that adequate data are available to make the com-
putations required under this subsection. 
‘‘(d) NOT COUNTING INDIVIDUALS TO ACCOUNT FOR 
EXCLUDED PAYMENTS.—Under rules specified by the 
Secretary, individuals shall not be counted as Medicaid 
beneficiaries for purposes of subsection (b)(1)(B) and sub-
section (c)(2)(A) in proportion to the extent that such in-
dividuals are receiving medical assistance for which pay-
ments described under subsection (a)(4)(A) are made. 
‘‘(e) RISK ADJUSTMENT.— 
‘‘(1) IN
GENERAL.—The amount under sub-
section (a)(1)(A) shall be adjusted under this sub-
section in an appropriate manner, specified by the 
Secretary and consistent with paragraph (2), to take 
into account— 
‘‘(A) the factors described in subsection 
(c)(2)(C)(i)(I) within a category of bene-
ficiaries; and 
‘‘(B) variations in costs on a county-by- 
county basis for medical assistance and admin-
istrative expenses. 
‘‘(2) METHOD OF ADJUSTMENT.— 
‘‘(A) 
IN
GENERAL.—The 
adjustments 
under paragraph (1) shall be made in a manner 
similar to the manner in which similar adjust-
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ments are made under subsection (c)(2)(C) and 
consistent with the requirements of clause (iii) 
of such subsection and subparagraph (B). 
‘‘(B) BIANNUAL UPDATE OF RISK ADJUST-
MENT
METHODOLOGY.—In 
applying 
clause 
(i)(I) of subsection (c)(2)(C) for purposes of 
subparagraph (A), the Secretary shall, in con-
sultation with the entities described in clause 
(ii)(I) of such subsection, update the risk ad-
justment methodology applied as appropriate 
not less often than every 2 years. 
‘‘(f) CHRONIC CARE QUALITY BONUS PAYMENTS.— 
‘‘(1) DETERMINATION OF BONUS PAYMENTS.— 
If the Secretary determines that, based on the re-
ports under paragraph (5), with respect to cat-
egories of chronic disease for which chronic care per-
formance targets had been established under para-
graph (3) for each category of Medicaid beneficiaries 
specified under subsection (b)(2) such targets have 
been met by a State for a reform year, the Secretary 
shall make an additional payment to such State in 
the amount specified in paragraph (6) for each quar-
ter in the succeeding reform year. Such payments 
shall be made in a manner specified by the Secretary 
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and may only be used consistent with subsection 
(a)(3). 
‘‘(2) IDENTIFICATION
OF
CATEGORIES
OF 
CHRONIC DISEASE.—The Secretary shall determine 
the categories of chronic disease for which bonus 
payments may be available under this subsection for 
each category of Medicaid beneficiaries. 
‘‘(3) ADOPTION
OF
QUALITY
MEASUREMENT 
SYSTEM
AND
IDENTIFICATION
OF
PERFORMANCE 
TARGETS.— 
‘‘(A) SYSTEM AND DATA.—With respect to 
the categories of chronic disease under para-
graph (2), the Secretary shall adopt a quality 
measurement system that uses data described 
in paragraph (4) and is similar to the Five-Star 
Quality Rating System used to indicate the per-
formance of Medicare Advantage plans under 
part C of title XVIII. 
‘‘(B) TARGETS.—Using such system and 
data, the Secretary shall establish for each re-
form year the chronic care performance targets 
for purposes of the payments under paragraph 
(1). Such performance targets shall be estab-
lished in consultation with States, associations 
representing individuals with chronic illnesses, 
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entities providing treatment to such individuals 
for such chronic illnesses, and other stake-
holders, including the National Association of 
Medicaid Directors and the National Governors 
Association. 
‘‘(4) DATA TO BE USED.—The data to be used 
under paragraph (3) shall include— 
‘‘(A) data collected through methods such 
as— 
‘‘(i) the ‘Healthcare Effectiveness 
Data and Information Set’ (also known as 
‘HEDIS’) (or an appropriate successor 
performance measurement tool); 
‘‘(ii) the ‘Consumer Assessment of 
Healthcare Providers and Systems’ (also 
known as ‘CAHPS’) (or an appropriate 
successor performance measurement tool); 
and 
‘‘(iii) the ‘Health Outcomes Survey’ 
(also known as ‘HOS’) (or an appropriate 
successor performance measurement tool); 
and 
‘‘(B) other data collected by the State. 
