59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–559 

NURTURING AND SUPPORTING HEALTHY BABIES ACT 

MAY 10, 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. 4978] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Energy and Commerce, to whom was referred 

the bill (H.R. 4978) to require the Government Accountability Office to submit to Congress a report on neonatal abstinence syndrome (NAS) in the United States and its treatment under Medicaid, having considered the same, report favorably thereon with 

amendments and recommend that the bill as amended do pass. 

CONTENTS 

Page 

Purpose and Summary ............................................................................................ 3 

Background and Need for Legislation .................................................................... 4 

Hearings ................................................................................................................... 5 

Committee Consideration ........................................................................................ 5 

Committee Votes ...................................................................................................... 5 

Committee Oversight Findings ............................................................................... 5 

Statement of General Performance Goals and Objectives .................................... 5 

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 5 

Earmark, Limited Tax Benefits, and Limited Tariff Benefits ............................. 5 

Committee Cost Estimate ....................................................................................... 5 

Congressional Budget Office Estimate ................................................................... 5 

Federal Mandates Statement ................................................................................. 9 

Duplication of Federal Programs ............................................................................ 9 

Disclosure of Directed Rule Makings ..................................................................... 9 

Advisory Committee Statement .............................................................................. 9 

Applicability to Legislative Branch ........................................................................ 9 

Section-by-Section Analysis of the Legislation ...................................................... 10 

Changes in Existing Law Made by the Bill, as Reported ..................................... 10 

The amendments are as follows: 

Strike all after the enacting clause and insert the following: 


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SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Nurturing And Supporting Healthy Babies Act’’ or 

as the ‘‘NAS Healthy Babies Act’’. 

SEC. 2. GAO REPORT ON NEONATAL ABSTINENCE SYNDROME (NAS). 

(a) IN GENERAL.—Not later than one year after the date of the enactment of this 

Act, the Comptroller General of the United States shall submit to the Committee 

on Energy and Commerce of the House of Representatives and the Committee on 

Finance and the Committee on Health, Education, Labor and Pensions of the Senate 

a report on neonatal abstinence syndrome (in this section referred to as ‘‘NAS’’) in 

the United States. 

(b) INFORMATION TO BE INCLUDED IN REPORT.—Such report shall include information on the following: 

(1) The prevalence of NAS in the United States, including the proportion of 

children born in the United States with NAS who are eligible for medical assistance under State Medicaid programs under title XIX of the Social Security Act 

at birth and the costs associated with NAS through such programs. 

(2) The services for which coverage is available under State Medicaid programs for treatment of infants with NAS. 

(3) The settings (including inpatient, outpatient, hospital-based, and other 

settings) for the treatment of infants with NAS and the reimbursement methodologies and costs associated with such treatment in such settings. 

(4) The prevalence of utilization of various care settings under State Medicaid 

programs for treatment of infants with NAS and any Federal barriers to treating such infants under such programs, particularly in non-hospital-based settings. 

(c) RECOMMENDATIONS.—Such report also shall include such recommendations as 

the Comptroller General determines appropriate for improvements that will ensure 

access to treatment for infants with NAS under State Medicaid programs. 

SEC. 3. EXCLUDING ABUSE-DETERRENT FORMULATIONS OF PRESCRIPTION DRUGS FROM 

THE MEDICAID ADDITIONAL REBATE REQUIREMENT FOR NEW FORMULATIONS OF 

PRESCRIPTION DRUGS. 

(a) IN GENERAL.—The last sentence of section 1927(c)(2)(C) of the Social Security 

Act (42 U.S.C. 1396r–8(c)(2)(C)) is amended by inserting before the period at the end 

the following: ‘‘, but does not include an abuse-deterrent formulation of the drug (as 

determined by the Secretary), regardless of whether such abuse-deterrent formulation is an extended release formulation’’. 

(b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply to 

drugs that are paid for by a State in calendar quarters beginning on or after the 

date of the enactment of this Act. 

SEC. 4. LIMITING DISCLOSURE OF PREDICTIVE MODELING AND OTHER ANALYTICS TECHNOLOGIES TO IDENTIFY AND PREVENT WASTE, FRAUD, AND ABUSE. 

(a) IN GENERAL.—Title XI of the Social Security Act is amended by inserting after 

section 1128J (42 U.S.C. 1320a–7k) the following new section: 

‘‘SEC. 1128K. DISCLOSURE OF PREDICTIVE MODELING AND OTHER ANALYTICS TECHNOLOGIES TO IDENTIFY AND PREVENT WASTE, FRAUD, AND ABUSE. 

‘‘(a) REFERENCE TO PREDICTIVE MODELING TECHNOLOGIES REQUIREMENTS.—For 

provisions relating to the use of predictive modeling and other analytics technologies 

to identify and prevent waste, fraud, and abuse with respect to the Medicare program under title XVIII, the Medicaid program under title XIX, and the Children’s 

Health Insurance Program under title XXI, see section 4241 of the Small Business 

Jobs Act of 2010 (42 U.S.C. 1320a–7m). 

‘‘(b) LIMITING DISCLOSURE OF PREDICTIVE MODELING TECHNOLOGIES.—In implementing such provisions under such section 4241 with respect to covered algorithms 

(as defined in subsection (c)), the following shall apply: 

‘‘(1) NONAPPLICATION OF FOIA.—The covered algorithms used or developed for 

purposes of such section (including by the Secretary or a State (or an entity operating under a contract with a State)) shall be exempt from disclosure under 

section 552(b)(3) of title 5, United States Code. 

‘‘(2) LIMITATION WITH RESPECT TO USE AND DISCLOSURE OF INFORMATION BY

STATE AGENCIES.— 

‘‘(A) IN GENERAL.—A State agency may not use or disclose covered algorithms used or developed for purposes of such section except for purposes 

of administering the State plan (or a waiver of the plan) under the Medicaid program under title XIX or the State child health plan (or a waiver 

of the plan) under the Children’s Health Insurance Program under title 

XXI, including by enabling an entity operating under a contract with a 


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State to assist the State to identify or prevent waste, fraud and abuse with 

respect to such programs. 

‘‘(B) INFORMATION SECURITY.—A State agency shall have in effect data security and control policies that the Secretary finds adequate to ensure the 

security of covered algorithms used or developed for purposes of such section 4241 and to ensure that access to such information is restricted to authorized persons for purposes of authorized uses and disclosures described 

in subparagraph (A). 

‘‘(C) PROCEDURAL REQUIREMENTS.—State agencies to which information is 

disclosed pursuant to such section 4241 shall adhere to uniform procedures 

established by the Secretary. 

‘‘(c) COVERED ALGORITHM DEFINED.—In this section, the term ‘covered algorithm’— 

‘‘(1) means a predictive modeling or other analytics technology, as used for 

purposes of section 4241(a) of the Small Business Jobs Act of 2010 (42 U.S.C. 

1320a–7m(a)) to identify and prevent waste, fraud, and abuse with respect to 

the Medicare program under title XVIII, the Medicaid program under title XIX, 

and the Children’s Health Insurance Program under title XXI; and 

‘‘(2) includes the mathematical expressions utilized in the application of such 

technology and the means by which such technology is developed.’’. 

(b) CONFORMING AMENDMENTS.— 

(1) MEDICAID STATE PLAN REQUIREMENT.—Section 1902(a) of the Social Security Act (42 U.S.C. 1396a(a)) is amended— 

(A) in paragraph (80), by striking ‘‘and’’ at the end; 

(B) in paragraph (81), by striking the period at the end and inserting ‘‘; 

and’’; and 

(C) by inserting after paragraph (81) the following new paragraph: 

‘‘(82) provide that the State agency responsible for administering the State 

plan under this title provides assurances to the Secretary that the State agency 

is in compliance with subparagraphs (A), (B), and (C) of section 1128K(b)(2).’’. 

(2) STATE CHILD HEALTH PLAN REQUIREMENT.—Section 2102(a)(7) of the Social 

Security Act (42 U.S.C. 1397bb(a)(7)) is amended— 

(A) in subparagraph (A), by striking ‘‘, and’’ at the end and inserting a 

semicolon; 

(B) in subparagraph (B), by striking the period at the end and inserting 

‘‘; and’’; and 

(C) by adding at the end the following new subparagraph: 

‘‘(C) to ensure that the State agency involved is in compliance with subparagraphs (A), (B), and (C) of section 1128K(b)(2).’’. 

SEC. 5. MEDICAID IMPROVEMENT FUND. 

Section 1941(b)(1) of the Social Security Act (42 U.S.C. 1396w–1(b)(1)) is amended 

to read as follows: 

‘‘(1) IN GENERAL.—There shall be available to the Fund, for expenditures from 

the Fund for fiscal year 2021 and thereafter, $5,000,000.’’. 

Amend the long title so as to read: A bill to require the Government Accountability Office to submit to Congress a report on neonatal abstinence syndrome (NAS) in the United States and its 

treatment under Medicaid, and for other purposes. 

PURPOSE AND SUMMARY

H.R. 4978, the ‘‘Nurturing and Supporting Healthy Babies Act,’’ 

would require the Comptroller General of the United States to 

issue a report one year after enactment on neonatal abstinence 

syndrome (NAS), including information on the treatment for infants with NAS under Medicaid. The bill would also correct an unintended consequence in current law by exempting abuse-deterrent 

formulations (ADF) of prescription drugs from the definition of 

‘‘line extension’’ when calculating Medicaid rebates—thus helping 

to incentivize the development of ADF to combat opioid abuse. In 

addition, the bill would prevent the public disclosure of program integrity algorithms used to identify and predict waste, fraud, and 

abuse in Medicare, Medicaid, and the Children’s Health Insurance 


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1Patrick S, Schumacher R, Benneyworth B, et al. ‘‘Neonatal abstinence syndrome and associated health care expenditures: United States, 2000–2009.’’ JAMA. 2012. 307(18):1934–40. 

Program (CHIP) and place savings in the Medicaid Improvement 

Fund. 

BACKGROUND AND NEED FOR LEGISLATION

The Centers for Disease Control and Prevention (CDC) has estimated that prescription opioid abuse costs the U.S. economy tens 

of billions of dollars each year in lost productivity and health care 

costs. Sadly, the human cost is much higher—more than 4 million 

Americans misuse or abuse prescription painkillers, and more than 

16,000 individuals die from prescription painkiller overdoses each 

year. Deaths from drug overdose are now the leading cause of injury-related death in the country—more than from car accidents. 

Even infants are suffering as a result of the drug abuse crisis, 

as opioid use by pregnant women can lead to infants being born 

with NAS, a group of problems that occur in a newborn who was 

exposed to addictive opiate drugs while in the mother’s womb. 

There has been a significant increase in the national prevalence of 

NAS. A 2012 article in the Journal of the American Medical Association found the diagnosis of NAS increased from 1.20 per 1,000 

hospital births in 2000 to 3.39 per 1,000 hospital births in 2009.1

Since Medicaid covers nearly 50 percent of births nationwide, 

many infants born with NAS will be covered by Medicaid. To make 

effective policy regarding treatment of NAS, Congress needs better 

information on the prevalence of NAS nationwide and among children covered by Medicaid, the services available under Medicaid for 

the treatment of infants with NAS, and the settings in which such 

care is provided. 

One promising method to try to address the nation’s drug abuse 

crisis is the development of ADFs of drugs. In its Opioids Action 

Plan, the Food and Drug Administration (FDA) said its goal is to 

‘‘expand access to abuse deterrent formulations to discourage 

abuse.’’ And in its ADF guidance to manufacturers, the agency has 

said it ‘‘considers the development of these products a high public 

health priority.’’ However, due to an unintended consequence in 

current law, ADFs are subject to a higher rebate under the Medicaid program, thus disincentivizing their development. H.R. 4978 

would remove this disincentive by ensuring that ADFs are not considered a line extension of a drug and thus are not subject to increased rebates. This policy was included in the President’s fiscal 

year 2017 budget. 

The cost of the ADF policy is being offset by a common sense policy from the President’s budget to protect tools used to identify and 

prevent fraud, waste, and abuse in Medicare, Medicaid, and CHIP. 

The Centers for Medicare and Medicaid Services (CMS) uses mathematical algorithms and predictive technologies to uncover fraud, 

waste, and abuse. However, if various aspects of these algorithms 

were to become publicly known, fraudsters could utilize the information to re-direct their schemes to other areas of the Medicare, 

Medicaid, and CHIP programs or adjust their schemes to avoid detection. H.R. 4978 would allow CMS and state Medicaid and CHIP 

programs to freely share algorithms and other predictive analytic 

tools, while protecting these anti-fraud tools from public disclosure. 


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HEARINGS

The Subcommittee on Health held no hearings on H.R. 4978. 

COMMITTEE CONSIDERATION

On April 20, 2016, the Subcommittee on Health met in open 

markup session and forwarded H.R. 4978, without amendment, to 

the full Committee by a voice vote. On April 26, 27, and 28, 2016, 

the full Committee on Energy and Commerce met in open markup 

session and ordered H.R. 4978 reported to the House, as amended, 

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. 4978 reported. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee has not held hearings on this 

legislation. 

STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

The objective of H.R. 4978 is to provide Congress with more information about Medicaid treatment for infants with NAS; 

incentivize the development of ADF of drugs to combat opioid 

abuse; and prevent waste, fraud, and abuse in Medicare, Medicaid, 

and CHIP. 

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. 4978 

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. 4978 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. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 


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the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, May 9, 2016. 

Hon. FRED UPTON, 

Chairman, Committee on Energy and Commerce, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4978, the Nurturing and 

Supporting Healthy Babies Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contacts are Andrea Noda, Lara 

Robillard, and Zoe ̈ Williams. 

Sincerely, 

KEITH HALL. 

Enclosure. 

H.R. 4978—Nurturing and Supporting Healthy Babies Act 

Summary: H.R. 4978 would exclude formulations of prescription 

drugs that include abuse deterrents from Medicaid’s requirement 

that new drug formulations pay additional rebates. The bill also 

would prevent the disclosure of algorithms used to detect fraud, 

provide additional funding to the Medicaid Improvement Fund, and 

require the Government Accountability Office to submit a report to 

the Congress on neonatal abstinence syndrome in the United 

States. 

CBO estimates that enacting H.R. 4978 would not, on net, 

change direct spending over the 2017–2026 period. Some provisions 

of the bill would increase direct spending by $80 million over that 

period while other provisions would decrease direct spending by the 

same amount. In addition, CBO estimates that implementing H.R. 

4978 would have a discretionary cost of less than $500,000; any 

such spending would be subject to the availability of appropriated 

funds. Pay-as-you-go procedures apply because enacting the legislation would affect direct spending. Enacting the legislation would 

not affect revenues. 

CBO estimates that enacting the legislation would not increase net direct spending or on-budget deficits by more than $5 billion 

in any of the four consecutive 10-year periods beginning in 2027. 

H.R. 4978 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA). 

Estimated cost to the Federal Government: The estimated budgetary effect of H.R. 4978 is shown in the following table. The budgetary effects of this legislation fall within budget functions 550 

(health) and 570 (Medicare). 

By fiscal year, in millions of dollars— 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017– 

2021 

2017– 

2026 

CHANGES IN DIRECT SPENDING 

Exclusion from Medicaid Rebate Requirements: 

Estimated Budget Authority ....................... 1 3 5 8 8 9 9 10 10 11 26 75 


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By fiscal year, in millions of dollars— 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017– 

2021 

2017– 

2026 

Estimated Outlays ........ 1 3 5 8 8 9 9 10 10 11 26 75 

Disclosure of Predictive Modeling: 

Estimated Budget Authority ....................... ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥40 ¥80 

Estimated Outlays ........ ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥8 ¥40 ¥80 

Medicaid Improvement Fund: 

Budget Authority ........... 0 0 0 0 5 0 0 0 0 0 5 5 

Estimated Outlays ........ 0 0 0 0 5 0 0 0 0 0 5 5 

Total Changes: 

Estimated Budget Authority ....................... ¥7 ¥5 ¥3 0 5 1 1 2 2 3 ¥9 0 

Estimated Outlays ........ ¥7 ¥5 ¥3 0 5 1 1 2 2 3 ¥9 0 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 

GAO Report: 

Estimated Authorization 

Level ......................... * 0 0 0 0 0 0 0 0 0 * * 

Estimated Outlays ........ * 0 0 0 0 0 0 0 0 0 * * 

Notes: * = Less than $500,000; Components may not add to totals because of rounding. 

Basis of estimate: For this estimate, CBO assumes that H.R. 

4978 will be enacted near the end of fiscal year 2016. 

Changes in direct spending 

CBO estimates that enacting H.R. 4978 would not have a net effect on direct spending over the 2017–2026 period. 

Exclusion from Medicaid Rebate Requirements. Section 3 of H.R. 

4978 would reduce the Medicaid rebate amount paid by some manufacturers of brand-name drugs that contain abuse-deterrent formulations (ADFs). ADFs are designed to make it more difficult to 

intentionally use prescription drugs for non-therapeutic purposes. 

For example, some ADFs make it more difficult for an individual 

to crush, break, or dissolve a drug to inappropriately extract and 

use its active ingredient. 

Under current law, pharmaceutical manufacturers are required 

to pay rebates to states for prescription drugs provided through 

Medicaid. Based on administrative data from the Centers for Medicare and Medicaid Services (CMS), manufacturers paid more than 

$20 billion in rebates to the Medicaid program in FY 2015. The formula which determines rebate amounts in the Medicaid program 

has several components. Some components generate rebates that 

are paid to states and shared with the federal government and others generate rebates that are paid to states and subsequently 

transferred in their entirety to the federal government. Under the 

bill, the component of the rebate formula that would no longer 

apply to ADFs of brand-name drugs is one that is paid to states 

and transferred in full to the federal government. Therefore, states 

would not be directly affected by this section of the bill. 

CBO estimates that this section would increase federal Medicaid 

costs by about $75 million over the 2017–2026 period by reducing 

rebates. CBO anticipates that an increasing number of ADFs of 

brand name drugs will launch over time; therefore, the component 

of the rebate affected by H.R. 4978 would also grow over time. This 

estimate is based on a review of potential classes of drugs where 

ADFs may be introduced over the next 10 years and on rebate calVerDate Sep 11 2014 10:59 May 11, 2016 Jkt 059006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR559.XXX HR559

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culations generated from Medicaid data obtained from the Centers 

for Medicare and Medicaid Services and Red Book data available 

from Truven Health Analytics. 

Disclosure of Predictive Modeling. CMS currently uses the Fraud 

Prevention System (FPS) to detect questionable and fraudulent activity within the fee-for-service Medicare program. The FPS uses 

sophisticated computer algorithms—similar to those used by creditcard issuers—to review millions of claims to look for evidence of inappropriate utilization or problematic billing. Originally authorized 

by the Small Business Jobs Act of 2010, the FPS is currently used 

to review Medicare claims. In the future, use of the FPS may expand to Medicaid and the Children’s Health Insurance Program 

(CHIP), which are administered by the states. 

Section 4 of H.R. 4978 would prevent disclosure of the FPS algorithms through requests under the Freedom of Information Act. 

The bill also would forbid disclosure of that information by state 

agencies unless such disclosure is necessary to administer their 

Medicaid and CHIP programs. Permitting public access to the algorithms would facilitate fraudulent schemes to circumvent the FPS. 

Because H.R. 4978 prevents public access to the FPS algorithms 

and discourages fraud, CBO estimates that enacting Section 4 of 

H.R. 4978 would reduce direct spending in the Medicare, Medicaid, 

and CHIP programs by about $80 million over the 2017–2026 period. 

Medicaid Improvement Fund. Section 5 of H.R. 4978 would provide $5 million in mandatory funding to the Medicaid Improvement 

Fund (MIF) in 2021, which would be available to the Secretary of 

Health and Human Services to improve federal management of the 

Medicaid program. Activities that could be funded by the MIF include oversight of contracts and contractors, and evaluation of demonstration programs. CBO estimates that Section 5 would increase 

spending by $5 million over the 2017–2026 period. 

Changes in spending subject to appropriation 

Section 2 of H.R. 4978 would require the Government Accountability Office to submit a report to the Congress on neonatal abstinence syndrome in the United States. CBO estimates that implementing section 2 would cost less than $500,000 over the 2017– 

2026 period; any such spending would be subject to the availability 

of appropriated funds. 

Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. The net 

changes in outlays that are subject to those pay-as-you-go procedures are shown in the following table. 


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CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 4978, THE NURTURING AND SUPPORTING 

HEALTHY BABIES ACT, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON ENERGY AND 

COMMERCE ON APRIL 27, 2016 

By fiscal year, in millions of dollars— 

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2016– 

2021 

2016– 

2026 

NET INCREASE OR DECREASE (¥) IN THE DEFICIT 

Statutory Pay-AsYou-Go Impact ... 0 ¥7 ¥5 ¥3 0 5 1 1 2 2 3 ¥9 0 

Increase in long-term direct spending and deficits: CBO estimates that enacting the legislation would not increase net direct 

spending or on-budget deficits by more than $5 billion in any of the 

four consecutive 10-year periods beginning in 2026. 

Intergovernmental and private-sector impact: H.R. 4978 contains 

no intergovernmental or private-sector mandate as defined in 

UMRA and would impose no costs on state, local, or tribal governments. 

Estimate prepared by: Federal costs: Andrea Noda, Lara 

Robillard, and Zoe ̈ Williams; Impact on state, local, and tribal governments: J’Nell Blanco Suchy; Impact on the Private Sector: Amy 

Petz. 

Estimate approved by: Holly Harvey, Deputy Assistant Director 

for Budget Analysis. 

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. 4978 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. 4978 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. 


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SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section provides the short title of the ‘‘Nurturing and Supporting Healthy Babies Act’’ or the ‘‘NAS Healthy Babies Act’’. 

Section 2. GAO report on Neonatal Abstinence Syndrome (NAS) 

Subsection (a) requires the Comptroller General of the United 

States to submit a report, one year after enactment, on NAS to the 

congressional committees of jurisdiction. 

Subsection (b) specifies that the report shall, among other things, 

include information on the prevalence of NAS among children covered by Medicaid, NAS treatment services covered by Medicaid and 

the costs associated with that treatment, the settings in which 

Medicaid covered treatment for infants with NAS are provided, and 

any Federal barriers for treating infants with NAS. 

Subsection (c) specifies that the report shall include recommendations, as the Comptroller General determines appropriate, 

for improving access to treatment for infants with NAS under Medicaid. 

Section 3. Excluding abuse-deterrent formulations of prescription 

drugs from the Medicaid additional rebate requirement for new 

formulations of prescription drugs. 

Subsection (a) specifies that an ADF of a drug is not included as 

a line-extension of a drug, even if such ADF is an extended release 

formulation. 

Subsection (b) specifies that the amendment made by subsection 

(a) is effective for drugs paid for by States in calendar quarters beginning on or after the date of enactment. 

Section 4. Limiting disclosure of predictive modeling and other analytics technologies to identify and prevent waste, fraud, and 

abuse 

Subsection (a) inserts a new section in Title XI of the Social Security Act. This section limits the disclosure of predictive modeling 

and other analytics technologies to identify and prevent waste, 

fraud, and abuse in Medicare, Medicaid, and CHIP. Specifically, 

the section exempts the algorithms used in such technology from 

disclosure under the Freedom of Information Act. It also restricts 

states from using or disclosing such algorithms except for purposes 

of administering their Medicaid or CHIP programs and specifies 

that states must have data security and procedures in place that 

the Secretary of Health and Human Services finds appropriate to 

ensure that the algorithms are protected. 

