1253
vious sentence, such an entity may be a college or univer-
sity, a State agency, a legislative branch agency in a State,
or an independent contractor.
‘‘(c) RESEARCH
DESIGN.—Each such evaluation
shall be conducted in accordance with a research design
that is based on generally accepted models of survey de-
sign and sampling and statistical analysis.
‘‘SEC. 2104. DESCRIPTION OF PROCESS FOR MEDIGRANT
PLAN DEVELOPMENT.
‘‘Each MediGrant plan shall include a description of
the process under which the plan shall be developed and
implemented in the State (consistent with section 2105).
‘‘SEC. 2105. CONSULTATION IN MEDIGRANT PLAN DEVELOP-
MENT.
‘‘(a) PUBLIC NOTICE PROCESS.—
‘‘(1) 
IN
GENERAL.—Before 
submitting 
a
MediGrant plan or a plan amendment described in
paragraph (3) to the Secretary under part E, a
State shall provide—
‘‘(A) public notice respecting the submittal
of the proposed plan or amendment, including
a general description of the plan or amendment;
‘‘(B) a means for the public to inspect or
obtain a copy (at reasonable charge) of the pro-
posed plan or amendment; and
1254
‘‘(C) an opportunity for submittal and con-
sideration of public comments on the proposed
plan or amendment.
The previous sentence shall not apply to a revision
of a MediGrant plan (or revision of an amendment
to a plan) made by a State under section 2154(c)(1)
or to a plan amendment withdrawal described in sec-
tion 2152(c)(4).
‘‘(2) CONTENTS OF NOTICE.—A notice under
paragraph (1)(A) for a proposed plan or amendment
shall include a description of—
‘‘(A) the general purpose of the proposed
plan or amendment (including applicable effec-
tive dates),
‘‘(B) where the public may inspect the pro-
posed plan or amendment,
‘‘(C) how the public may obtain a copy of
the proposed plan or amendment and the appli-
cable charge (if any) for the copy, and
‘‘(D) how the public may submit comments
on the proposed plan or amendment, including
any deadlines applicable to consideration of
such comments.
‘‘(3) AMENDMENTS
DESCRIBED.—An amend-
ment to a MediGrant plan described in this para-
1255
graph is an amendment which makes a material and
substantial change in eligibility under the MediGrant
plan or the benefits provided under the plan.
‘‘(4) PUBLICATION.—Notices under this sub-
section may be published (as selected by the State)
in one or more daily newspapers of general circula-
tion in the State or in any publication used by the
State to publish State statutes or rules.
‘‘(5) COMPARABLE PROCESS.—A separate no-
tice, or notices, shall not be required under this sub-
section for a State if notice of the MediGrant plan
or an amendment to the plan will be provided under
a process specified in State law that is substantially
equivalent to the notice process specified in this sub-
section.
‘‘(b) ADVISORY COMMITTEE.—
‘‘(1) 
IN
GENERAL.—Each 
State 
with 
a
MediGrant plan shall establish and maintain an ad-
visory committee.
‘‘(2) CONSULTATION.—The State shall periodi-
cally consult with the advisory committee in the de-
velopment, revision, and monitoring the performance
of the MediGrant plan, including—
1256
‘‘(A) the development of strategic objec-
tives and performance goals under section
2101,
‘‘(B) the annual report under section
2102, and
‘‘(C) the research design under section
2103(c).
‘‘(3) GEOGRAPHIC
DIVERSITY.—The composi-
tion of the advisory committee shall be chosen in a
manner that assures some representation on the ad-
visory committee of the different general geographic
regions of the State. Nothing in the previous sen-
tence shall be construed as requiring proportional
representation of geographic areas in a State.
‘‘(4) CONSTRUCTION.—Nothing in this title
shall be construed as preventing a State from estab-
lishing more than one advisory committee, including
specialized advisory committees that represent the
interests of specific population groups, provider
groups, or geographic areas.
‘‘SEC. 2106. MEDIGRANT TASK FORCE.
‘‘(a) IN GENERAL.—The Secretary shall provide for
the establishment of a MediGrant Task Force (in this sec-
tion referred to as the ‘Task Force’).
1257
‘‘(b) COMPOSITION.—The Task Force shall consist of
6 members appointed by the chair of the National Gov-
ernors Association and 6 members appointed by the vice
chair of the National Governors Association.
‘‘(c) ADVISORY GROUP FOR TASK FORCE.—The Sec-
retary shall provide for the establishment of an advisory
group to assist the Task Force in carrying out its duties
under this section, consisting of one representative ap-
pointed by each of the following associations:
‘‘(1) National Committee for Quality Assur-
ance.
‘‘(2) Joint Commission for the Accreditation of
Healthcare Organizations.
‘‘(3) Group Health Association of America.
‘‘(4) American Managed Care and Review Asso-
ciation.
‘‘(5) Association of State and Territorial Health
Officers.
‘‘(6) American Medical Association.
‘‘(7) American Hospital Association.
‘‘(8) American Dental Association.
‘‘(9) American College of Gerontology.
‘‘(10) American Health Care Association.
‘‘(11) An association identified by the Secretary
as representing the interests of disabled individuals.
1258
‘‘(12) An association identified by the Secretary
as representing the interests of children.
‘‘(13) An association identified by the Secretary
as representing the interests of the elderly.
‘‘(14) An association identified by the Secretary
as representing the interests of mentally ill individ-
uals.
Any reference in this subsection to a particular group shall
be deemed a reference to any successor to such group.
‘‘(d) DUTIES.—
‘‘(1) FORMAT FOR EXPENDITURE AND UTILIZA-
TION SUMMARIES.—The Task Force shall specify, by
not later than December 31, 1996, the format of ex-
penditure summaries and utilization summaries re-
quired under section 2102. Such format may provide
for the reporting of different information from that
required under section 2102(a), but shall include the
reporting of at least the information described in
section 2102(b)(1)(A)(i).
‘‘(2) MODELS AND SUGGESTIONS.—The Task
Force shall study and report to Congress and the
States, by not later than April 1, 1997, rec-
ommendations on the following:
‘‘(A) Recommended models for strategic
objectives and performance goals for consider-
1259
ation by States in the development of such ob-
jectives and goals under section 2102, including
alternative models for each of the objectives and
goals described in section 2101(b).
‘‘(B) For each suggested model for a stra-
tegic objective or performance goal suggested
methodologies for States to consider in measur-
ing and verifying the objective or goal.
‘‘(C) An assessment of the potential useful-
ness to States of quality assurance safeguards,
utilization data sets, and accreditation pro-
grams that are used or under development in
the private sector.
‘‘(D) Recommended designs and evaluation
methodologies for consideration by States in
providing for independent evaluations under
section 2103.
‘‘(3) CONSTRUCTION.—Nothing in this sub-
section shall be construed as requiring a State to
adopt any of the strategic objectives or performance
goals suggested under paragraph (2).
‘‘(e) ADMINISTRATIVE ASSISTANCE.—Administrative
support for the Task Force shall be provided by the Agen-
cy for Health Care Policy and Research (or, in the absence
of such Agency, the Secretary).
1260
‘‘PART B—ELIGIBILITY, BENEFITS, AND SET-ASIDES
‘‘SEC. 2111. GENERAL DESCRIPTION OF ELIGIBILITY AND
BENEFITS.
‘‘(a) IN GENERAL.—Each MediGrant plan shall in-
clude a description (consistent with this title) of the fol-
lowing:
‘‘(1) ELIGIBLE POPULATION.—The population
eligible for medical assistance under the plan, in-
cluding—
‘‘(A) any limitations on categories of such
individuals;
‘‘(B) any limitations as to the duration of
eligibility;
‘‘(C) any eligibility standards relating to
age, income (including any standards relating
to spenddowns), residency, resources, disability
status, immigration status, or employment sta-
tus of individuals;
‘‘(D) methods of establishing (and continu-
ing) eligibility and enrollment (including the
methodology for computing family income);
‘‘(E) the eligibility standards in the plan
that protect the income and resources of a mar-
ried individual who is living in the community
and whose spouse is residing in an institution
1261
in order to prevent the impoverishment of the
community spouse; and
‘‘(F) any other standards relating to eligi-
bility for medical assistance under the plan.
‘‘(2) SCOPE OF ASSISTANCE.—The amount, du-
ration, and scope of health care services and items
covered under the plan, including differences among
different eligible population groups.
‘‘(3) DELIVERY
METHOD.—The State’s ap-
proach to delivery of medical assistance, including a
general description of—
‘‘(A) the use (or intended use) of vouchers,
fee-for-service, or managed care arrangements
(such as capitated health care plans, case man-
agement, and case coordination), and
‘‘(B) utilization control systems.
‘‘(4) FEE-FOR-SERVICE BENEFITS.—To the ex-
tent that medical assistance is furnished on a fee-
for-service basis—
‘‘(A) how the State determines the quali-
fications of health care providers eligible to pro-
vide such assistance, and
‘‘(B) how the State determines rates of re-
imbursement for providing such assistance.
1262
‘‘(5) COST-SHARING.—Beneficiary cost-sharing
(if any), including variations in such cost-sharing by
population group or type of service and financial re-
sponsibilities of parents of recipients under 21 years
of age and the spouses of recipients.
‘‘(6) UTILIZATION INCENTIVES.—Incentives or
requirements (if any) to encourage the appropriate
utilization of services.
‘‘(7) TREATMENT OF HEALTH CENTERS.—
‘‘(A) IN GENERAL.—In the case of a State
in which one or more health centers is located,
the MediGrant plan shall include a description
of—
‘‘(i) what provision (if any) has been
made for payment for items and services
furnished by health centers, and
‘‘(ii) the manner in which medical as-
sistance for low-income eligible individuals
who received health care services at health
centers on or before the date of the enact-
ment of this title may be provided, as de-
termined by the State in consultation with
the health centers in the State.
1263
‘‘(B) HEALTH
CENTER
DEFINED.—For
purposes of subparagraph (A), the term ‘health
center’ means an entity that—
‘‘(i) is receiving a grant under section
329, 330, 340, or 340A of the Public
Health Service Act; or
‘‘(ii) based on the recommendation of
the Health Resources and Services Admin-
istration within the Public Health Service,
was determined by the Secretary to meet
the requirements to receive such a grant.
‘‘(8) SUPPORT FOR CERTAIN HOSPITALS.—
‘‘(A) IN GENERAL.—With respect to hos-
pitals described in subparagraph (B) located in
the State, the MediGrant plan shall includes a
description—
‘‘(i) of the extent to which provisions
have been made for expenditures for items
and services furnished by such hospitals
and covered under the plan, and
‘‘(ii) for individuals who (I) are en-
rolled for benefits for covered services
under the MediGrant plan and (II) were
previously receiving benefits for such serv-
ices under the medicaid program by or
1264
through such hospitals, where or how they
will receive benefits for such services under
the MediGrant plan if the MediGrant plan
does not permit such individuals to obtain
benefits for those services by or through
such hospitals.
‘‘(B) HOSPITALS
DESCRIBED.—For pur-
poses of subparagraph (A), a hospital described
in this subparagraph is a subsection (d) hos-
pital (as defined in section 1886(d)(1)(B)) that
is described in clauses (i) and (ii) of section
340B(a)(4)(L) of the Public Health Service
Act.
‘‘(b) 
IMMUNIZATIONS
FOR
CHILDREN.—The
MediGrant plan shall provide medical assistance for im-
munizations for children eligible for any medical assist-
ance under the MediGrant plan, in accordance with a
schedule for immunizations established by the Health De-
partment of the State in consultation with the individuals
and entities in the State responsible for the administration
of the plan.
‘‘(c) EQUAL PAYMENT RATES FOR RURAL PROVID-
ERS.—A State with a MediGrant plan shall establish pay-
ment rates for all services of rural providers that are com-
parable to the payment rates established for like services
1265
of such type of providers not in rural areas; except that
a State may provide for incentive payments to attract and
retain providers to medically underserved areas.
‘‘(d) PREEXISTING CONDITION EXCLUSIONS.—Not-
withstanding any other provision of this title—
‘‘(1) a MediGrant plan may not deny or exclude
coverage of any item or service for an eligible indi-
vidual for benefits under the MediGrant plan for
such item or service on the basis of a preexisting
condition; and
‘‘(2) if a State contracts or makes other ar-
rangements (through the eligible individual or
through another entity) with a capitated health care
organization, insurer, or other entity, for the provi-
sion of items or services to eligible individuals under
the MediGrant plan and the State permits such or-
ganization, insurer, or other entity to exclude cov-
erage of a covered item or service on the basis of a
preexisting condition, the State shall provide,
through its MediGrant plan, for such coverage
(through direct payment or otherwise) for any such
covered item or service denied or excluded on the
basis of a preexisting condition.
1266
‘‘SEC. 2112. SET-ASIDES OF FUNDS FOR POPULATION
GROUPS.
‘‘(a) FOR TARGETED LOW-INCOME FAMILIES.—
‘‘(1) IN GENERAL.—Subject to subsection (e), a
MediGrant plan shall provide that the amount of
funds expended under the plan for medical assist-
ance for targeted low-income families (as defined in
paragraph (3)) for a fiscal year shall be not less
than the minimum low-income-family percentage
specified in paragraph (2) of the total funds ex-
pended under the plan for all medical assistance for
the fiscal year.
‘‘(2) MINIMUM LOW-INCOME-FAMILY PERCENT-
AGE.—The minimum low-income-family percentage
specified in this paragraph for a State is equal to 85
percent of the average percentage of the expendi-
tures under title XIX for medical assistance in the
State during Federal fiscal years 1992 through 1994
which were attributable to expenditures for medical
assistance for mandated benefits (as defined in sub-
section (h)) furnished to individuals—
‘‘(A) who (at the time of furnishing the as-
sistance) were under 65 years of age,
‘‘(B) whose coverage (at such time) under
a State plan under title XIX was required
under Federal law, and
1267
‘‘(C) whose eligibility for such coverage (at
such time) was not on a basis directly related
to disability status (including being blind).
‘‘(3) TARGETED
LOW-INCOME
FAMILY
DE-
FINED.—In this subsection, the term ‘targeted low-
income family’ means a family (which may be an in-
dividual)—
‘‘(A) which includes a child or a pregnant
woman, and
‘‘(B) the income of which does not exceed
185 percent of the poverty line applicable to a
family of the size involved.
‘‘(b) FOR LOW-INCOME ELDERLY.—
‘‘(1) SET-ASIDES.—Subject to subsection (e)—
‘‘(A) GENERAL SET-ASIDE.—A MediGrant
plan shall provide that the amount of funds ex-
pended under the plan for medical assistance
for eligible low-income individuals 65 years of
age or older for a fiscal year shall be not less
than the minimum low-income-elderly percent-
age specified in paragraph (2)(A) of the total
funds expended under the plan for all medical
assistance for the fiscal year.
‘‘(B) SET-ASIDE FOR MEDICARE PREMIUM
ASSISTANCE.—A MediGrant plan shall provide
1268
that the amount of funds expended under the
plan for medical assistance for medicare cost-
sharing described in section 2171(c)(1) for a
fiscal year shall be not less than the minimum
medicare premium assistance percentage speci-
fied in paragraph (2)(B) of the total funds ex-
pended under the plan for all medical assistance
for the fiscal year.
‘‘(2) MINIMUM PERCENTAGES.—
‘‘(A) FOR GENERAL SET-ASIDE.—The min-
imum low-income-elderly percentage specified in
this subparagraph for a State is equal to 85
percent of the average percentage of the ex-
penditures under title XIX for medical assist-
ance in the State during Federal fiscal years
1992 through 1994 which was attributable to
expenditures for medical assistance for man-
dated benefits furnished to individuals—
‘‘(i) whose eligibility for such assist-
ance was based on their being 65 years of
age or older; and
‘‘(ii)(I) whose coverage (at such time)
under a State plan under title XIX was re-
quired under Federal law, or (II) who (at
1269
such time) were residents of a nursing fa-
cility.
