
          (1) In general.--During the period beginning on 
        January 1, 1991, and ending on December 31, 1994--
                  (A) a State may not reduce the payment limits 
                established by regulation under this title or 
                any limitation described in paragraph (3) with 
                respect to the ingredient cost of a covered 
                outpatient drug or the dispensing fee for such 
                a drug below the limits in effect as of January 
                1, 1991, and
                  (B) except as provided in paragraph (2), the 
                Secretary may not modify by regulation the 
                formula established under sections 447.331 
                through 447.334 of title 42, Code of Federal 
                Regulations, in effect on November 5, 1990, to 
                reduce the limits described in subparagraph 
                (A).
          (2) Special rule.--If a State is not in compliance 
        with the regulations described in paragraph (1)(B), 
        paragraph (1)(A) shall not apply to such State until 
        such State is in compliance with such regulations.
          (3) Effect on state maximum allowable cost 
        limitations.--This section shall not supersede or 
        affect provisions in effect prior to January 1, 1991, 
        or after December 31, 1994, relating to any maximum 
        allowable cost limitation established by a State for 
        payment by the State for covered outpatient drugs, and 
        rebates shall be made under this section without regard 
        to whether or not payment by the State for such drugs 
        is subject to such a limitation or the amount of such a 
        limitation.
          (4) Establishment of upper payment Limits.--Subject 
        to paragraph (5), the Secretary shall establish a 
        Federal upper reimbursement limit for each multiple 
        source drug for which the FDA has rated three or more 
        products therapeutically and pharmaceutically 
        equivalent, regardless of whether all such additional 
        formulations are rated as such and shall use only such 
        formulations when determining any such upper limit.
          (5) Use of amp in upper payment limits.--The 
        Secretary shall calculate the Federal upper 
        reimbursement limit established under paragraph (4) as 
        no less than 175 percent of the weighted average 
        (determined on the basis of utilization) of the most 
        recently reported monthly average manufacturer prices 
        for pharmaceutically and therapeutically equivalent 
        multiple source drug products that are available for 
        purchase by retail community pharmacies on a nationwide 
        basis. The Secretary shall implement a smoothing 
        process for average manufacturer prices. Such process 
        shall be similar to the smoothing process used in 
        determining the average sales price of a drug or 
        biological under section 1847A.
  (f) Survey of Retail Prices; State Payment and Utilization 
Rates; and Performance Rankings.--
          (1) Survey of retail prices.--
                  (A) Use of vendor.--The Secretary may 
                contract services for--
                          (i) with respect to a retail 
                        community pharmacy, the determination 
                        on a monthly basis of retail survey 
                        prices for covered outpatient drugs 
                        that represent a nationwide average of 
                        consumer purchase prices for such 
                        drugs, net of all discounts and rebates 
                        (to the extent any information with 
                        respect to such discounts and rebates 
                        is available); and
                          (ii) the notification of the 
                        Secretary when a drug product that is 
                        therapeutically and pharmaceutically 
                        equivalent and bioequivalent becomes 
                        generally available.
                  (B) Secretary response to notification of 
                availability of multiple source products.--If 
                contractor notifies the Secretary under 
                subparagraph (A)(ii) that a drug product 
                described in such subparagraph has become 
                generally available, the Secretary shall make a 
                determination, within 7 days after receiving 
                such notification, as to whether the product is 
                now described in subsection (e)(4).
                  (C) Use of competitive bidding.--In 
                contracting for such services, the Secretary 
                shall competitively bid for an outside vendor 
                that has a demonstrated history in--
                          (i) surveying and determining, on a 
                        representative nationwide basis, retail 
                        prices for ingredient costs of 
                        prescription drugs;
                          (ii) working with retail community 
                        pharmacies, commercial payers, and 
                        States in obtaining and disseminating 
                        such price information; and
                          (iii) collecting and reporting such 
                        price information on at least a monthly 
                        basis.
                In contracting for such services, the Secretary 
                may waive such provisions of the Federal 
                Acquisition Regulation as are necessary for the 
                efficient implementation of this subsection, 
                other than provisions relating to 
                confidentiality of information and such other 
                provisions as the Secretary determines 
                appropriate.