Subsection (b) makes conforming amendments to the Medicaid 

and CHIP statute. 

Section 5. Medicaid Improvement Fund 

This section places $5,000,000 in the Medicaid Improvement 

Fund to be available for fiscal year 2021 or later. 

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, 


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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 XI—GENERAL PROVISIONS, PEER REVIEW, AND 

ADMINISTRATIVE SIMPLIFICATION 

PART A—GENERAL PROVISIONS

* * * * * * * 

SEC. 1128K. DISCLOSURE OF PREDICTIVE MODELING AND OTHER ANALYTICS TECHNOLOGIES TO IDENTIFY AND PREVENT 

WASTE, FRAUD, AND ABUSE. 

(a) REFERENCE TO PREDICTIVE MODELING TECHNOLOGIES REQUIREMENTS.—For provisions relating to the use of predictive modeling and other analytics technologies to identify and prevent waste, 

fraud, and abuse with respect to the Medicare program under title 

XVIII, the Medicaid program under title XIX, and the Children’s 

Health Insurance Program under title XXI, see section 4241 of the 

Small Business Jobs Act of 2010 (42 U.S.C. 1320a–7m). 

(b) LIMITING DISCLOSURE OF PREDICTIVE MODELING TECHNOLOGIES.—In implementing such provisions under such section 

4241 with respect to covered algorithms (as defined in subsection 

(c)), the following shall apply: 

(1) NONAPPLICATION OF FOIA.—The covered algorithms used 

or developed for purposes of such section (including by the Secretary or a State (or an entity operating under a contract with 

a State)) shall be exempt from disclosure under section 

552(b)(3) of title 5, United States Code. 

(2) LIMITATION WITH RESPECT TO USE AND DISCLOSURE OF INFORMATION BY STATE AGENCIES.— 

(A) IN GENERAL.—A State agency may not use or disclose 

covered algorithms used or developed for purposes of such 

section except for purposes of administering the State plan 

(or a waiver of the plan) under the Medicaid program 

under title XIX or the State child health plan (or a waiver 

of the plan) under the Children’s Health Insurance Program under title XXI, including by enabling an entity operating under a contract with a State to assist the State to 

identify or prevent waste, fraud and abuse with respect to 

such programs. 

(B) INFORMATION SECURITY.—A State agency shall have 

in effect data security and control policies that the Secretary finds adequate to ensure the security of covered algorithms used or developed for purposes of such section 4241 

and to ensure that access to such information is restricted 

to authorized persons for purposes of authorized uses and 

disclosures described in subparagraph (A). 

(C) PROCEDURAL REQUIREMENTS.—State agencies to 

which information is disclosed pursuant to such section 


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4241 shall adhere to uniform procedures established by the 

Secretary. 

(c) COVERED ALGORITHM DEFINED.—In this section, the term ‘‘covered algorithm’’— 

(1) means a predictive modeling or other analytics technology, 

as used for purposes of section 4241(a) of the Small Business 

Jobs Act of 2010 (42 U.S.C. 1320a–7m(a)) to identify and prevent waste, fraud, and abuse with respect to the Medicare program under title XVIII, the Medicaid program under title XIX, 

and the Children’s Health Insurance Program under title XXI; 

and 

(2) includes the mathematical expressions utilized in the application of such technology and the means by which such technology is developed. 

* * * * * * * 

TITLE XIX—GRANTS TO STATES FOR MEDICAL ASSISTANCE 

PROGRAMS 

* * * * * * * 

STATE PLANS FOR MEDICAL ASSISTANCE

SEC. 1902. (a) A State plan for medical assistance must— 

(1) provide that it shall be in effect in all political subdivisions of the State, and, if administered by them, be mandatory 

upon them; 

(2) provide for financial participation by the State equal to 

not less than 40 per centum of the non-Federal share of the expenditures under the plan with respect to which payments 

under section 1903 are authorized by this title; and, effective 

July 1, 1969, provide for financial participation by the State 

equal to all of such non-Federal share or provide for distribution of funds from Federal or State sources, for carrying out 

the State plan, on an equalization or other basis which will assure that the lack of adequate funds from local sources will not 

result in lowering the amount, duration, scope, or quality of 

care and services available under the plan; 

(3) provide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for medical 

assistance under the plan is denied or is not acted upon with 

reasonable promptness; 

(4) provide (A) such methods of administration (including 

methods relating to the establishment and maintenance of personnel standards on a merit basis, except that the Secretary 

shall exercise no authority with respect to the selection, tenure 

of office, and compensation of any individual employed in accordance with such methods, and including provision for utilization of professional medical personnel in the administration 

and, where administered locally, supervision of administration 

of the plan) as are found by the Secretary to be necessary for 

the proper and efficient operation of the plan, (B) for the training and effective use of paid subprofessional staff, with particular emphasis on the full-time or part-time employment of 

recipients and other persons of low income, as community service aides, in the administration of the plan and for the use of 


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nonpaid or partially paid volunteers in a social service volunteer program in providing services to applicants and recipients 

and in assisting any advisory committees established by the 

State agency, (C) that each State or local officer, employee, or 

independent contractor who is responsible for the expenditure 

of substantial amounts of funds under the State plan, each individual who formerly was such an officer, employee, or contractor, and each partner of such an officer, employee, or contractor shall be prohibited from committing any act, in relation 

to any activity under the plan, the commission of which, in 

connection with any activity concerning the United States Government, by an officer or employee of the United States Government, an individual who was such an officer or employee, 

or a partner of such an officer or employee is prohibited by section 207 or 208 of title 18, United States Code, and (D) that 

each State or local officer, employee, or independent contractor 

who is responsible for selecting, awarding, or otherwise obtaining items and services under the State plan shall be subject to 

safeguards against conflicts of interest that are at least as 

stringent as the safeguards that apply under section 27 of the 

Office of Federal Procurement Policy Act (41 U.S.C. 423) to 

persons described in subsection (a)(2) of such section of that 

Act; 

(5) either provide for the establishment or designation of a 

single State agency to administer or to supervise the administration of the plan; or provide for the establishment or designation of a single State agency to administer or to supervise the 

administration of the plan, except that the determination of 

eligibility for medical assistance under the plan shall be made 

by the State or local agency administering the State plan approved under title I or XVI (insofar as it relates to the aged) 

if the State is eligible to participate in the State plan program 

established under title XVI, or by the agency or agencies administering the supplemental security income program established under title XVI or the State plan approved under part 

A of title IV if the State is not eligible to participate in the 

State plan program established under title XVI; 

(6) provide that the State agency will make such reports, in 

such form and containing such information, as the Secretary 

may from time to time require, and comply with such provisions as the Secretary may from time to time find necessary 

to assure the correctness and verification of such reports; 

(7) provide— 

(A) safeguards which restrict the use or disclosure of information concerning applicants and recipients to purposes 

directly connected with— 

(i) the administration of the plan; and 

(ii) the exchange of information necessary to certify 

or verify the certification of eligibility of children for 

free or reduced price breakfasts under the Child Nutrition Act of 1966 and free or reduced price lunches 

under the Richard B. Russell National School Lunch 

Act, in accordance with section 9(b) of that Act, using 

data standards and formats established by the State 

agency; and 


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(B) that, notwithstanding the Express Lane option under 

subsection (e)(13), the State may enter into an agreement 

with the State agency administering the school lunch program established under the Richard B. Russell National 

School Lunch Act under which the State shall establish 

procedures to ensure that— 

(i) a child receiving medical assistance under the 

State plan under this title whose family income does 

not exceed 133 percent of the poverty line (as defined 

in section 673(2) of the Community Services Block 

Grant Act, including any revision required by such 

section), as determined without regard to any expense, 

block, or other income disregard, applicable to a family 

of the size involved, may be certified as eligible for 

free lunches under the Richard B. Russell National 

School Lunch Act and free breakfasts under the Child 

Nutrition Act of 1966 without further application; and 

(ii) the State agencies responsible for administering 

the State plan under this title, and for carrying out 

the school lunch program established under the Richard B. Russell National School Lunch Act (42 U.S.C. 

1751 et seq.) or the school breakfast program established by section 4 of the Child Nutrition Act of 1966 

(42 U.S.C. 1773), cooperate in carrying out paragraphs 

(3)(F) and (15) of section 9(b) of that Act; 

(8) provide that all individuals wishing to make application 

for medical assistance under the plan shall have opportunity to 

do so, and that such assistance shall be furnished with reasonable promptness to all eligible individuals; 

(9) provide— 

(A) that the State health agency, or other appropriate 

State medical agency (whichever is utilized by the Secretary for the purpose specified in the first sentence of section 1864(a)), shall be responsible for establishing and 

maintaining health standards for private or public institutions in which recipients of medical assistance under the 

plan may receive care or services, 

(B) for the establishment or designation of a State authority or authorities which shall be responsible for establishing and maintaining standards, other than those relating to health, for such institutions, 

(C) that any laboratory services paid for under such plan 

must be provided by a laboratory which meets the applicable requirements of section 1861(e)(9) or paragraphs (16) 

and (17) of section 1861(s), or, in the case of a laboratory 

which is in a rural health clinic, of section 1861(aa)(2)(G), 

and 

(D) that the State maintain a consumer-oriented website 

providing useful information to consumers regarding all 

skilled nursing facilities and all nursing facilities in the 

State, including for each facility, Form 2567 State inspection reports (or a successor form), complaint investigation 

reports, the facility’s plan of correction, and such other information that the State or the Secretary considers useful 

in assisting the public to assess the quality of long term 


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care options and the quality of care provided by individual 

facilities; 

(10) provide— 

(A) for making medical assistance available, including at 

least the care and services listed in paragraphs (1) through 

(5), (17), (21), and (28) of section 1905(a), to— 

(i) all individuals— 

(I) who are receiving aid or assistance under 

any plan of the State approved under title I, X, 

XIV, or XVI, or part A or part E of title IV (including individuals eligible under this title by reason 

of section 402(a)(37), 406(h), or 473(b), or considered by the State to be receiving such aid as authorized under section 482(e)(6)), 

(II)(aa) with respect to whom supplemental security income benefits are being paid under title 

XVI (or were being paid as of the date of the enactment of section 211(a) of the Personal Responsibility and Work Opportunity Reconciliation Act 

of 1996 (P.L. 104–193) and would continue to be 

paid but for the enactment of that section), (bb) 

who are qualified severely impaired individuals 

(as defined in section 1905(q)), or (cc) who are 

under 21 years of age and with respect to whom 

supplemental security income benefits would be 

paid under title XVI if subparagraphs (A) and (B) 

of section 1611(c)(7) were applied without regard 

to the phrase ‘‘the first day of the month following’’, 

(III) who are qualified pregnant women or children as defined in section 1905(n), 

(IV) who are described in subparagraph (A) or 

(B) of subsection (l)(1) and whose family income 

does not exceed the minimum income level the 

State is required to establish under subsection 

(l)(2)(A) for such a family; 

(V) who are qualified family members as defined 

in section 1905(m)(1), 

(VI) who are described in subparagraph (C) of 

subsection (l)(1) and whose family income does not 

exceed the income level the State is required to 

establish under subsection (l)(2)(B) for such a family, 

(VII) who are described in subparagraph (D) of 

subsection (l)(1) and whose family income does not 

exceed the income level the State is required to 

establish under subsection (l)(2)(C) for such a family; 

(VIII) beginning January 1, 2014, who are 

under 65 years of age, not pregnant, not entitled 

to, or enrolled for, benefits under part A of title 

XVIII, or enrolled for benefits under part B of title 

XVIII, and are not described in a previous subclause of this clause, and whose income (as determined under subsection (e)(14)) does not exceed 


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133 percent of the poverty line (as defined in section 2110(c)(5)) applicable to a family of the size 

involved, subject to subsection (k); or 

(IX) who— 

(aa) are under 26 years of age; 

(bb) are not described in or enrolled under 

any of subclauses (I) through (VII) of this 

clause or are described in any of such subclauses but have income that exceeds the 

level of income applicable under the State 

plan for eligibility to enroll for medical assistance under such subclause; 

(cc) were in foster care under the responsibility of the State on the date of attaining 18 

years of age or such higher age as the State 

has elected under section 475(8)(B)(iii); and 

(dd) were enrolled in the State plan under 

this title or under a waiver of the plan while 

in such foster care; 

(ii) at the option of the State, to any group or groups 

of individuals described in section 1905(a) (or, in the 

case of individuals described in section 1905(a)(i), to 

any reasonable categories of such individuals) who are 

not individuals described in clause (i) of this subparagraph but— 

(I) who meet the income and resources requirements of the appropriate State plan described in 

clause (i) or the supplemental security income program (as the case may be), 

(II) who would meet the income and resources 

requirements of the appropriate State plan described in clause (i) if their work-related child care 

costs were paid from their earnings rather than by 

a State agency as a service expenditure, 

(III) who would be eligible to receive aid under 

the appropriate State plan described in clause (i) 

if coverage under such plan was as broad as allowed under Federal law, 

(IV) 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, aid or assistance under the 

appropriate State plan described in clause (i), supplemental security income benefits under title 

XVI, or a State supplementary payment; 

(V) who are in a medical institution for a period 

of not less than 30 consecutive days (with eligibility by reason of this subclause beginning on the 

first day of such period), who meet the resource 

requirements of the appropriate State plan described in clause (i) or the supplemental security 

income program, and whose income does not exceed a separate income standard established by 

the State which is consistent with the limit established under section 1903(f)(4)(C), 


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(VI) who would be eligible under the State plan 

under this title if they were in a medical institution, with respect to whom there has been a determination that but for the provision of home or 

community-based services described in subsection 

(c), (d), or (e) of section 1915 they would require 

the level of care provided in a hospital, nursing facility or intermediate care facility for the mentally 

retarded the cost of which could be reimbursed 

under the State plan, and who will receive home 

or community-based services pursuant to a waiver 

granted by the Secretary under subsection (c), (d), 

or (e) of section 1915, 

(VII) who would be eligible under the State plan 

under this title if they were in a medical institution, who are terminally ill, and who will receive 

hospice care pursuant to a voluntary election described in section 1905(o); 

(VIII) who is a child described in section 

1905(a)(i)— 

(aa) for whom there is in effect an adoption 

assistance agreement (other than an agreement under part E of title IV) between the 

State and an adoptive parent or parents, 

(bb) who the State agency responsible for 

adoption assistance has determined cannot be 

placed with adoptive parents without medical 

assistance because such child has special 

needs for medical or rehabilitative care, and 

(cc) who was eligible for medical assistance 

under the State plan prior to the adoption assistance agreement being entered into, or who 

would have been eligible for medical assistance at such time if the eligibility standards 

and methodologies of the State’s foster care 

program under part E of title IV were applied 

rather than the eligibility standards and 

methodologies of the State’s aid to families 

with dependent children program under part 

A of title IV; 

(IX) who are described in subsection (l)(1) and 

are not described in clause (i)(IV), clause (i)(VI), or 

clause (i)(VII); 

(X) who are described in subsection (m)(1); 

(XI) who receive only an optional State supplementary payment based on need and paid on a 

regular basis, equal to the difference between the 

individual’s countable income and the income 

standard used to determine eligibility for such 

supplementary payment (with countable income 

being the income remaining after deductions as 

established by the State pursuant to standards 

that may be more restrictive than the standards 

for supplementary security income benefits under 

title XVI), which are available to all individuals in 


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the State (but which may be based on different income standards by political subdivision according 

to cost of living differences), and which are paid 

by a State that does not have an agreement with 

the Commissioner of Social Security under section 

1616 or 1634; 

(XII) who are described in subsection (z)(1) (relating to certain TB-infected individuals); 

(XIII) who are in families whose income is less 

than 250 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, and who but for earnings in excess of the 

limit established under section 1905(q)(2)(B), 

would be considered to be receiving supplemental 

security income (subject, notwithstanding section 

1916, to payment of premiums or other cost-sharing charges (set on a sliding scale based on income) that the State may determine); 

(XIV) who are optional targeted low-income children described in section 1905(u)(2)(B); 

(XV) who, but for earnings in excess of the limit 

established under section 1905(q)(2)(B), would be 

considered to be receiving supplemental security 

income, who is at least 16, but less than 65, years 

of age, and whose assets, resources, and earned or 

unearned income (or both) do not exceed such limitations (if any) as the State may establish; 

(XVI) who are employed individuals with a 

medically improved disability described in section 

1905(v)(1) and whose assets, resources, and 

earned or unearned income (or both) do not exceed 

such limitations (if any) as the State may establish, but only if the State provides medical assistance to individuals described in subclause (XV); 

(XVII) who are independent foster care adolescents (as defined in section 1905(w)(1)), or who are 

within any reasonable categories of such adolescents specified by the State; 

(XVIII) who are described in subsection (aa) (relating to certain breast or cervical cancer patients); 

(XIX) who are disabled children described in 

subsection (cc)(1); 

(XX) beginning January 1, 2014, who are under 

65 years of age and are not described in or enrolled under a previous subclause of this clause, 

and whose income (as determined under subsection (e)(14)) exceeds 133 percent of the poverty 

line (as defined in section 2110(c)(5)) applicable to 

a family of the size involved but does not exceed 

the highest income eligibility level established 


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under the State plan or under a waiver of the 

plan, subject to subsection (hh); 

(XXI) who are described in subsection (ii) (relating to individuals who meet certain income standards); or 

(XXII) 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; 

(B) that the medical assistance made available to any individual described in subparagraph (A)— 

(i) shall not be less in amount, duration, or scope 

than the medical assistance made available to any 

other such individual, and 

(ii) shall not be less in amount, duration, or scope 

than the medical assistance made available to individuals not described in subparagraph (A); 

(C) that if medical assistance is included for any group 

of individuals described in section 1905(a) who are not described in subparagraph (A) or (E), then— 

(i) the plan must include a description of (I) the criteria for determining eligibility of individuals in the 

group for such medical assistance, (II) the amount, duration, and scope of medical assistance made available 

to individuals in the group, and (III) the single standard to be employed in determining income and resource eligibility for all such groups, and the methodology to be employed in determining such eligibility, 

which shall be no more restrictive than the methodology which would be employed under the supplemental security income program in the case of groups 

consisting of aged, blind, or disabled individuals in a 

State in which such program is in effect, and which 

shall be no more restrictive than the methodology 

which would be employed under the appropriate State 

plan (described in subparagraph (A)(i)) to which such 

group is most closely categorically related in the case 

of other groups; 

(ii) the plan must make available medical assistance— 

(I) to individuals under the age of 18 who (but 

for income and resources) would be eligible for 

medical assistance as an individual described in 

subparagraph (A)(i), and 

(II) to pregnant women, during the course of 

their pregnancy, who (but for income and resources) would be eligible for medical assistance 

as an individual described in subparagraph (A); 

(iii) such medical assistance must include (I) with 

respect to children under 18 and individuals entitled 

to institutional services, ambulatory services, and (II) 


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with respect to pregnant women, prenatal care and delivery services; and 

(iv) if such medical assistance includes services in 

institutions for mental diseases or in an intermediate 

care facility for the mentally retarded (or both) for any 

such group, it also must include for all groups covered 

at least the care and services listed in paragraphs (1) 

through (5) and (17) of section 1905(a) or the care and 

services listed in any 7 of the paragraphs numbered 

(1) through (24) of such section; 

(D) for the inclusion of home health services for any individual who, under the State plan, is entitled to nursing 

facility services; 

(E)(i) for making medical assistance available for medicare cost-sharing (as defined in section 1905(p)(3)) for 

qualified medicare beneficiaries described in section 

1905(p)(1); 

(ii) for making medical assistance available for payment 

of medicare cost-sharing described in section 

1905(p)(3)(A)(i) for qualified disabled and working individuals described in section 1905(s); 

(iii) for making medical assistance available for medicare 

cost sharing described in section 1905(p)(3)(A)(ii) subject to 

section 1905(p)(4), for individuals who would be qualified 

medicare beneficiaries described in section 1905(p)(1) but 

for the fact that their income exceeds the income level established by the State under section 1905(p)(2) but is less 

than 110 percent in 1993 and 1994, and 120 percent in 

1995 and years thereafter of the official poverty line (referred to in such section) for a family of the size involved; 

and 

(iv) subject to sections 1933 and 1905(p)(4), for making 

medical assistance available for medicare cost-sharing described in section 1905(p)(3)(A)(ii) for individuals who 

would be qualified medicare beneficiaries described in section 1905(p)(1) but for the fact that their income exceeds 

the income level established by the State under section 

1905(p)(2) and is at least 120 percent, but less than 135 

percent, of the official poverty line (referred to in such section) for a family of the size involved and who are not otherwise eligible for medical assistance under the State plan; 

(F) at the option of a State, for making medical assistance available for COBRA premiums (as defined in subsection (u)(2)) for qualified COBRA continuation beneficiaries described in section 1902(u)(1); and 

(G) that, in applying eligibility criteria of the supplemental security income program under title XVI for purposes of determining eligibility for medical assistance 

under the State plan of an individual who is not receiving 

supplemental security income, the State will disregard the 

provisions of subsections (c) and (e) of section 1613; 

except that (I) the making available of the services described 

in paragraph (4), (14), or (16) of section 1905(a) to individuals 

meeting the age requirements prescribed therein shall not, by 

reason of this paragraph (10), require the making available of 


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any such services, or the making available of such services of 

the same amount, duration, and scope, to individuals of any 

other ages, (II) the making available of supplementary medical 

insurance benefits under part B of title XVIII to individuals eligible therefor (either pursuant to an agreement entered into 

under section 1843 or by reason of the payment of premiums 

under such title by the State agency on behalf of such individuals), or provision for meeting part or all of the cost of 

deductibles, cost sharing, or similar charges under part B of 

title XVIII for individuals eligible for benefits under such part, 

shall not, by reason of this paragraph (10), require the making 

available of any such benefits, or the making available of services of the same amount, duration, and scope, to any other individuals, (III) the making available of medical assistance 

equal in amount, duration, and scope to the medical assistance 

made available to individuals described in clause (A) to any 

classification of individuals approved by the Secretary 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 

shall not, by reason of this paragraph (10), require the making 

available of any such assistance, or the making available of 

such assistance of the same amount, duration, and scope, to 

any other individuals not described in clause (A), (IV) the imposition of a deductible, cost sharing, or similar charge for any 

item or service furnished to an individual not eligible for the 

exemption under section 1916(a)(2) or (b)(2) shall not require 

the imposition of a deductible, cost sharing, or similar charge 

for the same item or service furnished to an individual who is 

eligible for such exemption, (V) the making available to pregnant women covered under the plan of services relating to 

pregnancy (including prenatal, delivery, and postpartum services) or to any other condition which may complicate pregnancy 

shall not, by reason of this paragraph (10), require the making 

available of such services, or the making available of such services of the same amount, duration, and scope, to any other individuals, provided such services are made available (in the 

same amount, duration, and scope) to all pregnant women covered under the State plan, (VI) with respect to the making 

available of medical assistance for hospice care to terminally ill 

individuals who have made a voluntary election described in 

section 1905(o) to receive hospice care instead of medical assistance for certain other services, such assistance may not be 

made available in an amount, duration, or scope less than that 

provided under title XVIII, and the making available of such 

assistance shall not, by reason of this paragraph (10), require 

the making available of medical assistance for hospice care to 

other individuals or the making available of medical assistance 

for services waived by such terminally ill individuals, (VII) the 

medical assistance made available to an individual described in 

subsection (l)(1)(A) who is eligible for medical assistance only 

because of subparagraph (A)(i)(IV) or (A)(ii)(IX) shall be limited 

to medical assistance for services related to pregnancy (including prenatal, delivery, postpartum, and family planning services) and to other conditions which may complicate pregnancy, 