‘‘(B) FOR SET-ASIDE FOR MEDICARE PRE-
MIUM
ASSISTANCE.—The minimum medicare
premium assistance percentage specified in this
subparagraph for a State is equal to 85 percent
of the average percentage of the expenditures
under title XIX for medical assistance in the
State during Federal fiscal years 1992 through
1994 which was attributable to expenditures for
medical assistance for medicare premiums de-
scribed in section 1905(p)(3)(A) for individuals
whose coverage (at such time) for such assist-
ance for such premiums under a State plan
under title XIX was required under Federal
law.
‘‘(c) FOR LOW-INCOME DISABLED PERSONS.—
‘‘(1) IN GENERAL.—Subject to subsection (e), a
MediGrant plan shall provide that the percentage of
funds expended under the plan for medical assist-
ance for eligible low-income individuals who are
under 65 years of age and are eligible for such as-
sistance on the basis of a disability (including being
blind) for a fiscal year is not less than the minimum
low-income-disabled percentage specified in para-
1270
graph (2) of the total funds expended under the plan
for medical assistance for the fiscal year.
‘‘(2) MINIMUM
LOW-INCOME-DISABLED
PER-
CENTAGE.—The minimum low-income-disabled per-
centage specified in this paragraph for a State is
equal to 85 percent of the average percentage of the
expenditures under title XIX for medical assistance
in the State during Federal fiscal years 1992
through 1994 which was attributable to expenditures
for medical assistance for mandated benefits fur-
nished to individuals—
‘‘(A) whose coverage (at such time) under
a State plan under title XIX was required
under Federal law, and
‘‘(B) whose coverage (at such time) was on
a basis directly related to disability status (in-
cluding being blind).
‘‘(d) USE OF RESIDUAL FUNDS.—
‘‘(1) IN GENERAL.—Subject to limitations on
payment under section 2123, any funds not required
to be expended under the set-asides under the pre-
vious subsections may be expended under the
MediGrant plan for any of the following:
‘‘(A) ADDITIONAL MEDICAL ASSISTANCE.—
Medical assistance for eligible low-income indi-
1271
viduals (as defined in section 2171(b)), in addi-
tion to any medical assistance made available
under a previous subsection.
‘‘(B) MEDICALLY-RELATED
SERVICES.—
Payment for medically-related services (as de-
fined in paragraph (2)).
‘‘(C) ADMINISTRATION.—Payment for the
administration of the MediGrant plan.
‘‘(2) 
MEDICALLY-RELATED
SERVICES
DE-
FINED.—In this title, the term ‘medically-related
services’ means services reasonably related to, or in
direct support of, the State’s attainment of one or
more of the strategic objectives and performance
goals established under section 2101, but does not
include items and services included on the list under
section 2171(a)(1) (relating to the definition of med-
ical assistance).
‘‘(e) EXCEPTIONS TO MINIMUM SET-ASIDES.—
‘‘(1) ALTERNATIVE MINIMUM SET-ASIDES.—
‘‘(A) IN GENERAL.—A State may provide
in its MediGrant plan (through an amendment
to the plan) for a lower dollar amount of ex-
penditures than the minimum amounts specified
in any (or all) of paragraphs (2) of subsections
1272
(a), (b), and (c) if State determines (and cer-
tifies to the Secretary) that—
‘‘(i) the health care needs of the low-
income populations described in paragraph
(1) of the respective subsection who are eli-
gible for medical assistance under the plan
during the previous fiscal year (or medi-
care premium assistance needs described in
subsection (b)(1)(B)) can be reasonably
met without the expenditure of the
amounts otherwise required to be ex-
pended, and
‘‘(ii) the performance goals estab-
lished under section 2101 relating to the
respective population can reasonably be
met with such lower amount of funds ex-
pended.
‘‘(B) PERIOD OF APPLICATION.—The de-
termination and certification under subpara-
graph (A) shall be made for such period as a
State may request, but may not be made for a
period of more than 3 consecutive Federal fiscal
years (beginning with the first fiscal year for
which the lower amount is sought). A new de-
termination and certification must be made
1273
under such paragraph for any subsequent pe-
riod.
‘‘(C) NO EXCEPTION PERMITTED BEFORE
FISCAL YEAR 1998.—This paragraph may not
apply with respect to a State for a fiscal year
before fiscal year 1998.
‘‘(2) INDEPENDENT CERTIFICATION OF COMPLI-
ANCE WITH GOALS.—
‘‘(A) IN GENERAL.—For purposes of sec-
tion 2151(c), a MediGrant plan shall not be
considered to be in substantial violation of the
requirements of this section if the amount of
actual State expenditures specified in any (or
all) of paragraphs (1) of subsections (a), (b),
and (c) is lower than the minimum amounts
specified in any (or all) of paragraphs (2) of
subsections (a), (b), and (c) if an independent
actuary determines and certifies to the State
that the MediGrant plan is reasonably designed
to result in a level of expenditures which is con-
sistent with the requirements of such sub-
sections.
‘‘(B) LIMIT
ON
VARIATION.—Subpara-
graph (A) shall not apply in the case of a
MediGrant plan for which the actual State ex-
1274
penditures described in any (or all) of para-
graphs (1) of subsections (a), (b), and (c) are
less than 95 percent of the expenditures which
would be made if the amount of State expendi-
tures specified in any (or all) of such para-
graphs was equal to the applicable minimum
amount specified in any (or all) of paragraphs
(2) of subsections (a), (b), and (c).
‘‘(3) TREATMENT
OF
STATES
WITH
NO
OP-
TIONAL BENEFITS.—In the case of a State for which
all expenditures under title XIX for medical assist-
ance in the State during Federal fiscal years 1992
through 1994 were expenditures for medical assist-
ance for mandated benefits, ‘75 percent’ shall be
substituted for ‘85 percent’ each place it appears in
paragraphs (2) of subsections (a), (b), and (c).
‘‘(f) COMPUTATIONS.—
‘‘(1) MINIMUM
PERCENTAGES.—States shall
calculate the minimum percentages under sub-
sections (a)(2), (b)(2), and (c)(2) in a reasonable
manner consistent with reports submitted to the
Secretary for the fiscal years involved.
‘‘(2) EXCLUSION OF PAYMENTS FOR CERTAIN
ALIENS.—For purposes of this section, medical as-
sistance attributable to the exception provided under
1275
section 1903(v)(2) shall not be considered to be ex-
penditures for medical assistance.
‘‘(g) BENEFITS INCLUDED FOR PURPOSES OF COM-
PUTING SET ASIDES.—In this section, the term ‘man-
dated benefits’—
‘‘(1) means medical assistance for items and
services described in section 1905(a) to the extent
such assistance with respect to such items and serv-
ices was required to be provided under title XIX,
‘‘(2) includes medical assistance for medicare
cost-sharing only to the extent such assistance was
required 
to 
be 
provided 
under 
section
1902(a)(10)(E), and
‘‘(3) does not include medical assistance attrib-
utable to disproportionate share payment adjust-
ments described in section 1923.
‘‘SEC. 2113. PREMIUMS AND COST-SHARING.
‘‘(a) IN GENERAL.—Subject to subsection (b), if any
charges are imposed under the MediGrant plan for cost-
sharing (as defined in subsection (d)), such cost-sharing
shall be pursuant to a public cost-sharing schedule.
‘‘(b) LIMITATION ON PREMIUM AND CERTAIN COST-
SHARING FOR LOW-INCOME FAMILIES INCLUDING CHIL-
DREN OR PREGNANT WOMEN.—
1276
‘‘(1) IN GENERAL.—In the case of a family de-
scribed in paragraph (2)—
‘‘(A) the plan shall not impose any pre-
mium, and
‘‘(B) the plan shall not (except as provided
in subsection (c)(1)) impose any cost-sharing
with respect to primary and preventive care
services (as defined by the State) covered under
the MediGrant plan for children or pregnant
women unless such cost-sharing is nominal in
nature.
‘‘(2) FAMILY DESCRIBED.—A family described
in this paragraph is a family (which may be an indi-
vidual) which—
‘‘(A) includes a child or a pregnant
woman,
‘‘(B) is made eligible for medical assistance
under the MediGrant plan, and
‘‘(C) the income of which does not exceed
100 percent of the poverty line applicable to a
family of the size involved.
‘‘(c) CERTAIN COST-SHARING PERMITTED.—Nothing
in this section shall be construed as preventing a
MediGrant plan (consistent with subsection (b))—
1277
‘‘(1) from imposing cost-sharing to discourage
the inappropriate use of emergency medical services
(delivered through a hospital emergency room, a
medical transportation provider, or otherwise);
‘‘(2) from imposing premiums and cost-sharing
differentially in order to encourage the use of pri-
mary and preventive care and discourage unneces-
sary or less economical care;
‘‘(3) from scaling cost-sharing in a manner that
reflects economic factors, employment status, and
family size;
‘‘(4) from scaling cost-sharing based on the
availability to the individual or family of other
health insurance coverage; or
‘‘(5) from scaling cost-sharing based on partici-
pation in employment training program, drug or al-
cohol abuse treatment, counseling programs, or
other programs promoting personal responsibility.
‘‘(d) COST-SHARING DEFINED.—In this section, the
term ‘cost-sharing’ includes copayments, deductibles, coin-
surance, and other charges for the provision of health care
services.
1278
‘‘SEC. 2114. DESCRIPTION OF PROCESS FOR DEVELOPING
CAPITATION PAYMENT RATES.
‘‘(a) IN GENERAL.—If a State contracts (or intends
to contract) with a capitated health care organization (as
defined in subsection (c)(1)) under which the State makes
a capitation payment (as defined in subsection (c)(2)) to
the organization for providing or arranging for the provi-
sion of medical assistance under the MediGrant plan for
a group of services (including at least inpatient hospital
services and physicians’ services), the plan shall include
a description of the following:
‘‘(1) USE OF ACTUARIAL SCIENCE.—The extent
and manner in which the State uses actuarial
science—
‘‘(A) to analyze and project health care ex-
penditures and utilization for individuals en-
rolled (or to be enrolled) in such an organiza-
tion under the MediGrant plan, and
‘‘(B) to develop capitation payment rates,
including a brief description of the general
methodologies used by actuaries.
‘‘(2) QUALIFICATIONS
OF
ORGANIZATIONS.—
The general qualifications (including any accredita-
tion, State licensure or certification, or provider net-
work standards) required by the State for participa-
1279
tion of capitated health care organizations under the
MediGrant plan.
‘‘(3) DISSEMINATION
PROCESS.—The process
used by the State under subsection (b) and other-
wise to disseminate, before entering into contracts
with capitated health care organizations, actuarial
information to such organizations on the historical
fee-for-service costs (or, if not available, other recent
financial data associated with providing covered
services) and utilization associated with individuals
described in paragraph (1)(A).
‘‘(b) PUBLIC NOTICE AND COMMENT.—Under the
MediGrant plan the State shall provide a process for pro-
viding, before the beginning of each contract year—
‘‘(1) public notice of—
‘‘(A) the amounts of the capitation pay-
ments (if any) made under the plan for the con-
tract year preceding the public notice, and
‘‘(B)(i) the information described under
subsection (a)(1) with respect to capitation pay-
ments for the contract year involved or (ii) the
amounts of the capitation payments the State
expects to make for the contract year involved,
1280
unless such information is designated as proprietary
and not subject to public disclosure under State law;
and
‘‘(2) an opportunity for receiving public com-
ment on the amounts and information for which no-
tice is provided under paragraph (1).
‘‘(c) DEFINITIONS.—In this title:
‘‘(1) CAPITATED
HEALTH
CARE
ORGANIZA-
TION.—The term ‘capitated health care organiza-
tion’ means a health maintenance organization or
any other entity (including a health insuring organi-
zation, managed care organization, prepaid health
plan, integrated service network, or similar entity)
which under State law is permitted to accept capita-
tion payments for providing (or arranging for the
provision of) a group of items and services including
at least inpatient hospital services and physicians’
services.
‘‘(2) CAPITATION PAYMENT.—The term ‘capita-
tion payment’ means, with respect to payment, pay-
ment on a prepaid capitation basis or any other risk
basis to an entity for the entity’s provision (or ar-
ranging for the provision) of a group of items and
services (including at least inpatient hospital services
and physicians’ services).
1281
‘‘SEC. 2115. CONSTRUCTION.
‘‘(a) NO FEDERAL ENTITLEMENT.—Nothing in this
title (including section 2112) shall be construed as creat-
ing an entitlement under Federal law in any individual
or category of individuals for medical assistance under a
MediGrant plan.
‘‘(b) STATE FLEXIBILITY IN BENEFITS, PROVIDER
PAYMENTS, GEOGRAPHICAL COVERAGE AREA, AND SE-
LECTION OF PROVIDERS.—Nothing in this title (other
than section 2111(b)) shall be construed as requiring a
State—
‘‘(1) to provide medical assistance for any par-
ticular items or services;
‘‘(2) subject to section 2111(c), to provide for
any payments with respect to any specific health
care providers or any level of payments for any serv-
ices;
‘‘(3) to provide for the same medical assistance
in all geographical areas or political subdivisions of
the State;
‘‘(4) to provide that the medical assistance
made available to any individual eligible for medical
assistance must not be less in amount, duration, or
scope than the medical assistance made available to
any other such individual; or
1282
‘‘(5) to provide that any individual eligible for
medical assistance with respect to an item or service
may choose to obtain such assistance from any insti-
tution, agency, or person qualified to provide the
item or service.
‘‘(c) STATE FLEXIBILITY WITH RESPECT TO MAN-
AGED CARE.—Nothing in this title shall be construed—
‘‘(1) to limit a State’s ability to contract with,
on a capitated basis or otherwise, health care plans
or individual health care providers for the provision
or arrangement of medical assistance;
‘‘(2) to limit a State’s ability to contract with
health care plans or other entities for case manage-
ment services or for coordination of medical assist-
ance; or
‘‘(3) to restrict a State from establishing capi-
tation rates on the basis of competition among
health care plans or negotiations between the State
and one or more health care plans.
‘‘SEC. 2116. LIMITATIONS ON CAUSES OF ACTION.
‘‘(a) IN GENERAL.—Notwithstanding any other pro-
vision of this Act (including section 1130A), no person (in-
cluding an applicant, beneficiary, provider, or health plan)
shall have a cause of action under Federal law against
a State in relation to a State’s compliance (or failure to
1284
‘‘(B) ADJUSTMENTS.—
‘‘(i) CARRYOVER OF ALLOTMENT PER-
MITTED.—If the amount of obligations en-
tered into under this part with a State for
quarters in a fiscal year is less than the
amount of the obligation allotment under
this section to the State for the fiscal year,
the amount of the difference shall be added
to the amount of the State obligation allot-
ment otherwise provided under this section
for the succeeding fiscal year.
‘‘(ii) REDUCTION
FOR
POST-ENACT-
MENT
NEW
OBLIGATIONS
UNDER
TITLE
XIX IN FISCAL YEAR 1996.—The amount of
the obligation allotment otherwise provided
under this section for fiscal year 1996 for
a State shall be reduced by the amount of
the obligations entered into with respect to
the State under section 1903(a) after the
date of the enactment of this Act.
‘‘(3) AGGREGATE LIMIT ON NEW OBLIGATION
AUTHORITY.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, subject to subparagraph (C), the
‘aggregate limit on new obligation authority’,
1285
for a fiscal year, is the pool amount under sub-
section (b) for the fiscal year, divided by the
payout adjustment factor (described in subpara-
graph (B)) for the fiscal year.
‘‘(B) PAYOUT ADJUSTMENT FACTOR.—For
purposes of this subsection, the ‘payout adjust-
ment factor’—
‘‘(i) for fiscal year 1996 is .950,
‘‘(ii) for fiscal year 1997 is .986, and
‘‘(iii) for a subsequent fiscal year is
.998.
‘‘(C) TRANSITIONAL
ADJUSTMENT
FOR
PRE-ENACTMENT-OBLIGATION
OUTLAYS.—In
order to account for pre-enactment-obligation
outlays described in paragraph (4)(C)(iv), in
determining the aggregate limit on new obliga-
tion authority under subparagraph (A) for fis-
cal year 1996, the pool amount for such fiscal
year is equal to—
‘‘(i) the pool amount for such year,
reduced by
‘‘(ii) $24.624 billion.
