II 

109TH CONGRESS 

2D SESSION S. 3705 

To amend title XIX of the Social Security Act to improve requirements 

under the Medicaid program for items and services furnished in or 

through an educational program or setting to children, including children 

with developmental, physical, or mental health needs, and for other 

purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 20, 2006 

Mr. KENNEDY (for himself, Mr. HARKIN, Mr. JEFFORDS, Mr. BINGAMAN, 

Mrs. CLINTON, Mrs. MURRAY, Mr. REED, Mr. DODD, Ms. MIKULSKI, Mr. 

DAYTON, Ms. STABENOW, and Mr. SCHUMER) introduced the following 

bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend title XIX of the Social Security Act to improve 

requirements under the Medicaid program for items and 

services furnished in or through an educational program 

or setting to children, including children with developmental, physical, or mental health needs, and for other 

purposes. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Protecting Children’s 

5 Health in Schools Act of 2006’’. 


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1 SEC. 2. REQUIREMENTS UNDER THE MEDICAID PROGRAM 

2 FOR ITEMS AND SERVICES FURNISHED IN OR 

3 THROUGH AN EDUCATIONAL PROGRAM OR 

4 SETTING TO CHILDREN, INCLUDING CHIL5 DREN WITH DEVELOPMENTAL, PHYSICAL, OR 

6 MENTAL HEALTH NEEDS. 

7 (a) REQUIREMENTS FOR PAYMENTS.—Section 1903 

8 of the Social Security Act (42 U.S.C. 1396b) is amend9 ed— 

10 (1) in subsection (i)— 

11 (A) in paragraph (22), by striking the pe12 riod at the end and inserting ‘‘; or’’; and 

13 (B) by inserting after paragraph (22), the 

14 following new paragraphs: 

15 ‘‘(23) with respect to any amount expended by, 

16 or on behalf of, the State (including by a local edu17 cational agency in the State or the lead agency in 

18 the State with responsibility for administering part 

19 C of the Individuals with Disabilities Education Act) 

20 for an item or service provided under the State plan 

21 in or through an educational program or setting, or 

22 for any administrative cost incurred to carry out the 

23 State plan in or through such a program or setting, 

24 or for a transportation service for an individual who 

25 has not attained age 21, unless the requirements of 

26 subsection (y) are met; or 


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1 ‘‘(24) with respect to any amount expended for 

2 an item or service provided under the State plan in 

3 or through an educational program or setting, or for 

4 any administrative cost incurred to carry out the 

5 plan in or through such a program or setting by, or 

6 on behalf of, the State through an agency that is not 

7 the State agency with responsibility for admin8 istering the State plan (including a local educational 

9 agency in the State or the lead agency in the State 

10 with responsibility for administering part C of the 

11 Individuals with Disabilities Education Act) and 

12 that enters into a contract or other arrangement 

13 with a person or entity for or in connection with the 

14 collection or submission of claims for such an ex15 penditure or cost, unless the agency— 

16 ‘‘(A) if not a public agency operating a 

17 consortium with other public agencies, uses a 

18 competitive bidding process or otherwise to con19 tract with such person or entity at a reasonable 

20 rate commensurate with the services performed 

21 by the person or entity; and 

22 ‘‘(B) requires that any fees (including any 

23 administrative fees) to be paid to the person or 

24 entity for the collection or submission of such 


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1 claims are identified as a non-contingent, speci2 fied dollar amount in the contract.’’; and 

3 (2) by adding at the end the following new sub4 section: 

5 ‘‘(y) REQUIREMENTS FOR FEDERAL FINANCIAL PAR6 TICIPATION FOR FURNISHING MEDICAL ASSISTANCE (IN7 CLUDING MEDICALLY NEEDED TRANSPORTATION) IN OR

8 THROUGH AN EDUCATIONAL PROGRAM OR SETTING.— 

9 For purposes of subsection (i)(23), the requirements of 

10 this subsection are the following: 