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(VIII) the medical assistance made available to a qualified 

medicare beneficiary described in section 1905(p)(1) who is 

only entitled to medical assistance because the individual is 

such a beneficiary shall be limited to medical assistance for 

medicare cost-sharing (described in section 1905(p)(3)), subject 

to the provisions of subsection (n) and section 1916(b), (IX) the 

making available of respiratory care services in accordance 

with subsection (e)(9) shall not, by reason of this paragraph 

(10), require the making available of such services, or the making available of such services of the same amount, duration, 

and scope, to any individuals not included under subsection 

(e)(9)(A), provided such services are made available (in the 

same amount, duration, and scope) to all individuals described 

in such subsection, (X) if the plan provides for any fixed 

durational limit on medical assistance for inpatient hospital 

services (whether or not such a limit varies by medical condition or diagnosis), the plan must establish exceptions to such 

a limit for medically necessary inpatient hospital services furnished with respect to individuals under one year of age in a 

hospital defined under the State plan, pursuant to section 

1923(a)(1)(A), as a disproportionate share hospital and subparagraph (B) (relating to comparability) shall not be construed as requiring such an exception for other individuals, 

services, or hospitals, (XI) the making available of medical assistance to cover the costs of premiums, deductibles, coinsurance, and other cost-sharing obligations for certain individuals 

for private health coverage as described in section 1906 shall 

not, by reason of paragraph (10), require the making available 

of any such benefits or the making available of services of the 

same amount, duration, and scope of such private coverage to 

any other individuals, (XII) the medical assistance made available to an individual described in subsection (u)(1) who is eligible for medical assistance only because of subparagraph (F) 

shall be limited to medical assistance for COBRA continuation 

premiums (as defined in subsection (u)(2)), (XIII) the medical 

assistance made available to an individual described in subsection (z)(1) who is eligible for medical assistance only because 

of subparagraph (A)(ii)(XII) shall be limited to medical assistance for TB-related services (described in subsection (z)(2)), 

(XIV) the medical assistance made available to an individual 

described in subsection (aa) who is eligible for medical assistance only because of subparagraph (A)(10)(ii)(XVIII) shall be 

limited to medical assistance provided during the period in 

which such an individual requires treatment for breast or cervical cancer (XV) the medical assistance made available to an 

individual described in subparagraph (A)(i)(VIII) shall be limited to medical assistance described in subsection (k)(1), (XVI) 

the medical assistance made available to an individual described in subsection (ii) shall be limited to family planning 

services and supplies described in section 1905(a)(4)(C) including medical diagnosis and treatment services that are provided 

pursuant to a family planning service in a family planning setting and (XVII) if an individual is described in subclause (IX) 

of subparagraph (A)(i) and is also described in subclause (VIII) 

of that subparagraph, the medical assistance shall be made 


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available to the individual through subclause (IX) instead of 

through subclause (VIII); 

(11)(A) provide for entering into cooperative arrangements 

with the State agencies responsible for administering or supervising the administration of health services and vocational rehabilitation services in the State looking toward maximum utilization of such services in the provision of medical assistance 

under the plan, (B) provide, to the extent prescribed by the 

Secretary, for entering into agreements, with any agency, institution, or organization receiving payments under (or through 

an allotment under) title V, (i) providing for utilizing such 

agency, institution, or organization in furnishing care and services which are available under such title or allotment and 

which are included in the State plan approved under this section (ii) making such provision as may be appropriate for reimbursing such agency, institution, or organization for the cost of 

any such care and services furnished any individual for which 

payment would otherwise be made to the State with respect to 

the individual under section 1903, and (iii) providing for coordination of information and education on pediatric vaccinations 

and delivery of immunization services, and (C) provide for coordination of the operations under this title, including the provision of information and education on pediatric vaccinations 

and the delivery of immunization services, with the State’s operations under the special supplemental nutrition program for 

women, infants, and children under section 17 of the Child Nutrition Act of 1966; 

(12) provide that, in determining whether an individual is 

blind, there shall be an examination by a physician skilled in 

the diseases of the eye or by an optometrist, whichever the individual may select; 

(13) provide— 

(A) for a public process for determination of rates of payment under the plan for hospital services, nursing facility 

services, and services of intermediate care facilities for the 

mentally retarded under which— 

(i) proposed rates, the methodologies underlying the 

establishment of such rates, and justifications for the 

proposed rates are published, 

(ii) providers, beneficiaries and their representatives, and other concerned State residents are given a 

reasonable opportunity for review and comment on the 

proposed rates, methodologies, and justifications, 

(iii) final rates, the methodologies underlying the establishment of such rates, and justifications for such 

final rates are published, and 

(iv) in the case of hospitals, such rates take into account (in a manner consistent with section 1923) the 

situation of hospitals which serve a disproportionate 

number of low-income patients with special needs; 

(B) for payment for hospice care in amounts no lower 

than the amounts, using the same methodology, used 

under part A of title XVIII and for payment of amounts 

under section 1905(o)(3); except that in the case of hospice 

care which is furnished to an individual who is a resident 


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of a nursing facility or intermediate care facility for the 

mentally retarded, and who would be eligible under the 

plan for nursing facility services or services in an intermediate care facility for the mentally retarded if he had 

not elected to receive hospice care, there shall be paid an 

additional amount, to take into account the room and 

board furnished by the facility, equal to at least 95 percent 

of the rate that would have been paid by the State under 

the plan for facility services in that facility for that individual; and 

(C) payment for primary care services (as defined in subsection (jj)) furnished in 2013 and 2014 by a physician 

with a primary specialty designation of family medicine, 

general internal medicine, or pediatric medicine at a rate 

not less than 100 percent of the payment rate that applies 

to such services and physician under part B of title XVIII 

(or, if greater, the payment rate that would be applicable 

under such part if the conversion factor under section 

1848(d) for the year involved were the conversion factor 

under such section for 2009); 

(14) provide that enrollment fees, premiums, or similar 

charges, and deductions, cost sharing, or similar charges, may 

be imposed only as provided in section 1916; 

(15) provide for payment for services described in clause (B) 

or (C) of section 1905(a)(2) under the plan in accordance with 

subsection (bb); 

(16) provide for inclusion, to the extent required by regulations prescribed by the Secretary, of provisions (conforming to 

such regulations) with respect to the furnishing of medical assistance under the plan to individuals who are residents of the 

State but are absent therefrom; 

(17) except as provided in subsections (e)(14), (e)(14), (l)(3), 

(m)(3), and (m)(4), include reasonable standards (which shall 

be comparable for all groups and may, in accordance with 

standards prescribed by the Secretary, differ with respect to income levels, but only in the case of applicants or recipients of 

assistance under the plan who are 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, based on the variations between shelter costs 

in urban areas and in rural areas) for determining eligibility 

for and the extent of medical assistance under the plan which 

(A) are consistent with the objectives of this title, (B) provide 

for taking into account only such income and resources as are, 

as determined in accordance with standards prescribed by the 

Secretary, available to the applicant or recipient and (in the 

case of any applicant or recipient who would, except for income 

and resources, be eligible for aid or assistance in the form of 

money payments under any plan of the State approved under 

title I, X, XIV, or XVI, or part A of title IV, or to have paid 

with respect to him supplemental security income benefits 

under title XVI) as would not be disregarded (or set aside for 

future needs) in determining his eligibility for such aid, assistance, or benefits, (C) provide for reasonable evaluation of any 


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such income or resources, and (D) do not take into account the 

financial responsibility of any individual for any applicant or 

recipient of assistance under the plan unless such applicant or 

recipient is such individual’s spouse or 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 is blind or disabled as defined in section 1614 (with respect to States which 

are not eligible to participate in such program); and provide for 

flexibility in the application of such standards with respect to 

income by taking into account, except to the extent prescribed 

by the Secretary, the costs (whether in the form of insurance 

premiums, payments made to the State under section 

1903(f)(2)(B), or otherwise and regardless of whether such costs 

are reimbursed under another public program of the State or 

political subdivision thereof) incurred for medical care or for 

any other type of remedial care recognized under State law; 

(18) comply with the provisions of section 1917 with respect 

to liens, adjustments and recoveries of medical assistance correctly paid, transfers of assets, and treatment of certain trusts; 

(19) provide such safeguards as may be necessary to assure 

that eligibility for care and services under the plan will be determined, and such care and services will be provided, in a 

manner consistent with simplicity of administration and the 

best interests of the recipients; 

(20) if the State plan includes medical assistance in behalf 

of individuals 65 years of age or older who are patients in institutions for mental diseases— 

(A) provide for having in effect such agreements or other 

arrangements with State authorities concerned with mental diseases, and, where appropriate, with such institutions, as may be necessary for carrying out the State plan, 

including arrangements for joint planning and for development of alternate methods of care, arrangements providing 

assurance of immediate readmittance to institutions where 

needed for individuals under alternate plans of care, and 

arrangements providing for access to patients and facilities, for furnishing information, and for making reports; 

(B) provide for an individual plan for each such patient 

to assure that the institutional care provided to him is in 

his best interests, including, to that end, assurances that 

there will be initial and periodic review of his medical and 

other needs, that he will be given appropriate medical 

treatment within the institution, and that there will be a 

periodic determination of his need for continued treatment 

in the institution; and 

(C) provide for the development of alternate plans of 

care, making maximum utilization of available resources, 

for recipients 65 years of age or older who would otherwise 

need care in such institutions, including appropriate medical treatment and other aid or assistance; for services referred to in section 3(a)(4)(A)(i) and (ii) or section 

1603(a)(4)(A)(i) and (ii) which are appropriate for such recipients and for such patients; and for methods of administration necessary to assure that the responsibilities of the 


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State agency under the State plan with respect to such recipients and such patients will be effectively carried out; 

(21) if the State plan includes medical assistance in behalf 

of individuals 65 years of age or older who are patients in public institutions for mental diseases, show that the State is making satisfactory progress toward developing and implementing 

a comprehensive mental health program, including provision 

for utilization of community mental health centers, nursing facilities, and other alternatives to care in public institutions for 

mental diseases; 

(22) include descriptions of (A) the kinds and numbers of 

professional medical personnel and supporting staff that will 

be used in the administration of the plan and of the responsibilities they will have, (B) the standards, for private or public 

institutions in which recipients of medical assistance under the 

plan may receive care or services, that will be utilized by the 

State authority or authorities responsible for establishing and 

maintaining such standards, (C) the cooperative arrangements 

with State health agencies and State vocational rehabilitation 

agencies entered into with a view to maximum utilization of 

and coordination of the provision of medical assistance with 

the services administered or supervised by such agencies, and 

(D) other standards and methods that the State will use to assure that medical or remedial care and services provided to recipients of medical assistance are of high quality; 

(23) provide that (A) any individual eligible for medical assistance (including drugs) may obtain such assistance from any 

institution, agency, community pharmacy, or person, qualified 

to perform the service or services required (including an organization which provides such services, or arranges for their 

availability, on a prepayment basis), who undertakes to provide him such services, and (B) an enrollment of an individual 

eligible for medical assistance in a primary care case-management system (described in section 1915(b)(1)), a medicaid managed care organization, or a similar entity shall not restrict the 

choice of the qualified person from whom the individual may 

receive services under section 1905(a)(4)(C), except as provided 

in subsection (g) and in section 1915, except that this paragraph shall not apply in the case of Puerto Rico, the Virgin Islands, and Guam, and except that nothing in this paragraph 

shall be construed as requiring a State to provide medical assistance for such services furnished by a person or entity convicted of a felony under Federal or State law for an offense 

which the State agency determines is inconsistent with the 

best interests of beneficiaries under the State plan or by a provider or supplier to which a moratorium under subsection 

(kk)(4) is applied during the period of such moratorium’; 

(24) effective July 1, 1969, provide for consultative services 

by health agencies and other appropriate agencies of the State 

to hospitals, nursing facilities, home health agencies, clinics, 

laboratories, and such other institutions as the Secretary may 

specify in order to assist them (A) to qualify for payments 

under this Act, (B) to establish and maintain such fiscal 

records as may be necessary for the proper and efficient administration of this Act, and (C) to provide information needed 


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to determine payments due under this Act on account of care 

and services furnished to individuals; 

(25) provide— 

(A) that the State or local agency administering such 

plan will take all reasonable measures to ascertain the 

legal liability of third parties (including health insurers, 

self-insured plans, group health plans (as defined in section 607(1) of the Employee Retirement Income Security 

Act of 1974), service benefit plans, managed care organizations, pharmacy benefit managers, or other parties that 

are, by statute, contract, or agreement, legally responsible 

for payment of a claim for a health care item or service) 

to pay for care and services available under the plan, including— 

(i) the collection of sufficient information (as specified by the Secretary in regulations) to enable the 

State to pursue claims against such third parties, with 

such information being collected at the time of any determination or redetermination of eligibility for medical assistance, and 

(ii) the submission to the Secretary of a plan (subject to approval by the Secretary) for pursuing claims 

against such third parties, which plan shall be integrated with, and be monitored as a part of the Secretary’s review of, the State’s mechanized claims processing and information retrieval systems required 

under section 1903(r); 

(B) that in any case where such a legal liability is found 

to exist after medical assistance has been made available 

on behalf of the individual and where the amount of reimbursement the State can reasonably expect to recover exceeds the costs of such recovery, the State or local agency 

will seek reimbursement for such assistance to the extent 

of such legal liability; 

(C) that in the case of an individual who is entitled to 

medical assistance under the State plan with respect to a 

service for which a third party is liable for payment, the 

person furnishing the service may not seek to collect from 

the individual (or any financially responsible relative or 

representative of that individual) payment of an amount 

for that service (i) if the total of the amount of the liabilities of third parties for that service is at least equal to the 

amount payable for that service under the plan (disregarding section 1916), or (ii) in an amount which exceeds 

the lesser of (I) the amount which may be collected under 

section 1916, or (II) the amount by which the amount payable for that service under the plan (disregarding section 

1916) exceeds the total of the amount of the liabilities of 

third parties for that service; 

(D) that a person who furnishes services and is participating under the plan may not refuse to furnish services 

to an individual (who is entitled to have payment made 

under the plan for the services the person furnishes) because of a third party’s potential liability for payment for 

the service; 


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(E) that in the case of prenatal or preventive pediatric 

care (including early and periodic screening and diagnosis 

services under section 1905(a)(4)(B)) covered under the 

State plan, the State shall— 

(i) make payment for such service in accordance 

with the usual payment schedule under such plan for 

such services without regard to the liability of a third 

party for payment for such services; and 

(ii) seek reimbursement from such third party in accordance with subparagraph (B); 

(F) that in the case of any services covered under such 

plan which are provided to an individual on whose behalf 

child support enforcement is being carried out by the State 

agency under part D of title IV of this Act, the State 

shall— 

(i) make payment for such service in accordance 

with the usual payment schedule under such plan for 

such services without regard to any third-party liability for payment for such services, if such third-party 

liability is derived (through insurance or otherwise) 

from the parent whose obligation to pay support is 

being enforced by such agency, if payment has not 

been made by such third party within 30 days after 

such services are furnished; 

(ii) seek reimbursement from such third party in accordance with subparagraph (B); 

(G) that the State prohibits any health insurer (including a group health plan, as defined in section 607(1) of the 

Employee Retirement Income Security Act of 1974, a selfinsured plan, a service benefit plan, a managed care organization, a pharmacy benefit manager, or other party that 

is, by statute, contract, or agreement, legally responsible 

for payment of a claim for a health care item or service), 

in enrolling an individual or in making any payments for 

benefits to the individual or on the individual’s behalf, 

from taking into account that the individual is eligible for 

or is provided medical assistance under a plan under this 

title for such State, or any other State; 

(H) that to the extent that payment has been made 

under the State plan for medical assistance in any case 

where a third party has a legal liability to make payment 

for such assistance, the State has in effect laws under 

which, to the extent that payment has been made under 

the State plan for medical assistance for health care items 

or services furnished to an individual, the State is considered to have acquired the rights of such individual to payment by any other party for such health care items or 

services; and 

(I) that the State shall provide assurances satisfactory to 

the Secretary that the State has in effect laws requiring 

health insurers, including self-insured plans, group health 

plans (as defined in section 607(1) of the Employee Retirement Income Security Act of 1974), service benefit plans, 

managed care organizations, pharmacy benefit managers, 

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ment, legally responsible for payment of a claim for a 

health care item or service, as a condition of doing business in the State, to— 

(i) provide, with respect to individuals who are eligible (and, at State option, individuals who apply or 

whose eligibility for medical assistance is being evaluated in accordance with section 1902(e)(13)(D)) for, or 

are provided, medical assistance under the State plan 

under this title (and, at State option, child health assistance under title XXI), upon the request of the 

State, information to determine during what period 

the individual or their spouses or their dependents 

may be (or may have been) covered by a health insurer and the nature of the coverage that is or was 

provided by the health insurer (including the name, 

address, and identifying number of the plan) in a manner prescribed by the Secretary; 

(ii) accept the State’s right of recovery and the assignment to the State of any right of an individual or 

other entity to payment from the party for an item or 

service for which payment has been made under the 

State plan; 

(iii) respond to any inquiry by the State regarding a 

claim for payment for any health care item or service 

that is submitted not later than 3 years after the date 

of the provision of such health care item or service; 

and 

(iv) agree not to deny a claim submitted by the State 

solely on the basis of the date of submission of the 

claim, the type or format of the claim form, or a failure to present proper documentation at the point-ofsale that is the basis of the claim, if— 

(I) the claim is submitted by the State within 

the 3-year period beginning on the date on which 

the item or service was furnished; and 

(II) any action by the State to enforce its rights 

with respect to such claim is commenced within 6 

years of the State’s submission of such claim; 

(26) if the State plan includes medical assistance for inpatient mental hospital services, provide, with respect to each patient receiving such services, for a regular program of medical 

review (including medical evaluation) of his need for such services, and for a written plan of care; 

(27) provide for agreements with every person or institution 

providing services under the State plan under which such person or institution agrees (A) to keep such records as are necessary fully to disclose the extent of the services provided to 

individuals receiving assistance under the State plan, and (B) 

to furnish the State agency or the Secretary with such information, regarding any payments claimed by such person or institution for providing services under the State plan, as the 

State agency or the Secretary may from time to time request; 

(28) provide— 

(A) that any nursing facility receiving payments under 

such plan must satisfy all the requirements of subsections 


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(b) through (d) of section 1919 as they apply to such facilities; 

(B) for including in ‘‘nursing facility services’’ at least 

the items and services specified (or deemed to be specified) 

by the Secretary under section 1919(f)(7) and making 

available upon request a description of the items and services so included; 

(C) for procedures to make available to the public the 

data and methodology used in establishing payment rates 

for nursing facilities under this title; and 

(D) for compliance (by the date specified in the respective sections) with the requirements of— 

(i) section 1919(e); 

(ii) section 1919(g) (relating to responsibility for survey and certification of nursing facilities); and 

(iii) sections 1919(h)(2)(B) and 1919(h)(2)(D) (relating to establishment and application of remedies); 

(29) include a State program which meets the requirements 

set forth in section 1908, for the licensing of administrators of 

nursing homes; 

(30)(A) provide such methods and procedures relating to the 

utilization of, and the payment for, care and services available 

under the plan (including but not limited to utilization review 

plans as provided for in section 1903(i)(4)) as may be necessary 

to safeguard against unnecessary utilization of such care and 

services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist 

enough providers so that care and services are available under 

the plan at least to the extent that such care and services are 

available to the general population in the geographic area; and 

(B) provide, under the program described in subparagraph 

(A), that— 

(i) each admission to a hospital, intermediate care facility for the mentally retarded, or hospital for mental diseases is reviewed or screened in accordance with criteria 

established by medical and other professional personnel 

who are not themselves directly responsible for the care of 

the patient involved, and who do not have a significant financial interest in any such institution and are not, except 

in the case of a hospital, employed by the institution providing the care involved, and 

(ii) the information developed from such review or 

screening, along with the data obtained from prior reviews 

of the necessity for admission and continued stay of patients by such professional personnel, shall be used as the 

basis for establishing the size and composition of the sample of admissions to be subject to review and evaluation by 

such personnel, and any such sample may be of any size 

up to 100 percent of all admissions and must be of sufficient size to serve the purpose of (I) identifying the patterns of care being provided and the changes occurring 

over time in such patterns so that the need for modification may be ascertained, and (II) subjecting admissions to 

early or more extensive review where information indicates that such consideration is warranted to a hospital, 


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intermediate care facility for the mentally retarded, or hospital for mental diseases; 

(31) with respect to services in an intermediate care facility 

for the mentally retarded (where the State plan includes medical assistance for such services) provide, with respect to each 

patient receiving such services, for a written plan of care, prior 

to admission to or authorization of benefits in such facility, in 

accordance with regulations of the Secretary, and for a regular 

program of independent professional review (including medical 

evaluation) which shall periodically review his need for such 

services; 

(32) provide that no payment under the plan for any care or 

service provided to an individual shall be made to anyone other 

than such individual or the person or institution providing 

such care or service, under an assignment or power of attorney 

or otherwise; except that— 

(A) in the case of any care or service provided by a physician, dentist, or other individual practitioner, such payment may be made (i) to the employer of such physician, 

dentist, or other practitioner if such physician, dentist, or 

practitioner is required as a condition of his employment 

to turn over his fee for such care or service to his employer, or (ii) (where the care or service was provided in 

a hospital, clinic, or other facility) to the facility in which 

the care or service was provided if there is a contractual 

arrangement between such physician, dentist, or practitioner and such facility under which such facility submits 

the bill for such care or service; 

(B) nothing in this paragraph shall be construed (i) to 

prevent the making of such a payment in accordance with 

an assignment from the person or institution providing the 

care or service involved if such assignment is made to a 

governmental agency or entity or is established by or pursuant to the order of a court of competent jurisdiction, or 

(ii) to preclude an agent of such person or institution from 

receiving any such payment if (but only if) such agent does 

so pursuant to an agency agreement under which the compensation to be paid to the agent for his services for or in 

connection with the billing or collection of payments due 

such person or institution under the plan is unrelated (directly or indirectly) to the amount of such payments or the 

billings therefor, and is not dependent upon the actual collection of any such payment; 

(C) in the case of services furnished (during a period 

that does not exceed 14 continuous days in the case of an 

informal reciprocal arrangement or 90 continuous days (or 

such longer period as the Secretary may provide) in the 

case of an arrangement involving per diem or other fee-fortime compensation) by, or incident to the services of, one 

physician to the patients of another physician who submits 

the claim for such services, payment shall be made to the 

physician submitting the claim (as if the services were furnished by, or incident to, the physician’s services), but only 

if the claim identifies (in a manner specified by the Secretary) the physician who furnished the services; and 