                  (D) Additional provisions.--A contract with a 
                vendor under this paragraph shall include such 
                terms and conditions as the Secretary shall 
                specify, including the following:
                          (i) The vendor must monitor the 
                        marketplace and report to the Secretary 
                        each time there is a new covered 
                        outpatient drug generally available.
                          (ii) The vendor must update the 
                        Secretary no less often than monthly on 
                        the retail survey prices for covered 
                        outpatient drugs.
                          (iii) The contract shall be effective 
                        for a term of 2 years.
                  (E) Availability of information to states.--
                Information on retail survey prices obtained 
                under this paragraph, including applicable 
                information on single source drugs, shall be 
                provided to States on at least a monthly basis. 
                The Secretary shall devise and implement a 
                means for providing access to each State agency 
                designated under section 1902(a)(5) with 
                responsibility for the administration or 
                supervision of the administration of the State 
                plan under this title of the retail survey 
                price determined under this paragraph.
          (2) Annual state report.--Each State shall annually 
        report to the Secretary information on--
                  (A) the payment rates under the State plan 
                under this title for covered outpatient drugs;
                  (B) the dispensing fees paid under such plan 
                for such drugs; and
                  (C) utilization rates for noninnovator 
                multiple source drugs under such plan.
          (3) Annual state performance rankings.--
                  (A) Comparative analysis.--The Secretary 
                annually shall compare, for the 50 most widely 
                prescribed drugs identified by the Secretary, 
                the national retail sales price data (collected 
                under paragraph (1)) for such drugs with data 
                on prices under this title for each such drug 
                for each State.
                  (B) Availability of information.--The 
                Secretary shall submit to Congress and the 
                States full information regarding the annual 
                rankings made under subparagraph (A).
          (4) Appropriation.--Out of any funds in the Treasury 
        not otherwise appropriated, there is appropriated to 
        the Secretary of Health and Human Services $5,000,000 
        for each of fiscal years 2006 through 2010 to carry out 
        this subsection.
  (g) Drug Use Review.--
          (1) In general.--
                  (A) In order to meet the requirement of 
                section 1903(i)(10)(B), a State shall provide, 
                by not later than January 1, 1993, for a drug 
                use review program described in paragraph (2) 
                for covered outpatient drugs in order to assure 
                that prescriptions (i) are appropriate, (ii) 
                are medically necessary, and (iii) are not 
                likely to result in adverse medical results. 
                The program shall be designed to educate 
                physicians and pharmacists to identify and 
                reduce the frequency of patterns of fraud, 
                abuse, gross overuse, or inappropriate or 
                medically unnecessary care, among physicians, 
                pharmacists, and patients, or associated with 
                specific drugs or groups of drugs, as well as 
                potential and actual severe adverse reactions 
                to drugs including education on therapeutic 
                appropriateness, overutilization and 
                underutilization, appropriate use of generic 
                products, therapeutic duplication, drug-disease 
                contraindications, drug-drug interactions, 
                incorrect drug dosage or duration of drug 
                treatment, drug-allergy interactions, and 
                clinical abuse/misuse.
                  (B) The program shall assess data on drug use 
                against predetermined standards, consistent 
                with the following:
                          (i) compendia which shall consist of 
                        the following:
                                  (I) American Hospital 
                                Formulary Service Drug 
                                Information;
                                  (II) United States 
                                Pharmacopeia-Drug Information 
                                (or its successor 
                                publications); and
                                  (III) the DRUGDEX Information 
                                System; and
                          (ii) the peer-reviewed medical 
                        literature.
                  (C) The Secretary, under the procedures 
                established in section 1903, shall pay to each 
                State an amount equal to 75 per centum of so 
                much of the sums expended by the State plan 
                during calendar years 1991 through 1993 as the 
                Secretary determines is attributable to the 
                statewide adoption of a drug use review program 
                which conforms to the requirements of this 
                subsection.
                  (D) States shall not be required to perform 
                additional drug use reviews with respect to 
                drugs dispensed to residents of nursing 
                facilities which are in compliance with the 
                drug regimen review procedures prescribed by 
                the Secretary for such facilities in 
                regulations implementing section 1919, 
                currently at section 483.60 of title 42, Code 
                of Federal Regulations.