‘‘(4) OBLIGATION ALLOTMENTS.—
‘‘(A) GENERAL RULE FOR 50 STATES AND
THE DISTRICT OF COLUMBIA.—Except as pro-
1286
vided in this paragraph, the ‘obligation allot-
ment’ for any of the 50 States or the District
of Columbia for a fiscal year (beginning with
fiscal year 1997) is an amount that bears the
same ratio to the outlay allotment under sub-
section (c)(2) for such State or District (not
taking into account any adjustment due to an
election under paragraph (4)) for the fiscal year
as the ratio of—
‘‘(i) the aggregate limit on new obliga-
tion authority (less the total of the obliga-
tion allotments under subparagraph (B))
for the fiscal year, to
‘‘(ii) the pool amount (less the sum of
the outlay allotments for the territories)
for such fiscal year.
‘‘(B) TERRITORIES.—The obligation allot-
ment for each of the Commonwealths and terri-
tories for a fiscal year is the outlay allotment
for such Commonwealth or territory (as deter-
mined under subsection (c)(5)) for the fiscal
year divided by the payout adjustment factor
for the fiscal year (as defined in paragraph
(3)(B)).
1287
‘‘(C) TRANSITIONAL
RULE
FOR
FISCAL
YEAR 1996.—
‘‘(i) IN
GENERAL.—The obligation
amount for fiscal year 1996 for any State
(including the District, a Commonwealth,
or territory) is determined according to the
formula: A=(B-C)/D, where—
‘‘(I) ‘A’ is the obligation amount
for such State;
‘‘(II) ‘B’ is the outlay allotment
of such State for fiscal year 1996, as
determined under subsection (c);
‘‘(III) ‘C’ is the amount of the
pre-enactment-obligation outlays (as
established for such State under
clause (ii)); and
‘‘(IV) ‘D’ is the payout adjust-
ment factor for such fiscal year (as
defined in paragraph (3)(B)).
‘‘(ii) 
PRE-ENACTMENT-OBLIGATION
OUTLAY AMOUNTS.—Within 30 days after
the date of the enactment of this title, the
Secretary shall estimate (based on the best
data available) and publish in the Federal
Register the amount of the pre-enactment-
1288
obligation outlays (as defined in clause
(iv)) for each State (including the District,
Commonwealths, and territories). The total
of such amounts shall equal the dollar
amount specified in paragraph (3)(C)(ii).
‘‘(iii) AGREEMENT.—The submission
of a MediGrant plan by a State under this
title is deemed to constitute the State’s ac-
ceptance of the obligation allotment limita-
tions under this subsection (including the
formula for computing the amount of such
obligation allotment).
‘‘(iv) 
PRE-ENACTMENT-OBLIGATION
OUTLAYS
DEFINED.—In this subsection,
the term ‘pre-enactment-obligation outlays’
means, for a State, the outlays of the Fed-
eral Government that result from obliga-
tions that have been incurred under title
XIX with respect to the State before the
date of the enactment of this title, but for
which payments to States have not been
made as of such date of enactment.
‘‘(D) ADJUSTMENT TO REFLECT ADOPTION
OF
ALTERNATIVE
GROWTH
FORMULA.—Any
State that has elected an alternative growth
1289
formula under subsection (c)(4) which increases
or decreases the dollar amount of an outlay al-
lotment for a fiscal year is deemed to have in-
creased or decreased, respectively, its obligation
amount for such fiscal year by the amount of
such increase or decrease.
‘‘(b) POOL OF AVAILABLE FUNDS.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the ‘pool amount’ under this subsection for—
‘‘(A) fiscal year 1996 is $95.673 billion;
‘‘(B) fiscal year 1997 is $102.135 billion;
‘‘(C) fiscal year 1998 is $106.221 billion;
‘‘(D) fiscal year 1999 is $110.469 billion;
‘‘(E) fiscal year 2000 is $114.888 billion;
‘‘(F) fiscal year 2001 is $119.483 billion;
‘‘(G) fiscal year 2002 is $124.263 billion;
and
‘‘(H) each subsequent fiscal year is the
pool amount under this paragraph for the pre-
vious fiscal year increased by the lesser of 4
percent or the annual percentage increase in
the consumer price index for all urban consum-
ers (U.S. city average) for the 12-month period
ending in June before the beginning of that
subsequent fiscal year.
1290
‘‘(2) NATIONAL MEDIGRANT GROWTH PERCENT-
AGE.—For purposes of this section for a fiscal year
(beginning with fiscal year 1997), the ‘national
MediGrant growth percentage’ is the percentage by
which—
‘‘(A) the pool amount under paragraph (1)
for the fiscal year, exceeds
‘‘(B) such pool amount for the previous
fiscal year.
‘‘(c) STATE OUTLAY ALLOTMENTS.—
‘‘(1) FISCAL YEAR 1996.—
‘‘(A) IN GENERAL.—For each of the 50
States and the District of Columbia, the
amount of the State outlay allotment under this
subsection for fiscal year 1996 is, subject to
paragraph (4), equal to—
‘‘(i) the total amount of Federal ex-
penditures made to the State under title
XIX for the 4 quarters in fiscal year 1994,
increased by
‘‘(ii) the percentage by which (I)
$95,529,490,500 (which represents the
total amount of outlay allotments for such
States and District for fiscal year 1996),
exceeds (II) $83,213,431,458 (which rep-
1291
resents Federal medicaid expenditures for
such States and District for fiscal year
1994).
‘‘(B) COMPUTATION OF EXPENDITURES.—
The amount of Federal expenditures described
in subparagraph (A)(i) shall be computed, using
data reported on the HCFA Form 64 as of
September 1, 1995, based on—
‘‘(i) the amount reported on line 11,
or
‘‘(ii) on the amount reported on line 6
multiplied by the ratio of (I) the sum of
the amounts so reported on line 11 of such
Form for fiscal year 1994 for the 50
States and the District of Columbia, to
(II) the sum of the amounts so reported on
line 6 of such Form for fiscal year 1994
for such States and District,
whichever is greater.
‘‘(C) LIMITATION ON ADJUSTMENT.—The
amount computed under subparagraph (B)
shall not be subject to adjustment (based on
any subsequent disallowances or otherwise).
‘‘(2) COMPUTATION OF STATE OUTLAY ALLOT-
MENTS.—
1292
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this subsection, the
amount of the State outlay allotment under this
subsection for one of the 50 States and the Dis-
trict of Columbia for a fiscal year (beginning
with fiscal year 1997) is equal to the product
of—
‘‘(i) the needs-based amount deter-
mined under subparagraph (B) for the
State for the fiscal year, and
‘‘(ii) the scalar factor described in
subparagraph (C) for the fiscal year.
‘‘(B) NEEDS-BASED AMOUNT.—The needs-
based amount under this subparagraph for a
State for a fiscal year is equal to the product
of—
‘‘(i) the State’s aggregate expenditure
need for the fiscal year (as determined
under subsection (d)), and
‘‘(ii) the State’s old Federal medical
assistance percentage (as defined in section
2122(d)) for the previous fiscal year (or, in
the case of fiscal year 1997, the Federal
medical assistance percentage determined
1293
under section 1905(b) for fiscal year
1996).
‘‘(C) SCALAR FACTOR.—The scalar factor
under this subparagraph for a fiscal year is
such proportion so that, when it is applied
under subparagraph (A)(ii) for the fiscal year
(taking into account the floors and ceilings
under paragraph (3)), the total of the outlay al-
lotments under this subsection for all the 50
States and the District of Columbia for the fis-
cal year (not taking into account any increase
in an outlay allotment for a fiscal year attrib-
utable to the election of an alternative growth
formula under paragraph (4)) is equal to the
amount by which (i) the pool amount for the
fiscal year (as determined under subsection
(b)), exceeds (ii) the sum of the outlay allot-
ments provided under paragraph (5) for the
Commonwealths and territories for the fiscal
year.
‘‘(3) FLOORS AND CEILINGS.—
‘‘(A) FLOORS.—In no case shall the
amount of the State outlay allotment under
paragraph (2) for a fiscal year be less than the
following:
1294
‘‘(i) FLOOR
BASED
ON
PREVIOUS
YEAR’S OUTLAY ALLOTMENT.—102 percent
of the amount of the State outlay allot-
ment under this subsection for the pre-
vious fiscal year.
‘‘(ii) FLOOR BASED ON OUTLAY AL-
LOTMENT
GROWTH
RATE
IN
FIRST
YEAR.—Beginning with fiscal year 1998,
in the case of a State for which the outlay
allotment under this subsection for fiscal
year 1997 exceeded its outlay allotment
under this subsection for the previous fis-
cal year by—
‘‘(I) more than 125 percent of
the national MediGrant growth per-
centage for fiscal year 1997, 104 per-
cent of the amount of the State outlay
allotment under this subsection for
the previous fiscal year; or
‘‘(II) less than 125 percent (but
more than 75 percent) of the national
MediGrant growth percentage for fis-
cal year 1997, 103 percent of the
amount of the State outlay allotment
1295
under this subsection for the previous
fiscal year.
‘‘(B) CEILING.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), in no case shall the amount of the
State outlay allotment under paragraph
(2) for a fiscal year be greater than the
product of—
‘‘(I) the State outlay allotment
under this subsection for the State for
the preceding fiscal year, and
‘‘(II) 133 percent of the national
MediGrant growth percentage (as de-
termined under subsection (b)(2)) for
the fiscal year involved.
‘‘(ii) SPECIAL
RULE.—For a fiscal
year after fiscal year 1997, in the case of
a State (among the 50 States and the Dis-
trict of Columbia) that is one of the 10
States with the lowest Federal MediGrant
spending per resident-in-poverty rates (as
determined under clause (iii)) for the fiscal
year, the reference in clause (i)(II) to ‘133
percent’ is deemed a reference to ‘150 per-
cent’.
1296
‘‘(iii) DETERMINATION
OF
FEDERAL
MEDIGRANT SPENDING PER RESIDENT-IN-
POVERTY RATE.—For purposes of clause
(ii), the ‘Federal MediGrant spending per
resident-in-poverty rate’ for a State for a
fiscal year is equal to—
‘‘(I) the State’s outlay allotment
under this subsection for the previous
fiscal year (determined without regard
to paragraph (4)), divided by
‘‘(II) the average annual number
of residents of the State in poverty
(as defined in subsection (d)(2)) with
respect to the fiscal year.
‘‘(4) ELECTION
OF
ALTERNATIVE
GROWTH
FORMULA.—
‘‘(A) ELECTION.—In order to reduce vari-
ations in increases in outlay allotments over
time, any of the 50 States or the District of Co-
lumbia may elect (by notice provided to the Sec-
retary by not later than April 1, 1996) to adopt
an alternative growth rate formula under this
paragraph for the determination of the State’s
outlay allotment in fiscal year 1996 and for the
1297
increase in the amount of such allotment in
subsequent fiscal years.
‘‘(B) FORMULA.—The alternative growth
formula under this paragraph may be any for-
mula under which a portion of the State outlay
allotment for fiscal year 1996 under paragraph
(1) is deferred and applied to increase the
amount of its outlay allotment for one or more
subsequent fiscal years, so long as the total
amount of such increases for all such subse-
quent fiscal years does not exceed the amount
of the outlay allotment deferred from fiscal year
1996.
‘‘(5) COMMONWEALTHS
AND
TERRITORIES.—
The outlay allotment for each of the Commonwealths
and territories for a fiscal year is the maximum
amount that could have been certified under section
1108(c) with respect to the Commonwealth or terri-
tory for the fiscal year with respect to title XIX, if
the national MediGrant growth percentage (as deter-
mined under subsection (b)(2)) for the fiscal year
had been substituted (beginning with fiscal year
1997) for the percentage increase referred to in sec-
tion 1108(c)(1)(B).
1298
‘‘(d) STATE AGGREGATE EXPENDITURE NEED DE-
TERMINED.—
‘‘(1) IN GENERAL.—For purposes of subsection
(c), the ‘State aggregate expenditure need’ for a
State for a fiscal year is equal to the product of the
following 4 factors:
‘‘(A) RESIDENTS IN POVERTY.—The aver-
age annual number of residents in poverty of
the State with respect to the fiscal year (as de-
termined under paragraph (2)).
‘‘(B) CASE MIX INDEX.—The average of
the case mix indexes for the State (as deter-
mined under paragraph (3)) for the 3 most re-
cent fiscal years for which data are available,
but in no case less than .9 or greater than 1.15.
‘‘(C) INPUT COST INDEX.—The average of
the input cost indexes for the State (as deter-
mined under paragraph (4)) for the 3 most re-
cent fiscal years for which data are available.
‘‘(D) NATIONAL AVERAGE SPENDING PER
RESIDENT IN POVERTY.—The national average
spending per resident in poverty (as determined
under paragraph (5)).
‘‘(2) RESIDENTS
IN
POVERTY.—In this sec-
tion—
1299
‘‘(A) IN GENERAL.—The term ‘average an-
nual number of residents in poverty’ means,
with respect to a State and a fiscal year, the
average annual number of residents in poverty
(as defined in subparagraph (B)) in the State
(based on data made generally available by the
Bureau of the Census from the Current Popu-
lation Survey) for the most recent 3-calendar-
year period (ending before the fiscal year) for
which such data are available.
‘‘(B) RESIDENT IN POVERTY DEFINED.—
The term ‘resident in poverty’ means an indi-
vidual whose family income does not exceed the
poverty threshold (as such terms are defined by
the Office of Management and Budget and are
generally interpreted and applied by the Bureau
of the Census for the year involved).
‘‘(3) CASE MIX INDEX.—
‘‘(A) IN GENERAL.—In this subsection, the
‘case mix index’ for a State for a fiscal year is
equal to—
‘‘(i) the sum of—
‘‘(I) the projected per recipient
expenditures with respect to elderly
individuals in the State for the fiscal
1300
year (determined under subparagraph
(B)),
‘‘(II) the projected per recipient
expenditures with respect to the blind
and disabled individuals in the State
for the fiscal year (determined under
subparagraph (C)), and
‘‘(III) the projected per recipient
expenditures with respect to other in-
dividuals in the State (determined
under subparagraph (D));
divided by—
‘‘(ii) the national average spending
per recipient determined under subpara-
graph (E) for the fiscal year involved.
‘‘(B) PROJECTED PER RECIPIENT EXPEND-
ITURES FOR THE ELDERLY.—For purposes of
subparagraph (A)(I)(i), the ‘projected per recip-
ient expenditures with respect to elderly individ-
uals’ in a State for a fiscal year is equal to the
product of—
‘‘(i) the national average per recipient
expenditures under this title in the 50
States and the District of Columbia for the
most recent fiscal year for which data are
1301
available for individuals who are 65 years
of age or older, and
‘‘(ii) the proportion, of all individuals
who received medical assistance under this
title in the State in the most recent fiscal
year referred to in clause (i), that were in-
dividuals described in such clause.
‘‘(C) PROJECTED PER RECIPIENT EXPEND-
ITURES FOR THE BLIND AND DISABLED.—For
purposes of subparagraph (A)(i)(II), the ‘pro-
jected per recipient expenditures with respect to
blind and disabled individuals’ in a State for a
fiscal year is equal to the product of—
‘‘(i) the national average per recipient
expenditures under this title in the 50
States and the District of Columbia for the
most recent fiscal year for which data are
available for individuals who are eligible
for medical assistance because they are
blind or disabled and under 65 years of
age, and
‘‘(ii) the proportion, of all individuals
who received medical assistance under this
title in the State in the most recent fiscal
1302
year referred to in clause (i), that were in-
dividuals described in such clause.
‘‘(D) PROJECTED
PER
RECIPIENT
EX-
PENDITURES
FOR
OTHER
INDIVIDUALS.—For
purposes of subparagraph (A)(i)(III), the ‘pro-
jected per recipient expenditures with respect to
other individuals’ in a State for a fiscal year is
equal to the product of—
‘‘(i) the national average per recipient
expenditures under this title in the 50
States and the District of Columbia for the
most recent fiscal year for which data are
available for individuals who are not de-
scribed in subparagraph (B)(i) or (C)(i),
and
‘‘(ii) the proportion, of all individuals
who received medical assistance under this
title in the State in the most recent fiscal
year referred to in clause (i), that were in-
dividuals described in such clause.
