69–006 

110TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 110–600 

PROTECTING THE MEDICAID SAFETY NET ACT OF 2008 

APRIL 22, 2008.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. DINGELL, from the Committee on Energy and Commerce, 

submitted the following 

R E P O R T 

[To accompany H.R. 5613] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Energy and Commerce, to whom was referred 

the bill (H.R. 5613) to extend certain moratoria and impose additional moratoria on certain Medicaid regulations through April 1, 

2009, having considered the same, report favorably thereon with 

amendments and recommend that the bill as amended do pass. 

CONTENTS 

Page 

Amendments ............................................................................................................ 1 

Purpose and Summary ............................................................................................ 6 

Background and Need for Legislation .................................................................... 7 

Hearings ................................................................................................................... 23 

Committee Consideration ........................................................................................ 24 

Committee Votes ...................................................................................................... 24 

Committee Oversight Findings ............................................................................... 27 

Statement of General Performance Goals and Objectives .................................... 27 

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 27 

Earmarks and Tax and Tariff Benefits .................................................................. 27 

Committee Cost Estimate ....................................................................................... 27 

Congressional Budget Office Estimate ................................................................... 27 

Federal Mandates Statement ................................................................................. 33 

Advisory Committee Statement .............................................................................. 33 

Constitutional Authority Statement ...................................................................... 33 

Applicability to Legislative Branch ........................................................................ 34 

Exchange of Committee Letters ............................................................................. 35 

Section-by-Section Analysis of the Legislation ...................................................... 42 

Changes in Existing Law Made by the Bill, as Reported ..................................... 44 

AMENDMENTS

The amendments are as follows: 


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Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Protecting the Medicaid Safety Net Act of 2008’’. 

SEC. 2. MORATORIA ON CERTAIN MEDICAID REGULATIONS. 

(a) EXTENSION OF CERTAIN MORATORIA IN PUBLIC LAW 110–28.—Section 

7002(a)(1) of the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq 

Accountability Appropriations Act, 2007 (Public Law 110–28) is amended— (1) by striking ‘‘prior to the date that is 1 year after the date of enactment 

of this Act’’ and inserting ‘‘prior to April 1, 2009’’; 

(2) in subparagraph (A), by inserting after ‘‘Federal Regulations)’’ the following: ‘‘or in the final regulation, relating to such parts, published on May 29, 

2007 (72 Federal Register 29748)’’; and 

(3) in subparagraph (C), by inserting before the period at the end the following: ‘‘, including the proposed regulation published on May 23, 2007 (72 Federal Register 28930)’’. (b) EXTENSION OF CERTAIN MORATORIA IN PUBLIC LAW 110–173.—Section 206 of 

the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law 110–173) is 

amended— (1) by striking ‘‘June 30, 2008’’ and inserting ‘‘April 1, 2009’’; 

(2) by inserting ‘‘, including the proposed regulation published on August 13, 

2007 (72 Federal Register 45201),’’ after ‘‘rehabilitation services’’; and 

(3) by inserting ‘‘, including the final regulation published on December 28, 

2007 (72 Federal Register 73635),’’ after ‘‘school-based transportation’’. (c) ADDITIONAL MORATORIA.— (1) IN GENERAL.—Notwithstanding any other provision of law, the Secretary 

of Health and Human Services shall not, prior to April 1, 2009, take any action 

(through promulgation of regulation, issuance of regulatory guidance, use of 

Federal payment audit procedures, or other administrative action, policy, or 

practice, including a Medical Assistance Manual transmittal or letter to State 

Medicaid directors) to impose any restrictions relating to a provision described 

in subparagraph (A), (B), or (C) of paragraph (2) if such restrictions are more 

restrictive in any aspect than those applied to the respective provision as of the 

date specified in paragraph (3) for such provision. 

(2) PROVISIONS DESCRIBED.— (A) PORTION OF INTERIM FINAL REGULATION RELATING TO MEDICAID TREAT- MENT OF OPTIONAL CASE MANAGEMENT SERVICES.— (i) IN GENERAL.—Subject to clause (ii), the provision described in this 

subparagraph is the interim final regulation relating to optional State 

plan case management services under the Medicaid program published 

on December 4, 2007 (72 Federal Register 68077) in its entirety. 

(ii) EXCEPTION.—The provision described in this subparagraph does 

not include the portion of such regulation as relates directly to implementing section 1915(g)(2)(A)(ii) of the Social Security Act, as amended 

by section 6052 of the Deficit Reduction Act of 2005 (Public Law 109– 171), through the definition of case management services and targeted 

case management services contained in proposed section 440.169 of 

title 42, Code of Federal Regulations, but only to the extent that such 

portion is not more restrictive than the policies set forth in the Dear 

State Medicaid Director letter on case management issued on January 

19, 2001 (SMDL #01–013), and with respect to community transition 

case management, the Dear State Medicaid Director letter issued on 

July 25, 2000 (Olmstead Update 3). 

(B) PROPOSED REGULATION RELATING TO REDEFINITION OF MEDICAID OUT- PATIENT HOSPITAL SERVICES.—The provision described in this subparagraph 

is the proposed regulation relating to clarification of outpatient clinic and 

hospital facility services definition and upper payment limit under the Medicaid program published on September 28, 2007 (72 Federal Register 55158) 

in its entirety. 

(C) PORTION OF PROPOSED REGULATION RELATING TO MEDICAID ALLOWABLE

PROVIDER TAXES.— (i) IN GENERAL.—Subject to clause (ii), the provision described in this 

subparagraph is the final regulation relating to health-care-related 

taxes under the Medicaid program published on February 22, 2008 (73 

Federal Register 9685) in its entirety. 

(ii) EXCEPTION.—The provision described in this subparagraph does 

not include the portions of such regulation as relate to the following: 

(I) REDUCTION IN THRESHOLD.—The reduction from 6 percent to 

5.5 percent in the threshold applied under section 433.68(f)(3)(i) of 


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title 42, Code of Federal Regulations, for determining whether or 

not there is an indirect guarantee to hold a taxpayer harmless, as 

required to carry out section 1903(w)(4)(C)(ii) of the Social Security 

Act, as added by section 403 of the Medicare Improvement and Extension Act of 2006 (division B of Public Law 109–432). 

(II) CHANGE IN DEFINITION OF MANAGED CARE.—The change in 

the definition of managed care as proposed in the revision of section 433.56(a)(8) of title 42, Code of Federal Regulations, as required to carry out section 1903(w)(7)(A)(viii) of the Social Security 

Act, as amended by section 6051 of the Deficit Reduction Act of 

2005 (Public Law 109–171). 

(3) DATE SPECIFIED.—The date specified in this paragraph for the provision 

described in— (A) subparagraph (A) of paragraph (2) is December 3, 2007; 

(B) subparagraph (B) of such paragraph is September 27, 2007; or 

(C) subparagraph (C) of such paragraph is February 21, 2008. 

SEC. 3. FUNDS TO REDUCE MEDICAID FRAUD AND ABUSE. 

(a) IN GENERAL.—For purposes of reducing fraud and abuse in the Medicaid program under title XIX of the Social Security Act, there is appropriated to the Secretary of Health and Human Services, out of any money in the Treasury not otherwise appropriated, $25,000,000, for each fiscal year (beginning with fiscal year 

2009). Amounts appropriated under this section shall remain available for expenditure until expended and shall be in addition to any other amounts appropriated or 

made available to the Secretary for such purposes with respect to the Medicaid program. 

(b) ANNUAL REPORT.—Not later than September 30 of 2009 and of each subsequent year, the Secretary of Health and Human Services shall submit to the Committee on Energy and Commerce of the House of Representatives and the Committee on Finance of the Senate a report on the activities (and the results of such 

activities) funded under subsection (a) to reduce waste, fraud, and abuse in the 

Medicaid program under title XIX of the Social Security Act during the previous 12 

month period, including the amount of funds appropriated under such subsection (a) 

for each such activity and an estimate of the savings to the Medicaid program resulting from each such activity. 

SEC. 4. STUDY AND REPORTS TO CONGRESS. 

(a) SECRETARIAL REPORT IDENTIFYING PROBLEMS.—Not later than July 1, 2008, 

the Secretary of Health and Human Services shall submit to the Committee on Energy and Commerce of the House of Representatives and the Committee on Finance 

of the Senate a report that— (1) outlines the specific problems the Medicaid regulations referred to in the 

amendments made by subsections (a) and (b) of section 2 and in the provisions 

described in subsection (c)(2) of such section were intended to address; 

(2) detailing how these regulations were designed to address these specific 

problems; and 

(3) cites the legal authority for such regulations. 

(b) INDEPENDENT COMPREHENSIVE STUDY AND REPORT.—

(1) IN GENERAL.—Not later than July 1, 2008, the Secretary of Health and 

Human Services shall enter into a contract with an independent organization 

for the purpose of—

(A) producing a comprehensive report on the prevalence of the problems 

outlined in the report submitted under subsection (a); 

(B) identifying strategies in existence to address these problems; and 

(C) assessing the impact of each regulation referred to in such subsection 

on each State and the District of Columbia. 

(2) ADDITIONAL MATTER.—The report under paragraph (1) shall also include—

(A) an identification of which claims for items and services (including administrative activities) under title XIX of the Social Security Act are not 

processed through systems described in section 1903(r) of such Act; 

(B) an examination of the reasons why these claims for such items and 

services are not processed through such systems; and 

(C) recommendations on actions by the Federal government and the 

States that can make claims for such items and services more accurate and 

complete consistent with such title. 

(3) DEADLINE.—The report under paragraph (1) shall be submitted to the 

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

Committee on Finance of the Senate not later than March 1, 2009. 

(4) COOPERATION OF STATES.—If the Secretary of Health and Human Services 

determines that a State or the District of Columbia has not cooperated with the 


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independent organization for purposes of the report under this subsection, the 

Secretary shall reduce the amount paid to the State or District under section 

1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) by $25,000 for each day 

on which the Secretary determines such State or District has not so cooperated. 

Such reduction shall be made through a process that permits the State or District to challenge the Secretary’s determination. 

(c) FUNDING.— (1) IN GENERAL.—Out of any money in the Treasury of the United States not 

otherwise appropriated, there are appropriated to the Secretary without further 

appropriation, $5,000,000 to carry out this section. 

(2) AVAILABILITY; AMOUNTS IN ADDITION TO OTHER AMOUNTS APPROPRIATED

FOR SUCH ACTIVITIES.—Amounts appropriated pursuant to paragraph (1) shall—

(A) remain available until expended; and 

(B) be in addition to any other amounts appropriated or made available 

to the Secretary of Health and Human Services with respect to the Medicaid program. 

SEC. 5. ASSET VERIFICATION THROUGH ACCESS TO INFORMATION HELD BY FINANCIAL INSTITUTIONS. 

(a) ADDITION OF AUTHORITY.—Title XIX of the Social Security Act is amended by 

inserting after section 1939 the following new section: 

‘‘ASSET VERIFICATION THROUGH ACCESS TO INFORMATION HELD BY FINANCIAL

INSTITUTIONS

‘‘SEC. 1940. (a) IMPLEMENTATION.—

‘‘(1) IN GENERAL.—Subject to the provisions of this section, each State shall 

implement an asset verification program described in subsection (b), for purposes of determining or redetermining the eligibility of an individual for medical 

assistance under the State plan under this title. 

‘‘(2) PLAN SUBMITTAL.—In order to meet the requirement of paragraph (1), 

each State shall—

‘‘(A) submit not later than a deadline specified by the Secretary consistent with paragraph (3), a State plan amendment under this title that 

describes how the State intends to implement the asset verification program; and 

‘‘(B) provide for implementation of such program for eligibility determinations and redeterminations made on or after 6 months after the deadline 

established for submittal of such plan amendment. 

‘‘(3) PHASE-IN.—

‘‘(A) IN GENERAL.—

‘‘(i) IMPLEMENTATION IN CURRENT ASSET VERIFICATION DEMO

STATES.—The Secretary shall require those States specified in subparagraph (C) (to which an asset verification program has been applied before the date of the enactment of this section) to implement an asset 

verification program under this subsection by the end of fiscal year 

2009. 

‘‘(ii) IMPLEMENTATION IN OTHER STATES.—The Secretary shall require 

other States to submit and implement an asset verification program 

under this subsection in such manner as is designed to result in the 

application of such programs, in the aggregate for all such other States, 

to enrollment of approximately, but not less than, the following percentage of enrollees, in the aggregate for all such other States, by the 

end of the fiscal year involved: 

‘‘(I) 12.5 percent by the end of fiscal year 2009. 

‘‘(II) 25 percent by the end of fiscal year 2010. 

‘‘(III) 50 percent by the end of fiscal year 2011. 

‘‘(IV) 75 percent by the end of fiscal year 2012. 

‘‘(V) 100 percent by the end of fiscal year 2013. 

‘‘(B) CONSIDERATION.—In selecting States under subparagraph (A)(ii), the 

Secretary shall consult with the States involved and take into account the 

feasibility of implementing asset verification programs in each such State. 

‘‘(C) STATES SPECIFIED.—The States specified in this subparagraph are 

California, New York, and New Jersey. 

‘‘(D) CONSTRUCTION.—Nothing in subparagraph (A)(ii) shall be construed 

as preventing a State from requesting, and the Secretary approving, the implementation of an asset verification program in advance of the deadline 

otherwise established under such subparagraph. 