          (2) Description of program.--Each drug use review 
        program shall meet the following requirements for 
        covered outpatient drugs:
                  (A) Prospective drug review.--(i) The State 
                plan shall provide for a review of drug therapy 
                before each prescription is filled or delivered 
                to an individual receiving benefits under this 
                title, typically at the point-of-sale or point 
                of distribution. The review shall include 
                screening for potential drug therapy problems 
                due to therapeutic duplication, drug-disease 
                contraindications, drug-drug interactions 
                (including serious interactions with 
                nonprescription or over-the-counter drugs), 
                incorrect drug dosage or duration of drug 
                treatment, drug-allergy interactions, and 
                clinical abuse/misuse. Each State shall use the 
                compendia and literature referred to in 
                paragraph (1)(B) as its source of standards for 
                such review.
                  (ii) As part of the State's prospective drug 
                use review program under this subparagraph 
                applicable State law shall establish standards 
                for counseling of individuals receiving 
                benefits under this title by pharmacists which 
                includes at least the following:
                          (I) The pharmacist must offer to 
                        discuss with each individual receiving 
                        benefits under this title or caregiver 
                        of such individual (in person, whenever 
                        practicable, or through access to a 
                        telephone service which is toll-free 
                        for long-distance calls) who presents a 
                        prescription, matters which in the 
                        exercise of the pharmacist's 
                        professional judgment (consistent with 
                        State law respecting the provision of 
                        such information), the pharmacist deems 
                        significant including the following:
                                  (aa) The name and description 
                                of the medication.
                                  (bb) The route, dosage form, 
                                dosage, route of 
                                administration, and duration of 
                                drug therapy.
                                  (cc) Special directions and 
                                precautions for preparation, 
                                administration and use by the 
                                patient.
                                  (dd) Common severe side or 
                                adverse effects or interactions 
                                and therapeutic 
                                contraindications that may be 
                                encountered, including their 
                                avoidance, and the action 
                                required if they occur.
                                  (ee) Techniques for self-
                                monitoring drug therapy.
                                  (ff) Proper storage.
                                  (gg) Prescription refill 
                                information.
                                  (hh) Action to be taken in 
                                the event of a missed dose.
                          (II) A reasonable effort must be made 
                        by the pharmacist to obtain, record, 
                        and maintain at least the following 
                        information regarding individuals 
                        receiving benefits under this title:
                                  (aa) Name, address, telephone 
                                number, date of birth (or age) 
                                and gender.
                                  (bb) Individual history where 
                                significant, including disease 
                                state or states, known 
                                allergies and drug reactions, 
                                and a comprehensive list of 
                                medications and relevant 
                                devices.
                                  (cc) Pharmacist comments 
                                relevant to the individual's 
                                drug therapy.
                Nothing in this clause shall be construed as 
                requiring a pharmacist to provide consultation 
                when an individual receiving benefits under 
                this title or caregiver of such individual 
                refuses such consultation, or to require 
                verification of the offer to provide 
                consultation or a refusal of such offer.
                  (B) Retrospective drug use review.--The 
                program shall provide, through its mechanized 
                drug claims processing and information 
                retrieval systems (approved by the Secretary 
                under section 1903(r)) or otherwise, for the 
                ongoing periodic examination of claims data and 
                other records in order to identify patterns of 
                fraud, abuse, gross overuse, or inappropriate 
                or medically unnecessary care, among 
                physicians, pharmacists and individuals 
                receiving benefits under this title, or 
                associated with specific drugs or groups of 
                drugs.
                  (C) Application of standards.--The program 
                shall, on an ongoing basis, assess data on drug 
                use against explicit predetermined standards 
                (using the compendia and literature referred to 
                in subsection (1)(B) as the source of standards 
                for such assessment) including but not limited 
                to monitoring for therapeutic appropriateness, 
                overutilization and underutilization, 
                appropriate use of generic products, 
                therapeutic duplication, drug-disease 
                contraindications, drug-drug interactions, 
                incorrect drug dosage or duration of drug 
                treatment, and clinical abuse/misuse and, as 
                necessary, introduce remedial strategies, in 
                order to improve the quality of care and to 
                conserve program funds or personal 
                expenditures.