11 ‘‘(1) APPROVED METHODOLOGY FOR EXPENDI12 TURES FOR BUNDLED ITEMS, SERVICES, AND AD13 MINISTRATIVE COSTS.— 

14 ‘‘(A) IN GENERAL.—In the case of any 

15 amount expended by, or on behalf of, the State 

16 for a bundle of individual items, services, and 

17 administrative costs under the State plan that 

18 are furnished in or through an educational pro19 gram or setting, the expenditure must be made 

20 in accordance with a methodology approved by 

21 the Secretary which— 

22 ‘‘(i) provides for an itemization to the 

23 Secretary in a manner that ensures ac24 countability of the cost of the bundled 

25 items, services, and administrative costs 


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1 and includes payment rates and the meth2 odologies underlying the establishment of 

3 such rates; 

4 ‘‘(ii) has a sound basis for deter5 mining such payment rates and methodolo6 gies; and 

7 ‘‘(iii) matches payments for the bun8 dled items, services, and administrative 

9 costs with corresponding items and services 

10 provided and administrative costs incurred 

11 under the State plan. 

12 ‘‘(B) RULE OF CONSTRUCTION.—Nothing 

13 in subparagraph (A) shall be construed as— 

14 ‘‘(i) requiring a State to establish and 

15 apply such a methodology through a State 

16 plan amendment; 

17 ‘‘(ii) requiring a State with such an 

18 approved methodology to obtain the ap19 proval of the Secretary for any increase in 

20 rates of reimbursement that are estab21 lished consistent with such methodology; or 

22 ‘‘(iii) prohibiting the Secretary from 

23 reviewing a State’s costs for the individual 

24 items, services, and administrative costs 

25 that make up a proposed bundle of items, 


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1 services, and costs as a condition of ap2 proval of the methodology that the State 

3 will establish to determine the rate of reim4 bursement for such bundle of items, serv5 ices, and costs. 

6 ‘‘(2) APPLICATION OF MARKET RATE FOR INDI7 VIDUAL ITEMS, SERVICES, ADMINISTRATIVE

8 COSTS.—In the case of an amount expended by, or 

9 on behalf of, the State for an individual item, serv10 ice, or administrative cost under the State plan that 

11 is furnished in or through an educational program 

12 or setting, the State must establish that the amount 

13 expended— 

14 ‘‘(A) does not exceed the amount that 

15 would have been paid for the item, service, or 

16 administrative cost if the item or service was 

17 provided or the cost was incurred by an entity 

18 in or through a program or setting other than 

19 an educational program or setting; or 

20 ‘‘(B) if the amount expended for the item, 

21 service, or administrative cost is higher than 

22 the amount described in subparagraph (A), was 

23 necessary. 

24 ‘‘(3) TRANSPORTATION SERVICES.— 


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1 ‘‘(A) IN GENERAL.—In the case of an 

2 amount expended by, or on behalf of, the State 

3 for furnishing in or through an educational pro4 gram or setting a transportation service for an 

5 individual who has not attained age 21 and who 

6 is eligible for medical assistance under the 

7 State plan, the State mush establish that— 

8 ‘‘(i) a medical need for transportation 

9 is specifically listed in the individualized 

10 education program for the individual estab11 lished pursuant to part B of the Individ12 uals with Disabilities Education Act or, in 

13 the case of an infant or a toddler with a 

14 disability, in the individualized family serv15 ice plan established for such infant or tod16 dler pursuant to part C of such Act, or is 

17 furnished to the individual pursuant to sec18 tion 504 of the Rehabilitation Act of 1973; 

19 ‘‘(ii) the vehicle used to furnish such 

20 transportation service is specially equipped 

21 or staffed to accommodate individuals who 

22 have not attained age 21 with develop23 mental, physical, or mental health needs; 

24 and 


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1 ‘‘(iii) payment for such service is 

2 made only for costs directly attributable to 

3 costs associated with transporting individ4 uals who have not attained age 21 and 

5 whose developmental, physical, or mental 

6 health needs require transport in such a 

7 vehicle in order to receive the services for 

8 which medical assistance is provided under 

9 the State plan. 

10 ‘‘(B) RULE OF CONSTRUCTION.—Nothing 

11 in subparagraph (A) shall be construed as 

12 modifying the obligation of a State to ensure 

13 that an individual who has not attained age 21 

14 and who is eligible for medical assistance under 

15 the State plan receives necessary transportation 

16 services to and from a provider of medical as17 sistance in or through a program or setting 

18 other than an educational program or setting.’’. 