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(D) in the case of payment for a childhood vaccine administered before October 1, 1994, to individuals entitled 

to medical assistance under the State plan, the State plan 

may make payment directly to the manufacturer of the 

vaccine under a voluntary replacement program agreed to 

by the State pursuant to which the manufacturer (i) supplies doses of the vaccine to providers administering the 

vaccine, (ii) periodically replaces the supply of the vaccine, 

and (iii) charges the State the manufacturer’s price to the 

Centers for Disease Control and Prevention for the vaccine 

so administered (which price includes a reasonable amount 

to cover shipping and the handling of returns); 

(33) provide— 

(A) that the State health agency, or other appropriate 

State medical agency, shall be responsible for establishing 

a plan, consistent with regulations prescribed by the Secretary, for the review by appropriate professional health 

personnel of the appropriateness and quality of care and 

services furnished to recipients of medical assistance 

under the plan in order to provide guidance with respect 

thereto in the administration of the plan to the State agency established or designated pursuant to paragraph (5) 

and, where applicable, to the State agency described in the 

second sentence of this subsection; and 

(B) that, except as provided in section 1919(g), the State 

or local agency utilized by the Secretary for the purpose 

specified in the first sentence of section 1864(a), or, if such 

agency is not the State agency which is responsible for licensing health institutions, the State agency responsible 

for such licensing, will perform for the State agency administering or supervising the administration of the plan 

approved under this title the function of determining 

whether institutions and agencies meet the requirements 

for participation in the program under such plan, except 

that, if the Secretary has cause to question the adequacy 

of such determinations, the Secretary is authorized to validate State determinations and, on that basis, make independent and binding determinations concerning the extent 

to which individual institutions and agencies meet the requirements for participation; 

(34) provide that in the case of any individual who has been 

determined to be eligible for medical assistance under the plan, 

such assistance will be made available to him for care and 

services included under the plan and furnished in or after the 

third month before the month in which he made application (or 

application was made on his behalf in the case of a deceased 

individual) for such assistance if such individual was (or upon 

application would have been) eligible for such assistance at the 

time such care and services were furnished; 

(35) provide that any disclosing entity (as defined in section 

1124(a)(2)) receiving payments under such plan complies with 

the requirements of section 1124; 

(36) provide that within 90 days following the completion of 

each survey of any health care facility, laboratory, agency, clinic, or organization, by the appropriate State agency described 


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in paragraph (9), such agency shall (in accordance with regulations of the Secretary) make public in readily available form 

and place the pertinent findings of each such survey relating 

to the compliance of each such health care facility, laboratory, 

clinic, agency, or organization with (A) the statutory conditions 

of participation imposed under this title, and (B) the major additional conditions which the Secretary finds necessary in the 

interest of health and safety of individuals who are furnished 

care or services by any such facility, laboratory, clinic, agency, 

or organization; 

(37) provide for claims payment procedures which (A) ensure 

that 90 per centum of claims for payment (for which no further 

written information or substantiation is required in order to 

make payment) made for services covered under the plan and 

furnished by health care practitioners through individual or 

group practices or through shared health facilities are paid 

within 30 days of the date of receipt of such claims and that 

99 per centum of such claims are paid within 90 days of the 

date of receipt of such claims, and (B) provide for procedures 

of prepayment and postpayment claims review, including review of appropriate data with respect to the recipient and provider of a service and the nature of the service for which payment is claimed, to ensure the proper and efficient payment of 

claims and management of the program; 

(38) require that an entity (other than an individual practitioner or a group of practitioners) that furnishes, or arranges 

for the furnishing of, items or services under the plan, shall 

supply (within such period as may be specified in regulations 

by the Secretary or by the single State agency which administers or supervises the administration of the plan) upon request specifically addressed to such entity by the Secretary or 

such State agency, the information described in section 

1128(b)(9); 

(39) provide that the State agency shall exclude any specified 

individual or entity from participation in the program under 

the State plan for the period specified by the Secretary, when 

required by him to do so pursuant to section 1128 or section 

1128A, terminate the participation of any individual or entity 

in such program if (subject to such exceptions as are permitted 

with respect to exclusion under sections 1128(c)(3)(B) and 

1128(d)(3)(B)) participation of such individual or entity is terminated under title XVIII or any other State plan under this 

title, and provide that no payment may be made under the 

plan with respect to any item or service furnished by such individual or entity during such period; 

(40) require each health services facility or organization 

which receives payments under the plan and of a type for 

which a uniform reporting system has been established under 

section 1121(a) to make reports to the Secretary of information 

described in such section in accordance with the uniform reporting system (established under such section) for that type of 

facility or organization; 

(41) provide that whenever a provider of services or any 

other person is terminated, suspended, or otherwise sanctioned 

or prohibited from participating under the State plan, the 


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State agency shall promptly notify the Secretary and, in the 

case of a physician and notwithstanding paragraph (7), the 

State medical licensing board of such action; 

(42) provide that— 

(A) the records of any entity participating in the plan 

and providing services reimbursable on a cost-related basis 

will be audited as the Secretary determines to be necessary to insure that proper payments are made under the 

plan; and 

(B) not later than December 31, 2010, the State shall— 

(i) establish a program under which the State contracts (consistent with State law and in the same 

manner as the Secretary enters into contracts with recovery audit contractors under section 1893(h), subject 

to such exceptions or requirements as the Secretary 

may require for purposes of this title or a particular 

State) with 1 or more recovery audit contractors for 

the purpose of identifying underpayments and overpayments and recouping overpayments under the 

State plan and under any waiver of the State plan 

with respect to all services for which payment is made 

to any entity under such plan or waiver; and 

(ii) provide assurances satisfactory to the Secretary 

that— 

(I) under such contracts, payment shall be made 

to such a contractor only from amounts recovered; 

(II) from such amounts recovered, payment— 

(aa) shall be made on a contingent basis for 

collecting overpayments; and 

(bb) may be made in such amounts as the 

State may specify for identifying underpayments; 

(III) the State has an adequate process for entities to appeal any adverse determination made by 

such contractors; and 

(IV) such program is carried out in accordance 

with such requirements as the Secretary shall 

specify, including— 

(aa) for purposes of section 1903(a)(7), that 

amounts expended by the State to carry out 

the program shall be considered amounts expended as necessary for the proper and efficient administration of the State plan or a 

waiver of the plan; 

(bb) that section 1903(d) shall apply to 

amounts recovered under the program; and 

(cc) that the State and any such contractors 

under contract with the State shall coordinate 

such recovery audit efforts with other contractors or entities performing audits of entities 

receiving payments under the State plan or 

waiver in the State, including efforts with 

Federal and State law enforcement with respect to the Department of Justice, including 

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spector General of the Department of Health 

and Human Services, and the State medicaid 

fraud control unit; and 

(43) provide for— 

(A) informing all persons in the State who are under the 

age of 21 and who have been determined to be eligible for 

medical assistance including services described in section 

1905(a)(4)(B), of the availability of early and periodic 

screening, diagnostic, and treatment services as described 

in section 1905(r) and the need for age-appropriate immunizations against vaccine-preventable diseases, 

(B) providing or arranging for the provision of such 

screening services in all cases where they are requested, 

(C) arranging for (directly or through referral to appropriate agencies, organizations, or individuals) corrective 

treatment the need for which is disclosed by such child 

health screening services, and 

(D) reporting to the Secretary (in a uniform form and 

manner established by the Secretary, by age group and by 

basis of eligibility for medical assistance, and by not later 

than April 1 after the end of each fiscal year, beginning 

with fiscal year 1990) the following information relating to 

early and periodic screening, diagnostic, and treatment 

services provided under the plan during each fiscal year: 

(i) the number of children provided child health 

screening services, 

(ii) the number of children referred for corrective 

treatment (the need for which is disclosed by such 

child health screening services), 

(iii) the number of children receiving dental services, 

and other information relating to the provision of dental services to such children described in section 

2108(e) and 

(iv) the State’s results in attaining the participation 

goals set for the State under section 1905(r); 

(44) in each case for which payment for inpatient hospital 

services, services in an intermediate care facility for the mentally retarded, or inpatient mental hospital services is made 

under the State plan— 

(A) a physician (or, in the case of skilled nursing facility 

services or intermediate care facility services, a physician, 

or a nurse practitioner or clinical nurse specialist who is 

not an employee of the facility but is working in collaboration with a physician) certifies at the time of admission, or, 

if later, the time the individual applies for medical assistance under the State plan (and a physician, a physician 

assistant under the supervision of a physician, or, in the 

case of skilled nursing facility services or intermediate 

care facility services, a physician, or a nurse practitioner 

or clinical nurse specialist who is not an employee of the 

facility but is working in collaboration with a physician, 

recertifies, where such services are furnished over a period 

of time, in such cases, at least as often as required under 

section 1903(g)(6) (or, in the case of services that are services provided in an intermediate care facility for the menVerDate Sep 11 2014 10:59 May 11, 2016 Jkt 059006 PO 00000 Frm 00035 Fmt 6659 Sfmt 6601 E:\HR\OC\HR559.XXX HR559

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tally retarded, every year), and accompanied by such supporting material, appropriate to the case involved, as may 

be provided in regulations of the Secretary), that such 

services are or were required to be given on an inpatient 

basis because the individual needs or needed such services, 

and 

(B) such services were furnished under a plan established and periodically reviewed and evaluated by a physician, or, in the case of skilled nursing facility services or 

intermediate care facility services, a physician, or a nurse 

practitioner or clinical nurse specialist who is not an employee of the facility but is working in collaboration with 

a physician; 

(45) provide for mandatory assignment of rights of payment 

for medical support and other medical care owed to recipients, 

in accordance with section 1912; 

(46)(A) provide that information is requested and exchanged 

for purposes of income and eligibility verification in accordance 

with a State system which meets the requirements of section 

1137 of this Act; and 

(B) provide, with respect to an individual declaring to be a 

citizen or national of the United States for purposes of establishing eligibility under this title, that the State shall satisfy 

the requirements of— 

(i) section 1903(x); or 

(ii) subsection (ee); 

(47) provide— 

(A) at the option of the State, for making ambulatory 

prenatal care available to pregnant women during a presumptive eligibility period in accordance with section 1920 

and provide for making medical assistance for items and 

services described in subsection (a) of section 1920A available to children during a presumptive eligibility period in 

accordance with such section and provide for making medical assistance available to individuals described in subsection (a) of section 1920B during a presumptive eligibility period in accordance with such section and provide 

for making medical assistance available to individuals described in subsection (a) of section 1920C during a presumptive eligibility period in accordance with such section; 

and 

(B) that any hospital that is a participating provider 

under the State plan may elect to be a qualified entity for 

purposes of determining, on the basis of preliminary information, whether any individual is eligible for medical assistance under the State plan or under a waiver of the 

plan for purposes of providing the individual with medical 

assistance during a presumptive eligibility period, in the 

same manner, and subject to the same requirements, as 

apply to the State options with respect to populations described in section 1920, 1920A, 1920B, or 1920C (but without regard to whether the State has elected to provide for 

a presumptive eligibility period under any such sections), 

subject to such guidance as the Secretary shall establish; 


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37 

(48) provide a method of making cards evidencing eligibility 

for medical assistance available to an eligible individual who 

does not reside in a permanent dwelling or does not have a 

fixed home or mailing address; 

(49) provide that the State will provide information and access to certain information respecting sanctions taken against 

health care practitioners and providers by State licensing authorities in accordance with section 1921; 

(50) provide, in accordance with subsection (q), for a monthly 

personal needs allowance for certain institutionalized individuals and couples; 

(51) meet the requirements of section 1924 (relating to protection of community spouses); 

(52) meet the requirements of section 1925 (relating to extension of eligibility for medical assistance); 

(53) provide— 

(A) for notifying in a timely manner all individuals in 

the State who are determined to be eligible for medical assistance and who are pregnant women, breastfeeding or 

postpartum women (as defined in section 17 of the Child 

Nutrition Act of 1966), or children below the age of 5, of 

the availability of benefits furnished by the special supplemental nutrition program under such section, and 

(B) for referring any such individual to the State agency 

responsible for administering such program; 

(54) in the case of a State plan that provides medical assistance for covered outpatient drugs (as defined in section 

1927(k)), comply with the applicable requirements of section 

1927; 

(55) provide for receipt and initial processing of applications 

of individuals for medical assistance under subsection 

(a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), or 

(a)(10)(A)(ii)(IX)— 

(A) at locations which are other than those used for the 

receipt and processing of applications for aid under part A 

of title IV and which include facilities defined as disproportionate share hospitals under section 1923(a)(1)(A) and 

Federally-qualified health centers described in section 

1905(1)(2)(B), and 

(B) using applications which are other than those used 

for applications for aid under such part; 

(56) provide, in accordance with subsection (s), for adjusted 

payments for certain inpatient hospital services; 

(57) provide that each hospital, nursing facility, provider of 

home health care or personal care services, hospice program, 

or medicaid managed care organization (as defined in section 

1903(m)(1)(A)) receiving funds under the plan shall comply 

with the requirements of subsection (w); 

(58) provide that the State, acting through a State agency, 

association, or other private nonprofit entity, develop a written 

description of the law of the State (whether statutory or as recognized by the courts of the State) concerning advance directives that would be distributed by providers or organizations 

under the requirements of subsection (w); 


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(59) maintain a list (updated not less often than monthly, 

and containing each physician’s unique identifier provided 

under the system established under subsection (x)) of all physicians who are certified to participate under the State plan; 

(60) provide that the State agency shall provide assurances 

satisfactory to the Secretary that the State has in effect the 

laws relating to medical child support required under section 

1908A; 

(61) provide that the State must demonstrate that it operates a medicaid fraud and abuse control unit described in section 1903(q) that effectively carries out the functions and requirements described in such section, as determined in accordance with standards established by the Secretary, unless the 

State demonstrates to the satisfaction of the Secretary that the 

effective operation of such a unit in the State would not be 

cost-effective because minimal fraud exists in connection with 

the provision of covered services to eligible individuals under 

the State plan, and that beneficiaries under the plan will be 

protected from abuse and neglect in connection with the provision of medical assistance under the plan without the existence 

of such a unit; 

(62) provide for a program for the distribution of pediatric 

vaccines to program-registered providers for the immunization 

of vaccine-eligible children in accordance with section 1928; 

(63) provide for administration and determinations of eligibility with respect to individuals who are (or seek to be) eligible for medical assistance based on the application of section 

1931; 

(64) provide, not later than 1 year after the date of the enactment of this paragraph, a mechanism to receive reports 

from beneficiaries and others and compile data concerning alleged instances of waste, fraud, and abuse relating to the operation of this title; 

(65) provide that the State shall issue provider numbers for 

all suppliers of medical assistance consisting of durable medical equipment, as defined in section 1861(n), and the State 

shall not issue or renew such a supplier number for any such 

supplier unless— 

(A)(i) full and complete information as to the identity of 

each person with an ownership or control interest (as defined in section 1124(a)(3)) in the supplier or in any subcontractor (as defined by the Secretary in regulations) in 

which the supplier directly or indirectly has a 5 percent or 

more ownership interest; and 

(ii) to the extent determined to be feasible under regulations of the Secretary, the name of any disclosing entity 

(as defined in section 1124(a)(2)) with respect to which a 

person with such an ownership or control interest in the 

supplier is a person with such an ownership or control interest in the disclosing entity; and 

(B) a surety bond in a form specified by the Secretary 

under section 1834(a)(16)(B) and in an amount that is not 

less than $50,000 or such comparable surety bond as the 

Secretary may permit under the second sentence of such 

section; 


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(66) provide for making eligibility determinations under section 1935(a); 

(67) provide, with respect to services covered under the State 

plan (but not under title XVIII) that are furnished to a PACE 

program eligible individual enrolled with a PACE provider by 

a provider participating under the State plan that does not 

have a contract or other agreement with the PACE provider 

that establishes payment amounts for such services, that such 

participating provider may not require the PACE provider to 

pay the participating provider an amount greater than the 

amount that would otherwise be payable for the service to the 

participating provider under the State plan for the State where 

the PACE provider is located (in accordance with regulations 

issued by the Secretary); 

(68) provide that any entity that receives or makes annual 

payments under the State plan of at least $5,000,000, as a condition of receiving such payments, shall— 

(A) establish written policies for all employees of the entity (including management), and of any contractor or 

agent of the entity, that provide detailed information about 

the False Claims Act established under sections 3729 

through 3733 of title 31, United States Code, administrative remedies for false claims and statements established 

under chapter 38 of title 31, United States Code, any State 

laws pertaining to civil or criminal penalties for false 

claims and statements, and whistleblower protections 

under such laws, with respect to the role of such laws in 

preventing and detecting fraud, waste, and abuse in Federal health care programs (as defined in section 1128B(f)); 

(B) include as part of such written policies, detailed provisions regarding the entity’s policies and procedures for 

detecting and preventing fraud, waste, and abuse; and 

(C) include in any employee handbook for the entity, a 

specific discussion of the laws described in subparagraph 

(A), the rights of employees to be protected as whistleblowers, and the entity’s policies and procedures for detecting and preventing fraud, waste, and abuse; 

(69) provide that the State must comply with any requirements determined by the Secretary to be necessary for carrying 

out the Medicaid Integrity Program established under section 

1936; 

(70) at the option of the State and notwithstanding paragraphs (1), (10)(B), and (23), provide for the establishment of 

a non-emergency medical transportation brokerage program in 

order to more cost-effectively provide transportation for individuals eligible for medical assistance under the State plan 

who need access to medical care or services and have no other 

means of transportation which— 

(A) may include a wheelchair van, taxi, stretcher car, 

bus passes and tickets, secured transportation, and such 

other transportation as the Secretary determines appropriate; and 

(B) may be conducted under contract with a broker 

who— 


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(i) is selected through a competitive bidding process 

based on the State’s evaluation of the broker’s experience, performance, references, resources, qualifications, and costs; 

(ii) has oversight procedures to monitor beneficiary 

access and complaints and ensure that transport personnel are licensed, qualified, competent, and courteous; 

(iii) is subject to regular auditing and oversight by 

the State in order to ensure the quality of the transportation services provided and the adequacy of beneficiary access to medical care and services; and 

(iv) complies with such requirements related to prohibitions on referrals and conflict of interest as the 

Secretary shall establish (based on the prohibitions on 

physician referrals under section 1877 and such other 

prohibitions and requirements as the Secretary determines to be appropriate); 

(71) provide that the State will implement an asset 

verification program as required under section 1940; 

(72) provide that the State will not prevent a Federallyqualified health center from entering into contractual relationships with private practice dental providers in the provision of 

Federally-qualified health center services; 

(73) in the case of any State in which 1 or more Indian 

Health Programs or Urban Indian Organizations furnishes 

health care services, provide for a process under which the 

State seeks advice on a regular, ongoing basis from designees 

of such Indian Health Programs and Urban Indian Organizations on matters relating to the application of this title that 

are likely to have a direct effect on such Indian Health Programs and Urban Indian Organizations and that— 

(A) shall include solicitation of advice prior to submission of any plan amendments, waiver requests, and proposals for demonstration projects likely to have a direct effect on Indians, Indian Health Programs, or Urban Indian 

Organizations; and 

(B) may include appointment of an advisory committee 

and of a designee of such Indian Health Programs and 

Urban Indian Organizations to the medical care advisory 

committee advising the State on its State plan under this 

title; 

(74) provide for maintenance of effort under the State plan 

or under any waiver of the plan in accordance with subsection 

(gg); and 

(75) provide that, beginning January 2015, and annually 

thereafter, the State shall submit a report to the Secretary 

that contains— 

(A) the total number of enrolled and newly enrolled individuals in the State plan or under a waiver of the plan for 

the fiscal year ending on September 30 of the preceding 

calendar year, disaggregated by population, including children, parents, nonpregnant childless adults, disabled individuals, elderly individuals, and such other categories or 

sub-categories of individuals eligible for medical assistance 


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under the State plan or under a waiver of the plan as the 

Secretary may require; 

(B) a description, which may be specified by population, 

of the outreach and enrollment processes used by the State 

during such fiscal year; and 

(C) any other data reporting determined necessary by 

the Secretary to monitor enrollment and retention of individuals eligible for medical assistance under the State plan 

or under a waiver of the plan; 

(76) provide that any data collected under the State plan 

meets the requirements of section 3101 of the Public Health 

Service Act; 

(77) provide that the State shall comply with provider and 

supplier screening, oversight, and reporting requirements in 

accordance with subsection (kk); 

(79) provide that any agent, clearinghouse, or other alternate 

payee (as defined by the Secretary) that submits claims on behalf of a health care provider must register with the State and 

the Secretary in a form and manner specified by the Secretary; 

(80) provide that the State shall not provide any payments 

for items or services provided under the State plan or under 

a waiver to any financial institution or entity located outside 

of the United States; øand¿ 

(81) provide for implementation of the payment models specified by the Secretary under section 1115A(c) for implementation on a nationwide basis unless the State demonstrates to 

the satisfaction of the Secretary that implementation would 

not be administratively feasible or appropriate to the health 

care delivery system of the Stateø.¿; and 

(82) provide that the State agency responsible for administering the State plan under this title provides assurances to 

the Secretary that the State agency is in compliance with subparagraphs (A), (B), and (C) of section 1128K(b)(2). 

Notwithstanding paragraph (5), if on January 1, 1965, and on the 

date on which a State submits its plan for approval under this 

title, the State agency which administered or supervised the administration of the plan of such State approved under title X (or 

title XVI, insofar as it relates to the blind) was different from the 

State agency which administered or supervised the administration 

of the State plan approved under title I (or title XVI, insofar as it 

relates to the aged), the State agency which administered or supervised the administration of such plan approved under title X (or 

title XVI, insofar as it relates to the blind) may be designated to 

administer or supervise the administration of the portion of the 

State plan for medical assistance which relates to blind individuals 

and a different State agency may be established or designated to 

administer or supervise the administration of the rest of the State 

plan for medical assistance; and in such case the part of the plan 

which each such agency administers, or the administration of 

which each such agency supervises, shall be regarded as a separate 

plan for purposes of this title (except for purposes of paragraph 

(10)). The provisions of paragraphs (9)(A), (31), and (33) and of section 1903(i)(4) shall not apply to a religious nonmedical health care 

institution (as defined in section 1861(ss)(1)). 


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For purposes of paragraph (10) any individual who, for the 

month of August 1972, was eligible for or receiving aid or assistance under a State plan approved under title I, X, XIV, or XVI, or 

part A of title IV and who for such month was entitled to monthly 

insurance benefits under title II shall for purposes of this title only 

be deemed to be eligible for financial aid or assistance for any 

month thereafter if such individual would have been eligible for financial aid or assistance for such month had the increase in 

monthly insurance benefits under title II resulting from enactment 

of Public Law 92-336 not been applicable to such individual. 

The requirement of clause (A) of paragraph (37) with respect to 

a State plan may be waived by the Secretary if he finds that the 

State has exercised good faith in trying to meet such requirement. 

For purposes of this title, any child who meets the requirements of 

paragraph (1) or (2) of section 473(b) shall be deemed to be a dependent child as defined in section 406 and shall be deemed to be 

a recipient of aid to families with dependent children under part 

A of title IV in the State where such child resides. Notwithstanding 

paragraph (10)(B) or any other provision of this subsection, a State 

plan shall provide medical assistance with respect to an alien who 

is not lawfully admitted for permanent residence or otherwise permanently residing in the United States under color of law only in 

accordance with section 1903(v). 