‘‘(4) EXEMPTION OF TERRITORIES.—This section shall only apply to the 50 

States and the District of Columbia. 


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‘‘(b) ASSET VERIFICATION PROGRAM.— ‘‘(1) IN GENERAL.—For purposes of this section, an asset verification program 

means a program described in paragraph (2) under which a State— ‘‘(A) requires each applicant for, or recipient of, medical assistance under 

the State plan under this title on the basis of being aged, blind, or disabled 

to provide authorization by such applicant or recipient (and any other person whose resources are material to the determination of the eligibility of 

the applicant or recipient for such assistance) for the State to obtain (subject to the cost reimbursement requirements of section 1115(a) of the Right 

to Financial Privacy Act but at no cost to the applicant or recipient) from 

any financial institution (within the meaning of section 1101(1) of such Act) 

any financial record (within the meaning of section 1101(2) of such Act) 

held by the institution with respect to the applicant or recipient (and such 

other person, as applicable), whenever the State determines the record is 

needed in connection with a determination with respect to such eligibility 

for (or the amount or extent of) such medical assistance; and ‘‘(B) uses the authorization provided under subparagraph (A) to verify the 

financial resources of such applicant or recipient (and such other person, as 

applicable), in order to determine or redetermine the eligibility of such applicant or recipient for medical assistance under the State plan. ‘‘(2) PROGRAM DESCRIBED.—A program described in this paragraph is a program for verifying individual assets in a manner consistent with the approach 

used by the Commissioner of Social Security under section 1631(e)(1)(B)(ii). 

‘‘(c) DURATION OF AUTHORIZATION.—Notwithstanding section 1104(a)(1) of the 

Right to Financial Privacy Act, an authorization provided to a State under subsection (b)(1) shall remain effective until the earliest of—

‘‘(1) the rendering of a final adverse decision on the applicant’s application for 

medical assistance under the State’s plan under this title; 

‘‘(2) the cessation of the recipient’s eligibility for such medical assistance; or 

‘‘(3) the express revocation by the applicant or recipient (or such other person 

described in subsection (b)(1), as applicable) of the authorization, in a written 

notification to the State. 

‘‘(d) TREATMENT OF RIGHT TO FINANCIAL PRIVACY ACT REQUIREMENTS.—

‘‘(1) An authorization obtained by the State under subsection (b)(1) shall be 

considered to meet the requirements of the Right to Financial Privacy Act for 

purposes of section 1103(a) of such Act, and need not be furnished to the financial institution, notwithstanding section 1104(a) of such Act. 

‘‘(2) The certification requirements of section 1103(b) of the Right to Financial 

Privacy Act shall not apply to requests by the State pursuant to an authorization provided under subsection (b)(1). 

‘‘(3) A request by the State pursuant to an authorization provided under subsection (b)(1) is deemed to meet the requirements of section 1104(a)(3) of the 

Right to Financial Privacy Act and of section 1102 of such Act, relating to a 

reasonable description of financial records. 

‘‘(e) REQUIRED DISCLOSURE.—The State shall inform any person who provides authorization pursuant to subsection (b)(1)(A) of the duration and scope of the authorization. 

‘‘(f) REFUSAL OR REVOCATION OF AUTHORIZATION.—If an applicant for, or recipient 

of, medical assistance under the State plan under this title (or such other person 

described in subsection (b)(1), as applicable) refuses to provide, or revokes, any authorization made by the applicant or recipient (or such other person, as applicable) 

under subsection (b)(1)(A) for the State to obtain from any financial institution any 

financial record, the State may, on that basis, determine that the applicant or recipient is ineligible for medical assistance. 

‘‘(g) USE OF CONTRACTOR.—For purposes of implementing an asset verification 

program under this section, a State may select and enter into a contract with a public or private entity meeting such criteria and qualifications as the State determines 

appropriate, consistent with requirements in regulations relating to general contracting provisions and with section 1903(i)(2). In carrying out activities under such 

contract, such an entity shall be subject to the same requirements and limitations 

on use and disclosure of information as would apply if the State were to carry out 

such activities directly. 

‘‘(h) TECHNICAL ASSISTANCE.—The Secretary shall provide States with technical 

assistance to aid in implementation of an asset verification program under this section. 

‘‘(i) REPORTS.—A State implementing an asset verification program under this section shall furnish to the Secretary such reports concerning the program, at such 

times, in such format, and containing such information as the Secretary determines 

appropriate. 


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‘‘(j) TREATMENT OF PROGRAM EXPENSES.—Notwithstanding any other provision of 

law, reasonable expenses of States in carrying out the program under this section 

shall be treated, for purposes of section 1903(a), in the same manner as State expenditures specified in paragraph (7) of such section.’’. 

(b) STATE PLAN REQUIREMENTS.—Section 1902(a) of such Act (42 U.S.C. 1396a(a)) 

is amended—

(1) in paragraph (69) by striking ‘‘and’’ at the end; 

(2) in paragraph (70) by striking the period at the end and inserting ‘‘; and’’; 

and 

(3) by inserting after paragraph (70), as so amended, the following new paragraph: 

‘‘(71) provide that the State will implement an asset verification program as 

required under section 1940.’’. 

(c) WITHHOLDING OF FEDERAL MATCHING PAYMENTS FOR NONCOMPLIANT

STATES.—Section 1903(i) of such Act (42 U.S.C. 1396b(i)) is amended—

(1) in paragraph (22) by striking ‘‘or’’ at the end; 

(2) in paragraph (23) by striking the period at the end and inserting ‘‘; or’’; 

and 

(3) by adding after paragraph (23) the following new paragraph: 

‘‘(24) if a State is required to implement an asset verification program under 

section 1940 and fails to implement such program in accordance with such section, with respect to amounts expended by such State for medical assistance for 

individuals subject to asset verification under such section, unless—

‘‘(A) the State demonstrates to the Secretary’s satisfaction that the State 

made a good faith effort to comply; 

‘‘(B) not later than 60 days after the date of a finding that the State is 

in noncompliance, the State submits to the Secretary (and the Secretary approves) a corrective action plan to remedy such noncompliance; and 

‘‘(C) not later than 12 months after the date of such submission (and approval), the State fulfills the terms of such corrective action plan.’’. 

(d) REPEAL.—Section 4 of Public Law 110–90 is repealed. 

SEC. 6. ADJUSTMENT TO PAQI FUND. 

Section 1848(l)(2) of the Social Security Act (42 U.S.C. 1395w-4(l)(2)), as amended 

by section 101(a)(2) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 

(Public Law 110-173), is amended—

(1) in subparagraph (A)(i)—

(A) in subclause (III), by striking ‘‘$4,960,000,000’’ and inserting 

‘‘$3,790,000,000’’; and 

(B) by adding at the end the following new subclause: 

‘‘(IV) For expenditures during 2014, an amount equal to 

$3,690,000,000.’’; 

(2) in subparagraph (A)(ii), by adding at the end the following new subclause: 

‘‘(IV) 2014.—The amount available for expenditures during 2014 

shall only be available for an adjustment to the update of the conversion factor under subsection (d) for that year.’’; and 

(3) in subparagraph (B)—

(A) in clause (ii), by striking ‘‘and’’ at the end; 

(B) in clause (iii), by striking the period at the end and inserting ‘‘; and’’; 

and 

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

‘‘(iv) 2014 for payment with respect to physicians’ services furnished 

during 2014.’’. 

Amend the title so as to read: 

A bill to extend certain moratoria and impose additional moratoria on certain 

Medicaid regulations through April 1, 2009, and for other purposes. 

PURPOSE AND SUMMARY

The purpose of H.R. 5613, the ‘‘Protecting the Medicaid Safety 

Net Act of 2008’’, is to place a one-year moratorium on the U.S. Department of Health and Human Services (HHS) implementation of 

seven Medicaid regulations recently issued by, and for other purposes. These proposed regulations have the potential to adversely 

affect the Medicaid program, title XIX of the Social Security Act. 

The regulations would eliminate Medicaid payment for certain outVerDate Aug 31 2005 02:40 Apr 24, 2008 Jkt 069006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR600.XXX HR600

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patient hospital services; redefine the rules for how States may use 

provider taxes to fund Medicaid; restrict Medicaid payments to governmental healthcare providers such as critical safety net hospitals 

and nursing homes; restrict Medicaid coverage of rehabilitative 

services which are essential for people with disabilities; eliminate 

Medicaid payment for Medicaid administrative activities in schools, 

such as outreach and enrollment, and specialized medical transportation for school-age children who receive a medical service in 

school; restrict the coverage of case management services under the 

Medicaid program; and eliminate Medicaid payment for graduate 

medical education costs, used to train medical residents who care 

for Medicaid beneficiaries and others with special needs. The legislation ensures that Secretary will take no action, regulatory or otherwise, to advance the specified policies of these proposed regulations before April 2009. 

The purpose of H.R. 5613, the ‘‘Protecting the Medicaid Safety 

Net Act of 2008,’’ is to place a 1-year moratorium on the Department of Health and Human Services implementation of 7 Medicaid 

regulations issued by the Department over the past 14 months, and 

for other purposes. These proposed regulations have the potential 

to adversely affect the Medicaid program. The regulations affected 

by this legislation would restrict the use of intergovernmental 

transfers, limit Medicaid payments to governmental providers, clarify and narrow payment policy for certain provisions in target case 

management final regulation, prohibit Federal Medicaid payments 

for certain school-based administration and transportation services, 

narrow the definition of rehabilitative services, prohibit Federal 

Medicaid payment for graduate medical education, clarify the definition of outpatient clinic and hospital services, and prohibit elements of regulation related to permissible taxes on healthcare providers. The legislation ensures that Secretary will take no action, 

regulatory or otherwise, to advance the specified policies of these 

proposed regulations before April 2009. 

BACKGROUND AND NEED FOR LEGISLATION

Beginning in 2007, the Centers for Medicare and Medicaid Services (CMS) began issuing rules that made significant programmatic 

changes to the Medicaid program. Only two of the regulations were 

issued in response to recent Congressional legislation, the provider 

tax rule, and the case management rule. This reshaping of the 

Medicaid program by Administrative action raised significant concern in Congress, as well as with the Nation’s governors, Medicaid 

directors, State legislators, beneficiary advocates, providers, 

schools, and others affected by the proposed changes. 

Throughout 2007, Congress acted to place moratoria on a number 

of the regulations targeted by H.R. 5613. In the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability 

Appropriations Act, 2007 (P.L. 110–28) Congress placed a one-year 

ban on the regulation restricting payments to public providers 

(intergovernmental transfers) and the rule eliminating Medicaid 

payment for graduate medical education (GME). This moratorium 

expires on May 25, 2008. 

In the Children’s Health Insurance Program Reauthorization Act 

(CHIPRA), Congress placed a moratorium on the rule restricting 

rehabilitation care and school-based administration and transporVerDate Aug 31 2005 02:40 Apr 24, 2008 Jkt 069006 PO 00000 Frm 00007 Fmt 6659 Sfmt 6602 E:\HR\OC\HR600.XXX HR600

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tation services. This legislation, however, was vetoed twice by the 

President. 

In the Medicare, Medicaid, and SCHIP Extension Act of 2007 

(P.L. 110–173), Congress placed a six-month moratorium on the implementation of the rule restricting rehabilitation care under Medicaid and the rule eliminating Medicaid payment for specialized 

medical transportation for school children with disabilities and 

Medicaid outreach and enrollment conducted by schools. This moratorium expires on June 30, 2008. 

In addition, Senators Mikulski (D–MD) and Coleman (R–MN) offered an amendment to S. 1200, the Indian Health Care Improvement Act (ICHIA), which placed a one-year moratorium on the targeted case management rule, which was adopted by voice vote. The 

House, however, has not yet completed action on ICHIA. 

Both the House and Senate-passed budget resolutions include a 

reserve fund that would allow for deficit-neutral action to place a 

moratorium on the regulations. These funds would allow Committee allocations to be appropriately adjusted in the event such 

legislation was enacted. Differences between the two bills are currently being negotiated by the House and Senate Budget Committees. 

In response to the concerns raised by Medicaid stakeholders 

about the looming expiration of the existing moratoria and the 

need for a moratorium on the remaining regulations, Rep. John D. 

Dingell (D–MI), Chairman of the Committee on Energy and Commerce, along with Representative Tim Murphy (R–PA), introduced 

H.R. 5613. This legislation would place a one-year moratorium, but 

not a permanent ban, on all seven regulations. This will allow Congress time to better understand the nature and extent of the problems that the regulations propose to address, whether the solution 

identified in the regulation is appropriate and within the authority 

of CMS, and how each regulation would affect States, beneficiaries, 

and providers. 

This legislation received broad bipartisan support by the Nation’s 

50 governors and Medicaid directors. More than 2,000 organizations, including national organizations such as the American Hospital Association, the American Health Care Association, and the 

American Association of School Administrators, and the American 

Association of People with Disabilities, as well as local organizations such as the Wayne County Public Schools in Michigan, have 

come forward in support of H.R. 5613. 

REGULATIONS DELAYED BY H.R. 5613 

Regulation Date issued/Status Summary 

Optional Case Management Services.Interim final rule issued December 4, 

2007; no current moratorium, regulation effective March 3, 2008.