‘‘(E) NATIONAL AVERAGE SPENDING PER
RECIPIENT.—For purposes of this paragraph,
the ‘national average expenditures per recipient’
for a fiscal year is equal to the sum of—
1303
‘‘(i) the product of (I) the national av-
erage described in subparagraph (B)(i),
and (II) the proportion, of all individuals
who received medical assistance under this
title in any of the 50 States or the District
of Columbia in the fiscal year referred to
in such subparagraph, who are described
in such subparagraph;
‘‘(ii) the product of (I) the national
average described in subparagraph (C)(i),
and (II) the proportion, of all individuals
who received medical assistance under this
title in any of the 50 States or the District
of Columbia in the fiscal year referred to
in such subparagraph, who are described
in such subparagraph; and
‘‘(iii) the product of (I) the national
average described in subparagraph (D)(i),
and (II) the proportion, of all individuals
who received medical assistance under this
title in any of the 50 States or the District
of Columbia in the fiscal year referred to
in such subparagraph, who are described
in such subparagraph.
1304
‘‘(F) DETERMINATION OF NATIONAL AVER-
AGES AND PROPORTIONS.—
‘‘(i) IN GENERAL.—The national aver-
ages per recipient and the proportions re-
ferred to in clauses (i) and (ii), respec-
tively, of subparagraphs (B), (C), and (D)
and subparagraph (E) shall be determined
by the Secretary using the most recent
data available.
‘‘(ii) USE OF MEDICAID DATA.—If for
a fiscal year there is inadequate data to
compute such averages and proportions
based on expenditures and numbers of in-
dividuals 
receiving 
medical 
assistance
under this title, the Secretary may com-
pute such averages based on expenditures
and numbers of such individuals under
title XIX for the most recent fiscal year
for which data are available and, for this
purpose—
‘‘(I) any reference in subpara-
graph (B)(i) to ‘individuals 65 years
of age or older’ is deemed a reference
to ‘individuals whose eligibility for
1305
medical assistance is based on being
65 years of age or older’,
‘‘(II) the reference in subpara-
graph (C)(i) to ‘and under 65 years of
age’ shall be considered to be deleted,
and
‘‘(III) individuals whose basis for
eligibility for medical assistance was
reported as unknown shall not be
counted as individuals under subpara-
graph (D)(i).
‘‘(4) INPUT COST INDEX.—
‘‘(A) IN
GENERAL.—In this section, the
‘input cost index’ for a State for a fiscal year
is the sum of—
‘‘(i) 0.15, and
‘‘(ii) 0.85 multiplied by the ratio of
(I) the annual average wages for hospital
employees in the State for the fiscal year
(as determined under subparagraph (B)),
to (II) the annual average wages for hos-
pital employees in the 50 States and the
District of Columbia for such year (as de-
termined under such subparagraph).
1306
‘‘(B) DETERMINATION OF ANNUAL AVER-
AGE
WAGES
OF
HOSPITAL
EMPLOYEES.—The
Secretary shall provide for the determination of
annual average wages for hospital employees in
a State and, collectively, in the 50 States and
the District of Columbia for a fiscal year based
on the area wage index applicable to hospitals
under 1886(d)(2)(E) (or, if such index no
longer exists, a comparable index of hospital
wages) for discharges occurring during the fis-
cal year involved.
‘‘(5) NATIONAL AVERAGE SPENDING PER RESI-
DENT
IN
POVERTY.—For purposes of this sub-
section, the ‘national average spending per resident
in poverty’—
‘‘(A) for fiscal year 1997 is equal to—
‘‘(i) the sum (for each of the 50
States and the District of Columbia) of the
total of the Federal and State expenditures
under title XIX for calendar quarters in
fiscal year 1994, increased by the percent-
age specified in subsection (c)(1)(A)(ii), di-
vided by
‘‘(ii) the sum of the number of resi-
dents in poverty (as defined in paragraph
1307
(2)(A)) for all of the 50 States and the
District of Columbia for fiscal year 1994;
‘‘(B) for a succeeding fiscal year is equal
to the national average spending per resident in
poverty under this paragraph for the preceding
fiscal year increased by the national MediGrant
growth percentage (as defined in subsection
(b)(2)) for the fiscal year involved.
‘‘(e) PUBLICATION OF OBLIGATION AND OUTLAY AL-
LOTMENTS.—
‘‘(1) NOTICE OF PRELIMINARY ALLOTMENTS.—
Not later than April 1 before the beginning of each
fiscal year (beginning with fiscal year 1997), the
Secretary shall initially compute, after consultation
with the Comptroller General, and publish in the
Federal Register notice of the proposed obligation
and outlay allotments for each State under this sec-
tion (not taking into account subsection (a)(2)(B))
for the fiscal year. The Secretary shall include in the
notice a description of the methodology and data
used in deriving such allotments for the year.
‘‘(2) REVIEW BY GAO.—The Comptroller Gen-
eral shall submit to Congress by not later than May
15 of each such fiscal year, a report analyzing such
1308
allotments and the extent to which they comply with
the precise requirements of this section.
‘‘(3) NOTICE
OF
FINAL
ALLOTMENTS.—Not
later than July 1 before the beginning of each such
fiscal year, the Secretary, taking into consideration
the analysis contained in the report of the Comptrol-
ler General under paragraph (2), shall compute and
publish in the Federal Register notice of the final al-
lotments under this section (both taking into ac-
count and not taking into account subsection
(a)(2)(B)) for the fiscal year. The Secretary shall in-
clude in the notice a description of any changes in
such allotments from the initial allotments published
under paragraph (1) for the fiscal year and the rea-
sons for such changes. Once published under this
paragraph, the Secretary is not authorized to change
such allotments.
‘‘(4) GAO REPORT ON FINAL ALLOTMENTS.—
The Comptroller General shall submit to Congress
by not later than August 1 of each such fiscal year,
a report analyzing the final allotments under para-
graph (3) and the extent to which they comply with
the precise requirements of this section.
1309
‘‘SEC. 2122. PAYMENTS TO STATES.
‘‘(a) AMOUNT OF PAYMENT.—From the allotment of
a State under section 2121 for a fiscal year, subject to
the succeeding provisions of this title, the Secretary shall
pay to each State which has a MediGrant plan approved
under part E, for each quarter in the fiscal year—
‘‘(1) an amount equal to the applicable Federal
medical assistance percentage (as defined in sub-
section (c)) of the total amount expended during
such quarter as medical assistance under the plan;
plus
‘‘(2) an amount equal to the applicable Federal
medical assistance percentage of the total amount
expended during such quarter for medically-related
services (as defined in section 2112(e)(2)); plus
‘‘(3) subject to section 2123(c)—
‘‘(A) an amount equal to 90 percent of the
amounts expended during such quarter for the
design, development, and installation of infor-
mation systems and for providing incentives to
promote the enforcement of medical support or-
ders, plus
‘‘(B) an amount equal to 75 percent of the
amounts expended during such quarter for
medical personnel, administrative support of
medical personnel, operation and maintenance
1310
of information systems, modification of infor-
mation systems, quality assurance activities,
utilization review, medical and peer review,
anti-fraud activities, independent evaluations,
coordination of benefits, and meeting reporting
requirements under this title, plus
‘‘(C) an amount equal to 50 percent of so
much of the remainder of the amounts ex-
pended during such quarter as are expended by
the State in the administration of the State
plan.
‘‘(b) PAYMENT PROCESS.—
‘‘(1) QUARTERLY ESTIMATES.—Prior to the be-
ginning of each quarter, the Secretary shall estimate
the amount to which a State will be entitled under
subsection (a) for such quarter, such estimates to be
based on (A) a report filed by the State containing
its estimate of the total sum to be expended in such
quarter in accordance with the provisions of such
subsections, and stating the amount appropriated or
made available by the State and its political subdivi-
sions for such expenditures in such quarter, and if
such amount is less than the State’s proportionate
share of the total sum of such estimated expendi-
tures, the source or sources from which the dif-
1311
ference is expected to be derived, and (B) such other
investigation as the Secretary may find necessary.
‘‘(2) PAYMENT.—
‘‘(A) IN
GENERAL.—The Secretary shall
then pay to the State, in such installments as
the Secretary may determine and in accordance
with section 6503(a) of title 31, United States
Code, the amount so estimated, reduced or in-
creased to the extent of any overpayment or
underpayment which the Secretary determines
was made under this section (or section 1903)
to such State for any prior quarter and with re-
spect to which adjustment has not already been
made under this subsection (or under section
1903(d)).
‘‘(B) TREATMENT
AS
OVERPAYMENTS.—
Expenditures for which payments were made to
the State under subsection (a) shall be treated
as an overpayment to the extent that the State
or local agency administering such plan has
been reimbursed for such expenditures by a
third party pursuant to the provisions of its
plan in compliance with section 2135.
‘‘(C) RECOVERY OF OVERPAYMENTS.—For
purposes of this subsection, when an overpay-
1312
ment is discovered, which was made by a State
to a person or other entity, the State shall have
a period of 60 days in which to recover or at-
tempt to recover such overpayment before ad-
justment is made in the Federal payment to
such State on account of such overpayment.
Except as otherwise provided in subparagraph
(D), the adjustment in the Federal payment
shall be made at the end of the 60 days, wheth-
er or not recovery was made.
‘‘(D) 
NO
ADJUSTMENT
FOR
UNCOLLECTABLES.—In any case where the
State is unable to recover a debt which rep-
resents an overpayment (or any portion thereof)
made to a person or other entity on account of
such debt having been discharged in bankruptcy
or otherwise being uncollectable, no adjustment
shall be made in the Federal payment to such
State on account of such overpayment (or por-
tion thereof).
‘‘(3) FEDERAL SHARE OF RECOVERIES.—The
pro rata share to which the United States is equi-
tably entitled, as determined by the Secretary, of the
net amount recovered during any quarter by the
State or any political subdivision thereof with re-
1313
spect to medical assistance furnished under the
State plan shall be considered an overpayment to be
adjusted under this subsection.
‘‘(4) TIMING
OF
OBLIGATION
OF
FUNDS.—
Upon the making of any estimate by the Secretary
under this subsection, any appropriations available
for payments under this section shall be deemed ob-
ligated.
‘‘(5) DISALLOWANCES.—In any case in which
the Secretary estimates that there has been an over-
payment under this section to a State on the basis
of a claim by such State that has been disallowed by
the Secretary under section 1116(d), and such State
disputes such disallowance, the amount of the Fed-
eral payment in controversy shall, at the option of
the State, be retained by such State or recovered by
the Secretary pending a final determination with re-
spect to such payment amount. If such final deter-
mination is to the effect that any amount was prop-
erly disallowed, and the State chose to retain pay-
ment of the amount in controversy, the Secretary
shall offset, from any subsequent payments made to
such State under this title, an amount equal to the
proper amount of the disallowance plus interest on
such amount disallowed for the period beginning on
1314
the date such amount was disallowed and ending on
the date of such final determination at a rate (deter-
mined by the Secretary) based on the average of the
bond equivalent of the weekly 90-day treasury bill
auction rates during such period.
‘‘(c) APPLICABLE FEDERAL MEDICAL ASSISTANCE
PERCENTAGE DEFINED.—In this section, except as pro-
vided in subsection (f), the term ‘applicable Federal medi-
cal assistance percentage’ means, with respect to one of
the 50 States or the District of Columbia, at the State’s
or District’s option—
‘‘(1) the old Federal medical assistance percent-
age (as determined in subsection (d)), or
‘‘(2) the new Federal medical assistance per-
centage (as determined under subsection (e)) or, if
less, the old Federal medical assistance percentage
plus 10 percentage points.
‘‘(d) OLD FEDERAL MEDICAL ASSISTANCE PER-
CENTAGE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2) and subsection (f), the term ‘old Federal
medical assistance percentage’ for any State is 100
percent less the State percentage; and the State per-
centage is that percentage which bears the same
ratio to 45 percent as the square of the per capita
1315
income of such State bears to the square of the per
capita income of the continental United States (in-
cluding Alaska) and Hawaii.
‘‘(2) LIMITATION ON RANGE.—In no case shall
the old Federal medical assistance percentage be less
than 50 percent or more than 83 percent.
‘‘(3) PROMULGATION.—The old Federal medical
assistance percentage for any State shall be deter-
mined and promulgated in accordance with the pro-
visions of section 1101(a)(8)(B).
‘‘(e) NEW FEDERAL MEDICAL ASSISTANCE PER-
CENTAGE DEFINED.—
‘‘(1) IN GENERAL.—
‘‘(A) TERM DEFINED.—Except as provided
in paragraph (3) and subsection (f), the term
‘new Federal medical assistance percentage’
means, for each of the 50 States and the Dis-
trict of Columbia, 100 percent reduced by the
product 0.39 and the ratio of—
‘‘(i)(I) for each of the 50 States, the
total taxable resources (TTR) ratio of the
State specified in subparagraph (B), or
‘‘(II) for the District of Columbia, the
per capita income ratio specified in sub-
paragraph (C),
1316
to—
‘‘(ii) the aggregate expenditure need
ratio of the State or District, as described
in subparagraph (D).
‘‘(B) TOTAL
TAXABLE
RESOURCES
(TTR)
RATIO.—For 
purposes 
of 
subparagraph
(A)(i)(I), the total taxable resources (TTR)
ratio for each of the 50 States is—
‘‘(i) an amount equal to the most re-
cent 3-year average of the total taxable re-
sources (TTR) of the State, as determined
by the Secretary of the Treasury, divided
by
‘‘(ii) an amount equal to the sum of
the 3-year averages determined under
clause (i) for each of the 50 States.
‘‘(C) PER
CAPITA
INCOME
RATIO.—For
purposes of subparagraph (A)(i)(II), the per
capita income ratio of the District of Columbia
is—
‘‘(i) an amount equal to the most re-
cent 3-year average of the total personal
income of the District of Columbia, as de-
termined in accordance with the provisions
of section 1101(a)(8)(B), divided by
1317
‘‘(ii) an amount equal to the total per-
sonal income of the continental United
States (including Alaska) and Hawaii, as
determined under section 1101(a)(8)(B).
‘‘(D) AGGREGATE
EXPENDITURE
NEED
RATIO.—For purposes of subparagraph (A),
with respect to each of the 50 States and the
District of Columbia for a fiscal year, the ag-
gregate expenditure need ratio is—
‘‘(i) the State aggregate expenditure
need (as defined in section 2121(d)) for
the State for the fiscal year, divided by
‘‘(ii) the such of such State aggregate
expenditure needs for the 50 States and
the District of Columbia for the fiscal year.
‘‘(2) LIMITATION ON RANGE.—Except as pro-
vided in subsection (f), the new Federal medical as-
sistance percentage shall in no case be less than 40
percent or greater than 83 percent.
‘‘(3) PROMULGATION.—The new Federal medi-
cal assistance percentage for any State shall be pro-
mulgated in a timely manner consistent with the
promulgation of the old Federal medical assistance
percentage under section 1101(a)(8)(B).
‘‘(f) SPECIAL RULES.—For purposes of this title—
1318
‘‘(1) COMMONWEALTHS AND TERRITORIES.—In
the case of Puerto Rico, the Virgin Islands, Guam,
the Northern Mariana Islands, and American
Samoa, the old and new Federal medical assistance
percentages are 50 percent.
‘‘(2) INDIAN HEALTH SERVICE FACILITIES.—
‘‘(A) IN GENERAL.—The old and new Fed-
eral medical assistance percentages shall be 100
percent with respect to the amounts expended
as medical assistance for services which are re-
ceived through a facility described in subpara-
graph (B) of an Indian tribe or tribal organiza-
tion or through an Indian Health Service facil-
ity whether operated by the Indian Health
Service or by an Indian tribe or tribal organiza-
tion (as defined in section 4 of the Indian
Health Care Improvement Act).
‘‘(B) FACILITY DESCRIBED.—For purposes
of subparagraph (A), a facility described in this
subparagraph is a facility of an Indian tribe
if—
‘‘(i) the facility is located in a State
which, as of the date of the enactment of
this title, was not operating its State plan
1319
under title XIX pursuant to a Statewide
waiver approved under section 1115,
‘‘(ii) the facility is not an Indian
Health Service facility,
‘‘(iii) the tribe owns at least 2 such
facilities, and
‘‘(iv) the tribe has at least 50,000
members (as of the date of the enactment
of this title).