                  (D) Educational program.--The program shall, 
                through its State drug use review board 
                established under paragraph (3), either 
                directly or through contracts with accredited 
                health care educational institutions, State 
                medical societies or State pharmacists 
                associations/societies or other organizations 
                as specified by the State, and using data 
                provided by the State drug use review board on 
                common drug therapy problems, provide for 
                active and ongoing educational outreach 
                programs (including the activities described in 
                paragraph (3)(C)(iii) of this subsection) to 
                educate practitioners on common drug therapy 
                problems with the aim of improving prescribing 
                or dispensing practices.
          (3) State drug use review board.--
                  (A) Establishment.--Each State shall provide 
                for the establishment of a drug use review 
                board (hereinafter referred to as the ``DUR 
                Board'') either directly or through a contract 
                with a private organization.
                  (B) Membership.--The membership of the DUR 
                Board shall include health care professionals 
                who have recognized knowledge and expertise in 
                one or more of the following:
                          (i) The clinically appropriate 
                        prescribing of covered outpatient 
                        drugs.
                          (ii) The clinically appropriate 
                        dispensing and monitoring of covered 
                        outpatient drugs.
                          (iii) Drug use review, evaluation, 
                        and intervention.
                          (iv) Medical quality assurance.
                The membership of the DUR Board shall be made 
                up at least \1/3\ but no more than 51 percent 
                licensed and actively practicing physicians and 
                at least \1/3\ licensed and actively practicing 
                pharmacists.
                  (C) Activities.--The activities of the DUR 
                Board shall include but not be limited to the 
                following:
                          (i) Retrospective DUR as defined in 
                        section (2)(B).
                          (ii) Application of standards as 
                        defined in section (2)(C).
                          (iii) Ongoing interventions for 
                        physicians and pharmacists, targeted 
                        toward therapy problems or individuals 
                        identified in the course of 
                        retrospective drug use reviews 
                        performed under this subsection. 
                        Intervention programs shall include, in 
                        appropriate instances, at least:
                                  (I) information dissemination 
                                sufficient to ensure the ready 
                                availability to physicians and 
                                pharmacists in the State of 
                                information concerning its 
                                duties, powers, and basis for 
                                its standards;
                                  (II) written, oral, or 
                                electronic reminders containing 
                                patient-specific or drug-
                                specific (or both) information 
                                and suggested changes in 
                                prescribing or dispensing 
                                practices, communicated in a 
                                manner designed to ensure the 
                                privacy of patient-related 
                                information;
                                  (III) use of face-to-face 
                                discussions between health care 
                                professionals who are experts 
                                in rational drug therapy and 
                                selected prescribers and 
                                pharmacists who have been 
                                targeted for educational 
                                intervention, including 
                                discussion of optimal 
                                prescribing, dispensing, or 
                                pharmacy care practices, and 
                                follow-up face-to-face 
                                discussions; and
                                  (IV) intensified review or 
                                monitoring of selected 
                                prescribers or dispensers.
                The Board shall re-evaluate interventions after 
                an appropriate period of time to determine if 
                the intervention improved the quality of drug 
                therapy, to evaluate the success of the 
                interventions and make modifications as 
                necessary.
                  (D) Annual report.--Each State shall require 
                the DUR Board to prepare a report on an annual 
                basis. The State shall submit a report on an 
                annual basis to the Secretary which shall 
                include a description of the activities of the 
                Board, including the nature and scope of the 
                prospective and retrospective drug use review 
                programs, a summary of the interventions used, 
                an assessment of the impact of these 
                educational interventions on quality of care, 
                and an estimate of the cost savings generated 
                as a result of such program. The Secretary 
                shall utilize such report in evaluating the 
                effectiveness of each State's drug use review 
                program.
  (h) Electronic Claims Management.--
          (1) In general.--In accordance with chapter 35 of 
        title 44, United States Code (relating to coordination 
        of Federal information policy), the Secretary shall 
        encourage each State agency to establish, as its 
        principal means of processing claims for covered 
        outpatient drugs under this title, a point-of-sale 
        electronic claims management system, for the purpose of 
        performing on-line, real time eligibility 
        verifications, claims data capture, adjudication of 
        claims, and assisting pharmacists (and other authorized 
        persons) in applying for and receiving payment.