Medicaid’s case management benefit is intended to 

help people with disabilities, chronic illnesses, or 

special needs to gain access to the full spectrum 

of health care and support services by arranging 

for and coordinating care. The rule would eliminate Federal reimbursement to States for all payments for certain case management activities 

(such as those done by child welfare workers); 

limit Federal reimbursement for other case management activities (such as assistance with 

transitioning out of a nursing home); and eliminate Federal reimbursement for case management as an administrative activity. 


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REGULATIONS DELAYED BY H.R. 5613—Continued 

Regulation Date issued/Status Summary 

Rehabilitation services 72 

Fed. Reg. 45201.

Proposed rule issued August 13, 2007; 

current moratorium (sec. 206 of the 

Medicare, Medicaid, and SCHIP Extension Act of 2007, P.L. 110–173) 

through June 30, 2008.

Medicaid’s rehabilitation benefit provides an array 

of care and services to allow individuals with 

disabilities to attain, maintain, or regain maximum function. The rule would prohibit Federal 

Medicaid reimbursement to States for services 

that allow a beneficiary to maintain current functional status and rehabilitative services furnished 

through a non-medical program (e.g., foster care, 

adoption services, education, juvenile justice) 

School-based administration and transportation 

services 72 Fed. Reg. 

73635.

Final rule issued December 28, 2007; 

current moratorium (sec. 206 of the 

Medicare, Medicaid, and SCHIP Extension Act of 2007, P.L. 110–173) 

through June 30, 2008.

Under current law, States may receive Federal Medicaid reimbursements for payments to schools for 

both administrative activities associated with the 

Medicaid program (such as outreach and enrollment) and specialized medical transportation 

services of a child to and from school. The rule 

prohibits Federal Medicaid reimbursements for (1) 

administrative activities by school employees or 

contractors and (2) specialized medical transportation of school-aged children from home to 

school and back when receiving a medical service at the school. 

Payments to public providers 72 Fed. Reg. 

29748.

Final rule issued May 29, 2007; current 

moratorium (sec. 7002 of P.L. 110–

28) through May 25, 2008.

This rule changes existing policy to eliminate a 

major source of supplemental payments to 

healthcare providers such as public hospitals and 

nursing homes. Since 1991 the Federal law has 

explicitly allowed States to use certain intergovernmental transfers and certified public expenditures to help States pay their share of Medicaid 

costs. This rule would limit the amount States 

can pay to governmentally-operated healthcare 

providers. It would also restrict the types of entities authorized to provide non-Federal share 

funding and the rule determines which healthcare 

providers would be subject to the new cost limit. 

Provider taxes 72 Fed. 

Reg. 13726.

Final rule issued February 22, 2008; no 

current moratorium.

Under current law, States are allowed to use certain 

types of taxes on healthcare providers as a way 

to help pay for Medicaid expenses. These taxes 

are typically supported by providers because the 

taxes are used to improve provider payment rates 

and improve quality. This rule redefines what 

CMS would consider an ‘‘allowable’’ provider tax 

beyond what is in the law, replacing the current 

objective and quantitative test for determining 

whether a provider tax, or quality fee, is permissible with a new test that is completely subjective. 

Graduate medical education 72 Fed. Reg. 

28930.

Proposed rule issued May 23, 2007; 

current moratorium (sec. 7002 of 

P.L. 110–28) through May 25, 2008.

This rule would prohibit Federal Medicaid reimbursement payments for graduate medical education 

programs that train providers so they have the 

experience and skills necessary to meet the 

unique needs of Medicaid beneficiaries, particularly individuals with disabilities. Forty-seven 

States and the District of Columbia currently provide these payments under the Medicaid program. 

During the comment periods for these regulations, CMS received 

virtually no comments in support of the seven regulations. CMS indicated that of approximately 1,000 comments on the public provider payment rule, one piece of correspondence contained a positive comment, the rest indicated opposition. Of the 333 comments 

received on the hospital outpatient rule, only 1 was positive. Of the 

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istration and transportation rule, 1,225 were in opposition. There 

were no positive comments among the 1,845 pieces of correspondence received on the rehabilitation rule. 

In spite of the significant opposition expressed by the public comments on these seven regulations, CMS issued a number of the regulations in final form, even after Congress specifically directed the 

agency to cease such activities. The public provider payment rule 

was issued in final form after Congress enacted the moratorium on 

the rule, but before the President signed the legislation making 

that law effective. Likewise, the rule on school-based administration and transportation was issued in final form after Congress 

passed a bill placing a moratorium on it, but before the President 

signed the bill into law. 

H.R. 5613 will allow for Congressional review of both the agency’s apparent disregard for the public comments received and the 

agency’s apparent disregard of Congressional intent. In fact, only 

minor provisions of two of the seven regulations were in response 

to statutory changes. The moratoria in H.R. 5613 would allow those 

two portions of the rules, which were specifically enacted by Congress, to proceed. 

These regulations were not published as a result of Congressional action. Congress has not acted to change these sections of 

the statute for years. For example, Congress last took legislative 

action on the hospital outpatient department benefit in 1977, and 

there has been no change in the statute regarding school services 

since 1987. And in a number of instances, Congress specifically rejected the changes the Administration made through regulations. 

In 2006, a majority of the House of Representatives wrote to HHS 

Secretary Michael Leavitt expressing opposition to the regulatory 

proposals included in the President’s Budget for fiscal year 2007, 

including changes to school-based administration and transportation services, public provider payments, provider taxes, and rehabilitation services. These views were conveyed in two separate letters: a letter dated July 26, 2006, signed by all 201 House Democratic Members, 1 Independent Member, and 4 Congressional Delegates; and a May 8, 2006, letter signed by 80 House Republican 

Members. 

PAYMENTS TO PUBLIC PROVIDERS CMS 2258–FC

Federal Medicaid law has long allowed States to use funds transferred from other units of government, such as counties or localities, to meet Medicaid’s State share requirement. These intergovernmental transfers (IGTs) are also allowed when the counties or 

localities operate hospitals or nursing facilities that participate in 

Medicaid. In 1991, Congress enacted legislation prohibiting the use 

of donations from non-governmental organizations but codifying the 

authority for States to use IGT funds transferred from units of government, including those that operate providers, to State Medicaid 

agencies for use as the non-Federal share. 

In 1997, Congress enacted legislation giving States broad flexibility in setting payment rates for inpatient hospital and nursing 

facility services, whether furnished by public or by private providers. As a result, States have for more than a decade had broad 

flexibility in setting payment rates to reimburse hospitals and 

nursing homes for covered Medicaid services, whether those faciliVerDate Aug 31 2005 02:40 Apr 24, 2008 Jkt 069006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR600.XXX HR600

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ties are public or private. This flexibility allows each State to decide whether its Medicaid program should contribute toward the 

cost of treating the uninsured. 

The CMS proposed rule would restrict Federal Medicaid reimbursements for services offered in hospitals, nursing homes, and 

other providers operated by units of government to their ‘‘direct 

costs’’ of furnishing services to Medicaid patients. Under this regulation, Medicaid would no longer contribute toward the costs incurred by public providers in treating the uninsured and for specific things such as the losses that the hospital might incur for 

emergency room visits, burn units, or trauma care. In contrast, 

Medicare includes coverage for direct and indirect costs. Indirect 

costs include Medicare’s fair share of the overall costs of running 

the hospital. 

This rule was not published as a result of any recent Congressional action. Congress has not acted to change payments for public 

providers under Medicaid since 1997. The Government Accountability Office (GAO) testified at the April 3, 2008, hearing before 

the Subcommittee on Health of the Committee on Energy and Commerce on H.R. 5613 that additional transparency is necessary in 

public provider payments and transfers of funds from the local to 

the State levels. The Committee believes, however, that ‘‘transparency’’ can be accomplished without this regulation. 

In a 1994 report GAO suggested that Congress consider enacting 

legislation to prohibit Medicaid payments that exceed costs to any 

government facility, to minimize the likelihood that States can develop illusory financing mechanisms whereby providers return 

Medicaid payments to the States, thus reducing the States’ share 

of Medicaid funding. In several reports subsequent to 1994 reviewing various aspects of inappropriate payment arrangements, GAO 

has reiterated this matter for the Congress to consider. (See 

HEHS–94–133, GAO/T–HEHS–00–193, GAO–04–228, GAO–04–

574T, See GAO–05–748, GAO–05–836T, and GAO–08–255T.) And, 

Congress passed legislation on this matter in 2000 (P.L. 106–554), 

and CMS rules implementing these changes became final in 2001. 

In a 2007 GAO report that reviewed CMS oversight of State 

Medicaid arrangements, it noted that the CMS initiative undertaken within the agency’s existing regulations had not been implemented in a transparent manner, contributing to concerns about 

the consistency of the agency’s actions. GAO recommended that the 

Administrator of CMS issue guidance to clarify allowable arrangements for financing the non-Federal share of Medicaid payments. 

GAO noted that such guidance could include finalizing the January 

18, 2007, draft regulation that limited payments to government 

providers to costs. (See GAO–07–214, GAO–08–255T.) 

The Committee believes, however, that CMS, through its successful oversight initiative launched in 2003, has already largely addressed all of the issues cited in the GAO and OIG testimony, without the provisions in the public provider rule. According to a CMS 

chart dated November 2006, only 3 States remained that CMS had 

identified potentially questionable IGT practices, down from 15 in 

2005. The most recent GAO report on the topic verified this and 

found that CMS had successfully terminated inappropriate financing arrangements in 29 States. The GAO testified at the April 3, 


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12 

2008, hearing before the Subcommittee on Health that they have 

no recent reports demonstrating a continuing problem. 

The National Association of Public Hospitals and Health Systems 

(NAPH), American Hospital Association (AHA), and the Association 

of American Medical Colleges (AAMC) have filed suit against in the 

United States District Court for the District of Columbia asking for 

a preliminary injunction prohibiting CMS from implementing these 

regulations restricting payments to public providers. 

HOSPITAL OUTPATIENT RULE CMS 2213–P

In September of 2007, CMS issued a proposed rule making significant changes to the Medicaid hospital outpatient department 

benefit. This regulation was not published as a result of Congressional action. In addition, GAO testified at the hearing before the 

Subcommittee on Health of the Committee on Energy and Commerce on April 3, 2008, that it has not done any work in this area. 

At this same hearing, the Director of the CMS Center for Medicaid 

and State Operations noted that ‘‘CMS does not anticipate a major 

impact on providers or beneficiaries under this regulation as [they] 

do not believe attempts to inflate UPLs [upper payment limits] 

through this manner are widely used currently, but [they] do believe it is important to clarify this policy.’’ The Committee requested the agency provide State-by-State information on the effect 

of this rule, but CMS has yet to respond. 

The proposed rule would restrict the types of outpatient services 

that can be reimbursed by the Federal Government. The rule 

would, for example, limit coverage of dental services and screening 

services as an outpatient department service. 

The Committee believes that such a restriction could have a negative effect on State efforts to reduce unnecessary emergency room 

use. Hospitals have used the outpatient clinics as a way to keep 

beneficiaries out of the emergency room. This is a more cost-effective alternative. And further, these clinics can provide a medical 

home for the patient. 

In the proposed rule, CMS states the rule is necessary to prevent 

Medicaid from raising payment limits for Medicaid services. GAO 

and other entities have reported on Medicaid’s historically low payment rates. In fact, one of the witnesses at the April 3, 2008, Subcommittee on Health hearing on H.R. 5613 noted that Medicaid’s 

payment rates are low. Ms. Grace-MarieTurner, President of the 

Galen Institute, said that ‘‘[t]he great majority of providers serving 

Medicaid patients are working to provide the best care possible, 

often at considerable sacrifice, such as physicians who treat Medicaid patients even if the Medicaid payment means they are taking 

a financial loss.’’ Since low payments can impair access to providers, the rule raises concerns regarding access for beneficiaries. 

This proposed rule would eliminate the practice used by many 

States to control costs of paying ‘‘all-inclusive’’ for outpatient hospital services. These rates, like Medicare’s rate, are paid to the hospital and include a professional component, for the services of the 

physician. Unlike Medicare, the physician cannot bill the Medicaid 

program separately. In order to receive Federal Medicaid reimbursements, the proposed rule would require States to break apart 

their payments, paying the facility and professional components 


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13 

separately. This would require States to amend their long standing 

payment policies. 

PROVIDER TAX RULE CMS 2275–P

Federal law allows States to generate the State’s share of Medicaid funding from other governmental sources. Many States use 

provider taxes as a way to raise funds to support Medicaid. These 

taxes are allowed as long as they meet a multi-prong test to ensure 

the tax is ‘‘broad-based and uniform’’ and do not hold the provider 

harmless for the amount of the tax. One part of this multi-prong 

test determines whether the tax is ‘positively correlated’ with provider payments. This is to prevent States from simply using the tax 

to generate Federal Medicaid dollars, and holding the provider 

harmless for the amount of the tax. 

Currently, States rely on a mathematical test to determine 

whether or not their provider tax was allowable. The State mathematical formula determines if the tax has a ‘positive correlation’ with provider payments. If so, the tax is not allowed. This test is 

simple and transparent. 

CMS issued a final rule making significant changes to the Medicaid provider tax requirements in February 2008. States were 

given two months to comply with the significant changes made in 

the rule, which takes effect on April 22, 2008. The final rule eliminated the mathematical test as the standard. States will have no 

clear, transparent guidance to follow to determine whether their 

program was operating in accordance with the law. 