(b) The Secretary shall approve any plan which fulfills the conditions specified in subsection (a) of this section, except that he shall 

not approve any plan which imposes, as a condition of eligibility for 

medical assistance under the plan— 

(1) an age requirement of more than 65 years; or 

(2) any residence requirement which excludes any individual 

who resides in the State, regardless of whether or not the residence is maintained permanently or at a fixed address; or 

(3) any citizenship requirement which excludes any citizen of 

the United States. 

(c) Notwithstanding subsection (b), the Secretary shall not approve any State plan for medical assistance if the State requires individuals described in subsection (l)(1) to apply for assistance under 

the State program funded under part A of title IV as a condition 

of applying for or receiving medical assistance under this title. 

(d) If a State contracts with an entity which meets the requirements of section 1152, as determined by the Secretary, or a utilization and quality control peer review organization having a contract 

with the Secretary under part B of title XI for the performance of 

medical or utilization review functions (including quality review 

functions described in subsection (a)(30)(C)) required under this 

title of a State plan with respect to specific services or providers 

(or services or providers in a geographic area of the State), such requirements shall be deemed to be met for those services or providers (or services or providers in that area) by delegation to such 

an entity or organization under the contract of the State’s authority 

to conduct such review activities if the contract provides for the 

performance of activities not inconsistent with part B of title XI 

and provides for such assurances of satisfactory performance by 

such an entity or organization as the Secretary may prescribe. 

(e)(1) Beginning April 1, 1990, for provisions relating to the extension of eligibility for medical assistance for certain families who 


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have received aid pursuant to a State plan approved under part A 

of title IV and have earned income, see section 1925. 

(2)(A) In the case of an individual who is enrolled with a medicaid managed care organization (as defined in section 

1903(m)(1)(A)), with a primary care case manager (as defined in 

section 1905(t)), or with an eligible organization with a contract 

under section 1876 and who would (but for this paragraph) lose eligibility for benefits under this title before the end of the minimum 

enrollment period (defined in subparagraph (B)), the State plan 

may provide, notwithstanding any other provision of this title, that 

the individual shall be deemed to continue to be eligible for such 

benefits until the end of such minimum period, but, except for benefits furnished under section 1905(a)(4)(C), only with respect to 

such benefits provided to the individual as an enrollee of such organization or entity or by or through the case manager. 

(B) For purposes of subparagraph (A), the term ‘‘minimum enrollment period’’ means, with respect to an individual’s enrollment 

with an organization or entity under a State plan, a period, established by the State, of not more than six months beginning on the 

date the individual’s enrollment with the organization or entity becomes effective. 

(3) At the option of the State, any individual who— 

(A) is 18 years of age or younger and qualifies as a disabled 

individual under section 1614(a); 

(B) with respect to whom there has been a determination by 

the State that— 

(i) the individual requires a level of care provided in a 

hospital, nursing facility, or intermediate care facility for 

the mentally retarded, 

(ii) it is appropriate to provide such care for the individual outside such an institution, and 

(iii) the estimated amount which would be expended for 

medical assistance for the individual for such care outside 

an institution is not greater than the estimated amount 

which would otherwise be expended for medical assistance 

for the individual within an appropriate institution; and 

(C) if the individual were in a medical institution, would be 

eligible for medical assistance under the State plan under this 

title, 

shall be deemed, for purposes of this title only, to be an individual with respect to whom a supplemental security income 

payment, or State supplemental payment, respectively, is being 

paid under title XVI. 

(4) A child born to a woman eligible for and receiving medical assistance under a State plan on the date of the child’s birth shall 

be deemed to have applied for medical assistance and to have been 

found eligible for such assistance under such plan on the date of 

such birth and to remain eligible for such assistance for a period 

of one year. During the period in which a child is deemed under 

the preceding sentence to be eligible for medical assistance, the 

medical assistance eligibility identification number of the mother 

shall also serve as the identification number of the child, and all 

claims shall be submitted and paid under such number (unless the 

State issues a separate identification number for the child before 

such period expires). Notwithstanding the preceding sentence, in 


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the case of a child who is born in the United States to an alien 

mother for whom medical assistance for the delivery of the child is 

made available pursuant to section 1903(v), the State immediately 

shall issue a separate identification number for the child upon notification by the facility at which such delivery occurred of the child’s 

birth. 

(5) A woman who, while pregnant, is eligible for, has applied for, 

and has received medical assistance under the State plan, shall 

continue to be eligible under the plan, as though she were pregnant, for all pregnancy-related and postpartum medical assistance 

under the plan, through the end of the month in which the 60-day 

period (beginning on the last day of her pregnancy) ends. 

(6) In the case of a pregnant woman described in subsection 

(a)(10) who, because of a change in income of the family of which 

she is a member, would not otherwise continue to be described in 

such subsection, the woman shall be deemed to continue to be an 

individual described in subsection (a)(10)(A)(i)(IV) and subsection 

(l)(1)(A) without regard to such change of income through the end 

of the month in which the 60-day period (beginning on the last day 

of her pregnancy) ends. The preceding sentence shall not apply in 

the case of a woman who has been provided ambulatory prenatal 

care pursuant to section 1920 during a presumptive eligibility period and is then, in accordance with such section, determined to be 

ineligible for medical assistance under the State plan. 

(7) In the case of an infant or child described in subparagraph 

(B), (C), or (D) of subsection (l)(1) or paragraph (2) of section 

1905(n)— 

(A) who is receiving inpatient services for which medical assistance is provided on the date the infant or child attains the 

maximum age with respect to which coverage is provided 

under the State plan for such individuals, and 

(B) who, but for attaining such age, would remain eligible for 

medical assistance under such subsection, 

the infant or child shall continue to be treated as an individual described in such respective provision until the end of the stay for 

which the inpatient services are furnished. 

(8) If an individual is determined to be a qualified medicare beneficiary (as defined in section 1905(p)(1)), such determination shall 

apply to services furnished after the end of the month in which the 

determination first occurs. For purposes of payment to a State 

under section 1903(a), such determination shall be considered to be 

valid for an individual for a period of 12 months, except that a 

State may provide for such determinations more frequently, but not 

more frequently than once every 6 months for an individual. 

(9)(A) At the option of the State, the plan may include as medical 

assistance respiratory care services for any individual who— 

(i) is medically dependent on a ventilator for life support at 

least six hours per day; 

(ii) has been so dependent for at least 30 consecutive days 

(or the maximum number of days authorized under the State 

plan, whichever is less) as an inpatient; 

(iii) but for the availability of respiratory care services, 

would require respiratory care as an inpatient in a hospital, 

nursing facility, or intermediate care facility for the mentally 


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retarded and would be eligible to have payment made for such 

inpatient care under the State plan; 

(iv) has adequate social support services to be cared for at 

home; and 

(v) wishes to be cared for at home. 

(B) The requirements of subparagraph (A)(ii) may be satisfied by 

a continuous stay in one or more hospitals, nursing facilities, or intermediate care facilities for the mentally retarded. 

(C) For purposes of this paragraph, respiratory care services 

means services provided on a part-time basis in the home of the 

individual by a respiratory therapist or other health care professional trained in respiratory therapy (as determined by the State), 

payment for which is not otherwise included within other items 

and services furnished to such individual as medical assistance 

under the plan. 

(10)(A) The fact that an individual, child, or pregnant woman 

may be denied aid under part A of title IV pursuant to section 

402(a)(43) shall not be construed as denying (or permitting a State 

to deny) medical assistance under this title to such individual, 

child, or woman who is eligible for assistance under this title on 

a basis other than the receipt of aid under such part. 

(B) If an individual, child, or pregnant woman is receiving aid 

under part A of title IV and such aid is terminated pursuant to section 402(a)(43), the State may not discontinue medical assistance 

under this title for the individual, child, or woman until the State 

has determined that the individual, child, or woman is not eligible 

for assistance under this title on a basis other than the receipt of 

aid under such part. 

(11)(A) In the case of an individual who is enrolled with a group 

health plan under section 1906 and who would (but for this paragraph) lose eligibility for benefits under this title before the end of 

the minimum enrollment period (defined in subparagraph (B)), the 

State plan may provide, notwithstanding any other provision of 

this title, that the individual shall be deemed to continue to be eligible for such benefits until the end of such minimum period, but 

only with respect to such benefits provided to the individual as an 

enrollee of such plan. 

(B) For purposes of subparagraph (A), the term ‘‘minimum enrollment period’’ means, with respect to an individual’s enrollment 

with a group health plan, a period established by the State, of not 

more than 6 months beginning on the date the individual’s enrollment under the plan becomes effective. 

(12) At the option of the State, the plan may provide that an individual who is under an age specified by the State (not to exceed 

19 years of age) and who is determined to be eligible for benefits 

under a State plan approved under this title under subsection 

(a)(10)(A) shall remain eligible for those benefits until the earlier 

of— 

(A) the end of a period (not to exceed 12 months) following 

the determination; or 

(B) the time that the individual exceeds that age. 

(13) EXPRESS LANE OPTION.— (A) IN GENERAL.— 

(i) OPTION TO USE A FINDING FROM AN EXPRESS LANE

AGENCY.—At the option of the State, the State plan may 


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provide that in determining eligibility under this title for 

a child (as defined in subparagraph (G)), the State may 

rely on a finding made within a reasonable period (as determined by the State) from an Express Lane agency (as 

defined in subparagraph (F)) when it determines whether 

a child satisfies one or more components of eligibility for 

medical assistance under this title. The State may rely on 

a finding from an Express Lane agency notwithstanding 

sections 1902(a)(46)(B) and 1137(d) or any differences in 

budget unit, disregard, deeming or other methodology, if 

the following requirements are met: 

(I) PROHIBITION ON DETERMINING CHILDREN INELIGIBLE FOR COVERAGE.—If a finding from an Express 

Lane agency would result in a determination that a 

child does not satisfy an eligibility requirement for 

medical assistance under this title and for child health 

assistance under title XXI, the State shall determine 

eligibility for assistance using its regular procedures. 

(II) NOTICE REQUIREMENT.—For any child who is 

found eligible for medical assistance under the State 

plan under this title or child health assistance under 

title XXI and who is subject to premiums based on an 

Express Lane agency’s finding of such child’s income 

level, the State shall provide notice that the child may 

qualify for lower premium payments if evaluated by 

the State using its regular policies and of the procedures for requesting such an evaluation. 

(III) COMPLIANCE WITH SCREEN AND ENROLL REQUIREMENT.—The State shall satisfy the requirements 

under subparagraphs (A) and (B) of section 2102(b)(3) 

(relating to screen and enroll) before enrolling a child 

in child health assistance under title XXI. At its option, the State may fulfill such requirements in accordance with either option provided under subparagraph 

(C) of this paragraph. 

(IV) VERIFICATION OF CITIZENSHIP OR NATIONALITY

STATUS.—The State shall satisfy the requirements of 

section 1902(a)(46)(B) or 2105(c)(9), as applicable for 

verifications of citizenship or nationality status. 

(V) CODING.—The State meets the requirements of 

subparagraph (E). 

(ii) OPTION TO APPLY TO RENEWALS AND REDETERMINATIONS.—The State may apply the provisions of this paragraph when conducting initial determinations of eligibility, 

redeterminations of eligibility, or both, as described in the 

State plan. 

(B) RULES OF CONSTRUCTION.—Nothing in this paragraph 

shall be construed— 

(i) to limit or prohibit a State from taking any actions 

otherwise permitted under this title or title XXI in determining eligibility for or enrolling children into medical assistance under this title or child health assistance under 

title XXI; or 


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(ii) to modify the limitations in section 1902(a)(5) concerning the agencies that may make a determination of eligibility for medical assistance under this title. 

(C) OPTIONS FOR SATISFYING THE SCREEN AND ENROLL RE- QUIREMENT.— (i) IN GENERAL.—With respect to a child whose eligibility 

for medical assistance under this title or for child health 

assistance under title XXI has been evaluated by a State 

agency using an income finding from an Express Lane 

agency, a State may carry out its duties under subparagraphs (A) and (B) of section 2102(b)(3) (relating to screen 

and enroll) in accordance with either clause (ii) or clause 

(iii). 

(ii) ESTABLISHING A SCREENING THRESHOLD.— 

(I) IN GENERAL.—Under this clause, the State establishes a screening threshold set as a percentage of the 

Federal poverty level that exceeds the highest income 

threshold applicable under this title to the child by a 

minimum of 30 percentage points or, at State option, 

a higher number of percentage points that reflects the 

value (as determined by the State and described in the 

State plan) of any differences between income methodologies used by the program administered by the 

Express Lane agency and the methodologies used by 

the State in determining eligibility for medical assistance under this title. 

(II) CHILDREN WITH INCOME NOT ABOVE THRESH- OLD.—If the income of a child does not exceed the 

screening threshold, the child is deemed to satisfy the 

income eligibility criteria for medical assistance under 

this title regardless of whether such child would otherwise satisfy such criteria. 

(III) CHILDREN WITH INCOME ABOVE THRESHOLD.—If 

the income of a child exceeds the screening threshold, 

the child shall be considered to have an income above 

the Medicaid applicable income level described in section 2110(b)(4) and to satisfy the requirement under 

section 2110(b)(1)(C) (relating to the requirement that 

CHIP matching funds be used only for children not eligible for Medicaid). If such a child is enrolled in child 

health assistance under title XXI, the State shall provide the parent, guardian, or custodial relative with 

the following: 

(aa) Notice that the child may be eligible to receive medical assistance under the State plan 

under this title if evaluated for such assistance 

under the State’s regular procedures and notice of 

the process through which a parent, guardian, or 

custodial relative can request that the State 

evaluate the child’s eligibility for medical assistance under this title using such regular procedures. 

(bb) A description of differences between the 

medical assistance provided under this title and 

child health assistance under title XXI, including 


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differences in cost-sharing requirements and covered benefits. 

(iii) TEMPORARY ENROLLMENT IN CHIP PENDING SCREEN

AND ENROLL.— (I) IN GENERAL.—Under this clause, a State enrolls 

a child in child health assistance under title XXI for 

a temporary period if the child appears eligible for 

such assistance based on an income finding by an Express Lane agency. 

(II) DETERMINATION OF ELIGIBILITY.—During such 

temporary enrollment period, the State shall determine the child’s eligibility for child health assistance 

under title XXI or for medical assistance under this 

title in accordance with this clause. 

(III) PROMPT FOLLOW UP.—In making such a determination, the State shall take prompt action to determine whether the child should be enrolled in medical 

assistance under this title or child health assistance 

under title XXI pursuant to subparagraphs (A) and (B) 

of section 2102(b)(3) (relating to screen and enroll). 

(IV) REQUIREMENT FOR SIMPLIFIED DETERMINA- TION.—In making such a determination, the State 

shall use procedures that, to the maximum feasible extent, reduce the burden imposed on the individual of 

such determination. Such procedures may not require 

the child’s parent, guardian, or custodial relative to 

provide or verify information that already has been 

provided to the State agency by an Express Lane 

agency or another source of information unless the 

State agency has reason to believe the information is 

erroneous. 

(V) AVAILABILITY OF CHIP MATCHING FUNDS DURING

TEMPORARY ENROLLMENT PERIOD.—Medical assistance 

for items and services that are provided to a child enrolled in title XXI during a temporary enrollment period under this clause shall be treated as child health 

assistance under such title. 

(D) OPTION FOR AUTOMATIC ENROLLMENT.— (i) IN GENERAL.—The State may initiate and determine 

eligibility for medical assistance under the State Medicaid 

plan or for child health assistance under the State CHIP 

plan without a program application from, or on behalf of, 

the child based on data obtained from sources other than 

the child (or the child’s family), but a child can only be 

automatically enrolled in the State Medicaid plan or the 

State CHIP plan if the child or the family affirmatively 

consents to being enrolled through affirmation in writing, 

by telephone, orally, through electronic signature, or 

through any other means specified by the Secretary or by 

signature on an Express Lane agency application, if the requirement of clause (ii) is met. 

(ii) INFORMATION REQUIREMENT.—The requirement of 

this clause is that the State informs the parent, guardian, 

or custodial relative of the child of the services that will 

be covered, appropriate methods for using such services, 


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premium or other cost sharing charges (if any) that apply, 

medical support obligations (under section 1912(a)) created 

by enrollment (if applicable), and the actions the parent, 

guardian, or relative must take to maintain enrollment 

and renew coverage. 

(E) CODING; APPLICATION TO ENROLLMENT ERROR RATES.— (i) IN GENERAL.—For purposes of subparagraph (A)(iv), 

the requirement of this subparagraph for a State is that 

the State agrees to— 

(I) assign such codes as the Secretary shall require 

to the children who are enrolled in the State Medicaid 

plan or the State CHIP plan through reliance on a 

finding made by an Express Lane agency for the duration of the State’s election under this paragraph; 

(II) annually provide the Secretary with a statistically valid sample (that is approved by Secretary) of 

the children enrolled in such plans through reliance on 

such a finding by conducting a full Medicaid eligibility 

review of the children identified for such sample for 

purposes of determining an eligibility error rate (as 

described in clause (iv)) with respect to the enrollment 

of such children (and shall not include such children 

in any data or samples used for purposes of complying 

with a Medicaid Eligibility Quality Control (MEQC) 

review or a payment error rate measurement (PERM) 

requirement); 

(III) submit the error rate determined under subclause (II) to the Secretary; 

(IV) if such error rate exceeds 3 percent for either 

of the first 2 fiscal years in which the State elects to 

apply this paragraph, demonstrate to the satisfaction 

of the Secretary the specific corrective actions implemented by the State to improve upon such error rate; 

and 

(V) if such error rate exceeds 3 percent for any fiscal 

year in which the State elects to apply this paragraph, 

a reduction in the amount otherwise payable to the 

State under section 1903(a) for quarters for that fiscal 

year, equal to the total amount of erroneous excess 

payments determined for the fiscal year only with respect to the children included in the sample for the fiscal year that are in excess of a 3 percent error rate 

with respect to such children. 

(ii) NO PUNITIVE ACTION BASED ON ERROR RATE.—The 

Secretary shall not apply the error rate derived from the 

sample under clause (i) to the entire population of children 

enrolled in the State Medicaid plan or the State CHIP 

plan through reliance on a finding made by an Express 

Lane agency, or to the population of children enrolled in 

such plans on the basis of the State’s regular procedures 

for determining eligibility, or penalize the State on the 

basis of such error rate in any manner other than the reduction of payments provided for under clause (i)(V). 

(iii) RULE OF CONSTRUCTION.—Nothing in this paragraph 

shall be construed as relieving a State that elects to apply 


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this paragraph from being subject to a penalty under section 1903(u), for payments made under the State Medicaid 

plan with respect to ineligible individuals and families 

that are determined to exceed the error rate permitted 

under that section (as determined without regard to the 

error rate determined under clause (i)(II)). 

(iv) ERROR RATE DEFINED.—In this subparagraph, the 

term ‘‘error rate’’ means the rate of erroneous excess payments for medical assistance (as defined in section 

1903(u)(1)(D)) for the period involved, except that such 

payments shall be limited to individuals for which eligibility determinations are made under this paragraph and 

except that in applying this paragraph under title XXI, 

there shall be substituted for references to provisions of 

this title corresponding provisions within title XXI. 

(F) EXPRESS LANE AGENCY.— 

(i) IN GENERAL.—In this paragraph, the term ‘‘Express 

Lane agency’’ means a public agency that— 

(I) is determined by the State Medicaid agency or 

the State CHIP agency (as applicable) to be capable of 

making the determinations of one or more eligibility 

requirements described in subparagraph (A)(i); 

(II) is identified in the State Medicaid plan or the 

State CHIP plan; and 

(III) notifies the child’s family— 

(aa) of the information which shall be disclosed 

in accordance with this paragraph; 

(bb) that the information disclosed will be used 

solely for purposes of determining eligibility for 

medical assistance under the State Medicaid plan 

or for child health assistance under the State 

CHIP plan; and 

(cc) that the family may elect to not have the information disclosed for such purposes; and 

(IV) enters into, or is subject to, an interagency 

agreement to limit the disclosure and use of the information disclosed. 

(ii) INCLUSION OF SPECIFIC PUBLIC AGENCIES AND INDIAN

TRIBES AND TRIBAL ORGANIZATIONS.—Such term includes 

the following: 

(I) A public agency that determines eligibility for assistance under any of the following: 

(aa) The temporary assistance for needy families program funded under part A of title IV. 

(bb) A State program funded under part D of 

title IV. 

(cc) The State Medicaid plan. 

(dd) The State CHIP plan. 

(ee) The Food and Nutrition Act of 2008 (7 

U.S.C. 2011 et seq.). 

(ff) The Head Start Act (42 U.S.C. 9801 et seq.). 

(gg) The Richard B. Russell National School 

Lunch Act (42 U.S.C. 1751 et seq.). 

(hh) The Child Nutrition Act of 1966 (42 U.S.C. 

1771 et seq.). 


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(ii) The Child Care and Development Block 

Grant Act of 1990 (42 U.S.C. 9858 et seq.). 

(jj) The Stewart B. McKinney Homeless Assistance Act (42 U.S.C. 11301 et seq.). 

(kk) The United States Housing Act of 1937 (42 

U.S.C. 1437 et seq.). 

(ll) The Native American Housing Assistance 

and Self-Determination Act of 1996 (25 U.S.C. 

4101 et seq.). 

(II) A State-specified governmental agency that has 

fiscal liability or legal responsibility for the accuracy of 

the eligibility determination findings relied on by the 

State. 

(III) A public agency that is subject to an interagency agreement limiting the disclosure and use of 

the information disclosed for purposes of determining 

eligibility under the State Medicaid plan or the State 

CHIP plan. 

(IV) The Indian Health Service, an Indian Tribe, 

Tribal Organization, or Urban Indian Organization (as 

defined in section 1139(c)). 

(iii) EXCLUSIONS.—Such term does not include an agency 

that determines eligibility for a program established under 

the Social Services Block Grant established under title XX 

or a private, for-profit organization. 

(iv) RULES OF CONSTRUCTION.—Nothing in this paragraph shall be construed as— 

(I) exempting a State Medicaid agency from complying with the requirements of section 1902(a)(4) relating to merit-based personnel standards for employees of the State Medicaid agency and safeguards 

against conflicts of interest); or 

(II) authorizing a State Medicaid agency that elects 

to use Express Lane agencies under this subparagraph 

to use the Express Lane option to avoid complying 

with such requirements for purposes of making eligibility determinations under the State Medicaid plan. 

(v) ADDITIONAL DEFINITIONS.—In this paragraph: 

(I) STATE.—The term ‘‘State’’ means 1 of the 50 

States or the District of Columbia. 

(II) STATE CHIP AGENCY.—The term ‘‘State CHIP 

agency’’ means the State agency responsible for administering the State CHIP plan. 

(III) STATE CHIP PLAN.—The term ‘‘State CHIP plan’’ 

means the State child health plan established under 

title XXI and includes any waiver of such plan. 

(IV) STATE MEDICAID AGENCY.—The term ‘‘State 

Medicaid agency’’ means the State agency responsible 

for administering the State Medicaid plan. 

(V) STATE MEDICAID PLAN.—The term ‘‘State Medicaid plan’’ means the State plan established under 

title XIX and includes any waiver of such plan. 

(G) CHILD DEFINED.—For purposes of this paragraph, the 

term ‘‘child’’ means an individual under 19 years of age, or, at 


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the option of a State, such higher age, not to exceed 21 years 

of age, as the State may elect. 