19 (b) REQUIREMENTS FOR THE PROVISION OF ITEMS

20 AND SERVICES THROUGH MEDICAID MANAGED CARE OR21 GANIZATIONS.— 

22 (1) CONTRACTUAL REQUIREMENTS.—Section 

23 1903(m)(2) of the Social Security Act (42 U.S.C. 

24 1396b(m)(2)) is amended— 


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1 (A) in subparagraph (A), by inserting after 

2 clause (i) the following new clause: 

3 ‘‘(ii) the contract with the entity satisfies the 

4 requirements of subparagraph (C) (relating to pay5 ment for, and coverage of, such services under an in6 dividual’s education program, an individualized fam7 ily service plan, or when furnished in or through an 

8 educational program or setting);’’; and 

9 (B) by inserting after subparagraph (B), 

10 the following new subparagraph: 

11 ‘‘(C) For purposes of clause (ii) of subparagraph (A), 

12 the requirements of this subparagraph are the following: 

13 ‘‘(i) The contract with the entity specifies the 

14 coverage and payment responsibilities of the entity 

15 in relation to medical assistance for items and serv16 ices that are covered under the State plan and in17 cluded in the contract, when such items and services 

18 are furnished in or through an educational program 

19 or setting. 

20 ‘‘(ii) In any case in which the entity is obligated 

21 under the contract to pay for items and services cov22 ered under the State plan, the contract with the en23 tity requires the entity to— 

24 ‘‘(I) enter into a provider network service 

25 agreement with the qualified provider or proVerDate Aug 31 2005 04:15 Jul 21, 2006 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S3705.IS S3705

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1 viders furnishing such items or services in or 

2 through an educational program or setting; 

3 ‘‘(II) promptly pay such providers at a rate 

4 that is at least equal to the rate that would be 

5 paid to a provider furnishing the same service 

6 in a non-educational program or setting; and 

7 ‘‘(III) treat as final and binding deter8 minations by State licensed providers or pro9 viders eligible for reimbursement under the 

10 State plan working in an educational program 

11 or setting regarding the medical necessity of an 

12 item or service. 

13 ‘‘(iii) The contract with the entity specifies the 

14 obligation of the entity to ensure that providers of 

15 items or services that are furnished in or through an 

16 educational program or setting refer children fur17 nished such items or services to the entity and its 

18 provider network for additional services that are not 

19 available in or through such program or setting but 

20 that are covered under the State plan and included 

21 in the entity’s contract with the State. 

22 ‘‘(iv) The contract with the entity requires, with 

23 respect to payment for, and coverage of, services for 

24 which the entity is responsible for, that the entity 


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1 must demonstrate that the entity has established 

2 procedures to— 

3 ‘‘(I) ensure coordination between the State, 

4 a local educational agency and the lead agency 

5 in the State with responsibility for admin6 istering part C of the Individuals with Disabil7 ities Education Act with respect to those serv8 ices for an individual who has not attained age 

9 21 and who is eligible for medical assistance 

10 under the State plan (including an individual 

11 who has an individualized education program 

12 established pursuant to part B of the Individ13 uals with Disabilities Education Act or other14 wise or an infant or toddler with a disability 

15 who has an individualized family service plan 

16 established pursuant to part C of such Act) 

17 which are required for the individual under the 

18 individual’s education program or the individ19 ualized family service plan, or are furnished to 

20 the individual pursuant to section 504 of the 

21 Rehabilitation Act of 1973 and which are not 

22 specifically included in the services required 

23 under the contract, but are the responsibility of 

24 the State, a local educational agency, or the 

25 lead agency in the State with responsibility for 


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1 administering part C of the Individuals with 

2 Disabilities Education Act; and 

3 ‘‘(II) prevent duplication of services and 

4 payments under this title with respect to items 

5 and services covered under the State plan that 

6 are furnished in or through an educational pro7 gram or setting to such individuals enrolled 

8 under the contract.’’. 