          (2) Encouragement.--In order to carry out paragraph 
        (1)--
                  (A) for calendar quarters during fiscal years 
                1991 and 1992, expenditures under the State 
                plan attributable to development of a system 
                described in paragraph (1) shall receive 
                Federal financial participation under section 
                1903(a)(3)(A)(i) (at a matching rate of 90 
                percent) if the State acquires, through 
                applicable competitive procurement process in 
                the State, the most cost-effective 
                telecommunications network and automatic data 
                processing services and equipment; and
                  (B) the Secretary may permit, in the 
                procurement described in subparagraph (A) in 
                the application of part 433 of title 42, Code 
                of Federal Regulations, and parts 95, 205, and 
                307 of title 45, Code of Federal Regulations, 
                the substitution of the State's request for 
                proposal in competitive procurement for advance 
                planning and implementation documents otherwise 
                required.
  (i) Annual Report.--
          (1) In general.--Not later than May 1 of each year 
        the Secretary shall transmit to the Committee on 
        Finance of the Senate, the Committee on Energy and 
        Commerce of the House of Representatives, and the 
        Committees on Aging of the Senate and the House of 
        Representatives a report on the operation of this 
        section in the preceding fiscal year.
          (2) Details.--Each report shall include information 
        on--
                  (A) ingredient costs paid under this title 
                for single source drugs, multiple source drugs, 
                and nonprescription covered outpatient drugs;
                  (B) the total value of rebates received and 
                number of manufacturers providing such rebates;
                  (C) how the size of such rebates compare with 
                the size or rebates offered to other purchasers 
                of covered outpatient drugs;
                  (D) the effect of inflation on the value of 
                rebates required under this section;
                  (E) trends in prices paid under this title 
                for covered outpatient drugs; and
                  (F) Federal and State administrative costs 
                associated with compliance with the provisions 
                of this title.
  (j) Exemption of Organized Health Care Settings.--
          (1) Covered outpatient drugs are not subject to the 
        requirements of this section if such drugs are--
                  (A) dispensed by health maintenance 
                organizations, including Medicaid managed care 
                organizations that contract under section 
                1903(m); and
                  (B) subject to discounts under section 340B 
                of the Public Health Service Act.
  (2) The State plan shall provide that a hospital (providing 
medical assistance under such plan) that dispenses covered 
outpatient drugs using drug formulary systems, and bills the 
plan no more than the hospital's purchasing costs for covered 
outpatient drugs (as determined under the State plan) shall not 
be subject to the requirements of this section.
  (3) Nothing in this subsection shall be construed as 
providing that amounts for covered outpatient drugs paid by the 
institutions described in this subsection should not be taken 
into account for purposes of determining the best price as 
described in subsection (c).
  (k) Definitions.--In the section--
          (1) Average manufacturer price.--
                  (A) In general.--Subject to subparagraph (B), 
                the term ``average manufacturer price'' means, 
                with respect to a covered outpatient drug of a 
                manufacturer for a rebate period, the average 
                price paid to the manufacturer for the drug in 
                the United States by--
                          (i) wholesalers for drugs distributed 
                        to retail community pharmacies; and
                          (ii) retail community pharmacies that 
                        purchase drugs directly from the 
                        manufacturer.
                  (B) Exclusion of customary prompt pay 
                discounts and other payments.--
                          (i) In general.--The average 
                        manufacturer price for a covered 
                        outpatient drug shall exclude--
                                  (I) customary prompt pay 
                                discounts extended to 
                                wholesalers;
                                  (II) bona fide service fees 
                                paid by manufacturers to 
                                wholesalers or retail community 
                                pharmacies, including (but not 
                                limited to) distribution 
                                service fees, inventory 
                                management fees, product 
                                stocking allowances, and fees 
                                associated with administrative 
                                services agreements and patient 
                                care programs (such as 
                                medication compliance programs 
                                and patient education 
                                programs);
                                  (III) reimbursement by 
                                manufacturers for recalled, 
                                damaged, expired, or otherwise 
                                unsalable returned goods, 
                                including (but not limited to) 
                                reimbursement for the cost of 
                                the goods and any reimbursement 
                                of costs associated with return 
                                goods handling and processing, 
                                reverse logistics, and drug 
                                destruction;
                                  (IV) payments received from, 
                                and rebates or discounts 
                                provided to, pharmacy benefit 
                                managers, managed care 
                                organizations, health 
                                maintenance organizations, 
                                insurers, hospitals, clinics, 
                                mail order pharmacies, long 
                                term care providers, 
                                manufacturers, or any other 
                                entity that does not conduct 
                                business as a wholesaler or a 
                                retail community pharmacy, 
                                unless the drug is an 
                                inhalation, infusion, 
                                instilled, implanted, or 
                                injectable drug that is not 
                                generally dispensed through a 
                                retail community pharmacy; and
                                  (V) discounts provided by 
                                manufacturers under section 
                                1860D-14A.