(H) STATE OPTION TO RELY ON STATE INCOME TAX DATA OR

RETURN.—At the option of the State, a finding from an Express 

Lane agency may include gross income or adjusted gross income shown by State income tax records or returns. 

(I) APPLICATION.—This paragraph shall not apply with respect to eligibility determinations made after September 30, 

2017. 

(14) INCOME DETERMINED USING MODIFIED ADJUSTED GROSS

INCOME.— 

(A) IN GENERAL.—Notwithstanding subsection (r) or any 

other provision of this title, except as provided in subparagraph (D), for purposes of determining income eligibility 

for medical assistance under the State plan or under any 

waiver of such plan and for any other purpose applicable 

under the plan or waiver for which a determination of income is required, including with respect to the imposition 

of premiums and cost-sharing, a State shall use the modified adjusted gross income of an individual and, in the case 

of an individual in a family greater than 1, the household 

income of such family. A State shall establish income eligibility thresholds for populations to be eligible for medical 

assistance under the State plan or a waiver of the plan 

using modified adjusted gross income and household income that are not less than the effective income eligibility 

levels that applied under the State plan or waiver on the 

date of enactment of the Patient Protection and Affordable 

Care Act. For purposes of complying with the maintenance 

of effort requirements under subsection (gg) during the 

transition to modified adjusted gross income and household income, a State shall, working with the Secretary, establish an equivalent income test that ensures individuals 

eligible for medical assistance under the State plan or 

under a waiver of the plan on the date of enactment of the 

Patient Protection and Affordable Care Act, do not lose 

coverage under the State plan or under a waiver of the 

plan. The Secretary may waive such provisions of this title 

and title XXI as are necessary to ensure that States establish income and eligibility determination systems that protect beneficiaries. 

(B) NO INCOME OR EXPENSE DISREGARDS.—Subject to 

subparagraph (I), no type of expense, block, or other income disregard shall be applied by a State to determine income eligibility for medical assistance under the State plan 

or under any waiver of such plan or for any other purpose 

applicable under the plan or waiver for which a determination of income is required. 

(C) NO ASSETS TEST.—A State shall not apply any assets 

or resources test for purposes of determining eligibility for 

medical assistance under the State plan or under a waiver 

of the plan. 

(D) EXCEPTIONS.— 

(i) INDIVIDUALS ELIGIBLE BECAUSE OF OTHER AID OR

ASSISTANCE, ELDERLY INDIVIDUALS, MEDICALLY NEEDY


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INDIVIDUALS, AND INDIVIDUALS ELIGIBLE FOR MEDICARE

COST-SHARING.—Subparagraphs (A), (B), and (C) shall 

not apply to the determination of eligibility under the 

State plan or under a waiver for medical assistance for 

the following: 

(I) Individuals who are eligible for medical assistance under the State plan or under a waiver 

of the plan on a basis that does not require a determination of income by the State agency administering the State plan or waiver, including as a 

result of eligibility for, or receipt of, other Federal 

or State aid or assistance, individuals who are eligible on the basis of receiving (or being treated as 

if receiving) supplemental security income benefits 

under title XVI, and individuals who are eligible 

as a result of being or being deemed to be a child 

in foster care under the responsibility of the State. 

(II) Individuals who have attained age 65. 

(III) Individuals who qualify for medical assistance under the State plan or under any waiver of 

such plan on the basis of being blind or disabled 

(or being treated as being blind or disabled) without regard to whether the individual is eligible for 

supplemental security income benefits under title 

XVI on the basis of being blind or disabled and including an individual who is eligible for medical 

assistance on the basis of section 1902(e)(3). 

(IV) Individuals described in subsection 

(a)(10)(C). 

(V) Individuals described in any clause of subsection (a)(10)(E). 

(ii) EXPRESS LANE AGENCY FINDINGS.—In the case of 

a State that elects the Express Lane option under 

paragraph (13), notwithstanding subparagraphs (A), 

(B), and (C), the State may rely on a finding made by 

an Express Lane agency in accordance with that paragraph relating to the income of an individual for purposes of determining the individual’s eligibility for 

medical assistance under the State plan or under a 

waiver of the plan. 

(iii) MEDICARE PRESCRIPTION DRUG SUBSIDIES DETERMINATIONS.—Subparagraphs (A), (B), and (C) shall not 

apply to any determinations of eligibility for premium 

and cost-sharing subsidies under and in accordance 

with section 1860D–14 made by the State pursuant to 

section 1935(a)(2). 

(iv) LONG-TERM CARE.—Subparagraphs (A), (B), and 

(C) shall not apply to any determinations of eligibility 

of individuals for purposes of medical assistance for 

nursing facility services, a level of care in any institution equivalent to that of nursing facility services, 

home or community-based services furnished under a 

waiver or State plan amendment under section 1915 

or a waiver under section 1115, and services described 

in section 1917(c)(1)(C)(ii). 


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(v) GRANDFATHER OF CURRENT ENROLLEES UNTIL

DATE OF NEXT REGULAR REDETERMINATION.—An individual who, on January 1, 2014, is enrolled in the 

State plan or under a waiver of the plan and who 

would be determined ineligible for medical assistance 

solely because of the application of the modified adjusted gross income or household income standard described in subparagraph (A), shall remain eligible for 

medical assistance under the State plan or waiver 

(and subject to the same premiums and cost-sharing 

as applied to the individual on that date) through 

March 31, 2014, or the date on which the individual’s 

next regularly scheduled redetermination of eligibility 

is to occur, whichever is later. 

(E) TRANSITION PLANNING AND OVERSIGHT.—Each State 

shall submit to the Secretary for the Secretary’s approval 

the income eligibility thresholds proposed to be established 

using modified adjusted gross income and household income, the methodologies and procedures to be used to determine income eligibility using modified adjusted gross income and household income and, if applicable, a State plan 

amendment establishing an optional eligibility category 

under subsection (a)(10)(A)(ii)(XX). To the extent practicable, the State shall use the same methodologies and 

procedures for purposes of making such determinations as 

the State used on the date of enactment of the Patient Protection and Affordable Care Act. The Secretary shall ensure that the income eligibility thresholds proposed to be 

established using modified adjusted gross income and 

household income, including under the eligibility category 

established under subsection (a)(10)(A)(ii)(XX), and the 

methodologies and procedures proposed to be used to determine income eligibility, will not result in children who 

would have been eligible for medical assistance under the 

State plan or under a waiver of the plan on the date of enactment of the Patient Protection and Affordable Care Act 

no longer being eligible for such assistance. 

(F) LIMITATION ON SECRETARIAL AUTHORITY.—The Secretary shall not waive compliance with the requirements of 

this paragraph except to the extent necessary to permit a 

State to coordinate eligibility requirements for dual eligible individuals (as defined in section 1915(h)(2)(B)) under 

the State plan or under a waiver of the plan and under 

title XVIII and individuals who require the level of care 

provided in a hospital, a nursing facility, or an intermediate care facility for the mentally retarded. 

(G) DEFINITIONS OF MODIFIED ADJUSTED GROSS INCOME

AND HOUSEHOLD INCOME.—In this paragraph, the terms 

‘‘modified adjusted gross income’’ and ‘‘household income’’ 

have the meanings given such terms in section 36B(d)(2) 

of the Internal Revenue Code of 1986. 

(H) CONTINUED APPLICATION OF MEDICAID RULES RE- GARDING POINT-IN-TIME INCOME AND SOURCES OF INCOME.—The requirement under this paragraph for States 

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come to determine income eligibility for medical assistance 

under the State plan or under any waiver of such plan and 

for any other purpose applicable under the plan or waiver 

for which a determination of income is required shall not 

be construed as affecting or limiting the application of— 

(i) the requirement under this title and under the 

State plan or a waiver of the plan to determine an individual’s income as of the point in time at which an 

application for medical assistance under the State 

plan or a waiver of the plan is processed; or 

(ii) any rules established under this title or under 

the State plan or a waiver of the plan regarding 

sources of countable income. 

(I) TREATMENT OF PORTION OF MODIFIED ADJUSTED GROSS

INCOME.—For purposes of determining the income eligibility of an individual for medical assistance whose eligibility is determined based on the application of modified 

adjusted gross income under subparagraph (A), the State 

shall— 

(i) determine the dollar equivalent of the difference 

between the upper income limit on eligibility for such 

an individual (expressed as a percentage of the poverty line) and such upper income limit increased by 5 

percentage points; and 

(ii) notwithstanding the requirement in subparagraph (A) with respect to use of modified adjusted 

gross income, utilize as the applicable income of such 

individual, in determining such income eligibility, an 

amount equal to the modified adjusted gross income 

applicable to such individual reduced by such dollar 

equivalent amount. 

(14) EXCLUSION OF COMPENSATION FOR PARTICIPATION IN A

CLINICAL TRIAL FOR TESTING OF TREATMENTS FOR A RARE DIS- EASE OR CONDITION.—The first $2,000 received by an individual (who has attained 19 years of age) as compensation for 

participation in a clinical trial meeting the requirements of section 1612(b)(26) shall be disregarded for purposes of determining the income eligibility of such individual for medical assistance under the State plan or any waiver of such plan. 

(f) Notwithstanding any other provision of this title, except as 

provided in subsection (e) and section 1619(b)(3) and section 1924, 

except with respect to qualified disabled and working individuals 

(described in section 1905(s)), and except with respect to qualified 

medicare beneficiaries, qualified severely impaired individuals, and 

individuals described in subsection (m)(1), no State not eligible to 

participate in the State plan program established under title XVI 

shall be required to provide medical assistance to any aged, blind, 

or disabled individual (within the meaning of title XVI) for any 

month unless such State would be (or would have been) required 

to provide medical assistance to such individual for such month 

had its plan for medical assistance approved under this title and 

in effect on January 1, 1972, been in effect in such month, except 

that for this purpose any such individual shall be deemed eligible 

for medical assistance under such State plan if (in addition to 

meeting such other requirements as are or may be imposed under 


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the State plan) the income of any such individual as determined in 

accordance with section 1903(f) (after deducting any supplemental 

security income payment and State supplementary payment made 

with respect to such individual, and incurred expenses for medical 

care as recognized under State law regardless of whether such expenses are reimbursed under another public program of the State 

or political subdivision thereof) is not in excess of the standard for 

medical assistance established under the State plan as in effect on 

January 1, 1972. In States which provide medical assistance to individuals pursuant to paragraph (10)(C) of subsection (a) of this 

section, an individual who is eligible for medical assistance by reason of the requirements of this section concerning the deduction of 

incurred medical expenses from income shall be considered an individual eligible for medical assistance under paragraph (10)(A) of 

that subsection if that individual is, or is eligible to be (1) an individual with respect to whom there is payable a State supplementary payment on the basis of which similarly situated individuals are eligible to receive medical assistance equal in amount, duration, and scope to that provided to individuals eligible under 

paragraph (10)(A), or (2) an eligible individual or eligible spouse, 

as defined in title XVI, with respect to whom supplemental security 

income benefits are payable; otherwise that individual shall be considered to be an individual eligible for medical assistance under 

paragraph (10)(C) of that subsection. In States which do not provide medical assistance to individuals pursuant to paragraph 

(10)(C) of that subsection, an individual who is eligible for medical 

assistance by reason of the requirements of this section concerning 

the deduction of incurred medical expenses from income shall be 

considered an individual eligible for medical assistance under paragraph (10)(A) of that subsection. 

(g) In addition to any other sanction available to a State, a State 

may provide for a reduction of any payment amount otherwise due 

with respect to a person who furnishes services under the plan in 

an amount equal to up to three times the amount of any payment 

sought to be collected by that person in violation of subsection 

(a)(25)(C). 

(h) Nothing in this title (including subsections (a)(13) and (a)(30) 

of this section) shall be construed as authorizing the Secretary to 

limit the amount of payment that may be made under a plan under 

this title for home and community care. 

(i)(1) In addition to any other authority under State law, where 

a State determines that a intermediate care facility for the mentally retarded which is certified for participation under its plan no 

longer substantially meets the requirements for such a facility 

under this title and further determines that the facility’s deficiencies— 

(A) immediately jeopardize the health and safety of its patients, the State shall provide for the termination of the facility’s certification for participation under the plan and may provide, or 

(B) do not immediately jeopardize the health and safety of its 

patients, the State may, in lieu of providing for terminating 

the facility’s certification for participation under the plan, establish alternative remedies if the State demonstrates to the 

Secretary’s satisfaction that the alternative remedies are effecVerDate Sep 11 2014 10:59 May 11, 2016 Jkt 059006 PO 00000 Frm 00056 Fmt 6659 Sfmt 6601 E:\HR\OC\HR559.XXX HR559

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tive in deterring noncompliance and correcting deficiencies, 

and may provide 

that no payment will be made under the State plan with respect 

to any individual admitted to such facility after a date specified by 

the State. 

(2) The State shall not make such a decision with respect to a 

facility until the facility has had a reasonable opportunity, following the initial determination that it no longer substantially 

meets the requirements for such a facility under this title, to correct its deficiencies, and, following this period, has been given reasonable notice and opportunity for a hearing. 

(3) The State’s decision to deny payment may be made effective 

only after such notice to the public and to the facility as may be 

provided for by the State, and its effectiveness shall terminate (A) 

when the State finds that the facility is in substantial compliance 

(or is making good faith efforts to achieve substantial compliance) 

with the requirements for such a facility under this title, or (B) in 

the case described in paragraph (1)(B), with the end of the eleventh 

month following the month such decision is made effective, whichever occurs first. If a facility to which clause (B) of the previous 

sentence applies still fails to substantially meet the provisions of 

the respective section on the date specified in such clause, the 

State shall terminate such facility’s certification for participation 

under the plan effective with the first day of the first month following the month specified in such clause. 

(j) Notwithstanding any other requirement of this title, the Secretary may waive or modify any requirement of this title with respect to the medical assistance program in American Samoa and 

the Northern Mariana Islands, other than a waiver of the Federal 

medical assistance percentage, the limitation in section 1108(f), or 

the requirement that payment may be made for medical assistance 

only with respect to amounts expended by American Samoa or the 

Northern Mariana Islands for care and services described in a 

numbered paragraph of section 1905(a). 

(k)(1) The medical assistance provided to an individual described 

in subclause (VIII) of subsection (a)(10)(A)(i) shall consist of benchmark coverage described in section 1937(b)(1) or benchmark equivalent coverage described in section 1937(b)(2). Such medical assistance shall be provided subject to the requirements of section 1937, 

without regard to whether a State otherwise has elected the option 

to provide medical assistance through coverage under that section, 

unless an individual described in subclause (VIII) of subsection 

(a)(10)(A)(i) is also an individual for whom, under subparagraph (B) 

of section 1937(a)(2), the State may not require enrollment in 

benchmark coverage described in subsection (b)(1) of section 1937 

or benchmark equivalent coverage described in subsection (b)(2) of 

that section. 

(2) Beginning with the first day of any fiscal year quarter that 

begins on or after April 1, 2010, and before January 1, 2014, a 

State may elect through a State plan amendment to provide medical assistance to individuals who would be described in subclause 

(VIII) of subsection (a)(10)(A)(i) if that subclause were effective before January 1, 2014. A State may elect to phase-in the extension 

of eligibility for medical assistance to such individuals based on income, so long as the State does not extend such eligibility to indiVerDate Sep 11 2014 10:59 May 11, 2016 Jkt 059006 PO 00000 Frm 00057 Fmt 6659 Sfmt 6601 E:\HR\OC\HR559.XXX HR559

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viduals described in such subclause with higher income before 

making individuals described in such subclause with lower income 

eligible for medical assistance. 

(3) If an individual described in subclause (VIII) of subsection 

(a)(10)(A)(i) is the parent of a child who is under 19 years of age 

(or such higher age as the State may have elected) who is eligible 

for medical assistance under the State plan or under a waiver of 

such plan (under that subclause or under a State plan amendment 

under paragraph (2), the individual may not be enrolled under the 

State plan unless the individual’s child is enrolled under the State 

plan or under a waiver of the plan or is enrolled in other health 

insurance coverage. For purposes of the preceding sentence, the 

term ‘‘parent’’ includes an individual treated as a caretaker relative 

for purposes of carrying out section 1931. 

(l)(1) Individuals described in this paragraph are— 

(A) women during pregnancy (and during the 60-day period 

beginning on the last day of the pregnancy), 

(B) infants under one year of age, 

(C) children who have attained one year of age but have not 

attained 6 years of age, and 

(D) children born after September 30, 1983 (or, at the option 

of a State, after any earlier date), who have attained 6 years 

of age but have not attained 19 years of age, 

who are not described in any of subclauses (I) through (III) of subsection (a)(10)(A)(i) and whose family income does not exceed the 

income level established by the State under paragraph (2) for a 

family size equal to the size of the family, including the woman, 

infant, or child. 

(2)(A)(i) For purposes of paragraph (1) with respect to individuals 

described in subparagraph (A) or (B) of that paragraph, the State 

shall establish an income level which is a percentage (not less than 

the percentage provided under clause (ii) and not more than 185 

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. 

(ii) The percentage provided under this clause, with respect to 

eligibility for medical assistance on or after— 

(I) July 1, 1989, is 75 percent, or, if greater, the percentage 

provided under clause (iii), and 

(II) April 1, 1990, 133 percent, or, if greater, the percentage 

provided under clause (iv). 

(iii) In the case of a State which, as of the date of the enactment 

of this clause, has elected to provide, and provides, medical assistance to individuals described in this subsection or has enacted legislation authorizing, or appropriating funds, to provide such assistance to such individuals before July 1, 1989, the percentage provided under clause (ii)(I) shall not be less than— 

(I) the percentage specified by the State in an amendment to 

its State plan (whether approved or not) as of the date of the 

enactment of this clause, or 

(II) if no such percentage is specified as of the date of the 

enactment of this clause, the percentage established under the 

State’s authorizing legislation or provided for under the State’s 

appropriations; 


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but in no case shall this clause require the percentage provided 

under clause (ii)(I) to exceed 100 percent. 

(iv) In the case of a State which, as of the date of the enactment 

of this clause, has established under clause (i), or has enacted legislation authorizing, or appropriating funds, to provide for, a percentage (of the income official poverty line) that is greater than 133 

percent, the percentage provided under clause (ii) for medical assistance on or after April 1, 1990, shall not be less than— 

(I) the percentage specified by the State in an amendment to 

its State plan (whether approved or not) as of the date of the 

enactment of this clause, or 

(II) if no such percentage is specified as of the date of the 

enactment of this clause, the percentage established under the 

State’s authorizing legislation or provided for under the State’s 

appropriations. 

(B) For purposes of paragraph (1) with respect to individuals described in subparagraph (C) of such paragraph, the State shall establish an income level which is equal to 133 percent of the income 

official poverty line described in subparagraph (A) applicable to a 

family of the size involved. 

(C) For purposes of paragraph (1) with respect to individuals described in subparagraph (D) of that paragraph, the State shall establish an income level which is equal to 100 percent (or, beginning 

January 1, 2014, 133 percent) of the income official poverty line described in subparagraph (A) applicable to a family of the size involved. 

(3) Notwithstanding subsection (a)(17), for individuals who are 

eligible for medical assistance because of subsection 

(a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), or 

(a)(10)(A)(ii)(IX)— 

(A) application of a resource standard shall be at the option 

of the State; 

(B) any resource standard or methodology that is applied 

with respect to an individual described in subparagraph (A) of 

paragraph (1) may not be more restrictive than the resource 

standard or methodology that is applied under title XVI; 

(C) any resource standard or methodology that is applied 

with respect to an individual described in subparagraph (B), 

(C), or (D) of paragraph (1) may not be more restrictive than 

the corresponding methodology that is applied under the State 

plan under part A of title IV; 

(D) the income standard to be applied is the appropriate income standard established under paragraph (2); and 

(E) family income shall be determined in accordance with the 

methodology employed under the State plan under part A or 

E of title IV (except to the extent such methodology is inconsistent with clause (D) of subsection (a)(17)), and costs incurred 

for medical care or for any other type of remedial care shall not 

be taken into account. 

Any different treatment provided under this paragraph for such individuals shall not, because of subsection (a)(17), require or permit 

such treatment for other individuals. 

(4)(A) 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 provide medical assistance 


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for pregnant women and infants under age 1 described in subsection (a)(10)(A)(i)(IV) and for children described in subsection 

(a)(10)(A)(i)(VI) or subsection (a)(10)(A)(i)(VII) in the same manner 

as the State would be required to provide such assistance for such 

individuals if the State had in effect a plan approved under this 

title. 

(B) In the case of a State which is not one of the 50 States or 

the District of Columbia, the State need not meet the requirement 

of subsection (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), or (a)(10)(A)(i)(VII) 

and, for purposes of paragraph (2)(A), the State may substitute for 

the percentage provided under clause (ii) of such paragraph any 

percentage. 

(m)(1) Individuals described in this paragraph are individuals— 

(A) who are 65 years of age or older or are disabled individuals (as determined under section 1614(a)(3)), 

(B) whose income (as determined under section 1612 for purposes of the supplemental security income program, except as 

provided in paragraph (2)(C)) does not exceed an income level 

established by the State consistent with paragraph (2)(A), and 

(C) whose resources (as determined under section 1613 for 

purposes of the supplemental security income program) do not 

exceed (except as provided in paragraph (2)(B)) the maximum 

amount of resources that an individual may have and obtain 

benefits under that program. 

(2)(A) The income level established under paragraph (1)(B) may 

not exceed a percentage (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) In the case of a State that provides medical assistance to individuals not described in subsection (a)(10)(A) and at the State’s 

option, the State may use under paragraph (1)(C) such resource 

level (which is higher than the level described in that paragraph) 

as may be applicable with respect to individuals described in paragraph (1)(A) who are not described in subsection (a)(10)(A). 

(C) The provisions of section 1905(p)(2)(D) shall apply to determinations of income under this subsection in the same manner as 

they apply to determinations of income under section 1905(p). 

(3) Notwithstanding subsection (a)(17), for individuals described 

in paragraph (1) who are covered under the State plan by virtue 

of subsection (a)(10)(A)(ii)(X)— 

(A) the income standard to be applied is the income standard 

described in paragraph (1)(B), and 

(B) except as provided in section 1612(b)(4)(B)(ii), costs incurred for medical care or for any other type of remedial care 

shall not be taken into account in determining income. 

Any different treatment provided under this paragraph for such individuals shall not, because of subsection (a)(17), require or permit 

such treatment for other individuals. 

(4) Notwithstanding subsection (a)(17), for qualified medicare 

beneficiaries described in section 1905(p)(1)— 

(A) the income standard to be applied is the income standard 

described in section 1905(p)(1)(B), and 


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(B) except as provided in section 1612(b)(4)(B)(ii), costs incurred for medical care or for any other type of remedial care 

shall not be taken into account in determining income. 

Any different treatment provided under this paragraph for such individuals shall not, because of subsection (a)(17), require or permit 

such treatment for other individuals. 

(n)(1) In the case of medical assistance furnished under this title 

for medicare cost-sharing respecting the furnishing of a service or 

item to a qualified medicare beneficiary, the State plan may provide payment in an amount with respect to the service or item that 

results in the sum of such payment amount and any amount of 

payment made under title XVIII with respect to the service or item 

exceeding the amount that is otherwise payable under the State 

plan for the item or service for eligible individuals who are not 

qualified medicare beneficiaries. 