Moreover, because many State provider tax programs are outlined in State statute, States would be unable to conform their programs to the new requirements in the two months provided by the 

rule. States would not only have to negotiate new allowable arrangements with CMS, but also have such arrangements approved 

by their State legislature. This cannot likely be accomplished in 

two months. 

The rule was not published as a result of work carried out by the 

Government Accountability Office. GAO testified at the April 3, 

2008, hearing before the Subcommittee on Health, that there was 

no basis in GAO work done for the provisions in the provider tax 

regulation, particularly those sections where there is no basis in 

law. 

The Deficit Reduction Act of 2005 (P.L. 109–171) (DRA) directed 

CMS to ensure taxes on managed care organizations were within 

the scope of the provider tax requirements. The Tax Relief and 

Health Care Act of 2006 lowered the allowable tax rate from 6 percent to 5.5 percent from January of 2008 through September of 

2011. 

H.R. 5613 does not place a moratorium on these two Congressionally-mandated changes. It only places a moratorium on the 

parts of the rule that go beyond the two statutory changes. 

GRADUATE MEDICAL EDUCATION CMS 2279–P

CMS published a proposed rule in May 2007 eliminating Medicaid payment for graduate medical education programs that train 

providers so they have the experience and skills necessary to meet 

the unique needs of Medicaid beneficiaries. Currently 47 States 

and the District of Columbia provide payment for graduate medical 


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14 

education costs under Medicaid. Only Illinois, Texas, and North 

Dakota do not provide such payments. 

In his testimony before the Committee, the Director of the CMS 

Center for Medicaid and State Operations noted that ‘‘GME is not 

included as a service, or a component of a service, that is eligible 

for FFP.’’ CMS has, however, historically and consistently recognized, approved, and funded its share of Medicaid GME payments. 

According to the Congressional Research Service (CRS), ‘‘Historically, Medicare and Medicaid have recognized * * * graduate medical education (GME) costs. * * *’’ States have the authority to 

cover GME payments as a cost of delivering hospital services, 

which comes under the broad requirements of 1902(a)(13)(A) which 

informs States of the process by which to establish their rates. 

In addition, GME is noted in both statute and regulation. Congress expressly identified GME as an allowable expense in the Deficit Reduction Act of 2005 (P.L. 109–171), in noting that default 

rates paid to certain Medicaid providers in Section 1932(b)(2) 

should be ‘‘less any payments for indirect costs of medical education and graduate medical education’’. In 2002, CMS modified 

Medicaid managed care regulations. In those regulations (42 CFR 

438.60), CMS required States to adjust Medicaid managed care 

payments ‘‘to account for the aggregate amount of GME payments 

to be made directly to hospitals’’ to ensure that States were not 

paying twice for GME. 

GAO testified at the April 3, 2008, hearing on H.R. 5613 that it 

had not worked to identify fraud and abuse in this area. CMS, 

however, believes that it does not have sufficient information on 

what Medicaid GME supports. Currently Medicaid State plans 

must include a description of how States will administer GME payments under Medicaid. CMS approves all these plans. 

Teaching hospitals, which receive these payments, represent only 

6 percent of all hospitals yet are the sites for approximately 25 percent of all Medicaid hospitalizations. They also supply nearly half 

of all pediatric intensive care beds and one-third of all intensive 

care beds for premature or seriously ill newborns. With the increase in the number of uninsured, and the increase in enrollment 

in Medicaid due to a decline in employer-coverage, Medicaid assistance to ensure physicians have training to deal with the unique 

needs of these beneficiaries is even more critical. Eliminating GME 

payments in Medicaid will harm physician-training programs at a 

time when the Nation faces a physician shortage and primary care 

physicians are becoming so important for this type of care. 

On a bipartisan basis, Governors have indicated the negative effect this regulation would have on patient care. Governor Haley 

Barbour of Mississippi noted ‘‘If the GME program is eliminated, 

the University of Mississippi Medical Center’s ability to provide 

care for our Medicaid beneficiaries will be threatened.’’ Ohio Governor Ted Strickland noted, ‘‘Ohio’s teaching hospitals will lose millions of dollars if these regulations and or proposals are allowed to 

proceed and it will undercut their ability to train the next generation of physicians.’’


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SCHOOL ADMINISTRATION AND TRANSPORTATION SERVICES CMS 2287–

F

CMS proposed a final rule restricting payments for school administrative and transportation services in December 2007, after Congress enacted a moratorium on implementation of the rule but before the President signed that bill into law. This rule eliminates 

Medicaid funding for any Medicaid administrative services conducted by schools, including outreach, enrollment, and care coordination. The rule also eliminates Medicaid payment for specialized 

medical transportation for children with disabilities to and from 

school on a day the child receives a Medicaid service in the school. 

This rule was not published as a result of recent Congressional 

action or as a result of work done by the Government Accountability Office. GAO testified at the April 3, 2008, hearing before the 

Subcommittee on Health that it had not recommended changes, 

such as elimination of payments for administration and transportation services in any of its work. 

According to a GAO 2005 report addressing the use of contingency fee contractors in Medicaid, GAO noted that the Department 

of Health and Human Services Office of the Inspector General had 

reviewed school-based claims in 18 States. These reviews largely 

cover claims made prior to issuance by CMS of the Medicaid Administrative Claiming guide (MAC), which provided schools and 

Medicaid agencies with clear guidance on billing for such services. 

In a 2000 GAO report, it recognized the importance of schoolbased administrative activities for Medicaid. GAO wrote, ‘‘Close to 

one-third of Medicaid-eligible individuals are children, making 

schools an important arena for Medicaid services * * * Outreach 

and identification activities—in many varied settings—help ensure 

that the nation’s most vulnerable children receive routine preventive health care or ongoing primary care and treatment.’’

Current law allows for schools to be reimbursed when they perform legitimate Medicaid activities. Federal Medicaid law calls for 

the provision of Federal funding for administrative activities that 

the Secretary finds ‘‘necessary * * * for the proper and efficient 

administration of the State [Medicaid] plan.’’

Until now, many States have entered into interagency agreements with schools whereby school nurses and other school staff 

identify children eligible for Medicaid and help their families 

through the enrollment process. School nurses also coordinate 

healthcare services for children with special needs, inform families 

of services that are available to the children, and help families access those services. States are required to provide these latter activities as part of the Federal Medicaid Early Periodic Screening 

Diagnostic and Treatment (EPSDT) benefit. 

The regulation would eliminate Medicaid payment for all of these 

services. Many school-based outreach efforts that successfully enroll uninsured low-income children in Medicaid would end, resulting in an increase in the number of children who are eligible for 

the program, but who remain uninsured. The regulation would also 

make it much more difficult for States to carry out their EPSDT 

responsibilities, which include arranging for and helping children 

access needed health care. 


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16 

The regulation would also eliminate all payments for Medicaidcovered transportation services to and from school. Under Medicaid, States must ensure children have transportation to and from 

providers. Many children who are in special education programs actually receive health services covered by Medicaid in schools. 

The Medicare Catastrophic Coverage Act of 1988 required Medicaid payment for Medicaid-covered services provided to Medicaideligible children pursuant to an Individualized Education Program 

(IEP) under the Individuals with Disabilities Education Act 

(IDEA). Section 1903(c) of the Social Security Act states, ‘‘Nothing 

in this title shall be construed to prohibit or restrict, payment 

under subsection (a) for medical assistance for covered services furnished to a child with a disability because such services are included in the child’s individualized education program established 

pursuant to part B of the Individuals with Disabilities Education 

Act [IDEA] * * * ’’. Thus, because transportation is a Medicaid-covered service for children, when specialized medical transportation 

is listed in an IEP as a required service, it is supposed to be reimbursed by Medicaid. 

As CMS has acknowledged in the preamble to its interim final 

rule, Medicaid coverage of school-based transportation services is 

already highly restricted. Under current law, Medicaid only pays 

for specialized medical transportation to and from school if the 

child is receiving special education and transportation is listed in 

the child’s Individualized Education Plan (IEP). Even then, Medicaid payment is only available on days when a child receives a 

Medicaid-covered service in school. The rule on schools, however, 

would eliminate all payments for Medicaid-related transportation 

under the current construct. 

‘‘Regular’’ transportation to and from school is clearly not a covered Medicaid service. Since at least 1999, CMS has made clear 

that such transportation is not covered by Medicaid. A May 21, 

1999, letter to State Medicaid directors stated, ‘‘HCFA would like 

to clarify that a child with special education needs under IDEA 

who rides the regular school bus to school with other non-disabled 

children in his/her neighborhood should not have transportation 

listed in his IEP and the cost of that bus ride should not be billed 

to Medicaid.’’

CASE MANAGEMENT RULE CMS 2237–IFC

CMS published an interim final rule restricting payments for 

Medicaid case management services in December 2007. This rule 

became effective on March 3, 2008. This rule restricts Medicaid 

funding for case management provided as an administrative activity. The rule also restricts Medicaid payment for targeted case 

management services needed for people with disabilities to remain 

in or transition to community living settings. 

Forty-nine States and the District of Columbia provide targeted 

case management services to various groups of adults with disabilities. All States, in compliance with the EPDST benefit must provide medically-necessary case management services to children. 

Case management is a critical Medicaid benefit, helping millions of 

low-income children and adults with disabilities gain access to 

needed medical services. The term ‘‘targeted’’ case management is 


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17 

used when the case management is provided to one specific group 

of beneficiaries. 

A January 2005 report by the Department of Health and Human 

Services notes the importance of case management, ‘‘[b]ecause successfully supporting working age adults with serious mental illness 

in the community often involves not only addressing their treatment needs, but also assisting them in other areas * * * the coverage of targeted case management services is a means to support 

linkages to other services, as well as to monitor the well-being of 

individuals and assist them to address problems they might encounter in community living.’’ In spite of this relatively recent support for case management by 

the HHS, the recent rule proposes to restrict this important benefit. In addition, GAO testified at the April 3, 2008, hearing before 

the Subcommittee on Health that many of the components of the 

case management regulation, such as requiring States to submit 

payment in 15-minute increments or reducing the amount of time 

beneficiaries can receive case management services when they are 

trying to move from an institution to the community, were not recommended by GAO. In a 2005 report dealing with the use of contingency fee consultants in two States, however, GAO noted that 

some claims for case management services were inconsistent with 

current CMS policy and that, to ensure compliance with existing 

policies, CMS establish or clarify certain policies and then communicate them, including policies for targeted case management services. GAO reiterated these recommendations in Congressional testimony (GAO–08–255T and GAO–05–836T.) 

In the Deficit Reduction Act of 2005, Congress directed CMS to 

issue a rule relating to certain aspects of case management clarifying that (1) case management can include contacts with individuals who are not eligible for Medicaid when necessary to manage 

the care of the Medicaid beneficiary, but does not include management of the ineligible individual’s own needs; and (2) case management does not include direct delivery of services to which the individual has been referred. DRA also clarified which specific foster 

care services are not considered part of Medicaid’s case management benefit. Congress did not direct CMS to change the Medicaid 

coverage of other case management services. 

H.R. 5613 would not impose a moratorium on the components of 

the rule that were published in accordance with Congressional direction. The bill would impose a moratorium on the components of 

the rule that seem to go beyond the DRA provisions. For example, 

the bill would put a moratorium on the provisions of the rule that 

restrict the ability of States to get reimbursement for case management that are provided as an administrative activity. It would also 

put a moratorium on the portion of the regulation that requires 

States to bill for case management services in separate 15-minute 

increments, rather than paying all-inclusive rates. 

It would also place a moratorium on the provision of the rule 

that shortens the time that people moving out of an institution into 

the community can receive case management services. The case 

management rule restricts the amount of time a case manager can 

spend helping a person with disabilities plan and execute a transition to the community. Some individuals would only have 14 days 

of case management to accomplish all these goals. Case manageVerDate Aug 31 2005 02:40 Apr 24, 2008 Jkt 069006 PO 00000 Frm 00017 Fmt 6659 Sfmt 6602 E:\HR\OC\HR600.XXX HR600

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ment services for others, who have been in an institution for more 

than 180 days, would be limited to 60 days. 

The moratorium in the legislation also would apply to that the 

portion of the case management rule that prohibits payment for the 

case management services until the individual actually transitions 

to the community. Case managers would bear greater financial 

risk, and in some cases could receive no payment at all. For example, if a person with a mental illness suffered a complicating setback that postponed his or her ability to transition out of the nursing home, the case manager, who had arranged for the community 

services needed by the beneficiary, would receive no payment because the beneficiary was unable to transition at that particular 

time. 

The moratorium would also apply to the portion of the case management rule that imposes a hard limit of one case manager per 

person. While in most cases this is appropriate, for a beneficiary 

with multiple conditions, such as HIV/AIDS, mental illness, or an 

intellectual disability, no single case manager may be able to coordinate housing, health care, and social needs across multiple systems. DRA did not place any such limits on case management services. 

The rule would impose an integral component test to prohibit 

Medicaid coverage of services that CMS deems are integral to other 

Federal or State non-medical programs. This test has no basis in 

the Medicaid statute. Further, it mirrors a policy that CMS sought 

to include in the rehabilitation services option under DRA, but 

which was specifically rejected by the Congress. The moratorium 

would also apply to this portion of the rule. 

The rule would require case management services for Medicaidcovered children in foster care by a Medicaid provider operating 

outside of the foster care system. Today States can reimburse providers in the foster care system when they provide Medicaid-covered services. States allocate payment to the foster care worker 

based on the time the foster care worker spends on Medicaid case 

management activities or having a qualified contractor of the foster 

care agency provide case management. 