9 (2) PROHIBITION ON DUPLICATIVE PAY10 MENTS.— 

11 (A) IN GENERAL.—Section 1903(i) of the 

12 Social Security Act (42 U.S.C. 1396b(i)), as 

13 amended by subsection (a), is amended— 

14 (i) in paragraph (24)(B), by striking 

15 the period and inserting ‘‘; or’’; and 

16 (ii) by inserting after paragraph (24) 

17 the following new paragraph: 

18 ‘‘(25) with respect to any amount ex19 pended under the State plan for an item, serv20 ice, or administrative cost for which payment is 

21 or may be made directly to a person or entity 

22 (including a State, local educational agency, or 

23 the lead agency in the State with responsibility 

24 for administering part C of the Individuals with 

25 Disabilities Education Act) under the State 


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1 plan if payment for such item, service, or ad2 ministrative cost was included in the determina3 tion of a prepaid capitation or other risk-based 

4 rate of payment to an entity under a contract 

5 pursuant to section 1903(m).’’. 

6 (B) CONFORMING AMENDMENT.—The 

7 third sentence of section 1903(i) of such Act 

8 (42 U.S.C. 1396b(i)), as amended by subsection 

9 (a)(1)(C), is amended by striking ‘‘and (24)’’ 

10 and inserting ‘‘(24), and (25)’’. 

11 (c) ALLOWABLE SHARE OF FFP WITH RESPECT TO

12 PAYMENT FOR SERVICES FURNISHED IN OR THROUGH AN

13 EDUCATIONAL PROGRAM OR SETTING.—Section 

14 1903(w)(6) of the Social Security Act (42 U.S.C. 

15 1396b(w)(6)) is amended— 

16 (1) in subparagraph (A), by inserting ‘‘subject 

17 to subparagraph (C),’’ after ‘‘subsection,’’; and 

18 (2) by adding at the end the following new sub19 paragraph: 

20 ‘‘(C) In the case of any Federal financial participa21 tion paid under subsection (a) with respect to an expendi22 ture for an item or service provided under the plan, or 

23 for any administrative cost incurred to carry out the plan, 

24 that is furnished in or through an educational program 

25 or setting, the State shall provide that— 


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1 ‘‘(i) if 0 percent of the expenditure was made 

2 or the cost was incurred directly by the State, the 

3 State shall pay the local educational agency in the 

4 State or the lead agency in the State with responsi5 bility for administering part C of the Individuals 

6 with Disabilities Education Act that made the ex7 penditure or incurred the cost (and, if applicable, 

8 any consortium of public agencies that incurred 

9 costs in connection with the collection or submission 

10 of claims for such expenditures or costs), 100 per11 cent (divided, as appropriate, between such agencies 

12 and such a consortium, if applicable) of the amount 

13 of the Federal financial participation; and 

14 ‘‘(ii) if 100 or any lesser percent of the expendi15 ture was made or the cost was directly incurred by 

16 the State, the State shall retain only such percent17 age of the Federal financial participation paid for 

18 the expenditure or cost as does not exceed the per19 centage of such expenditure or cost that was funded 

20 by State revenues that are dedicated solely for the 

21 provision of such medical assistance (and shall pay 

22 out of any remaining percentage of such Federal fi23 nancial participation, the percentage due to the local 

24 educational agency in the State or the lead agency 

25 in the State with responsibility for administering 


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1 part C of the Individuals with Disabilities Education 

2 Act that made or incurred the remaining percentage 

3 of such expenditure or cost (and, if applicable, any 

4 consortium of public agencies that incurred costs in 

5 connection with the collection or submission of 

6 claims for such expenditures or costs)).’’. 

7 (d) ASSURANCE OF REIMBURSEMENT FOR ADMINIS8 TRATIVE, ENROLLMENT, AND OUTREACH ACTIVITIES

9 CONDUCTED BY LOCAL EDUCATIONAL AGENCIES.— 

10 (1) MEDICAID.—Section 1902 of the Social Se11 curity Act (42 U.S.C. 1396a) is amended by insert12 ing after subsection (j) the following new subsection: 

13 ‘‘(k) Nothing in this title shall be construed as au14 thorizing the Secretary to prohibit the State agency with 

15 responsibility for the administration or supervision of the 

16 administration of the State plan from entering into inter17 agency agreements with local educational agencies under 

18 which such local educational agencies shall be reimbursed 

19 for the Federal share of amounts expended for administra20 tive, enrollment, and outreach activities for which payment 

21 is made to the State under section 1903(a)(7), including 

22 with respect to such activities as are conducted for pur23 poses of satisfying the requirements of subsection 

24 (a)(43).’’. 