‘‘(3) NO STATE MATCHING REQUIRED FOR CER-
TAIN EXPENDITURES.—In applying subsection (a)(1)
with respect to medical assistance provided to unlaw-
ful aliens pursuant to the exception specified in sec-
tion 2123(e)(2), payment shall be made for the
amount of such assistance without regard to any
need for a State match.
‘‘SEC. 2123. LIMITATION ON USE OF FUNDS; DISALLOW-
ANCE.
‘‘(a) IN GENERAL.—Funds provided to a State under
this title shall only be used to carry out the purposes of
this title.
‘‘(b) DISALLOWANCES
FOR
EXCLUDED
PROVID-
ERS.—
1320
‘‘(1) IN GENERAL.—Payment shall not be made
to a State under this part for expenditures for items
and services furnished—
‘‘(A) by a provider who was excluded from
participation under title V, XVIII, or XX or
under this title pursuant to section 1128,
1128A, 1156, or 1842(j)(2), or
‘‘(B) under the medical direction or on the
prescription of a physician who was so excluded,
if the provider of the services knew or had rea-
son to know of the exclusion.
‘‘(2) EXCEPTION FOR EMERGENCY SERVICES.—
Paragraph (1) shall not apply to emergency items or
services, not including hospital emergency room serv-
ices.
‘‘(c) LIMITATIONS.—
‘‘(1) IN GENERAL.—No Federal financial assist-
ance is available for expenditures under the
MediGrant plan for—
‘‘(A) medically-related services for a quar-
ter to the extent such expenditures exceed 5
percent of the total expenditures under the plan
for the quarter; or
‘‘(B) total administrative expenses (other
than expenses described in paragraph (2) dur-
1321
ing the first 8 quarters in which the plan is in
effect under this title) for quarters in a fiscal
year to the extent such expenditures exceed the
sum of $20,000,000 plus 10 percent of the total
expenditures under the plan for the year.
‘‘(2) ADMINISTRATIVE EXPENSES NOT SUBJECT
TO
LIMITATION.—The administrative expenses re-
ferred to in this paragraph are expenditures under
the MediGrant plan for the following activities:
‘‘(A) Quality assurance.
‘‘(B) The development and operation of the
certification program for nursing facilities and
intermediate care facilities for the mentally re-
tarded under section 2137(a)(2).
‘‘(C) Utilization review activities, including
medical activities and activities of peer review
organizations.
‘‘(D) Inspection and oversight of providers
and capitated health care organizations.
‘‘(E) Anti-fraud activities.
‘‘(F) Independent evaluations.
‘‘(G) Activities required to meet reporting
requirements under this title.
‘‘(d) TREATMENT OF THIRD PARTY LIABILITY.—No
payment shall be made to a State under this part for ex-
1322
penditures for medical assistance provided for an individ-
ual under its MediGrant plan to the extent that a private
insurer (as defined by the Secretary by regulation and in-
cluding a group health plan (as defined in section 607(1)
of the Employee Retirement Income Security Act of
1974), a service benefit plan, and a health maintenance
organization) would have been obligated to provide such
assistance but for a provision of its insurance contract
which has the effect of limiting or excluding such obliga-
tion because the individual is eligible for or is provided
medical assistance under the plan.
‘‘(e) LIMITATION
ON PAYMENTS
TO EMERGENCY
SERVICES FOR NONLAWFUL ALIENS.—
‘‘(1) IN GENERAL.—Notwithstanding the pre-
ceding provisions of this section, except as provided
in paragraph (2), no payment may be made to a
State under this part for medical assistance fur-
nished to an alien who is not lawfully admitted for
permanent residence or otherwise permanently resid-
ing in the United States under color of law.
‘‘(2) EXCEPTION FOR EMERGENCY SERVICES.—
Payment may be made under this section for care
and services that are furnished to an alien described
in paragraph (1) only if—
1323
‘‘(A) such care and services are necessary
for the treatment of an emergency medical con-
dition of the alien,
‘‘(B) such alien otherwise meets the eligi-
bility requirements for medical assistance under
the MediGrant plan (other than a requirement
of the receipt of aid or assistance under title
IV, supplemental security income benefits under
title XVI, or a State supplementary payment),
and
‘‘(C) such care and services are not related
to an organ transplant procedure.
‘‘(3) EMERGENCY
MEDICAL
CONDITION
DE-
FINED.—For purposes of this subsection, the term
‘emergency medical condition’ means a medical con-
dition (including emergency labor and delivery)
manifesting itself by acute symptoms of sufficient
severity (including severe pain) such that the ab-
sence of immediate medical attention could reason-
ably be expected to result in—
‘‘(A) placing the patient’s health in serious
jeopardy,
‘‘(B) serious impairment to bodily func-
tions, or
1324
‘‘(C) serious dysfunction of any bodily
organ or part.
‘‘(f) LIMITATION ON PAYMENT FOR CERTAIN OUT-
PATIENT PRESCRIPTION DRUGS.—
‘‘(1) IN GENERAL.—No payment may be made
to a State under this part for medical assistance for
covered outpatient drugs (as defined in section
2175(i)(2)) of a manufacturer provided under the
MediGrant plan unless the manufacturer (as defined
in section 2175(i)(4)) of the drug—
‘‘(A) has entered into a MediGrant master
rebate agreement with the Secretary under sec-
tion 2175; and
‘‘(B) is complying with the provisions of
section 8126 of title 38, United States Code, in-
cluding the requirement of entering into a mas-
ter agreement with the Secretary of Veterans
Affairs under such section.
‘‘(2) CONSTRUCTION.—Nothing in this sub-
section shall be construed as requiring a State to
participate in the MediGrant master rebate agree-
ment under section 2175.
‘‘(3) 
EFFECT
OF
SUBSEQUENT
AMEND-
MENTS.—For purposes of paragraph (1)(B), in de-
termining whether a manufacturer is in compliance
1325
with the requirements of section 8126 of title 38,
United States Code—
‘‘(A) the Secretary shall not take into ac-
count any amendments to such section that are
enacted after the enactment of title VI of the
Veterans Health Care Act of 1992; and
‘‘(B) a manufacturer is deemed to meet
such requirements if the manufacturer estab-
lishes to the satisfaction of the Secretary that
the manufacturer would comply (and has of-
fered to comply) with the provisions of section
8126 of title 38, United States Code (as in ef-
fect immediately after the enactment of the
Veterans Health Care Act of 1992) and would
have entered into an agreement under such sec-
tion (as such section was in effect at such
time), but for a legislative change in such sec-
tion after the date of the enactment of the Vet-
erans Health Care Act of 1992.
‘‘(g) LIMITATION ON PAYMENT FOR ABORTIONS.—
‘‘(1) IN GENERAL.—Payment shall not be made
to a State under this part for any amount expended
under the MediGrant plan to pay for any abortion
or to assist in the purchase, in whole or in part, of
1326
health benefit coverage that includes coverage of
abortion.
‘‘(2) EXCEPTION.—Paragraph (1) shall not
apply to an abortion—
‘‘(A) if the pregnancy is the result of an
act of rape or incest, or
‘‘(B) in the case where a woman suffers
from a physical disorder, illness, or injury that
would, as certified by a physician, place the
woman in danger of death unless an abortion is
performed.
‘‘(h) LIMITATION
ON
PAYMENT
FOR
ASSISTING
DEATHS.—Payment shall not be made to a State under
this part for amounts expended under the MediGrant plan
to pay for, or to assist in the purchase, in whole or in
part, of health benefit coverage that includes payment for
any drug, biological product, or service which was fur-
nished for the purpose of causing, or assisting in causing,
the death, suicide, euthanasia, or mercy killing of a per-
son.
‘‘PART D—PROGRAM INTEGRITY AND QUALITY
‘‘SEC. 2131. USE OF AUDITS TO ACHIEVE FISCAL INTEGRITY.
‘‘(a) FINANCIAL AUDITS OF PROGRAM.—
‘‘(1) IN GENERAL.—Each MediGrant plan shall
provide for an annual audit of the State’s expendi-
1327
tures from amounts received under this title, in com-
pliance with chapter 75 of title 31, United States
Code.
‘‘(2) VERIFICATION AUDITS.—If, after consulta-
tion with the State and the Comptroller General and
after a fair hearing, the Secretary determines that
a State’s audit under paragraph (1) was performed
in substantial violation of chapter 75 of title 31,
United States Code, the Secretary may—
‘‘(A) require that the State provide for a
verification audit in compliance with such chap-
ter, or
‘‘(B) conduct such a verification audit.
‘‘(3) AVAILABILITY OF AUDIT REPORTS.—With-
in 30 days after completion of each audit or verifica-
tion audit under this subsection, the State shall—
‘‘(A) provide the Secretary with a copy of
the audit report, including the State’s response
to any recommendations of the auditor, and
‘‘(B) make the audit report available for
public inspection in the same manner as pro-
posed MediGrant plan amendments are made
available under section 2105.
‘‘(b) FISCAL CONTROLS.—
1328
‘‘(1) IN
GENERAL.—With respect to the ac-
counting and expenditure of funds under this title,
each State shall adopt and maintain such fiscal con-
trols, accounting procedures, and data processing
safeguards as the State deems reasonably necessary
to assure the fiscal integrity of the State’s activities
under this title.
‘‘(2) CONSISTENCY WITH GENERALLY ACCEPT-
ED
ACCOUNTING
PRINCIPLES.—Such controls and
procedures shall be generally consistent with gen-
erally accepted accounting principles as recognized
by the Governmental Accounting Standards Board
or the Comptroller General.
‘‘(c) AUDITS OF PROVIDERS.—Each MediGrant plan
shall provide that the records of any entity providing items
or services for which payment may be made under the plan
may be audited as necessary to ensure that proper pay-
ments are made under the plan.
‘‘SEC. 2132. FRAUD PREVENTION PROGRAM.
‘‘(a) ESTABLISHMENT.—Each MediGrant plan shall
provide for the establishment and maintenance of an effec-
tive program for the detection and prevention of fraud and
abuse by beneficiaries, providers, and others in connection
with the operation of the program.
1329
‘‘(b) PROGRAM REQUIREMENTS.—The program es-
tablished pursuant to subsection (a) shall include at least
the following requirements:
‘‘(1) DISCLOSURE OF INFORMATION.—Any dis-
closing entity (as defined in section 1124(a)) receiv-
ing payments under the MediGrant plan shall com-
ply with the requirements of section 1124.
‘‘(2) SUPPLY
OF
INFORMATION.—An entity
(other than an individual practitioner or a group of
practitioners) that furnishes, or arranges for the fur-
nishing of, an item or service under the MediGrant
plan shall supply upon request specifically addressed
to the entity by the Secretary or the State agency
the information described in section 1128(b)(9).
‘‘(3) EXCLUSION.—
‘‘(A) IN GENERAL.—The MediGrant plan
shall exclude any specified individual or entity
from participation in the plan for the period
specified by the Secretary when required by the
Secretary to do so pursuant to section 1128 or
section 1128A, and provide that no payment
may be made under the plan with respect to
any item or service furnished by such individual
or entity during such period.
1330
‘‘(B) AUTHORITY.—In addition to any
other authority, a State may exclude any indi-
vidual or entity for purposes of participating
under the MediGrant plan for any reason for
which the Secretary could exclude the individual
or entity from participation in a program under
title XVIII or under section 1128, 1128A, or
1866(b)(2).
‘‘(4) NOTICE.—The MediGrant plan shall pro-
vide that whenever a provider of services or any
other person is terminated, suspended, or otherwise
sanctioned or prohibited from participating under
the plan, the State agency responsible for admin-
istering the plan shall promptly notify the Secretary
and, in the case of a physician, the State medical li-
censing board of such action.
‘‘(5) 
ACCESS
TO
INFORMATION.—The
MediGrant plan shall provide that the State will pro-
vide information and access to certain information
respecting sanctions taken against health care prac-
titioners and providers by State licensing authorities
in accordance with section 2133.
1331
‘‘SEC. 2133. INFORMATION CONCERNING SANCTIONS TAKEN
BY STATE LICENSING AUTHORITIES AGAINST
HEALTH CARE PRACTITIONERS AND PROVID-
ERS.
‘‘(a) INFORMATION REPORTING REQUIREMENT.—
The requirement referred to in section 2132(b)(5) is that
the State must provide for the following:
‘‘(1) INFORMATION REPORTING SYSTEM.—The
State must have in effect a system of reporting the
following information with respect to formal proceed-
ings (as defined by the Secretary in regulations)
concluded against a health care practitioner or entity
by any authority of the State (or of a political sub-
division thereof) responsible for the licensing of
health care practitioners (or any peer review organi-
zation or private accreditation entity reviewing the
services provided by health care practitioners) or en-
tities:
‘‘(A) Any adverse action taken by such li-
censing authority as a result of the proceeding,
including any revocation or suspension of a li-
cense (and the length of any such suspension),
reprimand, censure, or probation.
‘‘(B) Any dismissal or closure of the pro-
ceedings by reason of the practitioner or entity
1332
surrendering the license or leaving the State or
jurisdiction.
‘‘(C) Any other loss of the license of the
practitioner or entity, whether by operation of
law, voluntary surrender, or otherwise.
‘‘(D) Any negative action or finding by
such authority, organization, or entity regard-
ing the practitioner or entity.
‘‘(2) ACCESS TO DOCUMENTS.—The State must
provide the Secretary (or an entity designated by the
Secretary) with access to such documents of the au-
thority described in paragraph (1) as may be nec-
essary for the Secretary to determine the facts and
circumstances concerning the actions and determina-
tions described in such paragraph for the purpose of
carrying out this Act.
‘‘(b) FORM OF INFORMATION.—The information de-
scribed in subsection (a)(1) shall be provided to the Sec-
retary (or to an appropriate private or public agency,
under suitable arrangements made by the Secretary with
respect to receipt, storage, protection of confidentiality,
and dissemination of information) in such a form and
manner as the Secretary determines to be appropriate in
order to provide for activities of the Secretary under this
1333
Act and in order to provide, directly or through suitable
arrangements made by the Secretary, information—
‘‘(1) to agencies administering Federal health
care programs, including private entities administer-
ing such programs under contract,
‘‘(2) to licensing authorities described in sub-
section (a)(1),
‘‘(3) to State agencies administering or super-
vising the administration of State health care pro-
grams (as defined in section 1128(h)),
‘‘(4) to utilization and quality control peer re-
view organizations described in part B of title XI
and to appropriate entities with contracts under sec-
tion 1154(a)(4)(C) with respect to eligible organiza-
tions reviewed under the contracts,
‘‘(5) to State MediGrant fraud control units (as
defined in section 2134),
‘‘(6) to hospitals and other health care entities
(as defined in section 431 of the Health Care Qual-
ity Improvement Act of 1986), with respect to physi-
cians or other licensed health care practitioners that
have entered (or may be entering) into an employ-
ment or affiliation relationship with, or have applied
for clinical privileges or appointments to the medical
staff of, such hospitals or other health care entities
1334
(and such information shall be deemed to be dis-
closed pursuant to section 427 of, and be subject to
the provisions of, that Act),
‘‘(7) to the Attorney General and such other
law enforcement officials as the Secretary deems ap-
propriate, and
‘‘(8) upon request, to the Comptroller General,
in order for such authorities to determine the fitness
of individuals to provide health care services, to pro-
tect the health and safety of individuals receiving
health care through such programs, and to protect
the fiscal integrity of such programs.
‘‘(c) CONFIDENTIALITY
OF
INFORMATION
PRO-
VIDED.—The Secretary shall provide for suitable safe-
guards for the confidentiality of the information furnished
under subsection (a). Nothing in this subsection shall pre-
vent the disclosure of such information by a party which
is otherwise authorized, under applicable State law, to
make such disclosure.
‘‘(d) APPROPRIATE COORDINATION.—The Secretary
shall provide for the maximum appropriate coordination
in the implementation of subsection (a) of this section and
section 422 of the Health Care Quality Improvement Act
of 1986.
1335
‘‘SEC. 2134. STATE MEDIGRANT FRAUD CONTROL UNITS.