(2) In carrying out paragraph (1), a State is not required to provide any payment for any expenses incurred relating to payment 

for deductibles, coinsurance, or copayments for medicare cost-sharing to the extent that payment under title XVIII for the service 

would exceed the payment amount that otherwise would be made 

under the State plan under this title for such service if provided 

to an eligible recipient other than a medicare beneficiary. 

(3) In the case in which a State’s payment for medicare cost-sharing for a qualified medicare beneficiary with respect to an item or 

service is reduced or eliminated through the application of paragraph (2)— 

(A) for purposes of applying any limitation under title XVIII 

on the amount that the beneficiary may be billed or charged 

for the service, the amount of payment made under title XVIII 

plus the amount of payment (if any) under the State plan shall 

be considered to be payment in full for the service; 

(B) the beneficiary shall not have any legal liability to make 

payment to a provider or to an organization described in section 1903(m)(1)(A) for the service; and 

(C) any lawful sanction that may be imposed upon a provider 

or such an organization for excess charges under this title or 

title XVIII shall apply to the imposition of any charge imposed 

upon the individual in such case. 

This paragraph shall not be construed as preventing payment of 

any medicare cost-sharing by a medicare supplemental policy or an 

employer retiree health plan on behalf of an individual. 

(o) Notwithstanding any provision of subsection (a) to the contrary, a State plan under this title shall provide that any supplemental security income benefits paid by reason of subparagraph (E) 

or (G) of section 1611(e)(1) to an individual who— 

(1) is eligible for medical assistance under the plan, and 

(2) is in a hospital, skilled nursing facility, or intermediate 

care facility at the time such benefits are paid, 

will be disregarded for purposes of determining the amount of any 

post-eligibility contribution by the individual to the cost of the care 

and services provided by the hospital, skilled nursing facility, or intermediate care facility. 

(p)(1) In addition to any other authority, a State may exclude any 

individual or entity for purposes of participating under the State 

plan under this title for any reason for which the Secretary could 


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exclude the individual or entity from participation in a program 

under title XVIII under section 1128, 1128A, or 1866(b)(2). 

(2) In order for a State to receive payments for medical assistance under section 1903(a), with respect to payments the State 

makes to a medicaid managed care organization (as defined in section 1903(m)) or to an entity furnishing services under a waiver approved under section 1915(b)(1), the State must provide that it will 

exclude from participation, as such an organization or entity, any 

organization or entity that— 

(A) could be excluded under section 1128(b)(8) (relating to 

owners and managing employees who have been convicted of 

certain crimes or received other sanctions), 

(B) has, directly or indirectly, a substantial contractual relationship (as defined by the Secretary) with an individual or entity that is described in section 1128(b)(8)(B), or 

(C) employs or contracts with any individual or entity that 

is excluded from participation under this title under section 

1128 or 1128A for the provision of health care, utilization review, medical social work, or administrative services or employs or contracts with any entity for the provision (directly or 

indirectly) through such an excluded individual or entity of 

such services. 

(3) As used in this subsection, the term ‘‘exclude’’ includes the refusal to enter into or renew a participation agreement or the termination of such an agreement. 

(q)(1)(A) In order to meet the requirement of subsection (a)(50), 

the State plan must provide that, in the case of an institutionalized 

individual or couple described in subparagraph (B), in determining 

the amount of the individual’s or couple’s income to be applied 

monthly to payment for the cost of care in an institution, there 

shall be deducted from the monthly income (in addition to other allowances otherwise provided under the State plan) a monthly personal needs allowance— 

(i) which is reasonable in amount for clothing and other personal needs of the individual (or couple) while in an institution, 

and 

(ii) which is not less (and may be greater) than the minimum 

monthly personal needs allowance described in paragraph (2). 

(B) In this subsection, the term ‘‘institutionalized individual or 

couple’’ means an individual or married couple— 

(i) who is an inpatient (or who are inpatients) in a medical 

institution or nursing facility for which payments are made 

under this title throughout a month, and 

(ii) who is or are determined to be eligible for medical assistance under the State plan. 

(2) The minimum monthly personal needs allowance described in 

this paragraph is $30 for an institutionalized individual and $60 

for an institutionalized couple (if both are aged, blind, or disabled, 

and their incomes are considered available to each other in determining eligibility). 

(r)(1)(A) For purposes of sections 1902(a)(17) and 1924(d)(1)(D) 

and for purposes of a waiver under section 1915, with respect to 

the post-eligibility treatment of income of individuals who are institutionalized or receiving home or community-based services under 

such a waiver, the treatment described in subparagraph (B) shall 


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apply, there shall be disregarded reparation payments made by the 

Federal Republic of Germany, and there shall be taken into account amounts for incurred expenses for medical or remedial care 

that are not subject to payment by a third party, including— 

(i) medicare and other health insurance premiums, 

deductibles, or coinsurance, and 

(ii) necessary medical or remedial care recognized under 

State law but not covered under the State plan under this title, 

subject to reasonable limits the State may establish on the 

amount of these expenses. 

(B)(i) In the case of a veteran who does not have a spouse or a 

child, if the veteran— 

(I) receives, after the veteran has been determined to be eligible for medical assistance under the State plan under this 

title, a veteran’s pension in excess of $90 per month, and 

(II) resides in a State veterans home with respect to which 

the Secretary of Veterans Affairs makes per diem payments for 

nursing home care pursuant to section 1741(a) of title 38, 

United States Code, 

any such pension payment, including any payment made due to the 

need for aid and attendance, or for unreimbursed medical expenses, 

that is in excess of $90 per month shall be counted as income only 

for the purpose of applying such excess payment to the State veterans home’s cost of providing nursing home care to the veteran. 

(ii) The provisions of clause (i) shall apply with respect to a surviving spouse of a veteran who does not have a child in the same 

manner as they apply to a veteran described in such clause. 

(2)(A) The methodology to be employed in determining income 

and resource eligibility for individuals under subsection 

(a)(10)(A)(i)(III), (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), 

(a)(10)(A)(ii), (a)(10)(C)(i)(III), or (f) or under section 1905(p) may 

be less restrictive, and shall be no more restrictive, than the methodology— 

(i) in the case of groups consisting of aged, blind, or disabled 

individuals, under the supplemental security income program 

under title XVI, or 

(ii) in the case of other groups, under the State plan most 

closely categorically related. 

(B) For purposes of this subsection and subsection (a)(10), methodology is considered to be ‘‘no more restrictive’’ if, using the methodology, additional individuals may be eligible for medical assistance and no individuals who are otherwise eligible are made ineligible for such assistance. 

(s) In order to meet the requirements of subsection (a)(55), the 

State plan must provide that payments to hospitals under the plan 

for inpatient hospital services furnished to infants who have not attained the age of 1 year, and to children who have not attained the 

age of 6 years and who receive such services in a disproportionate 

share hospital described in section 1923(b)(1), shall— 

(1) if made on a prospective basis (whether per diem, per 

case, or otherwise) provide for an outlier adjustment in payment amounts for medically necessary inpatient hospital services involving exceptionally high costs or exceptionally long 

lengths of stay, 


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(2) not be limited by the imposition of day limits with respect 

to the delivery of such services to such individuals, and 

(3) not be limited by the imposition of dollar limits (other 

than such limits resulting from prospective payments as adjusted pursuant to paragraph (1)) with respect to the delivery 

of such services to any such individual who has not attained 

their first birthday (or in the case of such an individual who 

is an inpatient on his first birthday until such individual is 

discharged). 

(t) Nothing in this title (including sections 1903(a) and 1905(a)) 

shall be construed as authorizing the Secretary to deny or limit 

payments to a State for expenditures, for medical assistance for 

items or services, attributable to taxes of general applicability imposed with respect to the provision of such items or services. 

(u)(1) Individuals described in this paragraph are individuals— 

(A) who are entitled to elect COBRA continuation coverage 

(as defined in paragraph (3)), 

(B) whose income (as determined under section 1612 for purposes of the supplemental security income program) does not 

exceed 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, 

(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, and 

(D) with respect to whose enrollment for COBRA continuation coverage the State has determined that the savings in expenditures under this title resulting from such enrollment is 

likely to exceed the amount of payments for COBRA premiums 

made. 

(2) For purposes of subsection (a)(10)(F) and this subsection, the 

term ‘‘COBRA premiums’’ means the applicable premium imposed 

with respect to COBRA continuation coverage. 

(3) In this subsection, the term ‘‘COBRA continuation coverage’’ 

means coverage under a group health plan provided by an employer with 75 or more employees provided pursuant to title XXII 

of the Public Health Service Act, section 4980B of the Internal Revenue Code of 1986, or title VI of the Employee Retirement Income 

Security Act of 1974. 

(4) Notwithstanding subsection (a)(17), for individuals described 

in paragraph (1) who are covered under the State plan by virtue 

of subsection (a)(10)(A)(ii)(XI)— 

(A) the income standard to be applied is the income standard 

described in paragraph (1)(B), and 

(B) except as provided in section 1612(b)(4)(B)(ii), costs incurred for medical care or for any other type of remedial care 

shall not be taken into account in determining income. 

Any different treatment provided under this paragraph for such individuals shall not, because of subsection (a)(10)(B) or (a)(17), require or permit such treatment for other individuals. 

(v) A State plan may provide for the making of determinations 

of disability or blindness for the purpose of determining eligibility 


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for medical assistance under the State plan by the single State 

agency or its designee, and make medical assistance available to 

individuals whom it finds to be blind or disabled and who are determined otherwise eligible for such assistance during the period of 

time prior to which a final determination of disability or blindness 

is made by the Social Security Administration with respect to such 

an individual. In making such determinations, the State must 

apply the definitions of disability and blindness found in section 

1614(a) of the Social Security Act. 

(w)(1) For purposes of subsection (a)(57) and sections 

1903(m)(1)(A) and 1919(c)(2)(E), the requirement of this subsection 

is that a provider or organization (as the case may be) maintain 

written policies and procedures with respect to all adult individuals 

receiving medical care by or through the provider or organization— 

(A) to provide written information to each such individual 

concerning— 

(i) an individual’s rights under State law (whether statutory or as recognized by the courts of the State) to make 

decisions concerning such medical care, including the right 

to accept or refuse medical or surgical treatment and the 

right to formulate advance directives (as defined in paragraph (3)), and 

(ii) the provider’s or organization’s written policies respecting the implementation of such rights; 

(B) to document in the individual’s medical record whether 

or not the individual has executed an advance directive; 

(C) not to condition the provision of care or otherwise discriminate against an individual based on whether or not the 

individual has executed an advance directive; 

(D) to ensure compliance with requirements of State law 

(whether statutory or as recognized by the courts of the State) 

respecting advance directives; and 

(E) to provide (individually or with others) for education for 

staff and the community on issues concerning advance directives. 

Subparagraph (C) shall not be construed as requiring the provision 

of care which conflicts with an advance directive. 

(2) The written information described in paragraph (1)(A) shall 

be provided to an adult individual— 

(A) in the case of a hospital, at the time of the individual’s 

admission as an inpatient, 

(B) in the case of a nursing facility, at the time of the individual’s admission as a resident, 

(C) in the case of a provider of home health care or personal 

care services, in advance of the individual coming under the 

care of the provider, 

(D) in the case of a hospice program, at the time of initial 

receipt of hospice care by the individual from the program, and 

(E) in the case of a medicaid managed care organization, at 

the time of enrollment of the individual with the organization. 

(3) Nothing in this section shall be construed to prohibit the application of a State law which allows for an objection on the basis 

of conscience for any health care provider or any agent of such provider which as a matter of conscience cannot implement an advance directive. 


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(4) In this subsection, the term ‘‘advance directive’’ means a written instruction, such as a living will or durable power of attorney 

for health care, recognized under State law (whether statutory or 

as recognized by the courts of the State) and relating to the provision of such care when the individual is incapacitated. 

(5) For construction relating to this subsection, see section 7 of 

the Assisted Suicide Funding Restriction Act of 1997 (relating to 

clarification respecting assisted suicide, euthanasia, and mercy killing). 

(x) The Secretary shall establish a system, for implementation by 

not later than July 1, 1991, which provides for a unique identifier 

for each physician who furnishes services for which payment may 

be made under a State plan approved under this title. 

(y)(1) In addition to any other authority under State law, where 

a State determines that a psychiatric hospital which is certified for 

participation under its plan no longer meets the requirements for 

a psychiatric hospital (referred to in section 1905(h)) and further 

finds that the hospital’s deficiencies— 

(A) immediately jeopardize the health and safety of its patients, the State shall terminate the hospital’s participation 

under the State plan; or 

(B) do not immediately jeopardize the health and safety of its 

patients, the State may terminate the hospital’s participation 

under the State plan, or provide that no payment will be made 

under the State plan with respect to any individual admitted 

to such hospital after the effective date of the finding, or both. 

(2) Except as provided in paragraph (3), if a psychiatric hospital 

described in paragraph (1)(B) has not complied with the requirements for a psychiatric hospital under this title— 

(A) within 3 months after the date the hospital is found to 

be out of compliance with such requirements, the State shall 

provide that no payment will be made under the State plan 

with respect to any individual admitted to such hospital after 

the end of such 3-month period, or 

(B) within 6 months after the date the hospital is found to 

be out of compliance with such requirements, no Federal financial participation shall be provided under section 1903(a) with 

respect to further services provided in the hospital until the 

State finds that the hospital is in compliance with the requirements of this title. 

(3) The Secretary may continue payments, over a period of not 

longer than 6 months from the date the hospital is found to be out 

of compliance with such requirements, if— 

(A) the State finds that it is more appropriate to take alternative action to assure compliance of the hospital with the requirements than to terminate the certification of the hospital, 

(B) the State has submitted a plan and timetable for corrective action to the Secretary for approval and the Secretary approves the plan of corrective action, and 

(C) the State agrees to repay to the Federal Government 

payments received under this paragraph if the corrective action is not taken in accordance with the approved plan and 

timetable. 

(z)(1) Individuals described in this paragraph are individuals not 

described in subsection (a)(10)(A)(i)— 


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(A) who are infected with tuberculosis; 

(B) whose income (as determined under the State plan under 

this title with respect to disabled individuals) does not exceed 

the maximum amount of income a disabled individual described in subsection (a)(10)(A)(i) may have and obtain medical 

assistance under the plan; and 

(C) whose resources (as determined under the State plan 

under this title with respect to disabled individuals) do not exceed the maximum amount of resources a disabled individual 

described in subsection (a)(10)(A)(i) may have and obtain medical assistance under the plan. 

(2) For purposes of subsection (a)(10), the term ‘‘TB-related services’’ means each of the following services relating to treatment of 

infection with tuberculosis: 

(A) Prescribed drugs. 

(B) Physicians’ services and services described in section 

1905(a)(2). 

(C) Laboratory and X-ray services (including services to confirm the presence of infection). 

(D) Clinic services and Federally-qualified health center 

services. 

(E) Case management services (as defined in section 

1915(g)(2)). 

(F) Services (other than room and board) designed to encourage completion of regimens of prescribed drugs by outpatients, 

including services to observe directly the intake of prescribed 

drugs. 

(aa) Individuals described in this subsection are individuals 

who— 

(1) are not described in subsection (a)(10)(A)(i); 

(2) have not attained age 65; 

(3) have been screened for breast and cervical cancer under 

the Centers for Disease Control and Prevention breast and cervical cancer early detection program established under title XV 

of the Public Health Service Act (42 U.S.C. 300k et seq.) in accordance with the requirements of section 1504 of that Act (42 

U.S.C. 300n) and need treatment for breast or cervical cancer; 

and 

(4) are not otherwise covered under creditable coverage, as 

defined in section 2701(c) of the Public Health Service Act (42 

U.S.C. 300gg(c)), but applied without regard to paragraph 

(1)(F) of such section. 

(bb) PAYMENT FOR SERVICES PROVIDED BY FEDERALLY-QUALIFIED

HEALTH CENTERS AND RURAL HEALTH CLINICS.— 

(1) IN GENERAL.—Beginning with fiscal year 2001 with respect to services furnished on or after January 1, 2001, and 

each succeeding fiscal year, the State plan shall provide for 

payment for services described in section 1905(a)(2)(C) furnished by a Federally-qualified health center and services described in section 1905(a)(2)(B) furnished by a rural health 

clinic in accordance with the provisions of this subsection. 

(2) FISCAL YEAR 2001.—Subject to paragraph (4), for services 

furnished on and after January 1, 2001, during fiscal year 

2001, the State plan shall provide for payment for such services in an amount (calculated on a per visit basis) that is equal 


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to 100 percent of the average of the costs of the center or clinic 

of furnishing such services during fiscal years 1999 and 2000 

which are reasonable and related to the cost of furnishing such 

services, or based on such other tests of reasonableness as the 

Secretary prescribes in regulations under section 1833(a)(3), or, 

in the case of services to which such regulations do not apply, 

the same methodology used under section 1833(a)(3), adjusted 

to take into account any increase or decrease in the scope of 

such services furnished by the center or clinic during fiscal 

year 2001. 

(3) FISCAL YEAR 2002 AND SUCCEEDING FISCAL YEARS.—Subject to paragraph (4), for services furnished during fiscal year 

2002 or a succeeding fiscal year, the State plan shall provide 

for payment for such services in an amount (calculated on a 

per visit basis) that is equal to the amount calculated for such 

services under this subsection for the preceding fiscal year— 

(A) increased by the percentage increase in the MEI (as 

defined in section 1842(i)(3)) applicable to primary care 

services (as defined in section 1842(i)(4)) for that fiscal 

year; and 

(B) adjusted to take into account any increase or decrease in the scope of such services furnished by the center 

or clinic during that fiscal year. 

(4) ESTABLISHMENT OF INITIAL YEAR PAYMENT AMOUNT FOR

NEW CENTERS OR CLINICS.—In any case in which an entity first 

qualifies as a Federally-qualified health center or rural health 

clinic after fiscal year 2000, the State plan shall provide for 

payment for services described in section 1905(a)(2)(C) furnished by the center or services described in section 

1905(a)(2)(B) furnished by the clinic in the first fiscal year in 

which the center or clinic so qualifies in an amount (calculated 

on a per visit basis) that is equal to 100 percent of the costs 

of furnishing such services during such fiscal year based on the 

rates established under this subsection for the fiscal year for 

other such centers or clinics located in the same or adjacent 

area with a similar case load or, in the absence of such a center or clinic, in accordance with the regulations and methodology referred to in paragraph (2) or based on such other tests 

of reasonableness as the Secretary may specify. For each fiscal 

year following the fiscal year in which the entity first qualifies 

as a Federally-qualified health center or rural health clinic, the 

State plan shall provide for the payment amount to be calculated in accordance with paragraph (3). 

(5) ADMINISTRATION IN THE CASE OF MANAGED CARE.— 

(A) IN GENERAL.—In the case of services furnished by a 

Federally-qualified health center or rural health clinic pursuant to a contract between the center or clinic and a managed care entity (as defined in section 1932(a)(1)(B)), the 

State plan shall provide for payment to the center or clinic 

by the State of a supplemental payment equal to the 

amount (if any) by which the amount determined under 

paragraphs (2), (3), and (4) of this subsection exceeds the 

amount of the payments provided under the contract. 

(B) PAYMENT SCHEDULE.—The supplemental payment required under subparagraph (A) shall be made pursuant to 


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a payment schedule agreed to by the State and the Federally-qualified health center or rural health clinic, but in no 

case less frequently than every 4 months. 

(6) ALTERNATIVE PAYMENT METHODOLOGIES.—Notwithstanding any other provision of this section, the State plan 

may provide for payment in any fiscal year to a Federallyqualified health center for services described in section 

1905(a)(2)(C) or to a rural health clinic for services described 

in section 1905(a)(2)(B) in an amount which is determined 

under an alternative payment methodology that— 

(A) is agreed to by the State and the center or clinic; and 

(B) results in payment to the center or clinic of an 

amount which is at least equal to the amount otherwise 

required to be paid to the center or clinic under this section. 

(cc)(1) Individuals described in this paragraph are individuals— 

(A) who are children who have not attained 19 years of age 

and are born— 

(i) on or after January 1, 2001 (or, at the option of a 

State, on or after an earlier date), in the case of the second, third, and fourth quarters of fiscal year 2007; 

(ii) on or after October 1, 1995 (or, at the option of a 

State, on or after an earlier date), in the case of each quarter of fiscal year 2008; and 

(iii) after October 1, 1989, in the case of each quarter of 

fiscal year 2009 and each quarter of any fiscal year thereafter; 

(B) who would be considered disabled under section 

1614(a)(3)(C) (as determined under title XVI for children but 

without regard to any income or asset eligibility requirements 

that apply under such title with respect to children); and 

(C) whose family income does not exceed such income level 

as the State establishes and does not exceed— 

(i) 300 percent of the poverty line (as defined in section 

2110(c)(5)) applicable to a family of the size involved; or 

(ii) such higher percent of such poverty line as a State 

may establish, except that— 

(I) any medical assistance provided to an individual 

whose family income exceeds 300 percent of such poverty line may only be provided with State funds; and 

(II) no Federal financial participation shall be provided under section 1903(a) for any medical assistance 

provided to such an individual. 

(2)(A) If an employer of a parent of an individual described in 

paragraph (1) offers family coverage under a group health plan (as 

defined in section 2791(a) of the Public Health Service Act), the 

State shall— 

(i) notwithstanding section 1906, require such parent to 

apply for, enroll in, and pay premiums for such coverage as a 

condition of such parent’s child being or remaining eligible for 

medical assistance under subsection (a)(10)(A)(ii)(XIX) if the 

parent is determined eligible for such coverage and the employer contributes at least 50 percent of the total cost of annual premiums for such coverage; and 

(ii) if such coverage is obtained— 


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(I) subject to paragraph (2) of section 1916(h), reduce the 

premium imposed by the State under that section in an 

amount that reasonably reflects the premium contribution 

made by the parent for private coverage on behalf of a 

child with a disability; and 

(II) treat such coverage as a third party liability under 

subsection (a)(25). 

(B) In the case of a parent to which subparagraph (A) applies, 

a State, notwithstanding section 1906 but subject to paragraph 

(1)(C)(ii), may provide for payment of any portion of the annual 

premium for such family coverage that the parent is required to 

pay. Any payments made by the State under this subparagraph 

shall be considered, for purposes of section 1903(a), to be payments 

for medical assistance. 

(dd) ELECTRONIC TRANSMISSION OF INFORMATION.—If the State 

agency determining eligibility for medical assistance under this 

title or child health assistance under title XXI verifies an element 

of eligibility based on information from an Express Lane Agency 

(as defined in subsection (e)(13)(F)), or from another public agency, 

then the applicant’s signature under penalty of perjury shall not be 

required as to such element. Any signature requirement for an application for medical assistance may be satisfied through an electronic signature, as defined in section 1710(1) of the Government 

Paperwork Elimination Act (44 U.S.C. 3504 note). The requirements of subparagraphs (A) and (B) of section 1137(d)(2) may be 

met through evidence in digital or electronic form. 

(ee)(1) For purposes of subsection (a)(46)(B)(ii), the requirements 

of this subsection with respect to an individual declaring to be a 

citizen or national of the United States for purposes of establishing 

eligibility under this title, are, in lieu of requiring the individual 

to present satisfactory documentary evidence of citizenship or nationality under section 1903(x) (if the individual is not described in 

paragraph (2) of that section), as follows: 

(A) The State submits the name and social security number 

of the individual to the Commissioner of Social Security as part 

of the program established under paragraph (2). 