‘‘(5) REPORTS.— 
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‘‘(A) IN GENERAL.—Each State shall col-
lect, analyze, and report to the Secretary, at a 
frequency and in a manner to be established by 
the Secretary, data described in paragraph (4) 
that permit the Secretary to monitor the State’s 
performance relative to the chronic care per-
formance targets established under paragraph 
(3). 
‘‘(B) REVIEW
AND
VERIFICATION.—The 
Secretary may review the data collected by the 
State under subparagraph (A) to verify the 
State’s analysis of such data with respect to the 
performance targets under paragraph (3). 
‘‘(6) AMOUNT OF BONUS PAYMENTS.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), with respect to each cat-
egory of Medicaid beneficiaries, in the case of 
a State that the Secretary determines, based on 
the chronic care performance targets set under 
paragraph (3) for a reform year for such cat-
egory, performs— 
‘‘(i) in the top five States in such cat-
egory, subject to subparagraph (C)(ii), the 
amount of the bonus for each quarter in 
the succeeding reform year shall be 10 per-
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cent of the payment amount otherwise paid 
to the State under subsection (a) for indi-
viduals enrolled under the plan within such 
category; 
‘‘(ii) in the next five States in such 
category, subject to subparagraph (C)(ii), 
the amount of the bonus for each such 
quarter shall be 5 percent of the payment 
amount otherwise paid to the State under 
subsection (a) for individuals enrolled 
under the plan within such category; 
‘‘(iii) in the next five States in such 
category, subject to clauses (i) and (iii) of 
subparagraph (C), the amount of the 
bonus for each such quarter shall be 3 per-
cent of the payment amount otherwise paid 
to the State under subsection (a) for indi-
viduals enrolled under the plan within such 
category; 
‘‘(iv) in the next five States in such 
category, subject to clauses (i) and (iii) of 
subparagraph (C), the amount of the 
bonus for each such quarter shall be 2 per-
cent of the payment amount otherwise paid 
to the State under subsection (a) for indi-
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viduals enrolled under the plan within such 
category; and 
‘‘(v) in the next five States in such 
category, subject to clauses (i) and (iii) of 
subparagraph (C), the amount of the 
bonus for each such quarter shall be 1 per-
cent of the payment amount otherwise paid 
to the State under subsection (a) for indi-
viduals enrolled under the plan within such 
category. 
‘‘(B) AGGREGATE
ANNUAL
LIMIT
FOR 
EACH
CATEGORY
OF
MEDICAID
BENE-
FICIARIES.— 
‘‘(i) IN GENERAL.—In no case may 
the aggregate amount of bonuses under 
this subsection for quarters in a reform 
year for a category of Medicaid bene-
ficiaries exceed the limit specified in clause 
(ii) for the reform year. 
‘‘(ii) LIMIT.—The limit specified in 
this clause— 
‘‘(I) for the second reform year is 
equal to $250,000,000; or 
‘‘(II) for a subsequent reform 
year is equal to the limit specified in 
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this clause for the previous reform 
year increased by the per beneficiary 
percentage increase determined under 
paragraph (1)(E) of subsection (c). 
‘‘(C) LIMITATION AND PRORATION OF BO-
NUSES BASED ON APPLICATION OF AGGREGATE 
LIMIT.— 
‘‘(i) NO BONUS FOR THIRD OR SUBSE-
QUENT TIERS UNLESS AGGREGATE LIMIT 
NOT REACHED ON FIRST TWO TIERS.—No 
bonus shall be payable under clause (iii), 
(iv), or (v) of subparagraph (A) for a cat-
egory of Medicaid beneficiaries for a quar-
ter in a reform year unless the aggregate 
amount of bonuses under clauses (i) and 
(ii) of such subparagraph for such category 
and reform year is less than the limit spec-
ified in subparagraph (B)(ii) for the re-
form year. 