‘‘(a) IN GENERAL.—Each MediGrant plan shall pro-
vide for a State MediGrant fraud control unit described
in subsection (b) that effectively carries out the functions
and requirements described in such subsection, unless the
State demonstrates to the satisfaction of the Secretary
that the effective operation of such a unit in the State
would not be cost-effective because minimal fraud exists
in connection with the provision of covered services to eli-
gible individuals under the plan, and that beneficiaries
under the plan will be protected from abuse and neglect
in connection with the provision of medical assistance
under the plan without the existence of such a unit
‘‘(b) UNITS DESCRIBED.—For purposes of this sub-
section, the term ‘State MediGrant fraud control unit’
means a single identifiable entity of the State government
which meets the following requirements:
‘‘(1) ORGANIZATION.—The entity—
‘‘(A) is a unit of the office of the State At-
torney General or of another department of
State government which possesses statewide au-
thority to prosecute individuals for criminal vio-
lations;
‘‘(B) is in a State the constitution of which
does not provide for the criminal prosecution of
1336
individuals by a statewide authority and has
formal procedures that—
‘‘(i) assure its referral of suspected
criminal violations relating to the program
under this title to the appropriate author-
ity or authorities in the State for prosecu-
tion, and
‘‘(ii) assure its assistance of, and co-
ordination with, such authority or authori-
ties in such prosecutions; or
‘‘(C) has a formal working relationship
with the office of the State Attorney General
and has formal procedures (including proce-
dures for its referral of suspected criminal vio-
lations to such office) which provide effective
coordination of activities between the entity and
such office with respect to the detection, inves-
tigation, and prosecution of suspected criminal
violations relating to the program under this
title.
‘‘(2) INDEPENDENCE.—The entity is separate
and distinct from any State agency that has prin-
cipal responsibilities for administering or supervising
the administration of the MediGrant plan.
1337
‘‘(3) FUNCTION.—The entity’s function is con-
ducting a statewide program for the investigation
and prosecution of violations of all applicable State
laws regarding any and all aspects of fraud in con-
nection with any aspect of the provision of medical
assistance and the activities of providers of such as-
sistance under the MediGrant plan.
‘‘(4) REVIEW OF COMPLAINTS.—The entity has
procedures for reviewing complaints of the abuse
and neglect of patients of health care facilities which
receive payments under the MediGrant plan under
this title, and, where appropriate, for acting upon
such complaints under the criminal laws of the State
or for referring them to other State agencies for ac-
tion.
‘‘(5) OVERPAYMENTS.—The entity provides for
the collection, or referral for collection to a single
State agency, of overpayments that are made under
the MediGrant plan to health care providers and
that are discovered by the entity in carrying out its
activities.
‘‘(6) PERSONNEL.—The entity employs such
auditors, attorneys, investigators, and other nec-
essary personnel and is organized in such a manner
1338
as is necessary to promote the effective and efficient
conduct of the entity’s activities.
‘‘SEC. 2135. RECOVERIES FROM THIRD PARTIES AND OTH-
ERS.
‘‘(a) THIRD PARTY LIABILITY.—Each MediGrant
plan shall provide for reasonable steps—
‘‘(1) to ascertain the legal liability of third par-
ties to pay for care and services available under the
plan, including the collection of sufficient informa-
tion to enable States to pursue claims against third
parties; and
‘‘(2) to seek reimbursement for medical assist-
ance provided to the extent legal liability is estab-
lished where the amount expected to be recovered ex-
ceeds the costs of the recovery.
‘‘(b) BENEFICIARY PROTECTION.—
‘‘(1) IN GENERAL.—Each MediGrant plan shall
provide that in the case of a person furnishing serv-
ices under the plan for which a third party may be
liable for payment—
‘‘(A) the person may not seek to collect
from the individual (or financially responsible
relative) payment of an amount for the service
more than could be collected under the plan in
the absence of such third party liability, and
1339
‘‘(B) may not refuse to furnish services to
such an individual because of a third party’s
potential liability for payment for the service.
‘‘(2) PENALTY.—A MediGrant plan may pro-
vide for a reduction of any payment amount other-
wise due with respect to a person who furnishes
services under the plan in an amount equal to up to
three times the amount of any payment sought to be
collected by that person in violation of paragraph
(1)(A).
‘‘(c) GENERAL LIABILITY.—The State shall prohibit
any health insurer (including a group health plan as de-
fined in section 607 of the Employee Retirement Income
Security Act of 1974, a service benefit plan, or a health
maintenance organization), in enrolling an individual or
in making any payments for benefits to the individual or
on the individual’s behalf, from taking into account that
the individual is eligible for or is provided medical assist-
ance under a MediGrant plan for any State.
‘‘(d) ACQUISITION OF RIGHTS OF BENEFICIARIES.—
To the extent that payment has been made under a
MediGrant plan in any case where a third party has a
legal liability to make payment for such assistance, the
State shall have in effect laws under which, to the extent
that payment has been made under the plan for health
1340
care items or services furnished to an individual, the State
is considered to have acquired the rights of such individual
to payment by any other party for such health care items
or services.
‘‘(e) ASSIGNMENT OF MEDICAL SUPPORT RIGHTS.—
The MediGrant plan shall provide for mandatory assign-
ment of rights of payment for medical support and other
medical care owed to recipients in accordance with section
2136.
‘‘(f) REQUIRED LAWS RELATING TO MEDICAL CHILD
SUPPORT.—
‘‘(1) IN
GENERAL.— Each State with a
MediGrant plan shall have in effect the following
laws:
‘‘(A) A law that prohibits an insurer from
denying enrollment of a child under the health
coverage of the child’s parent on the ground
that—
‘‘(i) the child was born out of wedlock,
‘‘(ii) the child is not claimed as a de-
pendent on the parent’s Federal income
tax return, or
‘‘(iii) the child does not reside with
the parent or in the insurer’s service area.
1341
‘‘(B) In any case in which a parent is re-
quired by a court or administrative order to
provide health coverage for a child and the par-
ent is eligible for family health coverage
through an insurer, a law that requires such in-
surer—
‘‘(i) to permit such parent to enroll
under such family coverage any such child
who is otherwise eligible for such coverage
(without regard to any enrollment season
restrictions);
‘‘(ii) if such a parent is enrolled but
fails to make application to obtain cov-
erage of such child, to enroll such child
under such family coverage upon applica-
tion by the child’s other parent or by the
State agency administering the program
under this title or part D of title IV; and
‘‘(iii) not to disenroll (or eliminate
coverage of) such a child unless the insurer
is provided satisfactory written evidence
that—
‘‘(I) such court or administrative
order is no longer in effect, or
1342
‘‘(II) the child is or will be en-
rolled in comparable health coverage
through another insurer which will
take effect not later than the effective
date of such disenrollment.
‘‘(C) In any case in which a parent is re-
quired by a court or administrative order to
provide health coverage for a child and the par-
ent is eligible for family health coverage
through an employer doing business in the
State, a law that requires such employer—
‘‘(i) to permit such parent to enroll
under such family coverage any such child
who is otherwise eligible for such coverage
(without regard to any enrollment season
restrictions);
‘‘(ii) if such a parent is enrolled but
fails to make application to obtain cov-
erage of such child, to enroll such child
under such family coverage upon applica-
tion by the child’s other parent or by the
State agency administering the program
under this title or part D of title IV; and
‘‘(iii) not to disenroll (or eliminate
coverage of) any such child unless—
1343
‘‘(I) the employer is provided sat-
isfactory written evidence that such
court or administrative order is no
longer in effect, or the child is or will
be enrolled in comparable health cov-
erage which will take effect not later
than the effective date of such
disenrollment, or
‘‘(II) the employer has eliminated
family health coverage for all of its
employees; and
‘‘(iv) to withhold from such employ-
ee’s compensation the employee’s share (if
any) of premiums for health coverage (ex-
cept that the amount so withheld may not
exceed the maximum amount permitted to
be withheld under section 303(b) of the
Consumer Credit Protection Act), and to
pay such share of premiums to the insurer,
except that the Secretary may provide by
regulation for appropriate circumstances
under which an employer may withhold
less than such employee’s share of such
premiums.
1344
‘‘(D) A law that prohibits an insurer from
imposing requirements on a State agency,
which has been assigned the rights of an indi-
vidual eligible for medical assistance under this
title and covered for health benefits from the
insurer, that are different from requirements
applicable to an agent or assignee of any other
individual so covered.
‘‘(E) A law that requires an insurer, in
any case in which a child has health coverage
through the insurer of a noncustodial parent—
‘‘(i) to provide such information to the
custodial parent as may be necessary for
the child to obtain benefits through such
coverage;
‘‘(ii) to permit the custodial parent
(or provider, with the custodial parent’s
approval) to submit claims for covered
services without the approval of the
noncustodial parent; and
‘‘(iii) to make payment on claims sub-
mitted in accordance with clause (ii) di-
rectly to such custodial parent, the pro-
vider, or the State agency.
1345
‘‘(F) A law that permits the State agency
under this title to garnish the wages, salary, or
other employment income of, and requires with-
holding amounts from State tax refunds to, any
person who—
‘‘(i) is required by court or adminis-
trative order to provide coverage of the
costs of health services to a child who is el-
igible for medical assistance under this
title,
‘‘(ii) has received payment from a
third party for the costs of such services to
such child, but
‘‘(iii) has not used such payments to
reimburse, as appropriate, either the other
parent or guardian of such child or the
provider of such services,
to the extent necessary to reimburse the State
agency for expenditures for such costs under its
plan under this title, but any claims for current
or past-due child support shall take priority
over any such claims for the costs of such serv-
ices.
‘‘(2) DEFINITION.—For purposes of this sub-
section, the term ‘insurer’ includes a group health
1346
plan, as defined in section 607(1) of the Employee
Retirement Income Security Act of 1974, a health
maintenance organization, and an entity offering a
service benefit plan.
‘‘(g) 
ESTATE
RECOVERIES
AND
LIENS
PER-
MITTED.—A State may take such actions as it considers
appropriate to adjust or recover from the individual or the
individual’s estate any amounts paid as medical assistance
to or on behalf of the individual under the MediGrant
plan, including through the imposition of liens against the
property or estate of the individual.
‘‘SEC. 2136. ASSIGNMENT OF RIGHTS OF PAYMENT.
‘‘(a) IN GENERAL.—For the purpose of assisting in
the collection of medical support payments and other pay-
ments for medical care owed to recipients of medical as-
sistance under the MediGrant plan, each MediGrant plan
shall—
‘‘(1) provide that, as a condition of eligibility
for medical assistance under the plan to an individ-
ual who has the legal capacity to execute an assign-
ment for himself, the individual is required—
‘‘(A) to assign the State any rights, of the
individual or of any other person who is eligible
for medical assistance under the plan and on
whose behalf the individual has the legal au-
1347
thority to execute an assignment of such rights,
to support (specified as support for the purpose
of medical care by a court or administrative
order) and to payment for medical care from
any third party,
‘‘(B) to cooperate with the State (i) in es-
tablishing the paternity of such person (referred
to in subparagraph (A)) if the person is a child
born out of wedlock, and (ii) in obtaining sup-
port and payments (described in subparagraph
(A)) for himself and for such person, unless (in
either case) the individual is pregnant woman
or the individual is found to have good cause
for refusing to cooperate as determined by the
State, and
‘‘(C) to cooperate with the State in identi-
fying, and providing information to assist the
State in pursuing, any third party who may be
liable to pay for care and services available
under the plan, unless such individual has good
cause for refusing to cooperate as determined
by the State; and
‘‘(2) provide for entering into cooperative ar-
rangements (including financial arrangements), with
any appropriate agency of any State (including, with
1348
respect to the enforcement and collection of rights of
payment for medical care by or through a parent,
with a State’s agency established or designated
under section 454(3)) and with appropriate courts
and law enforcement officials, to assist the agency or
agencies administering the plan with respect to—
‘‘(A) the enforcement and collection of
rights to support or payment assigned under
this section, and
‘‘(B) any other matters of common con-
cern.
‘‘(b) USE OF AMOUNTS COLLECTED.—Such part of
any amount collected by the State under an assignment
made under the provisions of this section shall be retained
by the State as is necessary to reimburse it for medical
assistance payments made on behalf of an individual with
respect to whom such assignment was executed (with ap-
propriate reimbursement of the Federal Government to
the extent of its participation in the financing of such
medical assistance), and the remainder of such amount
collected shall be paid to such individual.
‘‘SEC. 2137. QUALITY ASSURANCE STANDARDS FOR NURS-
ING FACILITIES.
‘‘(a) STANDARDS FOR AND CERTIFICATION OF CER-
TAIN FACILITIES.—
1349
‘‘(1) STANDARDS FOR FACILITIES.—
‘‘(A) IN GENERAL.—Each MediGrant plan
shall provide for the establishment and mainte-
nance of standards consistent with the contents
described in subparagraph (B) for nursing fa-
cilities which furnish services under the plan.
‘‘(B) CONTENTS
OF
STANDARDS.—The
standards established for facilities under this
paragraph shall contain provisions relating to
the following items:
‘‘(i) The treatment of resident medical
records.
‘‘(ii) Policies, procedures, and bylaws
for operation.
‘‘(iii) Quality assurance systems.
‘‘(iv) Resident assessment procedures,
including care planning and outcome eval-
uation.
‘‘(v) The assurance of a safe and ade-
quate physical plant for the facility.
‘‘(vi) Qualifications for staff sufficient
to provide adequate care, as defined by the
State.
‘‘(vii) Utilization review.
1350
‘‘(viii) The protection and enforce-
ment of resident rights described in sub-
paragraph (C).
‘‘(C) RESIDENT RIGHTS DESCRIBED.—The
resident rights described in this subparagraph
are the rights of residents to the following:
‘‘(i) To exercise the individual’s rights
as a resident of the facility and as a citizen
or resident of the United States.
‘‘(ii) To receive notice of rights and
services.
‘‘(iii) To be protected against the mis-
use of resident funds.
‘‘(iv) To be provided privacy and con-
fidentiality.
‘‘(v) To voice grievances.
‘‘(vi) To examine the results of State
certification program inspections.
‘‘(vii) To refuse to perform services
for the facility.
‘‘(viii) To be provided privacy in com-
munications and to receive mail.
‘‘(ix) To have the facility provide im-
mediate access to any resident by any rep-
resentative of the certification program,
1351
the resident’s individual physician, the
State long term care ombudsman, and any
person the resident has designated as a
visitor.
‘‘(x) To retain and use personal prop-
erty.
‘‘(xi) To be free from abuse, including
verbal, sexual, physical and mental abuse,
corporal punishment, and involuntary se-
clusion.
‘‘(xii) To be provided with prior writ-
ten notice of a pending transfer or dis-
charge.
‘‘(D) PROCESS
FOR
ESTABLISHMENT.—
The standards established by the State for fa-
cilities under this paragraph shall be promul-
gated either through the State’s legislative, reg-
ulatory, or other process, and may only take ef-
fect after the State has provided the public with
notice and an opportunity for comment.
‘‘(2) CERTIFICATION PROGRAM.—
‘‘(A) IN GENERAL.—Each MediGrant plan
shall provide for the establishment and oper-
ation of a program consistent with the require-
ments of subparagraph (B) for the certification
1352
of nursing facilities which meet the standards
established under paragraph (1) and the decer-
tification of facilities which fail to meet such
standards.
‘‘(B) REQUIREMENTS FOR PROGRAM.—In
addition to any other requirements the State
may impose, in establishing and operating the
certification program under subparagraph (A),
the State shall ensure the following:
‘‘(i) The State shall ensure public ac-
cess (as defined by the State) to the cer-
tification program’s evaluations of partici-
pating 
facilities, 
including 
compliance
records and enforcement actions and other
reports by the State regarding the owner-
ship, compliance histories, and services
provided by certified facilities.
‘‘(ii) Not less often than every 4
years, the State shall audit its expendi-
tures under the program, through an en-
tity designated by the State which is not
affiliated with the program, as designated
by the State.