                          (ii) Inclusion of other discounts and 
                        payments.--Notwithstanding clause (i), 
                        any other discounts, rebates, payments, 
                        or other financial transactions that 
                        are received by, paid by, or passed 
                        through to, retail community pharmacies 
                        shall be included in the average 
                        manufacturer price for a covered 
                        outpatient drug.
                  (C) Inclusion of section 505(c) drugs.--In 
                the case of a manufacturer that approves, 
                allows, or otherwise permits any drug of the 
                manufacturer to be sold under a new drug 
                application approved under section 505(c) of 
                the Federal Food, Drug, and Cosmetic Act, such 
                term shall be inclusive of the average price 
                paid for such drug by wholesalers for drugs 
                distributed to retail community pharmacies.
          (2) Covered outpatient drug.--Subject to the 
        exceptions in paragraph (3), the term ``covered 
        outpatient drug'' means--
                  (A) of those drugs which are treated as 
                prescribed drugs for purposes of section 
                1905(a)(12), a drug which may be dispensed only 
                upon prescription (except as provided in 
                paragraph (5)), and--
                          (i) which is approved for safety and 
                        effectiveness as a prescription drug 
                        under section 505 or 507 of the Federal 
                        Food, Drug, and Cosmetic Act or which 
                        is approved under section 505(j) of 
                        such Act;
                          (ii)(I) which was commercially used 
                        or sold in the United States before the 
                        date of the enactment of the Drug 
                        Amendments of 1962 or which is 
                        identical, similar, or related (within 
                        the meaning of section 310.6(b)(1) of 
                        title 21 of the Code of Federal 
                        Regulations) to such a drug, and (II) 
                        which has not been the subject of a 
                        final determination by the Secretary 
                        that it is a ``new drug'' (within the 
                        meaning of section 201(p) of the 
                        Federal Food, Drug, and Cosmetic Act) 
                        or an action brought by the Secretary 
                        under section 301, 302(a), or 304(a) of 
                        such Act to enforce section 502(f) or 
                        505(a) of such Act; or
                          (iii)(I) which is described in 
                        section 107(c)(3) of the Drug 
                        Amendments of 1962 and for which the 
                        Secretary has determined there is a 
                        compelling justification for its 
                        medical need, or is identical, similar, 
                        or related (within the meaning of 
                        section 310.6(b)(1) of title 21 of the 
                        Code of Federal Regulations) to such a 
                        drug, and (II) for which the Secretary 
                        has not issued a notice of an 
                        opportunity for a hearing under section 
                        505(e) of the Federal Food, Drug, and 
                        Cosmetic Act on a proposed order of the 
                        Secretary to withdraw approval of an 
                        application for such drug under such 
                        section because the Secretary has 
                        determined that the drug is less than 
                        effective for some or all conditions of 
                        use prescribed, recommended, or 
                        suggested in its labeling; and
                  (B) a biological product, other than a 
                vaccine which--
                          (i) may only be dispensed upon 
                        prescription,
                          (ii) is licensed under section 351 of 
                        the Public Health Service Act, and
                          (iii) is produced at an establishment 
                        licensed under such section to produce 
                        such product; and
                  (C) insulin certified under section 506 of 
                the Federal Food, Drug, and Cosmetic Act.