(B) If the State receives notice from the Commissioner of Social Security that the name or social security number, or the 

declaration of citizenship or nationality, of the individual is inconsistent with information in the records maintained by the 

Commissioner— 

(i) the State makes a reasonable effort to identify and 

address the causes of such inconsistency, including 

through typographical or other clerical errors, by contacting the individual to confirm the accuracy of the name 

or social security number submitted or declaration of citizenship or nationality and by taking such additional actions as the Secretary, through regulation or other guidance, or the State may identify, and continues to provide 

the individual with medical assistance while making such 

effort; and 

(ii) in the case such inconsistency is not resolved under 

clause (i), the State— 

(I) notifies the individual of such fact; 


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(II) provides the individual with a period of 90 days 

from the date on which the notice required under subclause (I) is received by the individual to either 

present satisfactory documentary evidence of citizenship or nationality (as defined in section 1903(x)(3)) or 

resolve the inconsistency with the Commissioner of Social Security (and continues to provide the individual 

with medical assistance during such 90-day period); 

and 

(III) disenrolls the individual from the State plan 

under this title within 30 days after the end of such 

90-day period if no such documentary evidence is presented or if such inconsistency is not resolved. 

(2)(A) Each State electing to satisfy the requirements of this subsection for purposes of section 1902(a)(46)(B) shall establish a program under which the State submits at least monthly to the Commissioner of Social Security for comparison of the name and social 

security number, of each individual newly enrolled in the State 

plan under this title that month who is not described in section 

1903(x)(2) and who declares to be a United States citizen or national, with information in records maintained by the Commissioner. 

(B) In establishing the State program under this paragraph, the 

State may enter into an agreement with the Commissioner of Social Security— 

(i) to provide, through an on-line system or otherwise, for the 

electronic submission of, and response to, the information submitted under subparagraph (A) for an individual enrolled in 

the State plan under this title who declares to be citizen or national on at least a monthly basis; or 

(ii) to provide for a determination of the consistency of the 

information submitted with the information maintained in the 

records of the Commissioner through such other method as 

agreed to by the State and the Commissioner and approved by 

the Secretary, provided that such method is no more burdensome for individuals to comply with than any burdens that 

may apply under a method described in clause (i). 

(C) The program established under this paragraph shall provide 

that, in the case of any individual who is required to submit a social security number to the State under subparagraph (A) and who 

is unable to provide the State with such number, shall be provided 

with at least the reasonable opportunity to present satisfactory documentary evidence of citizenship or nationality (as defined in section 1903(x)(3)) 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. 

(3)(A) The State agency implementing the plan approved under 

this title shall, at such times and in such form as the Secretary 

may specify, provide information on the percentage each month 

that the inconsistent submissions bears to the total submissions 

made for comparison for such month. For purposes of this subparagraph, a name, social security number, or declaration of citizenship 

or nationality of an individual shall be treated as inconsistent and 

included in the determination of such percentage only if— 


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(i) the information submitted by the individual is not consistent with information in records maintained by the Commissioner of Social Security; 

(ii) the inconsistency is not resolved by the State; 

(iii) the individual was provided with a reasonable period of 

time to resolve the inconsistency with the Commissioner of Social Security or provide satisfactory documentation of citizenship status and did not successfully resolve such inconsistency; 

and 

(iv) payment has been made for an item or service furnished 

to the individual under this title. 

(B) If, for any fiscal year, the average monthly percentage determined under subparagraph (A) is greater than 3 percent— 

(i) the State shall develop and adopt a corrective plan to review its procedures for verifying the identities of individuals 

seeking to enroll in the State plan under this title and to identify and implement changes in such procedures to improve 

their accuracy; and 

(ii) pay to the Secretary an amount equal to the amount 

which bears the same ratio to the total payments under the 

State plan for the fiscal year for providing medical assistance 

to individuals who provided inconsistent information as the 

number of individuals with inconsistent information in excess 

of 3 percent of such total submitted bears to the total number 

of individuals with inconsistent information. 

(C) The Secretary may waive, in certain limited cases, all or part 

of the payment under subparagraph (B)(ii) if the State is unable to 

reach the allowable error rate despite a good faith effort by such 

State. 

(D) Subparagraphs (A) and (B) shall not apply to a State for a 

fiscal year if there is an agreement described in paragraph (2)(B) 

in effect as of the close of the fiscal year that provides for the submission on a real-time basis of the information described in such 

paragraph. 

(4) Nothing in this subsection shall affect the rights of any individual under this title to appeal any disenrollment from a State 

plan. 

(ff) Notwithstanding any other requirement of this title or any 

other provision of Federal or State law, a State shall disregard the 

following property from resources for purposes of determining the 

eligibility of an individual who is an Indian for medical assistance 

under this title: 

(1) Property, including real property and improvements, that 

is held in trust, subject to Federal restrictions, or otherwise 

under the supervision of the Secretary of the Interior, located 

on a reservation, including any federally recognized Indian 

Tribe’s reservation, pueblo, or colony, including former reservations in Oklahoma, Alaska Native regions established by the 

Alaska Native Claims Settlement Act, and Indian allotments 

on or near a reservation as designated and approved by the 

Bureau of Indian Affairs of the Department of the Interior. 

(2) For any federally recognized Tribe not described in paragraph (1), property located within the most recent boundaries 

of a prior Federal reservation. 


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(3) Ownership interests in rents, leases, royalties, or usage 

rights related to natural resources (including extraction of natural resources or harvesting of timber, other plants and plant 

products, animals, fish, and shellfish) resulting from the exercise of federally protected rights. 

(4) Ownership interests in or usage rights to items not covered by paragraphs (1) through (3) that have unique religious, 

spiritual, traditional, or cultural significance or rights that 

support subsistence or a traditional lifestyle according to applicable tribal law or custom. 

(gg) MAINTENANCE OF EFFORT.— 

(1) GENERAL REQUIREMENT TO MAINTAIN ELIGIBILITY STANDARDS UNTIL STATE EXCHANGE IS FULLY OPERATIONAL.—Subject 

to the succeeding paragraphs of this subsection, during the period that begins on the date of enactment of the Patient Protection and Affordable Care Act and ends on the date on which 

the Secretary determines that an Exchange established by the 

State under section 1311 of the Patient Protection and Affordable Care Act is fully operational, as a condition for receiving 

any Federal payments under section 1903(a) for calendar quarters occurring during such period, a State shall not have in effect eligibility standards, methodologies, or procedures under 

the State plan under this title or under any waiver of such 

plan that is in effect during that period, that are more restrictive than the eligibility standards, methodologies, or procedures, respectively, under the plan or waiver that are in effect 

on the date of enactment of the Patient Protection and Affordable Care Act. 

(2) CONTINUATION OF ELIGIBILITY STANDARDS FOR CHILDREN

UNTIL OCTOBER 1, 2019.—The requirement under paragraph (1) 

shall continue to apply to a State through September 30, 2019, 

with respect to the eligibility standards, methodologies, and 

procedures under the State plan under this title or under any 

waiver of such plan that are applicable to determining the eligibility for medical assistance of any child who is under 19 

years of age (or such higher age as the State may have elected). 

(3) NONAPPLICATION.—During the period that begins on January 1, 2011, and ends on December 31, 2013, the requirement 

under paragraph (1) shall not apply to a State with respect to 

nonpregnant, nondisabled adults who are eligible for medical 

assistance under the State plan or under a waiver of the plan 

at the option of the State and whose income exceeds 133 percent of the poverty line (as defined in section 2110(c)(5)) applicable to a family of the size involved if, on or after December 

31, 2010, the State certifies to the Secretary that, with respect 

to the State fiscal year during which the certification is made, 

the State has a budget deficit, or with respect to the succeeding State fiscal year, the State is projected to have a budget deficit. Upon submission of such a certification to the Secretary, the requirement under paragraph (1) shall not apply to 

the State with respect to any remaining portion of the period 

described in the preceding sentence. 

(4) DETERMINATION OF COMPLIANCE.— 


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(A) STATES SHALL APPLY MODIFIED ADJUSTED GROSS IN- COME.—A State’s determination of income in accordance 

with subsection (e)(14) shall not be considered to be eligibility standards, methodologies, or procedures that are 

more restrictive than the standards, methodologies, or procedures in effect under the State plan or under a waiver 

of the plan on the date of enactment of the Patient Protection and Affordable Care Act for purposes of determining 

compliance with the requirements of paragraph (1), (2), or 

(3). 

(B) STATES MAY EXPAND ELIGIBILITY OR MOVE WAIVERED

POPULATIONS INTO COVERAGE UNDER THE STATE PLAN.— 

With respect to any period applicable under paragraph (1), 

(2), or (3), a State that applies eligibility standards, methodologies, or procedures under the State plan under this 

title or under any waiver of the plan that are less restrictive than the eligibility standards, methodologies, or procedures, applied under the State plan or under a waiver of 

the plan on the date of enactment of the Patient Protection 

and Affordable Care Act, or that makes individuals who, 

on such date of enactment, are eligible for medical assistance under a waiver of the State plan, after such date of 

enactment eligible for medical assistance through a State 

plan amendment with an income eligibility level that is 

not less than the income eligibility level that applied under 

the waiver, or as a result of the application of subclause 

(VIII) of section 1902(a)(10)(A)(i), shall not be considered to 

have in effect eligibility standards, methodologies, or procedures that are more restrictive than the standards, 

methodologies, or procedures in effect under the State plan 

or under a waiver of the plan on the date of enactment of 

the Patient Protection and Affordable Care Act for purposes of determining compliance with the requirements of 

paragraph (1), (2), or (3). 

(hh)(1) A State may elect to phase-in the extension of eligibility 

for medical assistance to individuals described in subclause (XX) of 

subsection (a)(10)(A)(ii) based on the categorical group (including 

nonpregnant childless adults) or income, so long as the State does 

not extend such eligibility to individuals described in such subclause with higher income before making individuals described in 

such subclause with lower income eligible for medical assistance. 

(2) If an individual described in subclause (XX) of subsection 

(a)(10)(A)(ii) is the parent of a child who is under 19 years of age 

(or such higher age as the State may have elected) who is eligible 

for medical assistance under the State plan or under a waiver of 

such plan, the individual may not be enrolled under the State plan 

unless the individual’s child is enrolled under the State plan or 

under a waiver of the plan or is enrolled in other health insurance 

coverage. For purposes of the preceding sentence, the term ‘‘parent’’ 

includes an individual treated as a caretaker relative for purposes 

of carrying out section 1931. 

(ii)(1) Individuals described in this subsection are individuals— 

(A) whose income does not exceed an income eligibility 

level established by the State that does not exceed the 

highest income eligibility level established under the State 


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plan under this title (or under its State child health plan 

under title XXI) for pregnant women; and 

(B) who are not pregnant. 

(2) At the option of a State, individuals described in this subsection may include individuals who, had individuals applied 

on or before January 1, 2007, would have been made eligible 

pursuant to the standards and processes imposed by that State 

for benefits described in clause (XVI) of the matter following 

subparagraph (G) of section subsection (a)(10) pursuant to a 

waiver granted under section 1115. 

(3) At the option of a State, for purposes of subsection 

(a)(17)(B), in determining eligibility for services under this subsection, the State may consider only the income of the applicant or recipient. 

(jj) PRIMARY CARE SERVICES DEFINED.—For purposes of subsection (a)(13)(C), the term ‘‘primary care services’’ means— 

(1) evaluation and management services that are procedure 

codes (for services covered under title XVIII) for services in the 

category designated Evaluation and Management in the 

Healthcare Common Procedure Coding System (established by 

the Secretary under section 1848(c)(5) as of December 31, 2009, 

and as subsequently modified); and 

(2) services related to immunization administration for vaccines and toxoids for which CPT codes 90465, 90466, 90467, 

90468, 90471, 90472, 90473, or 90474 (as subsequently modified) apply under such System. 

(kk) PROVIDER AND SUPPLIER SCREENING, OVERSIGHT, AND REPORTING REQUIREMENTS.—For purposes of subsection (a)(77), the 

requirements of this subsection are the following: 

(1) SCREENING.—The State complies with the process for 

screening providers and suppliers under this title, as established by the Secretary under section 1886(j)(2). 

(2) PROVISIONAL PERIOD OF ENHANCED OVERSIGHT FOR NEW

PROVIDERS AND SUPPLIERS.—The State complies with procedures to provide for a provisional period of enhanced oversight 

for new providers and suppliers under this title, as established 

by the Secretary under section 1886(j)(3). 

(3) DISCLOSURE REQUIREMENTS.—The State requires providers and suppliers under the State plan or under a waiver 

of the plan to comply with the disclosure requirements established by the Secretary under section 1886(j)(4). 

(4) TEMPORARY MORATORIUM ON ENROLLMENT OF NEW PROVIDERS OR SUPPLIERS.— 

(A) TEMPORARY MORATORIUM IMPOSED BY THE SECRETARY.— 

(i) IN GENERAL.—Subject to clause (ii), the State 

complies with any temporary moratorium on the enrollment of new providers or suppliers imposed by the 

Secretary under section 1886(j)(6). 

(ii) EXCEPTION.—A State shall not be required to 

comply with a temporary moratorium described in 

clause (i) if the State determines that the imposition 

of such temporary moratorium would adversely impact 

beneficiaries’ access to medical assistance. 


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(B) MORATORIUM ON ENROLLMENT OF PROVIDERS AND

SUPPLIERS.—At the option of the State, the State imposes, 

for purposes of entering into participation agreements with 

providers or suppliers under the State plan or under a 

waiver of the plan, periods of enrollment moratoria, or numerical caps or other limits, for providers or suppliers 

identified by the Secretary as being at high-risk for fraud, 

waste, or abuse as necessary to combat fraud, waste, or 

abuse, but only if the State determines that the imposition 

of any such period, cap, or other limits would not adversely 

impact beneficiaries’ access to medical assistance. 

(5) COMPLIANCE PROGRAMS.—The State requires providers 

and suppliers under the State plan or under a waiver of the 

plan to establish, in accordance with the requirements of section 1866(j)(7), a compliance program that contains the core 

elements established under subparagraph (B) of that section 

1866(j)(7) for providers or suppliers within a particular industry or category. 

(6) REPORTING OF ADVERSE PROVIDER ACTIONS.—The State 

complies with the national system for reporting criminal and 

civil convictions, sanctions, negative licensure actions, and 

other adverse provider actions to the Secretary, through the 

Administrator of the Centers for Medicare & Medicaid Services, in accordance with regulations of the Secretary. 

(7) ENROLLMENT AND NPI OF ORDERING OR REFERRING PRO- VIDERS.—The State requires— 

(A) all ordering or referring physicians or other professionals to be enrolled under the State plan or under a 

waiver of the plan as a participating provider; and 

(B) the national provider identifier of any ordering or referring physician or other professional to be specified on 

any claim for payment that is based on an order or referral 

of the physician or other professional. 

(8) OTHER STATE OVERSIGHT.—Nothing in this subsection 

shall be interpreted to preclude or limit the ability of a State 

to engage in provider and supplier screening or enhanced provider and supplier oversight activities beyond those required 

by the Secretary. 

* * * * * * * 

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, 


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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. 


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(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 EN- SURE 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 


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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. 


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(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 PER- CENTAGE.— (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 


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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); 


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(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 


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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.— 


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(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 AGREE- MENTS.—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 


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(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 availVerDate Sep 11 2014 10:59 May 11, 2016 Jkt 059006 PO 00000 Frm 00085 Fmt 6659 Sfmt 6601 E:\HR\OC\HR559.XXX HR559

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able 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 


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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. 


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(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— 


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(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, but does not include 

an abuse-deterrent formulation of the drug (as determined 

by the Secretary), regardless of whether such abuse-deterrent formulation is 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 subparaVerDate Sep 11 2014 10:59 May 11, 2016 Jkt 059006 PO 00000 Frm 00089 Fmt 6659 Sfmt 6601 E:\HR\OC\HR559.XXX HR559

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graphs (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)); 


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(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 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 

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cluded 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 


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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 LIMITA- TIONS.—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 


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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 AVAIL- ABILITY 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. 


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(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, drugdrug 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 


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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 overthe-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. 


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(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. 


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(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. 


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(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; 


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(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 


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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 


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(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 


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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. 


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(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, ownlabel 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. 


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Payments made for activities under this subsection shall be in addition to payments that would otherwise be made for such activities. 

(b) FUNDING.— 

ø(1) IN GENERAL.—There shall be available to the Fund, for 

expenditures from the Fund— 

ø(A) for fiscal year 2014, $10,000,000; and 

ø(B) for each of fiscal years 2015 through 2018, $0.¿ 

(1) IN GENERAL.—There shall be available to the Fund, for expenditures from the Fund for fiscal year 2021 and thereafter, 

$5,000,000. 

(2) 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). 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. 

* * * * * * * 

TITLE XXI—STATE CHILDREN’S HEALTH INSURANCE 

PROGRAM 

* * * * * * * 

SEC. 2102. GENERAL CONTENTS OF STATE CHILD HEALTH PLAN; ELIGIBILITY; OUTREACH. 

(a) GENERAL BACKGROUND AND DESCRIPTION.—A State child 

health plan shall include a description, consistent with the requirements of this title, of— 

(1) the extent to which, and manner in which, children in the 

State, including targeted low-income children and other classes 

of children classified by income and other relevant factors, currently have creditable health coverage (as defined in section 

2110(c)(2)); 

(2) current State efforts to provide or obtain creditable 

health coverage for uncovered children, including the steps the 

State is taking to identify and enroll all uncovered children 

who are eligible to participate in public health insurance programs and health insurance programs that involve public-private partnerships; 

(3) how the plan is designed to be coordinated with such efforts to increase coverage of children under creditable health 

coverage; 

(4) the child health assistance provided under the plan for 

targeted low-income children, including the proposed methods 

of delivery, and utilization control systems; 

(5) eligibility standards consistent with subsection (b); 

(6) outreach activities consistent with subsection (c); and 

(7) methods (including monitoring) used— 

(A) to assure the quality and appropriateness of care, 

particularly with respect to well-baby care, well-child care, 

and immunizations provided under the planø, and¿; 


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(B) to assure access to covered services, including emergency services and services described in section 

2103(c)(5)ø.¿; and 

(C) to ensure that the State agency involved is in compliance with subparagraphs (A), (B), and (C) of section 

1128K(b)(2). 

(b) GENERAL DESCRIPTION OF ELIGIBILITY STANDARDS AND METH- ODOLOGY.— (1) ELIGIBILITY STANDARDS.— (A) IN GENERAL.—The plan shall include a description of 

the standards used to determine the eligibility of targeted 

low-income children for child health assistance under the 

plan. Such standards may include (to the extent consistent 

with this title) those relating to the geographic areas to be 

served by the plan, age, income and resources (including 

any standards relating to spenddowns and disposition of 

resources), residency, disability status (so long as any 

standard relating to such status does not restrict eligibility), access to or coverage under other health coverage, 

and duration of eligibility. Such standards may not discriminate on the basis of diagnosis. 

(B) LIMITATIONS ON ELIGIBILITY STANDARDS.—Such eligibility standards— 

(i) shall, within any defined group of covered targeted low-income children, not cover such children 

with higher family income without covering children 

with a lower family income; 

(ii) may not deny eligibility based on a child having 

a preexisting medical condition; 

(iii) may not apply a waiting period (including a 

waiting period to carry out paragraph (3)(C)) in the 

case of a targeted low-income pregnant woman provided pregnancy-related assistance under section 2112; 

(iv) at State option, may not apply a waiting period 

in the case of a child provided dental-only supplemental coverage under section 2110(b)(5); and 

(v) shall, beginning January 1, 2014, use modified 

adjusted gross income and household income (as defined in section 36B(d)(2) of the Internal Revenue 

Code of 1986) to determine eligibility for child health 

assistance under the State child health plan or under 

any waiver of such plan and for any other purpose applicable under the plan or waiver for which a determination of income is required, including with respect 

to the imposition of premiums and cost-sharing, consistent with section 1902(e)(14). 

(2) METHODOLOGY.—The plan shall include a description of 

methods of establishing and continuing eligibility and enrollment. 

(3) ELIGIBILITY SCREENING; COORDINATION WITH OTHER

HEALTH COVERAGE PROGRAMS.—The plan shall include a description of procedures to be used to ensure— 

(A) through both intake and followup screening, that 

only targeted low-income children are furnished child 

health assistance under the State child health plan; 


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(B) that children found through the screening to be eligible for medical assistance under the State medicaid plan 

under title XIX are enrolled for such assistance under such 

plan; 

(C) that the insurance provided under the State child 

health plan does not substitute for coverage under group 

health plans; 

(D) the provision of child health assistance to targeted 

low-income children in the State who are Indians (as defined in section 4(c) of the Indian Health Care Improvement Act, 25 U.S.C. 1603(c)); and 

(E) coordination with other public and private programs 

providing creditable coverage for low-income children. 

(4) REDUCTION OF ADMINISTRATIVE BARRIERS TO ENROLLMENT.— 

(A) IN GENERAL.—Subject to subparagraph (B), the plan 

shall include a description of the procedures used to reduce 

administrative barriers to the enrollment of children and 

pregnant women who are eligible for medical assistance 

under title XIX or for child health assistance or health 

benefits coverage under this title. Such procedures shall be 

established and revised as often as the State determines 

appropriate to take into account the most recent information available to the State identifying such barriers. 

(B) DEEMED COMPLIANCE IF JOINT APPLICATION AND RE- NEWAL PROCESS THAT PERMITS APPLICATION OTHER THAN IN

PERSON.—A State shall be deemed to comply with subparagraph (A) if the State’s application and renewal forms and 

supplemental forms (if any) and information verification 

process is the same for purposes of establishing and renewing eligibility for children and pregnant women for 

medical assistance under title XIX and child health assistance under this title, and such process does not require an 

application to be made in person or a face-to-face interview. 

(5) NONENTITLEMENT.—Nothing in this title shall be construed as providing an individual with an entitlement to child 

health assistance under a State child health plan. 

(c) OUTREACH AND COORDINATION.—A State child health plan 

shall include a description of the procedures to be used by the 

State to accomplish the following: 

(1) OUTREACH.—Outreach (through community health workers and others) to families of children likely to be eligible for 

child health assistance under the plan or under other public or 

private health coverage programs to inform these families of 

the availability of, and to assist them in enrolling their children in, such a program. 

(2) COORDINATION WITH OTHER HEALTH INSURANCE PROGRAMS.—Coordination of the administration of the State program under this title with other public and private health insurance programs. 

(3) PREMIUM ASSISTANCE SUBSIDIES.—In the case of a State 

that provides for premium assistance subsidies under the State 

child health plan in accordance with paragraph (2)(B), (3), or 

(10) of section 2105(c), or a waiver approved under section 


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1115, outreach, education, and enrollment assistance for families of children likely to be eligible for such subsidies, to inform 

such families of the availability of, and to assist them in enrolling their children in, such subsidies, and for employers likely 

to provide coverage that is eligible for such subsidies, including 

the specific, significant resources the State intends to apply to 

educate employers about the availability of premium assistance 

subsidies under the State child health plan. 

* * * * * * * 

Æ 


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