‘‘(b) INTERMEDIATE SANCTION AUTHORITY.—
1353
‘‘(1) AUTHORITY.—In addition to any other au-
thority under State law, where a State determines
that a nursing facility which is certified for partici-
pation under the MediGrant plan no longer substan-
tially meets the requirements for such a facility
under this title and further determines that the fa-
cility’s deficiencies—
‘‘(A) immediately jeopardize the health and
safety of its residents, the State shall at least
provide for the termination of the facility’s cer-
tification for participation under the plan, or
‘‘(B) do not immediately jeopardize the
health and safety of its residents, the State
may, in lieu of providing for terminating the fa-
cility’s certification for participation under the
plan, provide lesser sanctions including one that
provides that no payment will be made under
the plan with respect to any individual admitted
to such facility after a date specified by the
State.
‘‘(2) NOTICE.—The State shall not make such
a decision with respect to a facility until the facility
has had a reasonable opportunity, following the ini-
tial determination that it no longer substantially
meets the requirements for such a facility under the
1354
plan, to correct its deficiencies, and, following this
period, has been given reasonable notice and oppor-
tunity for a hearing.
‘‘(3) EFFECTIVENESS.—The State’s decision to
deny payment may be made effective only after such
notice to the public and to the facility as may be
provided for by the State, and its effectiveness shall
terminate (A) when the State finds that the facility
is in substantial compliance (or is making good faith
efforts to achieve substantial compliance) with the
requirements for such a facility under this title, or
(B) in the case described in paragraph (1)(B), with
the end of the eleventh month following the month
such decision is made effective, whichever occurs
first. If a facility to which clause (B) of the previous
sentence applies still fails to substantially meet the
provisions of the respective section on the date speci-
fied in such clause, the State shall terminate such
facility’s certification for participation under the
MediGrant plan effective with the first day of the
first month following the month specified in such
clause.
1355
‘‘SEC. 2138. OTHER PROVISIONS PROMOTING PROGRAM IN-
TEGRITY.
‘‘(a) PUBLIC ACCESS TO SURVEY RESULTS.—Each
MediGrant plan shall provide that upon completion of a
survey of any health care facility or organization by a
State agency to carry out the plan, the agency shall make
public in readily available form and place the pertinent
findings of the survey relating to the compliance of the
facility or organization with requirements of law.
‘‘(b) RECORD KEEPING.—Each MediGrant plan shall
provide for agreements with persons or institutions provid-
ing services under the plan under which the person or in-
stitution agrees—
‘‘(1) to keep such records (including ledgers,
books, and original evidence of costs) as are nec-
essary to fully disclose the extent of the services pro-
vided to individuals receiving assistance under the
plan; and
‘‘(2) to furnish the State agency with such in-
formation regarding any payments claimed by such
person or institution for providing services under the
plan, as the State agency may from time to time re-
quest.
1356
‘‘PART E—ESTABLISHMENT AND AMENDMENT OF
MEDIGRANT PLANS
‘‘SEC. 2151. SUBMITTAL AND APPROVAL OF MEDIGRANT
PLANS.
‘‘(a) SUBMITTAL.—As a condition of receiving fund-
ing under part C, each State shall submit to the Secretary
a MediGrant plan that meets the applicable requirements
of this title.
‘‘(b) APPROVAL.—Except as the Secretary may pro-
vide under section 2154, a MediGrant plan submitted
under subsection (a)—
‘‘(1) shall be approved for purposes of this title,
and
‘‘(2) shall be effective beginning with a calendar
quarter that is specified in the plan, but in no case
earlier than the first calendar quarter that begins at
least 60 days after the date the plan is submitted.
‘‘(c) APPROVAL
OF LEGISLATURE
FOR SUBMIT-
TAL.—In the case of a State which has a State allotment
under section 2121(c)(1) for fiscal year 1996 of more than
$10 billion, the State may not submit a MediGrant plan
under this section unless the State legislature, by law, has
specifically authorized such submittal.
1357
‘‘SEC. 2152. SUBMITTAL AND APPROVAL OF PLAN AMEND-
MENTS.
‘‘(a) SUBMITTAL OF AMENDMENTS.—A State may
amend, in whole or in part, its MediGrant plan at any
time through transmittal of a plan amendment under this
section.
‘‘(b) APPROVAL.—Except as the Secretary may pro-
vide under section 2154, an amendment to a MediGrant
plan submitted under subsection (a)—
‘‘(1) shall be approved for purposes of this title,
and
‘‘(2) shall be effective as provided in subsection
(c).
‘‘(c) EFFECTIVE DATES FOR AMENDMENTS.—
‘‘(1) IN GENERAL.—Subject to the succeeding
provisions of this subsection, an amendment to
MediGrant plan shall take effect on one or more ef-
fective dates specified in the amendment.
‘‘(2) AMENDMENTS RELATING TO ELIGIBILITY
OR
BENEFITS.—Except as provided in paragraph
(4)—
‘‘(A) NOTICE
REQUIREMENT.—Any plan
amendment that eliminates or restricts eligi-
bility or benefits under the plan may not take
effect unless the State certifies that it has pro-
vided prior or contemporaneous public notice of
1358
the change, in a form and manner provided
under applicable State law.
‘‘(B) TIMELY
TRANSMITTAL.—Any plan
amendment that eliminates or restricts eligi-
bility or benefits under the plan shall not be ef-
fective for longer than a 60 day period unless
the amendment has been transmitted to the
Secretary before the end of such period.
‘‘(3) OTHER AMENDMENTS.—Subject to para-
graph (4), any plan amendment that is not described
in paragraph (2) becomes effective in a State fiscal
year may not remain in effect after the end of such
fiscal year (or, if later, the end of the 90-day period
on which it becomes effective) unless the amendment
has been transmitted to the Secretary.
‘‘(4) EXCEPTION.—The requirements of para-
graphs (2) and (3) shall not apply to a plan amend-
ment that is submitted on a timely basis pursuant
to a court order or an order of the Secretary.
‘‘SEC. 2153. PROCESS FOR STATE WITHDRAWAL FROM PRO-
GRAM.
‘‘(a) IN
GENERAL.—A State may rescind its
MediGrant plan and discontinue participation in the pro-
gram under this title at any time after providing—
1359
‘‘(1) the public with 90 days prior notice in a
publication in one or more daily newspapers of gen-
eral circulation in the State or in any publication
used by the State to publish State statutes or rules,
and
‘‘(2) the Secretary with 90 days prior written
notice.
‘‘(b) EFFECTIVE DATE.—Such discontinuation shall
not apply to payments under part C for expenditures made
for items and services furnished under the MediGrant plan
before the effective date of the discontinuation.
‘‘(c) PRORATION OF ALLOTMENTS.—In the case of
any withdrawal under this section other than at the end
of a Federal fiscal year, notwithstanding any provision of
section 2121 to the contrary, the Secretary shall provide
for such appropriate proration of the application of allot-
ments under section 2121 as is appropriate.
‘‘SEC. 2154. SANCTIONS FOR SUBSTANTIAL NONCOMPLI-
ANCE.
‘‘(a) PROMPT REVIEW OF PLAN SUBMITTALS.—The
Secretary shall promptly review MediGrant plans and plan
amendments submitted under this part to determine if
they substantially comply with the requirements of this
title.
1360
‘‘(b) DETERMINATIONS
OF
SUBSTANTIAL
NON-
COMPLIANCE.—
‘‘(1) AT TIME OF PLAN OR AMENDMENT SUB-
MITTAL.—
‘‘(A) IN GENERAL.—If the Secretary, dur-
ing the 30-day period beginning on the date of
submittal of a MediGrant plan or plan amend-
ment—
‘‘(i) determines that the plan or
amendment substantially violates (within
the meaning of subsection (c)) a require-
ment of this title, and
‘‘(ii) provides written notice of such
determination to the State,
the Secretary shall issue an order specifying
that the plan or amendment, insofar as it is in
substantial violation of such a requirement,
shall not be effective, except as provided in sub-
section (c), beginning at the end of a period of
not less than 30 days, or 120 days in the case
of the initial submission of the MediGrant plan)
specified in the order beginning on the date of
the notice of the determination.
‘‘(B) EXTENSION OF TIME PERIODS.—The
time periods specified in subparagraph (A) may
1361
be extended by written agreement of the Sec-
retary and the State involved.
‘‘(2) VIOLATIONS
IN
ADMINISTRATION
OF
PLAN.—
‘‘(A) IN GENERAL.—If the Secretary deter-
mines, after reasonable notice and opportunity
for a hearing for the State, that in the adminis-
tration of a MediGrant plan there is a substan-
tial violation of a requirement of this title, the
Secretary shall provide the State with written
notice of the determination and with an order
to remedy such violation. Such an order shall
become effective prospectively, as specified in
the order, after the date of receipt of such writ-
ten notice. Such an order may include the with-
holding of funds, consistent with subsection (f),
for parts of the MediGrant plan affected by
such violation, until the Secretary is satisfied
that the violation has been corrected.
‘‘(B) EFFECTIVENESS.—If the Secretary
issues an order under paragraph (1), the order
shall become effective, except as provided in
subsection (c), beginning at the end of a period
(of not less than 30 days) specified in the order
1362
beginning on the date of the notice of the deter-
mination to the State.
‘‘(C) TIMELINESS
OF
DETERMINATIONS
RELATING
TO
REPORT-BASED
COMPLIANCE.—
The Secretary shall make determinations under
this paragraph respecting violations relating to
information contained in an annual report
under section 2102, an independent evaluation
under section 2103, or an audit report under
section 2131 not later than 30 days after the
date of transmittal of the report or evaluation
to the Secretary.
‘‘(3) CONSULTATION
WITH
STATE.—Before
making a determination adverse to a State under
this section, the Secretary shall (within any time pe-
riods provided under this section)—
‘‘(A) reasonably consult with the State in-
volved,
‘‘(B) offer the State a reasonable oppor-
tunity to clarify the submission and submit fur-
ther information to substantiate compliance
with the requirements of this title, and
‘‘(C) reasonably consider any such clari-
fications and information submitted.
1363
‘‘(4) JUSTIFICATION OF ANY INCONSISTENCIES
IN DETERMINATIONS.—If the Secretary makes a de-
termination under this section that is, in whole or in
part, inconsistent with any previous determination
issued by the Secretary under this title, the Sec-
retary shall include in the determination a detailed
explanation and justification for any such difference.
‘‘(5) SUBSTANTIAL VIOLATION DEFINED.—For
purposes of this title, a MediGrant plan (or amend-
ment to such a plan) or the administration of the
MediGrant plan is considered to ‘substantially vio-
late’ a requirement of this title if a provision of the
plan or amendment (or an omission from the plan
or amendment) or the administration of the plan—
‘‘(A) is material and substantial in nature
and effect, and
‘‘(B) is inconsistent with an express re-
quirement of this title.
A failure to meet a strategic objective or perform-
ance goal (as described in section 2101) shall not be
considered to substantially violate a requirement of
this title.
‘‘(c) STATE RESPONSE TO ORDERS.—
‘‘(1) STATE RESPONSE BY REVISING PLAN.—
1364
‘‘(A) IN GENERAL.—Insofar as an order
under subsection (b)(1) relates to a substantial
violation by a MediGrant plan or plan amend-
ment, a State may respond (before the date the
order becomes effective) to such an order by
submitting a written revision of the plan or
plan amendment to substantially comply with
the requirements of this part.
‘‘(B) REVIEW OF REVISION.—In the case
of submission of such a revision, the Secretary
shall promptly review the submission and shall
withhold any action on the order during the pe-
riod of such review.
‘‘(C) SECRETARIAL RESPONSE.—The revi-
sion shall be considered to have corrected the
deficiency (and the order rescinded insofar as it
relates to such deficiency) unless the Secretary
determines and notifies the State in writing,
within 15 days after the date the Secretary re-
ceives the revision, that the plan or amendment,
as proposed to be revised, still substantially vio-
lates a requirement of this title. In such case
the State may respond by seeking reconsider-
ation or a hearing under paragraph (2).
1365
‘‘(D) REVISION RETROACTIVE.—If the re-
vision provides for substantial compliance, the
revision may be treated, at the option of the
State, as being effective either as of the effec-
tive date of the provision to which it relates or
such later date as the State and Secretary may
agree.
‘‘(2) STATE RESPONSE BY SEEKING RECONSID-
ERATION
OR
AN
ADMINISTRATIVE
HEARING.—A
State may respond to an order under subsection (b)
by filing a request with the Secretary for—
‘‘(A) a reconsideration of the determina-
tion, pursuant to subsection (d)(1), or
‘‘(B) a review of the determination through
an administrative hearing, pursuant to sub-
section (d)(2).
In such case, the order shall not take effect before
the completion of the reconsideration or hearing.
‘‘(3) STATE RESPONSE BY CORRECTIVE ACTION
PLAN.—
‘‘(A) IN
GENERAL.—In the case of an
order described in subsection (b)(2) that relates
to a substantial violation in the administration
of the MediGrant plan, a State may respond to
such an order by submitting a corrective action
1366
plan with the Secretary to correct deficiencies
in the administration of the plan which are the
subject of the order.
‘‘(B) REVIEW
OF
CORRECTIVE
ACTION
PLAN.—In such case, the Secretary shall with-
hold any action on the order for a period (not
to exceed 30 days) during which the Secretary
reviews the corrective action plan.
‘‘(C) SECRETARIAL RESPONSE.—The cor-
rective action plan shall be considered to have
corrected the deficiency (and the order re-
scinded insofar as it relates to such deficiency)
unless the Secretary determines and notifies the
State in writing, within 15 days after the date
the Secretary receives the corrective action
plan, that the State’s administration of the
MediGrant plan, as proposed to be corrected in
the plan, will still substantially violate a re-
quirement of this title. In such case the State
may respond by seeking reconsideration or a
hearing under paragraph (2).
‘‘(4) STATE
RESPONSE
BY
WITHDRAWAL
OF
PLAN AMENDMENT; FAILURE TO RESPOND.—Insofar
as an order relates to a substantial violation in a
plan amendment submitted, a State may respond to
1367
such an order by withdrawing the plan amendment
and the MediGrant plan shall be treated as though
the amendment had not been made.
‘‘(d) ADMINISTRATIVE REVIEW AND HEARING.—
‘‘(1) RECONSIDERATION.—Within 30 days after
the date of receipt of a request under subsection
(b)(2)(A), the Secretary shall notify the State of the
time and place at which a hearing will be held for
the purpose of reconsidering the Secretary’s deter-
mination. The hearing shall be held not less than 20
days nor more than 60 days after the date notice of
the hearing is furnished to the State, unless the Sec-
retary and the State agree in writing to holding the
hearing at another time. The Secretary shall affirm,
modify, or reverse the original determination within
60 days of the conclusion of the hearing.
‘‘(2) ADMINISTRATIVE
HEARING.—Within 30
days after the date of receipt of a request under
subsection (b)(2)(B), an administrative law judge
shall schedule a hearing for the purpose of reviewing
the Secretary’s determination. The hearing shall be
held not less than 20 days nor more than 60 days
after the date notice of the hearing is furnished to
the State, unless the Secretary and the State agree
in writing to holding the hearing at another time.
1368
The administrative law judge shall affirm, modify, or
reverse the determination within 60 days of the con-
clusion of the hearing.
‘‘(e) JUDICIAL REVIEW.—
‘‘(1) IN GENERAL.—A State which is dissatis-
fied with a final determination made by the Sec-
retary under subsection (d)(1) or a final determina-
tion of an administrative law judge under subsection
(d)(2) may, within 60 days after it has been notified
of such determination, file with the United States
court of appeals for the circuit in which the State
is located a petition for review of such determina-
tion. A copy of the petition shall be forthwith trans-
mitted by the clerk of the court to the Secretary
and, in the case of a determination under subsection
(d)(2), to the administrative law judge involved. The
Secretary (or judge involved) thereupon shall file in
the court the record of the proceedings on which the
final determination was based, as provided in section
2112 of title 28, United States Code.
‘‘(2) STANDARD FOR REVIEW.—The findings of
fact by the Secretary or administrative law judge, if
supported by substantial evidence, shall be conclu-
sive, but the court, for good cause shown, may re-
mand the case to the Secretary or judge to take fur-
1369
ther evidence, and the Secretary or judge may there-
upon make new or modified findings of fact and may
modify a previous determination, and shall certify to
the court the transcript and record of the further
proceedings. Such new or modified findings of fact
shall likewise be conclusive if supported by substan-
tial evidence.