The States of Maine, Maryland, New Jersey, and Oklahoma have 

filed a suit against the U.S. Department of Health and Human 

Services in the District of Columbia U.S. District Court, seeking injunctive and declaratory relief against the case management rule, 

which they argue is an ‘‘arbitrary and capricious exercise, taken 

without regard to procedure required by law and in excess of Defendants’ statutory jurisdiction, authority, or limitations, in violation of the Administrative Procedure Act * * * ’’ New York also 

joined the suit in April 2008. 

REHABILITATION RULE CMS–2261–P

CMS proposed a rule restricting payments for rehabilitation services in August 2007. This rule restricted Medicaid’s rehabilitation 

benefit, including eliminating Medicaid payment for a number of 

services that have been covered for years. 

The Social Security Act (Section 1905(a)(13)) defines rehabilitation as ‘‘diagnostic, screening, preventive, and rehabilitative services, including any medical or remedial services (provided in a facility, home, or other setting) recommended by a physician or other 


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practitioner of the healing arts within the scope of their practice 

under state law, for the maximum reduction of physical or mental 

disability and restoration of an individual to the best possible functional level.’’ Rehabilitation option services are broader than simple clinical 

treatment and assist individuals with disabilities in acquiring the 

skills essential for every day functioning. For example, one type of 

program offered through Medicaid’s Rehabilitation Option is Mental Health Skills Training. Both adults and children with serious 

mental illnesses can benefit from this type of program, which allows for skills trainers to work with recipients on specific, individualized treatment goals that focus on their unique mental and behavioral needs. These services are typically offered at a location in 

the community or in the beneficiary’s home. Examples of goals in 

the individualized treatment plan may include: promoting various 

anger management skills and coping skills, working with a beneficiary who is suicidal on ways to keep him/her safe, and assisting 

a child suffering from depression in working to overcome self esteem issues. 

The rehabilitation option allows States to provide services in 

community settings, including a home or work environment, whereas other service categories specify the setting in which the services 

can be provided. The rehabilitation option also allows services to be 

provided by a broader range of professionals than other service categories. Community paraprofessionals and peer specialists can provide needed services, whereas they could not under other service 

categories. A 2006 report from the Department of Health and 

Human Services notes, ‘‘This flexibility is very useful to states because it allows them to cover a number of intensive home and community services that are particularly important for youth with SED 

[serious emotional disturbance] and their families.’’ But States cannot cover anything under the rehabilitation option. 

Current guidance specifies what services cannot be covered under 

this option, including vocational training, personal care services, 

case management services directed toward gaining access to and 

monitoring of non-Medicaid services. Furthermore, in order for 

States to provide rehabilitation services, their plan must clearly define the scope of the benefits the State is providing through the option and be approved by CMS. 

This rule was not published as a result of work done by GAO. 

A 2005 GAO report dealing with the use of contingency fee contractors in Medicaid recommended that CMS establish or clarify certain policies, and then communicate them, including policies for rehabilitation services. (See GAO–05–748.) GAO reiterated these recommendations in two subsequent testimonies. (See GAO–05–836T 

and GAO–08–255T.) GAO, however, testified at the April 3, 2008, 

Subcommittee on Health hearing that it had not recommended the 

changes made by the rule such as eliminating coverage of certain 

rehabilitation services. 

One issue in the rehabilitation rule is the imposition of an ‘‘intrinsic element’’ test to prohibit Medicaid coverage for services that 

are otherwise coverable under the rehabilitation services option, on 

the basis that these services are intrinsic to another Federal or 

State non-medical program. The Congress has established in the 

Medicaid statute a third party liability system to delineate when 


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1 Report of the House Committee on the Budget, ‘‘Explanation of the Commerce and Ways and 

Means Committees Affecting Medicare-Medicaid Programs,’’ September 20, 1989. 

Medicaid’s payment obligations are superseded by another program. Under the proposed rule, CMS would deem a service ineligible for FFP, whether or not a third party was available to pay 

for a service. It should be noted that the concept of an intrinsic element test has no basis in the Medicaid statute and the Congress 

specifically rejected such a test in its deliberations leading up to 

the enactment of the Deficit Reduction Act of 2005. 

Another issue is the elimination of coverage for day habilitation 

services for persons with mental retardation and related conditions. 

The proposed rule would eliminate coverage of day habilitation 

services under the rehab and clinic options for persons with developmental disabilities in contravention of Section 6411(g) of the Omnibus Budget and Reconciliation Act of 1989 (OBRA ’89, P.L. 101–

239). This provision of law states that the Secretary may not deny 

Medicaid funding for habilitation services unless the Secretary promulgates a final regulation that ‘‘specifies the types of day habilitation and related services that a State may cover * * * on behalf 

of persons with mental retardation or with related conditions.’’ In 

contravention to the language of Section 6411(g) of OBRA ’89, the 

proposed rule does not specify the types of day habilitation services 

that a State may cover. Instead, the proposed rule would prohibit 

the provisioning of habilitation services under the clinic and rehab 

options. 

In enacting OBRA ’89, the Congress clearly intended to protect 

access to day habilitation programs for people with mental retardation and related conditions. A Committee on the Budget House Report accompanying this legislation stated, ‘‘In the view of the Committee, HCFA should be encouraging states to offer communitybased services to this vulnerable population, not restricting their 

efforts to do so.’’ 1 The moratorium imposed by H.R. 5613 would 

allow these programs to continue. 

Adult day health care programs provide a related set of services, 

similar in many respects to habilitation services for persons with 

developmental disabilities, but generally targeted to seniors, including persons with Alzheimer’s disease and other forms of dementia and/or cognitive impairments. These programs provide a 

cost-effective alternative to institutional placement by providing 

States the opportunity to offer community-based treatment programs that support individuals in retaining their capability for 

independence and self-care. Currently, there are eight States that 

operate such adult day health care programs. By placing a one-year 

moratorium on the rehabilitation rule, Congress ensures that these 

habilitation programs and adult day health care services programs 

can continue to operate. 

In addition to eliminating coverage of day habilitation programs, 

under the proposed rehabilitation rule those with mental retardation and related conditions (including epilepsy, autism, and cerebral palsy) will be ineligible for most rehabilitation option services, 

based on the presumption that, because these individuals have cognitive impairments, they have never achieved a level of functioning 

that could require rehabilitation services to restore or maintain. 

These illnesses can cause loss of function that needs to be restored, 


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but they would no longer qualify for rehabilitation services to restore that functioning. 

In the rehabilitation rule, services must be not only for the maximum reduction of disability but also must restore previous functioning or skills. For example, this is problematic for a child, born 

with a defect, who may walk with therapy, but wasn’t born walking, or for a person with developmental disabilities who may not 

have had a particular skill but can learn it through therapy. 

These two changes would make it likely that many people who 

are today living successfully in the community would no longer receive the services that enable them to do so. People with disabilities could need to go back into institutions to receive these necessary services. Institutional care is more expensive than community care and for some populations can cost upwards of $100,000 

a year. In 2006, the national average for one-year of care in a large 

(16+ persons) private ICF–MR was nearly $70,000. Depending on 

the setting, these costs rise to more than $171,000 per year for care 

in a large, State-operated ICF–MR. 

Finally, the rehabilitation rule would place constraints on State 

flexibility in billing. The rehabilitation rule would require States to 

bill for services individually in 15-minute increments, eliminating 

State the flexibility to select its own payment methodology such as 

case rate payments, daily payments, or various other forms of 

capitated or bundled payments. Moreover, billing in 15-minute increments, instead of on a case rate basis that is tied to the average 

time the provider spends working with a patient, would make it 

difficult to provide services that require a provider to be on call at 

all times. 

Together, these seven rules would affect the ability of States to 

provide critical Medicaid services. A March 2008 House Committee 

on Oversight and Government Reform report on the Medicaid regulations provides additional insights as to the effect of these regulations on States. This report summarized the results of a 50 State 

survey of Medicaid directors. That Committee received responses 

from 43 States, representing nearly 95 percent of total Medicaid 

spending. 

State responses to the Committee on Oversight and Government 

Reform indicated that the regulations will reduce spending by 

shifting costs, not through greater efficiencies. These regulations 

will impose administrative burdens and costs on State Medicaid 

programs. 

The National Governors Association (NGA) sent a letter on February 26, 2008, urging Congress to block the implementation of 

these regulations. NGA sent a subsequent letter on April 2, 2008, 

indicating the Dingell-Murphy legislation is a high priority for the 

Nation’s governors. In addition, the National Association of State 

Medicaid Directors (NASMD) and the American Public Human 

Services Administrators (APHSA) issued a joint letter urging Congress to stop the implementation of these regulations noting, 

‘‘* * * these regulations will impose billions of dollars of cuts over 

the next five years, an amount that will be difficult for states to 

absorb and would restrict the reach and effectiveness of the 

Medicaid program in many States.’’ More than 2,000 organizations 

have written in support of H.R. 5613. A complete list can be found 


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at http://energycommerce.house.gov/MedicaidProtectionl110/ 

index.shtml 

In addition to the effect on State budgets and beneficiaries, many 

elements of these regulations are of questionable legality. A March 

2008 report by Professor Sara Rosenbaum, Chair of the Department of Health Policy, the George Washington University School of 

Public Health and Health Care Services, entitled, ‘‘CMS’ Medicaid 

Regulations: Implications for Children with Special Health Care 

Needs’’ on the effect these regulations have on children found that 

many provisions in the Medicaid regulations were in violation of 

the Medicaid statute, which guarantees health care for children 

with special needs. The rules would restrict or eliminate critical 

coverage for the Early Periodic Screening Detection and Treatment 

benefit that is essential for children to attain maximum growth 

and development. The EPSDT benefit was added by Congress at 

the request of President Johnson. It was done in response to extensive evidence showing a high level of preventable physical, dental, 

and mental health conditions among low income children and adolescents. This included both preschool children in early Head Start 

programs, young children served in the Nation’s first community 

health centers, and young military draftees. The intent of the 

EPSDT amendments was to both assure access to health care and 

establish comprehensive coverage for all categorically needy children under age 21 (that is, children whose family incomes and assets make them eligible for Medicaid). 

Three examples of where the regulations are inconsistent with 

Medicaid law, EPSDT benefits, for children with special needs are 

outlined below: • With regard to targeted case management services, the report 

notes, ‘‘[t]he Deficit Reduction Act (DRA) made no changes whatsoever in states’ administrative obligations to manage the care of 

children receiving care financed through EPSDT. Access to care is 

an administrative obligation of all Medicaid programs under the 

statutory EPSDT access requirements. Payment for EPSDT medical assistance and administrative services is required regardless of 

whether the child is also receiving child welfare or special education services.’’ Yet the new targeted case management regulation 

would eliminate payment for important administrative activities 

needed to manage care for children with special needs and ensure 

access to that care. 

• With respect to the hospital outpatient rule, the report notes, 

‘‘[t]o the extent that states have defined outpatient hospital services to include the special services offered by hospital outpatient 

departments to children (such as developmental therapies and 

interventions for children with physical or mental health conditions), the regulation directly contravenes the EPSDT statute in excluding federal financial participation in hospital outpatient care 

programs that furnish EPSDT diagnostic and treatment services 

that may have no counterpart in federal Medicare law.’’

• With respect to the rule eliminating payment for school-based 

administrative and transportation services the report notes, ‘‘[t]o 

the extent that schools contract with health agencies, including 

agencies and programs receiving Title V funding, to provide administration services in schools, the regulation directly contravenes 

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cies and grantees as well as state agency payment for all services 

furnished by such agencies, whether medical assistance or administrative in nature.’’ Title V of the Public Health Service Act is a 

block grant that provides funding for Maternal and Child Health 

Services. 

HEARINGS

On Thursday April 3, 2008, the Subcommittee on Health of the 

Committee on Energy and Commerce held a hearing entitled ‘‘H.R. 

5613, the Protecting the Medicaid Safety Net Act of 2008.’’ The 

hearing examined the effect of the regulations on States, beneficiaries, and providers. The witnesses included: Barbara Coulter 

Edwards, Interim Director of the National Association of State 

Medicaid Directors (NASMD); Randy Mohundro, Superintendent of 

the DeLeon Independent School District and Executive Committee 

Member of American Association of School Administrators; James 

Cosgrove, Ph.D., Acting Director of Health Care Issues for the Government Accountability Office; James E. Buckner, Jr., CHE, Administrator of Uvalde Memorial Hospital; Joseph R. Antos, Ph.D., 

Wilson H. Taylor Scholar in Health Care and Retirement Policy of 

the American Enterprise Institute; Stuart H. Shapiro, M.D., President and Chief Executive Officer of the Pennsylvania Health Care 

Association, Marsha Raulerson, MD, FAAP of the American Academy of Pediatrics; Ms. Grace-Marie Turner, President of the Galen 

Institute; Dennis G. Smith, Director of the Center for Medicaid and 

State Operations of the Centers for Medicare and Medicaid Services; the Honorable Herb Conaway, Jr., M.D., State Assemblyman 

representing Legislative District 7 of the State of New Jersey; and 

John G. Folkemer, Deputy Secretary of Health Care Financing of 

the Department of Health and Mental Hygiene. 