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1 (2) SCHIP.—Section 2107(e)(1) of the Social 

2 Security Act (42 U.S.C. 1397gg(e)(1)) is amended— 

3 (A) by redesignating subparagraphs (B) 

4 through (D) as subparagraphs (C) through (E), 

5 respectively; and 

6 (B) by inserting after subparagraph (A) 

7 the following new subparagraph: 

8 ‘‘(B) Section 1902(k) (relating to inter9 agency agreements with local educational agen10 cies for reimbursement for expenditures for ad11 ministrative, enrollment, and outreach activi12 ties).’’. 

13 (e) CLARIFICATION OF COVERAGE OF EPSDT AND

14 ITEMS AND SERVICES FURNISHED TO A DISABLED CHILD

15 PURSUANT TO SECTION 504 OF THE REHABILITATION

16 ACT OF 1973; DEFINITION OF ‘‘EDUCATIONAL PROGRAM

17 OR SETTING’’.—Section 1903(c) of the Social Security Act 

18 (42 U.S.C. 1396b(c)) is amended— 

19 (1) by inserting ‘‘(1)’’ after ‘‘(c)’’; 

20 (2) by striking ‘‘Education Act or’’ and insert21 ing ‘‘Education Act,’’; 

22 (3) by inserting ‘‘, or furnished to a child with 

23 a disability pursuant to section 504 of the Rehabili24 tation Act of 1973’’ before the period; and 


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1 (4) by adding at the end the following new 

2 paragraphs: 

3 ‘‘(2) Nothing in this title shall be construed as pro4 hibiting or restricting, or authorizing the Secretary to pro5 hibit or restrict, payment under subsection (a) for the fol6 lowing items or services furnished in or through an edu7 cational program or setting, or costs incurred with respect 

8 to the furnishing of such items or services: 

9 ‘‘(A) Medical assistance for items or services 

10 described in section 1905(a)(4)(B) (relating to early 

11 and periodic screening, diagnostic, and treatment 

12 services defined in section 1905(r)) and costs in13 curred for providing such items or services in ac14 cordance with the requirements of section 

15 1902(a)(43). 

16 ‘‘(B) Costs incurred for providing services re17 lated to the administration of the State plan, includ18 ing providing information regarding the availability 

19 of, and eligibility for, medical assistance under the 

20 plan, and assistance with determinations of eligi21 bility and enrollment and redeterminations of eligi22 bility under the plan. 

23 ‘‘(3) Nothing in this title shall be construed as pro24 hibiting or restricting, or authorizing the Secretary to pro25 hibit or restrict, payment under subsection (a) for medical 


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1 assistance furnished in or through an educational program 

2 or setting or costs described in paragraph (2)(B) solely 

3 because— 

4 ‘‘(A) the State utilizes an all-inclusive payment 

5 arrangement in making payments for medical assist6 ance described in subsections (a) or (r) of section 

7 1905; or 

8 ‘‘(B) the State utilizes a cost allocation system 

9 that meets Federal requirements when paying for 

10 the cost of services described in section 1902(a)(43) 

11 or other administrative services directly related to 

12 the administration of the State plan. 

13 ‘‘(4)(A) For purposes of this title, the term ‘edu14 cational program or setting’ means any location in which 

15 the items or services included in a child’s individualized 

16 education plan established pursuant to part B of the Indi17 viduals with Disabilities Education Act or otherwise, or 

18 in an infant’s or toddler’s individualized family service 

19 plan established pursuant to part C of such Act, are deliv20 ered, including the home, child care setting, or school of 

21 the child, infant, or toddler. 