          (3) Limiting definition.--The term ``covered 
        outpatient drug'' does not include any drug, biological 
        product, or insulin provided as part of, or as incident 
        to and in the same setting as, any of the following 
        (and for which payment may be made under this title as 
        part of payment for the following and not as direct 
        reimbursement for the drug):
                  (A) Inpatient hospital services.
                  (B) Hospice services.
                  (C) Dental services, except that drugs for 
                which the State plan authorizes direct 
                reimbursement to the dispensing dentist are 
                covered outpatient drugs.
                  (D) Physicians' services.
                  (E) Outpatient hospital services.
                  (F) Nursing facility services and services 
                provided by an intermediate care facility for 
                the mentally retarded.
                  (G) Other laboratory and x-ray services.
                  (H) Renal dialysis.
        Such term also does not include any such drug or 
        product for which a National Drug Code number is not 
        required by the Food and Drug Administration or a drug 
        or biological used for a medical indication which is 
        not a medically accepted indication. Any drug, 
        biological product, or insulin excluded from the 
        definition of such term as a result of this paragraph 
        shall be treated as a covered outpatient drug for 
        purposes of determining the best price (as defined in 
        subsection (c)(1)(C)) for such drug, biological 
        product, or insulin.
          (4) Nonprescription drugs.--If a State plan for 
        medical assistance under this title includes coverage 
        of prescribed drugs as described in section 1905(a)(12) 
        and permits coverage of drugs which may be sold without 
        a prescription (commonly referred to as ``over-the-
        counter'' drugs), if they are prescribed by a physician 
        (or other person authorized to prescribe under State 
        law), such a drug shall be regarded as a covered 
        outpatient drug.
          (5) Manufacturer.--The term ``manufacturer'' means 
        any entity which is engaged in--
                  (A) the production, preparation, propagation, 
                compounding, conversion, or processing of 
                prescription drug products, either directly or 
                indirectly by extraction from substances of 
                natural origin, or independently by means of 
                chemical synthesis, or by a combination of 
                extraction and chemical synthesis, or
                  (B) in the packaging, repackaging, labeling, 
                relabeling, or distribution of prescription 
                drug products.
        Such term does not include a wholesale distributor of 
        drugs or a retail pharmacy licensed under State law.
          (6) Medically accepted indication.--The term 
        ``medically accepted indication'' means any use for a 
        covered outpatient drug which is approved under the 
        Federal Food, Drug, and Cosmetic Act, or the use of 
        which is supported by one or more citations included or 
        approved for inclusion in any of the compendia 
        described in subsection (g)(1)(B)(i).
          (7) Multiple source drug; innovator multiple source 
        drug; noninnovator multiple source drug; single source 
        drug.--
                  (A) Defined.--
                          (i) Multiple source drug.--The term 
                        ``multiple source drug'' means, with 
                        respect to a rebate period, a covered 
                        outpatient drug (not including any drug 
                        described in paragraph (5)) for which 
                        there at least 1 other drug product 
                        which--
                                  (I) is rated as 
                                therapeutically equivalent 
                                (under the Food and Drug 
                                Administration's most recent 
                                publication of ``Approved Drug 
                                Products with Therapeutic 
                                Equivalence Evaluations''),
                                  (II) except as provided in 
                                subparagraph (B), is 
                                pharmaceutically equivalent and 
                                bioequivalent, as defined in 
                                subparagraph (C) and as 
                                determined by the Food and Drug 
                                Administration, and
                                  (III) is sold or marketed in 
                                the United States during the 
                                period.
                          (ii) Innovator multiple source 
                        drug.--The term ``innovator multiple 
                        source drug'' means a multiple source 
                        drug that was originally marketed under 
                        an original new drug application 
                        approved by the Food and Drug 
                        Administration.
                          (iii) Noninnovator multiple source 
                        drug.--The term ``noninnovator multiple 
                        source drug'' means a multiple source 
                        drug that is not an innovator multiple 
                        source drug.
                          (iv) Single source drug.--The term 
                        ``single source drug'' means a covered 
                        outpatient drug which is produced or 
                        distributed under an original new drug 
                        application approved by the Food and 
                        Drug Administration, including a drug 
                        product marketed by any cross-licensed 
                        producers or distributors operating 
                        under the new drug application.