Prior to this legislative hearing, the Subcommittee on Health 

held four hearings during January-February of 2008, which focused, in part, on these regulations. At the January 16, 2008, hearing entitled, ‘‘Helping Families with Needed Care: Medicaid’s Critical Role For Americans With Disabilities,’’ witnesses described the 

difficulties posed for beneficiaries as a result of the targeted case 

management, rehabilitation, and school-based outreach and transportation regulations. At the January 29, 2008, hearing entitled, 

‘‘Covering Uninsured Kids: Missed Opportunities for Moving Forward,’’ the Committee heard testimony from Dennis Smith, Director of the Center for Medicaid and State Operations, Centers for 

Medicaid and Medicare Services; Tricia Brooks, President and CEO 

of New Hampshire’s Healthy Kids Corporation, which administers 

the State’s Medicaid and SCHIP program; and Ann Kohler, Deputy 

Secretary of the New Jersey Department of Health and Human 

Services regarding these regulations. 

At the February 26, 2008, hearing entitled ‘‘Covering Uninsured 

Kids: Reversing Progress Already Made’’ the Subcommittee heard 

testimony from five Governors opposed to the implementation of 

the seven CMS regulations. Finally, at the February 28, 2008, ‘‘A 

Review of the Department of Health and Human Services Fiscal 

Year 2009 Budget’’ the Committee on Energy and Commerce had 

the opportunity to question HHS Secretary Michael Leavitt about 

the regulations. 


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COMMITTEE CONSIDERATION

On Wednesday, April 9, 2008, the Subcommittee on Health met 

in open markup session and favorably forwarded H.R. 5613, 

amended, to the full Committee for consideration, by a voice vote. 

On Wednesday, April 16, 2008, the full Committee met in open 

markup session and ordered H.R. 5613 favorably reported to the 

House, amended, by a record 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. A motion by Mr. 

Dingell to order H.R. 5613 favorably reported to the House, amended, was agreed to by a recorded vote of 46 yeas and 0 nays. The 

following are the recorded votes taken on the motion and amendments, including the names of those Members voting for and 

against. 


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COMMITTEE OVERSIGHT FINDINGS

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

of Representatives, the Subcommittee on Health held a legislative 

hearing, and the oversight findings of the Committee regarding 

H.R. 5613 are reflected in this report. 

STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

The purpose of H.R. 5613 is to impose a one year moratorium on 

seven rules issued by the Department of Health and Human Services which would restrict or eliminate Medicaid payment for certain 

health care services and safety net institutions. The purpose is to 

ensure that Congress is able to consider the effect of these rules 

on States, beneficiary groups, and providers to determine whether 

the changes made by the rules are appropriate and in the best interest of the Medicaid program or warrant any further action. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

Regarding compliance with clause 3(c)(2) of rule XIII of the Rules 

of the House of Representatives, the Committee adopts as its own 

the estimate of budget authority, entitlement authority, tax expenditures, and revenues regarding H.R. 5613 prepared by the Director of the Congressional Budget Office pursuant to section 402 

of the Congressional Budget Act of 1974. 

EARMARKS AND TAX AND TARIFF BENEFITS

Regarding compliance with clause 9 of rule XXI of the Rules of 

the House of Representatives, H.R. 5613 does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits 

as defined in clause 9(d), 9(e), or 9(f) of rule XXI. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate on H.R. 5613 

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 on H.R. 5613 

provided by the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, April 22, 2008. 

Hon. JOHN D. DINGELL, 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. 5613, the Protecting the 

Medicaid Safety Net Act of 2008. The bill was ordered reported on 

April 16, 2008. 


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

to provide them. The CBO staff contact is Jeanne De Sa. 

Sincerely, 

ROBERT A. SUNSHINE

(For Peter R. Orszag, Director). 

Enclosure. 

H.R. 5613—Protecting the Medicaid Safety Net Act of 2008 

Summary: H.R. 5613 would extend existing moratoria on certain 

regulatory actions taken by the Centers for Medicare & Medicaid 

Services (CMS) with regard to the Medicaid program. Those actions 

are related to payments for services furnished by public providers, 

for graduate medical education, for school-based administration 

and transportation services, and for rehabilitation services. In addition, the bill would impose new moratoria on Medicaid regulations 

involving targeted case-management services and provider taxes 

and on a proposed regulation involving outpatient hospital services. 

The bill would appropriate $5 million to study the effects of these 

regulations on the Medicaid program. 

The bill would make additional changes to Medicaid by requiring 

more stringent verification of assets in certain eligibility determinations. H.R. 5613 also would appropriate $25 million a year to 

the Secretary of Health and Human Services to address fraud and 

abuse in Medicaid and would reduce funding for the Medicare physician assistance and quality initiative (PAQI) fund in fiscal year 

2013, and increase such funding in 2014. 

Some of the bill’s provisions would increase direct spending; others would reduce direct spending. CBO estimates that the increases 

would amount to $1.8 billion over the 2008–2013 period and $1.9 

billion over the 2008–2018 period, largely due to the required 

delays in implementing regulations. Other provisions related to 

asset verification and adjustments to the PAQI fund would reduce 

direct spending by similar amounts. On net, H.R. 5613 would reduce direct spending by $3 million over the 2008–2013 and 2008–

2018 periods. 

H.R. 5613 would not affect federal revenues or discretionary 

spending. This bill 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 impact of H.R. 5613 is shown in the following table. The 

changes in direct spending fall within budget functions 550 (health) 

and 570 (Medicare). 


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By fiscal year, in millions of dollars

—

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008– 2013 

CHANGES IN DIRECT SPENDING 

Moratoria on Certain Medicaid Regulations: 

Estimated Budget Authority ..................................................................... 445 1,205 0 0 0 0 0 0 0 0 0 1,650 Estimated Outlays .................................................................................... 445 1,205 0 0 0 0 0 0 0 0 0 1,650 

Funds to Reduce Fraud and Abuse: 

Estimated Budget Authority ..................................................................... 0 25 25 25 25 25 25 25 25 25 25 125 Estimated Outlays .................................................................................... 0 24 25 25 25 25 25 25 25 25 25 124 

Study on Impact of Regulations: 

Estimated Budget Authority ..................................................................... 5 0 0 0 0 0 0 0 0 0 0 5 Estimated Outlays .................................................................................... 0 5 0 0 0 0 0 0 0 0 0 5 

Medicaid Asset Verification: 

Estimated Budget Authority ..................................................................... 0 ¥80 ¥130 ¥180 ¥230 ¥380 ¥490 ¥590 ¥690 ¥820 ¥950 ¥1,000 

Estimated Outlays .................................................................................... 0 ¥80 ¥130 ¥180 ¥230 ¥380 ¥490 ¥590 ¥690 ¥820 ¥950 ¥1,000 

Medicare Physician Assistance and Quality Fund: 

Estimated Budget Authority ..................................................................... 0 0 0 0 0 ¥1,203 3,777 58 0 0 0 ¥1,203 

Estimated Outlays .................................................................................... 0 0 0 0 0 ¥782 2,027 1,387 0 0 0 ¥782 

Total Changes: 

Estimated Budget Authority ............................................................ 450 1,150 ¥105 ¥155 ¥205 ¥1,558 3,312 ¥507 ¥665 ¥795 ¥925 ¥423 

Estimated Outlays ........................................................................... 445 1,154 ¥105 ¥155 ¥205 ¥1,137 1,562 822 ¥665 ¥795 ¥925 ¥3 

Note: Components may not sum to totals because of rounding. 


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Basis of estimate: The bill contains provisions that would both 

increase and decrease direct spending. CBO estimates that the net 

impact would be savings of $3 million over both the 2008–2013 period and over the 2008–2018 period. This estimate assumes that 

the bill will be enacted by late May 2008. 

Moratoria on certain Medicaid regulations 

CMS has taken regulatory action to limit payments under the 

Medicaid program for certain financing mechanisms and services. 

The Congress previously enacted moratoria on four of those regulations. H.R. 5613 would extend the existing moratoria through April 

1, 2009, and would impose new moratoria through April 1, 2009, 

on certain provisions of regulations involving targeted case-management services, provider taxes, and covered outpatient services. 

In total, CBO estimates that the seven moratoria would increase 

Medicaid spending by $1.7 billion over the 2008–2009 period. 

All of the regulations addressed by H.R. 5613 are incorporated either fully or partially in CBO’s baseline projections of Medicaid 

spending. For final regulations, CBO fully incorporates the projected effects into the baseline (after any moratorium ends), reflecting implementation of current law. For proposed rules or other significant administrative actions, CBO generally assigns a weight of 

50 percent in its baseline, reflecting the uncertainties of the administrative process. 

Payment to Public Providers. CMS issued a final rule on May 29, 

2007, to restrict the use of intergovernmental transfers and limit 

payment to public providers to cost (public providers are health 

care providers owned or operated by a unit of government). The 

final rule: • Clarifies that the only providers that may participate in 

providing the nonfederal share of Medicaid funding are those 

that are part of a unit of government; • Limits Medicaid payments to cost for providers operated 

by units of government; and 

• Requires that providers retain the full amount of their 

Medicaid payments. 

The Congress enacted a moratorium on implementation of that 

rule that will remain in effect until May 25, 2008, under current 

law. Using information from CMS on how states use intergovernmental transfers, estimates of hospital and nursing home spending 

based on administrative data, and analysis of the distribution of 

spending by facility ownership, CBO estimates the bill’s extended 

moratorium on the public provider final rule would increase spending by a total of $0.8 billion in fiscal years 2008 and 2009. 

Graduate Medical Education. On May 23, 2007, CMS issued a 

proposed rule to prohibit payment for Medicaid graduate medical 

education. The Congress enacted a moratorium on further regulatory action in this area, which remains in effect until May 25, 

2008. The extension of that moratorium on the proposed rule for 

graduate medical education would increase spending by $0.1 billion 

over the 2008–2009 period, CBO estimates, based on information 

from CMS about which states use Medicaid funds for graduate 

medical education. Because the graduate medical education regulation is proposed and not final, CBO’s estimate represents half of 

the potential costs of this moratorium. 


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School-based Administration and Transportation Services. On 

December 20, 2007, CMS issued a final rule prohibiting payments 

for administrative costs for any activities performed by employees 

or contractors of local school districts and for transportation of 

Medicaid recipients from their home to their school. The Congress 

enacted a moratorium on implementing that rule, which will remain in effect until May 25, 2008. Relying on spending information 

provided by CMS, CBO estimates that extending this moratorium 

would increase spending by a total of $0.5 billion in fiscal years 

2008 and 2009. 

Rehabilitation Services. On August 13, 2007, CMS issued a proposed rule to narrow the definition of rehabilitation services. The 

proposed rule would: 

• Prohibit payments for services that are ‘‘intrinsic parts’’ of 

other programs such as foster care, child welfare, or juvenile 

justice; 

• Ban states from using bundled rates to pay for therapeutic 

foster care (which is a type of rehabilitation service); 

• Prohibit payments, unless otherwise permitted by a Secretarial waiver, for habilitation services (which help individuals 

to develop new skills instead of restoring previously existing 

skills); and 

• Restrict payments for recreational or social services. 

The Congress enacted a moratorium on further agency action in 

this area, which remains in effect until May 25, 2008. The bill’s extended moratorium on implementing the rehabilitation rule would 

increase spending by $0.1 billion over the 2008–2009 period. Because the rehabilitative services regulation is proposed and not 

final, CBO’s estimate represents half of the potential costs of this 

moratorium. 

Targeted Case Management. The Deficit Reduction Act of 2005 

clarified and narrowed payment policy for targeted case-management services, and required CMS to issue a final rule to implement 

the policy. On December 4, 2007, CMS issued a final rule, which 

went into effect on March 3, 2008. The rule defines case-management and targeted case-management services and clarifies that 

those services may not include the direct delivery of other social 

services, specifically foster care. It also limits transitional assistance services to individuals in institutions to 60 days (as opposed 

to 180 days), restricts services to only one case manager per person, requires that payments be based on 15-minute increments, 

and prohibits child welfare agencies and contractors from serving 

as case managers. 

The bill would not prevent CMS from implementing the clarification of targeted case management outlined in the Deficit Reduction 

Act of 2005. However it would prohibit implementation of portions 

of the rule that are more stringent than the statute, particularly 

the restriction on days of service and the limit of one case manager 

per person. The moratorium on implementing the portion of the 

targeted case management final rule that is more stringent than 

the underlying statute would increase spending by a total of $0.1 

billion in fiscal years 2008 and 2009, CBO estimates. CBO based 

its analysis of this rule on projections of expenditures for targeted 

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rollment data, and analysis of the regulation by the Kaiser Family 

Foundation. 

Provider Taxes. On February 22, 2008, CMS issued a final rule 

that revises standards on permissible provider taxes through 2011, 

lowering allowable amounts from 6.0 percent to 5.5 percent of gross 

patient revenues. The final rule specifies methodologies for determining when states are using an impermissible tax. H.R. 5613 

would allow the provider tax limits to go into effect, but would 

delay implementation of the clarifications outlined in the regulation. CBO estimates this delay would have no effect because the 

regulation codifies current practices, which would continue in the 

absence of that regulation. 

Outpatient Clinic and Hospital Services. On September 28, 2007, 

CMS issued a proposed rule to clarify the definition of outpatient 

clinic and hospital services eligible for payment under the Medicaid 

program and to require states to use the definition of ‘‘outpatient 

hospital services’’ that is used by Medicare. 