‘‘(ii) PRORATION
FOR
FIRST
TWO 
TIERS.—If the aggregate amount of bo-
nuses under clauses (i) and (ii) of subpara-
graph (A) for a category of Medicaid bene-
ficiaries for quarters in a reform year ex-
ceeds the limit specified in subparagraph 
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(B)(ii) for the reform year, the amount of 
each such bonus shall be prorated in a 
manner so the aggregate amount of such 
bonuses is equal to such limit. 
‘‘(iii) PRORATION FOR NEXT THREE 
TIERS.—If the aggregate amount of bo-
nuses under clauses (i) and (ii) of subpara-
graph (A) for a category of Medicaid bene-
ficiaries for quarters in a reform year is 
less than the limit specified in subpara-
graph (B)(ii) for the reform year, but the 
aggregate amount of bonuses under clauses 
(i) through (v) of subparagraph (A) for the 
category and such quarters in the reform 
year exceeds the limit specified in subpara-
graph (B)(ii) for the reform year, the 
amount of each bonus in clauses (iii), (iv), 
and (v) of subparagraph (A) shall be pro-
rated in a manner so the aggregate 
amount of all the bonuses under subpara-
graph (A) is equal to such limit. 
‘‘(g) STATE OPTION FOR RECEIVING MEDICARE PAY-
MENTS FOR FULL-BENEFIT DUAL ELIGIBLE INDIVID-
UALS.— 
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‘‘(1) IN
GENERAL.—Under this subsection a 
State may elect for quarters beginning on or after 
the implementation date in a reform year to receive 
payment from the Secretary under paragraph (3). 
As a condition of receiving such payment, the State 
shall agree to provide to full-benefit dual eligible in-
dividuals eligible for medical assistance under the 
State plan— 
‘‘(A) the medical assistance to which such 
eligible individuals would otherwise be entitled 
under this title; and 
‘‘(B) any items and services which such eli-
gible individuals would otherwise receive under 
title XVIII. 
‘‘(2) PROVIDER PAYMENT REQUIREMENT.— 
‘‘(A) IN GENERAL.—A State electing the 
option under this subsection shall provide pay-
ment to health care providers for the items and 
services described under paragraph (1)(B) at a 
rate that is not less than the rate at which pay-
ments would be made to such providers for such 
items and services under title XVIII. 
‘‘(B) FLEXIBILITY
IN
PAYMENT
METH-
ODS.—Nothing in subparagraph (A) shall be 
construed as preventing a State from using al-
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ternative payment methodologies (such as bun-
dled payments or the use of accountable care 
organizations (as such term is used in section 
1899)) for purposes of making payments to 
health care providers for items and services pro-
vided to dual eligible individuals in the State 
under the option under this subsection. 
‘‘(3) PAYMENTS TO STATES IN LIEU OF MEDI-
CARE
PAYMENTS.—With respect to a full-benefit 
dual eligible individual, in the case of a State that 
elects the option under paragraph (1) for quarters in 
a reform year— 
‘‘(A) the Secretary shall not make any pay-
ment under title XVIII for items and services 
furnished to such individual for such quarters; 
and 
‘‘(B) the Secretary shall pay to the State, 
in addition to the amounts paid to such State 
under subsection (a), the amount that the Sec-
retary would, but for this subsection, otherwise 
pay under title XVIII for items and services 
furnished to such an individual in such State 
for such quarters. 
‘‘(4) FULL-BENEFIT
DUAL
ELIGIBLE
INDI-
VIDUAL
DEFINED.—In this subsection, the term 
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‘full-benefit dual eligible individual’ means an indi-
vidual who meets the requirements of section 
1935(c)(6)(A)(ii). 
‘‘(h) AUDITS.—The Secretary shall conduct such au-
dits on the number and classification of Medicaid bene-
ficiaries under such subsections and expenditures under 
this section as may be necessary to ensure appropriate 
payments under this section. 
‘‘(i) TREATMENT OF WAIVERS.— 
‘‘(1) NO IMPACT ON CURRENT WAIVERS.—In 
the case of a waiver of requirements of this title pur-
suant to section 1115 or other law that is in effect 
as of the date of the enactment of this section, noth-
ing in this section shall be construed to affect such 
waiver for the period of the waiver as approved as 
of such date. 