                  (B) Exception.--Subparagraph (A)(i)(II) shall 
                not apply if the Food and Drug Administration 
                changes by regulation the requirement that, for 
                purposes of the publication described in 
                subparagraph (A)(i)(I), in order for drug 
                products to be rated as therapeutically 
                equivalent, they must be pharmaceutically 
                equivalent and bioequivalent, as defined in 
                subparagraph (C).
                  (C) Definitions.--For purposes of this 
                paragraph--
                          (i) drug products are 
                        pharmaceutically equivalent if the 
                        products contain identical amounts of 
                        the same active drug ingredient in the 
                        same dosage form and meet compendial or 
                        other applicable standards of strength, 
                        quality, purity, and identity; and
                          (ii) drugs are bioequivalent if they 
                        do not present a known or potential 
                        bioequivalence problem, or, if they do 
                        present such a problem, they are shown 
                        to meet an appropriate standard of 
                        bioequivalence.
          (8) Rebate period.--The term ``rebate period'' means, 
        with respect to an agreement under subsection (a), a 
        calendar quarter or other period specified by the 
        Secretary with respect to the payment of rebates under 
        such agreement.
          (9) State agency.--The term ``State agency'' means 
        the agency designated under section 1902(a)(5) to 
        administer or supervise the administration of the State 
        plan for medical assistance.
          (10) Retail community pharmacy.--The term ``retail 
        community pharmacy'' means an independent pharmacy, a 
        chain pharmacy, a supermarket pharmacy, or a mass 
        merchandiser pharmacy that is licensed as a pharmacy by 
        the State and that dispenses medications to the general 
        public at retail prices. Such term does not include a 
        pharmacy that dispenses prescription medications to 
        patients primarily through the mail, nursing home 
        pharmacies, long-term care facility pharmacies, 
        hospital pharmacies, clinics, charitable or not-for-
        profit pharmacies, government pharmacies, or pharmacy 
        benefit managers.
          (11) Wholesaler.--The term ``wholesaler'' means a 
        drug wholesaler that is engaged in wholesale 
        distribution of prescription drugs to retail community 
        pharmacies, including (but not limited to) 
        manufacturers, repackers, distributors, own-label 
        distributors, private-label distributors, jobbers, 
        brokers, warehouses (including manufacturer's and 
        distributor's warehouses, chain drug warehouses, and 
        wholesale drug warehouses) independent wholesale drug 
        traders, and retail community pharmacies that conduct 
        wholesale distributions.

           *       *       *       *       *       *       *

                       medicaid improvement fund

  Sec. 1941. (a) Establishment.--The Secretary shall establish 
under this title a Medicaid Improvement Fund (in this section 
referred to as the ``Fund'') which shall be available to the 
Secretary to improve the management of the Medicaid program by 
the Centers for Medicare & Medicaid Services, including 
oversight of contracts and contractors and evaluation of 
demonstration projects. Payments made for activities under this 
subsection shall be in addition to payments that would 
otherwise be made for such activities.
          (b) Funding.--
                  (1) In general.--There shall be available to 
                the Fund, for expenditures from the Fund--
                          (A) for fiscal year 2014, 
                        $10,000,000; and
                          (B) for each of fiscal years 2015 
                        through 2018, $0.
                  (2) Additional funding.--In addition to any 
                funds otherwise made available to the Fund, 
                there shall be available to the Fund, for 
                expenditures from the Fund--
                          (A) for fiscal year 2021, 
                        $10,000,000, to remain available until 
                        expended; and
                          (B) for fiscal year 2022, 
                        $14,000,000, to remain available until 
                        expended.
                  [(2)] (3) Funding limitation.--Amounts in the 
                Fund shall be available in advance of 
                appropriations but only if the total amount 
                obligated from the Fund does not exceed the 
                amount available to the Fund [under paragraph 
                (1)] under this subsection. The Secretary may 
                obligate funds from the Fund only if the 
                Secretary determines (and the Chief Actuary of 
                the Centers for Medicare & Medicaid Services 
                and the appropriate budget officer certify) 
                that there are available in the Fund sufficient 
                amounts to cover all such obligations incurred 
                consistent with the previous sentence.

           *       *       *       *       *       *       *

                                  [all]
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