Based on Medicaid administrative spending data, information 

from CMS, and analysis of the regulation by the Kaiser Family 

Foundation, CBO expects that the moratorium on the proposed rule 

clarifying outpatient clinic and hospital services would allow certain services to be performed in higher-cost settings and estimates 

that a delay in implementation would increase spending by a total 

of $0.1 billion in fiscal years 2008 and 2009. Because the regulation 

is proposed and not final, CBO’s estimate represents half of the potential costs. 

Funds to reduce fraud and abuse 

H.R. 5613 would appropriate $25 million a year for the Secretary 

of Health and Human Services to address fraud and abuse in the 

Medicaid program. CBO estimates that this provision would cost 

about $125 million and $250 million over the 2009–2013 and 2009– 2018 periods, respectively. 

Study on impact of Medicaid regulations 

The bill would appropriate $5 million for the Secretary of Health 

and Human Services to contract with an independent organization 

to produce a report on the impact of the regulations subject to the 

moratoria and an analysis of the problems the regulations were designed to address. CBO anticipates those funds would be spent in 

fiscal year 2009. 

Medicaid asset verification demonstration 

Section 5 would require all states to incorporate into their Medicaid programs a demonstration program from the Supplemental 

Security Income (SSI) program. The program uses Web-based techniques to identify assets that might otherwise not be discovered 

through the eligibility-determination process and requires beneficiaries to allow access to their financial information. Under current law, New York and New Jersey, which both operate the SSI 

demonstration, are required to implement this program for Medicaid through 2013. The bill would allow a five-year phase-in period 

during which CMS would develop a staggered schedule for states 

to adopt the necessary administrative and systems requirements. 

California, which recently implemented the SSI demonstration, 


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would be required to implement the program for Medicaid by the 

end of fiscal year 2009. The bill would permit states to enroll people in the demonstration program even if they refuse to allow disclosure of their financial information. 

Based on information from CMS, CBO expects that the new Medicaid procedures would result in denial of or delay in eligibility for 

some people and reduced enrollment in Medicaid, mainly for individuals seeking nursing home coverage or other high-cost long-term 

care services. CBO estimates that this provision would reduce federal outlays by $1.0 billion over the 2009–2013 period and $4.5 billion over the 2009–2018 period. 

Medicare physician assistance and quality initiative fund 

Under current law, the Secretary of Health and Human Services has $5.0 billion available in 2013 to use for initiatives related to 

physician payments and quality improvements in Medicare. Section 

6 would reduce the funding available in 2013 by $1.2 billion and 

would increase the funding for 2014 by $3.8 billion. CBO estimates 

that those changes in funding would decrease outlays by $0.8 billion in 2013 and would increase outlays by $2.6 billion over the 

2013–2015 period. 

Intergovernmental and private-sector impact: H.R. 5613 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA. The bill would impose a new requirement on states to electronically verify the assets of Medicaid enrollees. That requirement 

would increase administrative spending by states; however, the 

provision also would result in lower caseloads and an overall decline in state spending. Because Medicaid provides states with significant flexibility to make programmatic adjustments to accommodate changes, the requirement to verify assets would not be an 

intergovernmental mandate as defined by UMRA. State, local, and 

tribal governments would benefit from provisions in the bill that 

would delay the implementation of several Medicaid regulations. 

Estimate prepared by: Federal Costs: Jeanne De Sa; Impact on 

State, Local, and Tribal Governments: Lisa Ramirez-Branum; Impact on the Private Sector: Patrick Bernhardt. 

Estimate approved by: Keith J. Fontenot, Deputy Assistant Director for Health and Human Resources, Budget Analysis Division. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates regarding H.R. 5613 prepared by the Director of the Congressional Budget Office pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act would be created by H.R. 5613. 

CONSTITUTIONAL AUTHORITY STATEMENT

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

of Representatives, the Committee finds that the Constitutional authority for H.R. 5613 is provided in Article I, section 8, clause 3, 

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eign nations, among the several States, and with the Indian Tribes, 

and in the provisions of Article I, section 8, clause 1, that relate 

to expending funds to provide for the general welfare of the United 

States. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that H.R. 5613 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 of 1995. 


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SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

Section 1 establishes the short title of the Act as the ‘‘Protecting 

the Medicaid Safety Net Act of 2008’’. 

Section 2. Moratoria on certain Medicaid regulations 

(a) Extension of certain moratoria in Public Law 110–28 

This subsection extends moratoria Congress previously placed on 

two Medicaid regulations issued by the Department of Health and 

Human Services having to do with restrictions on Medicaid payments to public providers and elimination of Medicaid payments for 

graduate medical education (GME). These moratoria were enacted 

through the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (P.L. 110–28) 

and will expire on May 25, 2008. This section extends the current 

moratoria through March of 2009. 

(b) Extension of certain moratoria in Public Law 110–173 

This subsection extends moratoria Congress previously placed on 

two Medicaid regulations dealing with restrictions on Medicaid 

payments for rehabilitation services and elimination of Medicaid 

payments for school-based transportation and administration services. These moratoria were enacted in the Medicare, Medicaid, and 

SCHIP Extension Act of 2007 (P.L. 110–173) and will expire on 

June 30, 2008. This subsection extends the current moratoria 

through March of 2009. This moratorium would insure that CMS 

cannot implement an intrinsic element test or eliminate State day 

habilitation programs for persons with mental retardation and related conditions, as well as coverage under approved State plans of 

adult day health care programs, which are covered by that regulation. 

(c) Additional moratoria 

This subsection would prohibit the Secretary from going beyond 

current law, through regulation, to put limits on what States can 

provide in terms of case management services in their Medicaid 

programs. Case management services are those that assist beneficiaries in gaining access to needed medical, social, educational, 

and other services and include assistance for transitioning out of 

a nursing home. This subsection would allow the Secretary to provide regulations to implement the current law provisions passed in 

the deficit reduction act (DRA) as long as they are not more restrictive than the policies set forth in previous guidance from the Centers for Medicare and Medicaid Services relating to State responsibilities under Medicaid for persons with disabilities. The Secretary may exercise such authority so long as restrictions are not 

imposed on case management services that are more restrictive 

than the policies set forth in the Dear State Medicaid Director letter issued on January 19, 2001 (SMDL #01–013), which clarified 

the interaction of Medicaid with the Title IV–E foster care program 

and included a listing of some of the allowable services under the 

Medicaid case management benefit for children receiving Title IV– E services, and so long as restrictions are not imposed on commuVerDate Aug 31 2005 02:40 Apr 24, 2008 Jkt 069006 PO 00000 Frm 00042 Fmt 6659 Sfmt 6602 E:\HR\OC\HR600.XXX HR600

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nity transition case management more restrictive than the policies 

set forth in the Dear State Medicaid Director letter issued on July 

25, 2000 (Olmstead Update 3), including the standard that permits 

Medicaid coverage of transition case management for 180 days, and 

which does not include a prohibition on payment for transition case 

management until an individual has successfully completed a community transition. 

This subsection also would place a moratorium on the proposed 

regulations that restrict Medicaid payment for preventative care, 

rehabilitation services, and dental care provided in outpatient hospital settings. 

This subsection would prevent the Secretary from implementing 

the portions of the final regulation relating to Medicaid allowable 

provider taxes that does not directly implement the changes Congress made in the Tax Relief and Health Care Act of 2006 (P.L. 

109–432). The Secretary went beyond the current law by redefining 

what is considered an ‘‘allowable’’ provider tax. 

The bill as approved by the Committee modified the language of 

subsection (c) in section 2 of the introduced bill to address concerns 

that the scope of the moratoria was too broad. Language was substituted as used in P.L. 110–73, the Medicare, Medicaid, and 

SCHIP Extension Act. 

Section 3. Funds to reduce Medicaid fraud and abuse 

Section 3 of the bill included $25 million a year appropriation to 

the Secretary of Health and Human Services beginning with fiscal 

year 2009 for the purposes of reducing fraud and abuse in the Medicaid program. In addition, this section includes a requirement for 

the Secretary to report to the Committee on Energy and Commerce 

and the Committee on Finance on the activities funded and results 

of such activities. 

Section 4. Study and reports to Congress 

Section 4(a) requires the Secretary of Health and Human Services to submit a report to the Committee on Energy and Commerce 

and the Committee on Finance by July 1, 2008. This report would 

outline what specific problems the Medicaid regulations are intended to address, how the regulations address those problems and 

the legal authority for such regulations. 

Section 4(b) directs the Secretary to enter into a contract with an 

independent organization for the purpose of producing a report on 

the prevalence of the problems identified in the regulations, identifying existing strategies to address such problems, and assessing 

the impact of each regulation on the States and the District of Columbia. The independent report produced under section 4(b) shall 

identify strategies in existence to address the problems outlined in 

the Secretary’s report to Congress to indicate where current legal 

authority is sufficient to respond to any identified problems, and 

shall assess the impact of the regulations referred to in the report 

conducted under section 4(a) on each State and the District of Columbia. This shall include an examination of the effect that these 

regulations would have on State efforts to operate evidence-based 

programs consistent with the current standards of best professional 

practice in the various areas covered by the rules. Section 4 provides $5 million for the purposes of conducting this report. 


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44 

Section 5. Asset verification through access to information held by 

financial institutions 

Section 5 requires all States to phase in a program for electronic 

verification of the assets of aged, blind, and disabled individuals 

applying for Medicaid coverage. States would submit and implement an asset verification program so that such a program is applied to approximately, but not less than 12.5 percent of Medicaid 

enrollees by the end of fiscal year 2009; 25 percent by the end of 

fiscal year 2010; 50 percent by the end of fiscal year 2011; 75 percent by the end of fiscal year 2012; and 100 percent by the end of 

fiscal year 2013. Section 5(a) requires the Secretary to develop this 

schedule taking into account the feasibility of implementing asset 

verification programs in each individual State. States are permitted to voluntarily request approval to implement an ‘asset 

verification program’ in advance of being required by the Secretary. 

Section 5(a) defines an ‘‘asset verification program,’’ established 

under section 5 of this bill, as a program requiring that each applicant for, or recipient of, medical assistance under a Medicaid State 

plan, on the basis of being aged, blind, or disabled, authorize the 

State to obtain financial records held by any financial institution. 

States that do not apply an asset test in determining eligibility of 

categories of individuals who qualify for Medicaid on the basis of 

being aged, blind, or disabled obviously would not be required to 

apply the electronic asset verification system to such individuals. 

An asset verification program requires an individual to authorize 

the State to obtain financial records when the State determines it 

is needed in connection with determining eligibility for medical assistance under the Medicaid program. Under current law, States 

might need to verify assets of a spouse in determining eligibility of 

an individual, but the authority to require other individuals to provide authorization to obtain financial records is limited, and should 

not extend to parties whose assets are not relevant to the determination. The State shall use those financial records to verify the 

financial resources of individuals applying for, or receiving medical 

assistance. An asset verification program established under section 

5 must verify individual assets in a manner consistent with procedures used by the Commissioner of Social Security. 

Section 6. Adjustment to PAQI fund 

Section 6 amends the Social Security Act, as amended by the 

Medicare, Medicaid, and SCHIP Extension Act of 2007, to reduce 

the amount of money available to the Physician Assistance and 

Quality Initiative Fund for expenditure during 2013 from 

$4,960,000,000 to $3,790,000,000. Section 6, however, makes 

$3,690,000,000 available to the fund for expenditures during 2014 

under the same limitations provided for expenditures made with 

money available during 2013. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 


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45 

SECTION 7002 OF THE U.S. TROOP READINESS, VETERANS’ CARE, KATRINA RECOVERY, AND IRAQ ACCOUNTABILITY APPROPRIATIONS ACT, 2007 

SEC. 7002. (a) PROHIBITION.—

(1) LIMITATION ON SECRETARIAL AUTHORITY.—Notwithstanding any other provision of law, the Secretary of Health 

and Human Services shall not, øprior to the date that is 1 year 

after the date of enactment of this Act¿ prior to April 1, 2009, 

take any action (through promulgation of regulation, issuance 

of regulatory guidance, or other administrative action) to 

(A) finalize or otherwise implement provisions contained 

in the proposed rule published on January 18, 2007, on 

pages 2236 through 2248 of volume 72, Federal Register 

(relating to parts 433, 447, and 457 of title 42, Code of 

Federal Regulations) or in the final regulation, relating to 

such parts, published on May 29, 2007 (72 Federal Register 

29748); 

* * * * * * * 

(C) promulgate or implement any rule or provisions restricting payments for graduate medical education under 

the Medicaid program, including the proposed regulation 

published on May 23, 2007 (72 Federal Register 28930). 

* * * * * * * 

SECTION 206 OF THE MEDICARE, MEDICAID, AND SCHIP 

EXTENSION ACT OF 2007 

SEC. 206. MORATORIUM ON CERTAIN PAYMENT RESTRICTION. 

Notwithstanding any other provision of law, the Secretary of 

Health and Human Services shall not, prior to øJune 30, 2008¿ 

April 1, 2009, take any action (through promulgation of regulation, 

issuance of regulatory guidance, use of Federal payment audit procedures, or other administrative action, policy, or practice, including a Medical Assistance Manual transmittal or letter to State 

Medicaid directors) to impose any restrictions relating to coverage 

or payment under title XIX of the Social Security Act for rehabilitation services, including the proposed regulation published on August 13, 2007 (72 Federal Register 45201), or school-based administration and school-based transportation, including the final regulation published on December 28, 2007 (72 Federal Register 73635), 

if such restrictions are more restrictive in any aspect than those 

applied to such areas as of July 1, 2007. 