22 ‘‘(B) Such term includes— 

23 ‘‘(i) any location in which an evaluation or as24 sessment is conducted, in accordance with the re25 quirements of section 1902(a)(43) and subsections 


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1 (a)(4)(B) and (r) of section 1905, to determine if a 

2 child is a child with a disability under section 614 

3 of the Individuals with Disabilities Education Act 

4 (20 U.S.C. 1414) who requires an individualized 

5 education program (IEP) under section 614(d) of 

6 such Act (20 U.S.C. 1414(d)) or if an infant or tod7 dler is an infant or toddler with a disability under 

8 section 635(a)(3) of such Act (20 U.S.C. 

9 1435(a)(3)) who requires an individualized family 

10 service plan under section 636 of such Act (20 

11 U.S.C. 1436) and any location in which a reevalua12 tion or reassessment of such a determination is con13 ducted; and 

14 ‘‘(ii) for purposes of subsection (m)(2)(C), any 

15 location in which items or services described in sec16 tion 1905(a)(4)(B) (relating to early and periodic 

17 screening, diagnostic, and treatment services defined 

18 in section 1905(r)) are delivered and costs are in19 curred for providing such items or services in ac20 cordance with the requirements of section 

21 1902(a)(43).’’. 

22 (f) ASSURANCE OF COMPLIANCE WITH FEDERAL

23 AND STATE REQUIREMENTS.—Section 1902(a) of the So24 cial Security Act (42 U.S.C. 1396a(a)) is amended— 


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

2 end; 

3 (2) in paragraph (70)(B)(iv), by striking the 

4 period at the end and inserting ‘‘; and’’; and 

5 (3) by inserting after paragraph (70), the fol6 lowing new paragraph: 

7 ‘‘(71) provide that— 

8 ‘‘(A) the State will establish procedures to 

9 ensure that— 

10 ‘‘(i) any provider of an item or service 

11 covered under the plan that is furnished in 

12 or through an educational program or set13 ting complies with all Federal and State 

14 requirements applicable to providers of 

15 such items or services under the plan; and 

16 ‘‘(ii) any educational entity that is en17 gaged in the provision of an activity de18 scribed in paragraph (43) or any other ac19 tivity that is directly related to the admin20 istration of the plan complies with all Fed21 eral and State requirements applicable for 

22 payment for such activity; and 

23 ‘‘(B) the State will not furnish medical as24 sistance for an item or service covered under 

25 the plan in or through an educational program 


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1 or setting, or undertake any activity described 

2 in paragraph (43) or any other activity that is 

3 directly related to the administration of the 

4 plan in or through such a program or setting, 

5 unless the entity responsible for providing the 

6 item or service, or undertaking such an activity, 

7 in or through the educational program or set8 ting will be paid under the State plan for the 

9 costs related to the furnishing of such item or 

10 service or the undertaking of such activity.’’. 

11 (g) UNIFORM METHODOLOGY FOR EDUCATIONAL

12 PROGRAM OR SETTING-BASED CLAIMS.— 

13 (1) IN GENERAL.—Not later than 90 days after 

14 the date of enactment of this Act, the Secretary of 

15 Health and Human Services and the Secretary of 

16 Education, acting jointly and in consultation with 

17 State medicaid directors, State educational agencies, 

18 local educational agencies, and State agencies with 

19 responsibility for administering part C of the Indi20 viduals with Disabilities Education Act, shall develop 

21 and implement a uniform methodology for claims for 

22 payment of medical assistance and related adminis23 trative costs furnished under title XIX of the Social 

24 Security Act in an educational program or setting. 


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1 (2) REQUIREMENTS.—The methodology devel2 oped under paragraph (1)— 

3 (A) shall not prohibit or restrict payment 

4 for medical assistance and administrative activi5 ties that are provided or conducted in accord6 ance with section 1903(c) of the Social Security 

7 Act (42 U.S.C. 1396b(c)); and 

8 (B) with respect to administrative costs, 

9 shall be based on— 

10 (i) standards related to time studies 

11 and population estimates; and 

12 (ii) a national standard for deter13 mining payment for such costs. 

14 (h) EFFECTIVE DATE.—The amendments made by 

15 this section shall take effect on the date of enactment of 

16 this Act and shall apply to items and services provided 

17 and expenditures made on or after such date, without re18 gard to whether implementing regulations are in effect. 

Æ 


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