‘‘(2) APPLICATION OF BUDGET NEUTRALITY TO 
SUBSEQUENT WAIVERS AND RENEWALS TAKING SEC-
TION INTO ACCOUNT.—In the case of a waiver of re-
quirements of this title pursuant to section 1115 or 
other law that is approved or renewed after the date 
of the enactment of this section, to the extent that 
such approval or renewal is conditioned upon a dem-
onstration of budget neutrality, budget neutrality 
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shall be determined taking into account the applica-
tion of this section. 
‘‘(j) REPORT TO CONGRESS.—Not later than Janu-
ary 1 of the second reform year, the Secretary shall submit 
to Congress a report on the implementation of this section. 
‘‘(k) DEFINITIONS.—In this section: 
‘‘(1) IMPLEMENTATION DATE.—The term ‘im-
plementation date’ means— 
‘‘(A) July 1, 2015, if this section is en-
acted on or before July 1, 2014; or 
‘‘(B) July 1, 2016, if this section is en-
acted after July 1, 2014. 
‘‘(2) REFORM YEARS.— 
‘‘(A) The term ‘reform year’ means a fiscal 
year beginning with the first reform year. 
‘‘(B) The term ‘first reform year’ means 
the fiscal year in which the implementation date 
occurs. 
‘‘(C) The terms ‘second’, ‘third’, and suc-
cessive similar terms mean, with respect to a 
reform year, the second, third, or successive re-
form year, respectively, succeeding the first re-
form year.’’. 
(b) CONFORMING AMENDMENTS.— 
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(1) CONTINUED
APPLICATION
OF
CLAWBACK 
PROVISIONS.— 
(A) 
CONTINUED
APPLICATION.—Sub-
sections (a) and (c)(1)(C) of section 1935 of 
such Act (42 U.S.C. 1396u–5) are each amend-
ed by inserting ‘‘or 1903A(a)’’ after ‘‘1903(a)’’. 
(B) 
TECHNICAL
AMENDMENT.—Section 
1935(d)(1) of the Social Security Act (42 
U.S.C. 1396u–5(d)(1)) is amended by inserting 
‘‘except as provided in section 1903A(g)’’ after 
‘‘any other provision of this title’’. 
(2) PAYMENT RULES UNDER SECTION 1903.— 
(A) Section 1903(a) of such Act (42 
U.S.C. 1396b(a)) is amended, in the matter be-
fore paragraph (1), by inserting ‘‘and section 
1903A’’ after ‘‘except as otherwise provided in 
this section’’. 
(B) Section 1903(d) of such Act (42 
U.S.C. 1396b(d)) is amended— 
(i) in paragraph (1), by inserting 
‘‘and under section 1903A’’ after ‘‘sub-
sections (a) and (b)’’; 
(ii) in paragraph (2)— 
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(I) in subparagraph (A), by in-
serting ‘‘or section 1903A’’ after ‘‘was 
made under this section’’; and 
(II) in subparagraph (B), by in-
serting ‘‘or section 1903A’’ after 
‘‘under subsection (a)’’; 
(iii) in paragraph (4)— 
(I) by striking ‘‘under this sub-
section’’ and inserting ‘‘, with respect 
to this section or section 1903A, 
under this subsection’’; and 
(II) by striking ‘‘under this sec-
tion’’ and inserting ‘‘under the respec-
tive section’’; and 
(iv) in paragraph (5), by inserting ‘‘or 
section 1903A’’ after ‘‘overpayment under 
this section’’. 
(3) CONFORMING WAIVER AUTHORITY.—Section 
1115(a)(2)(A) of the Social Security Act (42 U.S.C. 
1315(a)(2)(A)) is amended by striking ‘‘or 1903’’ 
and inserting ‘‘1903, or 1903A’’. 
(4) REPORT
ON
ADDITIONAL
CONFORMING 
AMENDMENTS NEEDED.—Not later than 6 months 
after the date of the enactment of this Act, the Sec-
retary of Health and Human Services shall submit 
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to Congress a report that includes a description of 
any additional technical and conforming amend-
ments to law that are required to properly carry out 
this Act. 
Æ 
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