SOCIAL SECURITY ACT 

* * * * * * * 


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46 

TITLE XVIII—HEALTH INSURANCE FOR THE AGED AND 

DISABLED 

* * * * * * * 

PART B—SUPPLEMENTARY MEDICAL INSURANCE BENEFITS FOR THE

AGED AND DISABLED

* * * * * * * 

PAYMENT FOR PHYSICIANS’ SERVICES

SEC. 1848. (a) * * * 

* * * * * * * 

(l) PHYSICIAN ASSISTANCE AND QUALITY INITIATIVE FUND.— (1) * * * 

(2) FUNDING.—

(A) AMOUNT AVAILABLE.—

(i) IN GENERAL.—Subject to clause (ii), there shall be 

available to the Fund the following amounts: 

(I) * * * 

* * * * * * * 

(III) For expenditures during 2013, an amount 

equal to ø$4,960,000,000¿ $3,790,000,000. 

(IV) For expenditures during 2014, an amount equal to $3,690,000,000. 

(ii) LIMITATIONS ON EXPENDITURES.— (I) * * * 

* * * * * * * 

(IV) 2014.—The amount available for expenditures during 2014 shall only be available for an 

adjustment to the update of the conversion factor 

under subsection (d) for that year. 

(B) TIMELY OBLIGATION OF ALL AVAILABLE FUNDS FOR

SERVICES.—The Secretary shall provide for expenditures 

from the Fund in a manner designed to provide (to the 

maximum extent feasible) for the obligation of the entire 

amount available for expenditures, after application of 

subparagraph (A)(ii), during—

(i) * * * 

(ii) 2009 for payment with respect to physicians’

services furnished during 2009; øand¿ 

(iii) 2013 for payment with respect to physicians’

services furnished during 2013ø.¿; and 

(iv) 2014 for payment with respect to physicians’

services furnished during 2014. 

* * * * * * * 

TITLE XIX—GRANTS TO STATES FOR MEDICAL ASSISTANCE 

PROGRAMS 

* * * * * * * 

STATE PLANS FOR MEDICAL ASSISTANCE

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


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47 

(1) * * * 

* * * * * * * 

(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; øand¿ 

(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) * * * 

* * * * * * * 

(B) may be conducted under contract with a broker 

who—

(i) * * * 

* * * * * * * 

(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)ø.¿; and 

(71) provide that the State will implement an asset 

verification program as required under section 1940. 

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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48 

PAYMENT TO STATES

SEC. 1903. (a) * * * 

* * * * * * * 

(i) Payment under the preceding provisions of this section shall 

not be made— (1) * * * 

* * * * * * * 

(22) with respect to amounts expended for medical assistance 

for an individual who declares under section 1137(d)(1)(A) to be 

a citizen or national of the United States for purposes of establishing eligibility for benefits under this title, unless the requirement of subsection (x) is met; øor¿ 

(23) with respect to amounts expended for medical assistance 

for covered outpatient drugs (as defined in section 1927(k)(2)) 

for which the prescription was executed in written (and nonelectronic) form unless the prescription was executed on a tamper-resistant padø.¿; or 

(24) if a State is required to implement an asset verification 

program under section 1940 and fails to implement such program in accordance with such section, with respect to amounts 

expended by such State for medical assistance for individuals 

subject to asset verification under such section, unless— (A) the State demonstrates to the Secretary’s satisfaction 

that the State made a good faith effort to comply; 

(B) not later than 60 days after the date of a finding that 

the State is in noncompliance, the State submits to the Secretary (and the Secretary approves) a corrective action plan 

to remedy such noncompliance; and 

(C) not later than 12 months after the date of such submission (and approval), the State fulfills the terms of such 

corrective action plan. 

Nothing in paragraph (1) shall be construed as permitting a State 

to provide services under its plan under this title that are not reasonable in amount, duration, and scope to achieve their purpose. 

Paragraphs (1), (2), (16), (17), and (18) shall apply with respect to 

items or services furnished and amounts expended by or through 

a managed care entity (as defined in section 1932(a)(1)(B)) in the 

same manner as such paragraphs apply to items or services furnished and amounts expended directly by the State. 

* * * * * * * 

ASSET VERIFICATION THROUGH ACCESS TO INFORMATION HELD BY

FINANCIAL INSTITUTIONS

SEC. 1940. (a) IMPLEMENTATION.—

(1) IN GENERAL.—Subject to the provisions of this section, 

each State shall implement an asset verification program described in subsection (b), for purposes of determining or redetermining the eligibility of an individual for medical assistance 

under the State plan under this title. 

(2) PLAN SUBMITTAL.—In order to meet the requirement of 

paragraph (1), each State shall—

(A) submit not later than a deadline specified by the Secretary consistent with paragraph (3), a State plan amendVerDate Aug 31 2005 02:40 Apr 24, 2008 Jkt 069006 PO 00000 Frm 00048 Fmt 6659 Sfmt 6603 E:\HR\OC\HR600.XXX HR600

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ment under this title that describes how the State intends 

to implement the asset verification program; and 

(B) provide for implementation of such program for eligibility determinations and redeterminations made on or 

after 6 months after the deadline established for submittal 

of such plan amendment. 

(3) PHASE-IN.— (A) IN GENERAL.— (i) IMPLEMENTATION IN CURRENT ASSET

VERIFICATION DEMO STATES.—The Secretary shall require those States specified in subparagraph (C) (to 

which an asset verification program has been applied 

before the date of the enactment of this section) to implement an asset verification program under this subsection by the end of fiscal year 2009. 

(ii) IMPLEMENTATION IN OTHER STATES.—The Secretary shall require other States to submit and implement an asset verification program under this subsection in such manner as is designed to result in the 

application of such programs, in the aggregate for all 

such other States, to enrollment of approximately, but 

not less than, the following percentage of enrollees, in 

the aggregate for all such other States, by the end of 

the fiscal year involved: 

(I) 12.5 percent by the end of fiscal year 2009. 

(II) 25 percent by the end of fiscal year 2010. 

(III) 50 percent by the end of fiscal year 2011. 

(IV) 75 percent by the end of fiscal year 2012. 

(V) 100 percent by the end of fiscal year 2013. 

(B) CONSIDERATION.—In selecting States under subparagraph (A)(ii), the Secretary shall consult with the States involved and take into account the feasibility of implementing 

asset verification programs in each such State. 

(C) STATES SPECIFIED.—The States specified in this subparagraph are California, New York, and New Jersey. 

(D) CONSTRUCTION.—Nothing in subparagraph (A)(ii) 

shall be construed as preventing a State from requesting, 

and the Secretary approving, the implementation of an 

asset verification program in advance of the deadline otherwise established under such subparagraph. 

(4) EXEMPTION OF TERRITORIES.—This section shall only 

apply to the 50 States and the District of Columbia. 

(b) ASSET VERIFICATION PROGRAM.—

(1) IN GENERAL.—For purposes of this section, an asset 

verification program means a program described in paragraph 

(2) under which a State—

(A) requires each applicant for, or recipient of, medical 

assistance under the State plan under this title on the basis 

of being aged, blind, or disabled to provide authorization 

by such applicant or recipient (and any other person whose 

resources are material to the determination of the eligibility 

of the applicant or recipient for such assistance) for the 

State to obtain (subject to the cost reimbursement requirements of section 1115(a) of the Right to Financial Privacy 

Act but at no cost to the applicant or recipient) from any 


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50 

financial institution (within the meaning of section 1101(1) 

of such Act) any financial record (within the meaning of 

section 1101(2) of such Act) held by the institution with respect to the applicant or recipient (and such other person, 

as applicable), whenever the State determines the record is 

needed in connection with a determination with respect to 

such eligibility for (or the amount or extent of) such medical assistance; and 

(B) uses the authorization provided under subparagraph 

(A) to verify the financial resources of such applicant or recipient (and such other person, as applicable), in order to 

determine or redetermine the eligibility of such applicant or 

recipient for medical assistance under the State plan. 

(2) PROGRAM DESCRIBED.—A program described in this paragraph is a program for verifying individual assets in a manner 

consistent with the approach used by the Commissioner of Social Security under section 1631(e)(1)(B)(ii). 

(c) DURATION OF AUTHORIZATION.—Notwithstanding section 

1104(a)(1) of the Right to Financial Privacy Act, an authorization 

provided to a State under subsection (b)(1) shall remain effective 

until the earliest of— (1) the rendering of a final adverse decision on the applicant’s 

application for medical assistance under the State’s plan under 

this title; 

(2) the cessation of the recipient’s eligibility for such medical 

assistance; or 

(3) the express revocation by the applicant or recipient (or 

such other person described in subsection (b)(1), as applicable) 

of the authorization, in a written notification to the State. 

(d) TREATMENT OF RIGHT TO FINANCIAL PRIVACY ACT REQUIRE- MENTS.—

(1) An authorization obtained by the State under subsection 

(b)(1) shall be considered to meet the requirements of the Right 

to Financial Privacy Act for purposes of section 1103(a) of such 

Act, and need not be furnished to the financial institution, notwithstanding section 1104(a) of such Act. 

(2) The certification requirements of section 1103(b) of the 

Right to Financial Privacy Act shall not apply to requests by 

the State pursuant to an authorization provided under subsection (b)(1). 

(3) A request by the State pursuant to an authorization provided under subsection (b)(1) is deemed to meet the requirements of section 1104(a)(3) of the Right to Financial Privacy 

Act and of section 1102 of such Act, relating to a reasonable description of financial records. 

(e) REQUIRED DISCLOSURE.—The State shall inform any person 

who provides authorization pursuant to subsection (b)(1)(A) of the 

duration and scope of the authorization. 

(f) REFUSAL OR REVOCATION OF AUTHORIZATION.—If an applicant 

for, or recipient of, medical assistance under the State plan under 

this title (or such other person described in subsection (b)(1), as applicable) refuses to provide, or revokes, any authorization made by 

the applicant or recipient (or such other person, as applicable) 

under subsection (b)(1)(A) for the State to obtain from any financial 

institution any financial record, the State may, on that basis, deterVerDate Aug 31 2005 02:40 Apr 24, 2008 Jkt 069006 PO 00000 Frm 00050 Fmt 6659 Sfmt 6603 E:\HR\OC\HR600.XXX HR600

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mine that the applicant or recipient is ineligible for medical assistance. 

(g) USE OF CONTRACTOR.—For purposes of implementing an asset 

verification program under this section, a State may select and 

enter into a contract with a public or private entity meeting such 

criteria and qualifications as the State determines appropriate, consistent with requirements in regulations relating to general contracting provisions and with section 1903(i)(2). In carrying out activities under such contract, such an entity shall be subject to the 

same requirements and limitations on use and disclosure of information as would apply if the State were to carry out such activities 

directly. 

(h) TECHNICAL ASSISTANCE.—The Secretary shall provide States 

with technical assistance to aid in implementation of an asset 

verification program under this section. 

(i) REPORTS.—A State implementing an asset verification program under this section shall furnish to the Secretary such reports 

concerning the program, at such times, in such format, and containing such information as the Secretary determines appropriate. 

(j) TREATMENT OF PROGRAM EXPENSES.—Notwithstanding any 

other provision of law, reasonable expenses of States in carrying out 

the program under this section shall be treated, for purposes of section 1903(a), in the same manner as State expenditures specified in 

paragraph (7) of such section. 

* * * * * * * 

SECTION 4 OF THE TMA, ABSTINENCE EDUCATION, AND 

QI PROGRAMS EXTENSION ACT OF 2007 

(Public Law 110–90) 

AN ACT To provide for the extension of transitional medical assistance (TMA), the 

abstinence education program, and the qualifying individuals (QI) program, and 

for other purposes. 

* * * * * * * 

øSEC. 4. EXTENSION OF SSI WEB-BASED ASSET DEMONSTRATION 

PROJECT TO THE MEDICAID PROGRAM. 

ø(a) IN GENERAL.—Beginning on October 1, 2007, and ending on 

September 30, 2012, the Secretary of Health and Human Services 

shall provide for the application to asset eligibility determinations 

under the Medicaid program under title XIX of the Social Security 

Act of the automated, secure, web-based asset verification request 

and response process being applied for determining eligibility for 

benefits under the Supplemental Security Income (SSI) program 

under title XVI of such Act under a demonstration project conducted under the authority of section 1631(e)(1)(B)(ii) of such Act 

(42 U.S.C. 1383(e)(1)(B)(ii)). 

ø(b) LIMITATION.—Such application shall only extend to those 

States in which such demonstration project is operating and only 

for the period in which such project is otherwise provided. 

ø(c) RULES OF APPLICATION.—For purposes of carrying out subsection (a), notwithstanding any other provision of law, information 


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obtained from a financial institution that is used for purposes of 

eligibility determinations under such demonstration project with 

respect to the Secretary of Health and Human Services under the 

SSI program may also be shared and used by States for purposes 

of eligibility determinations under the Medicaid program. In applying section 1631(e)(1)(B)(ii) of the Social Security Act under this 

subsection, references to the Commissioner of Social Security and 

benefits under title XVI of such Act shall be treated as including 

a reference to a State described in subsection (b) and medical assistance under title XIX of such Act provided by such a State.¿ 

* * * * * * * 

Æ 


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