‘‘(3) JURISDICTION
OF
APPELLATE
COURT.—
The court shall have jurisdiction to affirm the action
of the Secretary or judge or to set it aside, in whole
or in part. The judgment of the court shall be sub-
ject to review by the Supreme Court of the United
States upon certiorari or certification as provided in
section 1254 of title 28, United States Code.
‘‘(f) WITHHOLDING OF FUNDS.—
‘‘(1) IN GENERAL.—Any order under this sec-
tion relating to the withholding of funds shall be ef-
fective not earlier than the effective date of the
order and shall only relate to the portions of a
MediGrant plan or administration thereof which sub-
stantially violate a requirement of this title. In the
case of a failure to meet a set-aside requirement
under section 2112, any withholding shall only apply
to the extent of such failure.
1370
‘‘(2) SUSPENSION OF WITHHOLDING.—The Sec-
retary may suspend withholding of funds under
paragraph (1) during the period reconsideration or
administrative and judicial review is pending under
subsection (d) or (e).
‘‘(3) RESTORATION
OF
FUNDS.—Any funds
withheld under this subsection under an order shall
be immediately restored to a State—
‘‘(A) to the extent and at the time the
order is—
‘‘(i) modified or withdrawn by the
Secretary upon reconsideration,
‘‘(ii) modified or reversed by an ad-
ministrative law judge, or
‘‘(iii) set aside (in whole or in part) by
an appellate court; or
‘‘(B) when the Secretary determines that
the deficiency which was the basis for the order
is corrected;
‘‘(C) when the Secretary determines that
violation which was the basis for the order is
resolved or the amendment which was the basis
for the order is withdrawn; or
‘‘(D) at any time upon the initiative of the
Secretary.
1371
‘‘SEC. 2155. SECRETARIAL AUTHORITY.
‘‘(a) NEGOTIATED AGREEMENT AND DISPUTE RESO-
LUTION.—
‘‘(1) NEGOTIATIONS.—Nothing in this part
shall be construed as preventing the Secretary and
a State from at any time negotiating a satisfactory
resolution to any dispute concerning the approval of
a MediGrant plan (or amendments to a MediGrant
plan) or the compliance of a MediGrant plan (in-
cluding its administration) with requirements of this
title.
‘‘(2) COOPERATION.—The Secretary shall act in
a cooperative manner with the States in carrying out
this title. In the event of a dispute between a State
and the Secretary, the Secretary shall, whenever
practicable, engage in informal dispute resolution ac-
tivities in lieu of formal enforcement or sanctions
under section 2154.
‘‘(b) LIMITATIONS ON DELEGATION OF DECISION-
MAKING AUTHORITY.—The Secretary may not delegate
(other than to the Administrator of the Health Care Fi-
nancing Administration) the authority to make determina-
tions or reconsiderations respecting the approval of
MediGrant plans (or amendments to such plans) or the
compliance of a MediGrant plan (including its administra-
tion) with requirements of this title. Such Administrator
1372
may not further delegate such authority to any individual,
including any regional official of such Administration.
‘‘(c) 
REQUIRING
FORMAL
RULEMAKING
FOR
CHANGES IN SECRETARIAL ADMINISTRATION.—The Sec-
retary shall carry out the administration of the program
under this title only through a prospective formal rule-
making process, including issuing notices of proposed rule
making, publishing proposed rules or modifications to
rules in the Federal Register, and soliciting public com-
ment.
‘‘PART F—GENERAL PROVISIONS
‘‘SEC. 2171. DEFINITIONS.
‘‘(a) MEDICAL ASSISTANCE.—
‘‘(1) IN GENERAL.—For purposes of this title,
except as provided in paragraph (2), the term ‘medi-
cal assistance’ means payment of part or all the cost
of any of the following for eligible low-income indi-
viduals (as defined in subsection (b)) as specified
under the MediGrant plan:
‘‘(A) Inpatient hospital services.
‘‘(B) Outpatient hospital services.
‘‘(C) Physician services.
‘‘(D) Surgical services.
‘‘(E) Clinic services and other ambulatory
health care services.
1373
‘‘(F) Nursing facility services.
‘‘(G) Intermediate care facility services for
the mentally retarded.
‘‘(H) Prescription drugs and biologicals.
‘‘(I) Over-the-counter medications.
‘‘(J) Laboratory and radiological services.
‘‘(K) Family planning services and sup-
plies.
‘‘(L) Inpatient mental health services, in-
cluding services furnished in a State-operated
mental hospital and including residential or
other 24-hour therapeutically planned struc-
tured services in the case of a child.
‘‘(M) Outpatient mental health services, in-
cluding services furnished in a State-operated
mental hospital and including community-based
services in the case of a child.
‘‘(N) Durable medical equipment and other
medically-related or remedial devices (such as
prosthetic devices, implants, eyeglasses, hearing
aids, dental devices, and adaptive devices).
‘‘(O) Disposable medical supplies.
‘‘(P) Home and community-based health
care services and related supportive services
(such as home health nursing services, home
1374
health aide services, personal care, assistance
with activities of daily living, chore services, day
care services, respite care services, and training
for family members).
‘‘(Q) Community supported living arrange-
ments.
‘‘(R) Nursing care services (such as private
duty nursing care, nurse midwife services, res-
piratory care services, pediatric nurse services,
and advanced practice nurse services) in a
home, school, or other setting.
‘‘(S) Dental services.
‘‘(T) Inpatient substance abuse treatment
services and residential substance abuse treat-
ment services.
‘‘(U) Outpatient substance abuse treat-
ment services.
‘‘(V) Case management services.
‘‘(W) Care coordination services.
‘‘(X) Physical therapy, occupational ther-
apy, and services for individuals with speech,
hearing, and language disorders.
‘‘(Y) Hospice care.
‘‘(Z) Any other medical, diagnostic, screen-
ing, preventive, restorative, remedial, thera-
1375
peutic, or rehabilitative services (whether in a
facility, home, school, or other setting) if recog-
nized by State law and if the service is—
‘‘(i) prescribed by or furnished by a
physician or other licensed or registered
practitioner within the scope of practice as
defined by State law,
‘‘(ii) performed under the general su-
pervision or at the direction of a physician,
or
‘‘(iii) furnished by a health care facil-
ity that is operated by a State or local gov-
ernment or is licensed under State law and
operating within the scope of the license.
‘‘(AA) Premiums for private health care
insurance coverage, including private long-term
care insurance coverage.
‘‘(BB) Medical transportation.
‘‘(CC) Medicare cost-sharing (as defined in
subsection (c)).
‘‘(DD) Enabling services (such as trans-
portation, translation, and outreach services)
designed to increase the accessibility of primary
and preventive health care services for eligible
low-income individuals.
1376
‘‘(EE) Any other health care services or
items specified by the Secretary.
‘‘(2) EXCLUSION
OF
CERTAIN
PAYMENTS.—
Such term does not include the payment with re-
spect to care or services for—
‘‘(A) any individual who is an inmate of a
public institution (except as a patient in a State
psychiatric hospital); and
‘‘(B) any individual who is not an eligible
low-income individual.
‘‘(b) ELIGIBLE
LOW-INCOME
INDIVIDUAL.—The
term ‘eligible low-income individual’ means an individual
who has been determined eligible by the State for medical
assistance under the MediGrant plan and whose family in-
come (as determined under the plan) does not exceed a
percentage (specified in the MediGrant plan and not to
exceed 300 percent) of the poverty line for a family of
the size involved. In determining the amount of income
under the previous sentence, a State may exclude costs
incurred for medical care or other types of remedial care
recognized by the State.
‘‘(c) MEDICARE COST-SHARING.—For purposes of
this title, the term ‘medicare cost-sharing’ means any of
the following:
‘‘(1)(A) Premiums under section 1839.
1377
‘‘(B) Premiums under section 1818 or 1818A.
‘‘(2) Coinsurance under title XVIII (including
coinsurance described in section 1813).
‘‘(3) Deductibles established under title XVIII
(including those described in section 1813 and sec-
tion 1833(b)).
‘‘(4) The difference between the amount that is
paid under section 1833(a) and the amount that
would be paid under such section if any reference to
‘80 percent’ therein were deemed a reference to ‘100
percent’.
‘‘(5) Premiums for enrollment of an individual
with an eligible organization under section 1876 or
with a MedicarePlus organization under part C of
title XVIII.
‘‘(d) ADDITIONAL DEFINITIONS.—For purposes of
this title:
‘‘(1) CHILD.—The term ‘child’ means an indi-
vidual under 19 years of age.
‘‘(2) POVERTY LINE DEFINED.—The term ‘pov-
erty line’ means the income official poverty line (as
defined by the Office of Management and Budget
and revised annually in accordance with section
673(2) of the Omnibus Budget Reconciliation Act of
1981).
1378
‘‘(3) PREGNANT WOMAN.—The term ‘pregnant
woman’ includes a woman during the 60-day period
beginning on the last day of the pregnancy.
‘‘SEC. 2172. TREATMENT OF TERRITORIES.
‘‘Notwithstanding any other requirement of this title,
the Secretary may waive or modify any requirement of this
title with respect to the medical assistance program a
State other than the 50 States and the District of Colum-
bia, other than a waiver of—
‘‘(1) the applicable Federal medical assistance
percentage,
‘‘(2) the limitation on total payments in a fiscal
year to the amount of the allotment under section
2121(c), or
‘‘(3) the requirement that payment may be
made for medical assistance only with respect to
amounts expended by the State for care and services
described in paragraph (1) of section 2171(a) and
medically-related services (as defined in section
2112(e)(2)).
‘‘SEC. 2173. DESCRIPTION OF TREATMENT OF INDIAN
HEALTH SERVICE FACILITIES.
‘‘In the case of a State in which one or more facilities
of the Indian Health Service are located, the MediGrant
plan shall include a description of—
1379
‘‘(1) what provision (if any) has been made for
payment for items and services furnished by such fa-
cilities, and
‘‘(2) the manner in which medical assistance for
low-income eligible individuals who are Indians will
be provided, as determined by the State in consulta-
tion with the appropriate Indian tribes and tribal or-
ganizations.
‘‘SEC. 2174. APPLICATION OF CERTAIN GENERAL PROVI-
SIONS.
‘‘The following sections in part A of title XI shall
apply to States under this title in the same manner as
they applied to a State under title XIX:
‘‘(1) Section 1101(a)(1) (relating to definition
of State).
‘‘(2) Section 1116 (relating to administrative
and judicial review), but only insofar as consistent
with the provisions of part C.
‘‘(3) Section 1124 (relating to disclosure of
ownership and related information).
‘‘(4) Section 1126 (relating to disclosure of in-
formation about certain convicted individuals).
‘‘(5) Section 1132 (relating to periods within
which claims must be filed).
1380
‘‘SEC. 2175. MEDIGRANT MASTER DRUG REBATE AGREE-
MENTS.
‘‘(a) REQUIREMENT FOR MANUFACTURER TO ENTER
INTO AGREEMENT.—
‘‘(1) 
IN
GENERAL.—Pursuant 
to 
section
2123(f), in order for payment to be made to a State
under part C for medical assistance for covered out-
patient drugs of a manufacturer, the manufacturer
shall enter into and have in effect an MediGrant
master rebate agreement described in subsection (b)
with the Secretary on behalf of States electing to
participate in the agreement.
‘‘(2) STATE PARTICIPATION IN MASTER AGREE-
MENT OPTIONAL.—Nothing in this section shall be
construed to—
‘‘(A) require a State to participate in an
MediGrant master rebate agreement under this
section; or
‘‘(B) prohibit a State from entering into
an agreement with a manufacturer of covered
outpatient drugs (under such terms as the
State and manufacturer may agree upon) re-
garding the amount of payment for such drugs
under the MediGrant plan.
‘‘(3) COVERAGE
OF
DRUGS
NOT
COVERED
UNDER REBATE AGREEMENTS.—Nothing in this sec-
1381
tion shall be construed to prohibit a State in its dis-
cretion from providing coverage under its MediGrant
plan of a covered outpatient drug for which no re-
bate agreement is in effect under this section.
‘‘(4) EFFECT ON EXISTING AGREEMENTS.—If a
State has a rebate agreement in effect with a manu-
facturer on the date of the enactment of this section
which provides for a minimum aggregate rebate
equal to or greater than the minimum aggregate re-
bate which would otherwise be paid under the
MediGrant master agreement under this section, at
the option of the State—
‘‘(A) such agreement shall be considered to
meet the requirements of the MediGrant master
rebate agreement; and
‘‘(B) the State shall be considered to have
elected to participate in the MediGrant master
rebate agreement.
‘‘(b) TERMS OF REBATE AGREEMENT.—
‘‘(1) PERIODIC
REBATES.—The MediGrant
master rebate agreement under this section shall re-
quire the manufacturer to provide, to the MediGrant
plan of each State participating in the agreement, a
rebate for a rebate period in an amount specified in
subsection (c) for covered outpatient drugs of the
1382
manufacturer dispensed after the effective date of
the agreement, for which payment was made under
the plan for such period. Such rebate shall be paid
by the manufacturer not later than 30 days after the
date of receipt of the information described in para-
graph (2) for the period involved.
‘‘(2) STATE PROVISION OF INFORMATION.—
‘‘(A) STATE RESPONSIBILITY.—Each State
participating in the MediGrant master rebate
agreement shall report to each manufacturer
not later than 60 days after the end of each re-
bate period and in a form consistent with a
standard reporting format established by the
Secretary, information on the total number of
units of each dosage form and strength and
package size of each covered outpatient drug,
for which payment was made under the
MediGrant plan for the period, and shall
promptly transmit a copy of such report to the
Secretary.
‘‘(B) AUDITS.—A manufacturer may audit
the information provided (or required to be pro-
vided) under subparagraph (A). Adjustments to
rebates shall be made to the extent that infor-
1383
mation indicates that utilization was greater or
less than the amount previously specified.
‘‘(3) MANUFACTURER PROVISION OF PRICE IN-
FORMATION.—
‘‘(A) IN
GENERAL.—Each manufacturer
which is subject to the MediGrant master re-
bate agreement under this section shall report
to the Secretary—
‘‘(i) not later than 30 days after the
last day of each rebate period under the
agreement (beginning on or after January
1, 1991), on the average manufacturer
price (as defined in subsection (i)(1)) and,
for single source drugs and innovator mul-
tiple source drugs, the manufacturer’s best
price (as defined in subsection (c)(1)(C))
for each covered outpatient drug for the
rebate period under the agreement, and
‘‘(ii) not later than 30 days after the
date of entering into an agreement under
this section, on the average manufacturer
price (as defined in subsection (i)(1)) as of
October 1, 1990, for each of the manufac-
turer’s covered outpatient drugs.
1384
‘‘(B) VERIFICATION SURVEYS OF AVERAGE
MANUFACTURER
PRICE.—The Secretary may
survey wholesalers and manufacturers that di-
rectly distribute their covered outpatient drugs,
when necessary, to verify manufacturer prices
reported under subparagraph (A). The Sec-
retary may impose a civil monetary penalty in
an amount not to exceed $10,000 on a whole-
saler, manufacturer, or direct seller, if the
wholesaler, manufacturer, or direct seller of a
covered outpatient drug refuses a request for
information by the Secretary in connection with
a survey under this subparagraph. The provi-
sions of section 1128A (other than subsections
(a) (with respect to amounts of penalties or ad-
ditional assessments) and (b)) shall apply to a
civil money penalty under this subparagraph in
the same manner as such provisions apply to a
penalty or proceeding under section 1128A(a).
‘‘(C) PENALTIES.—
‘‘(i) FAILURE TO PROVIDE TIMELY IN-
FORMATION.—In the case of a manufac-
turer which is subject to the MediGrant
master rebate agreement that fails to pro-
vide information required under subpara-
1385
graph (A) on a timely basis, the amount of
the penalty shall be $10,000 for each day
in which such information has not been
provided and such amount shall be paid to
the Treasury. If such information is not
reported within 90 days of the deadline im-
posed, the agreement shall be suspended
for services furnished after the end of such
90-day period and until the date such in-
formation is reported (but in no case shall
such suspension be for a period of less
than 30 days).
‘‘(ii) 
FALSE
INFORMATION.—Any
manufacturer which is subject to the
MediGrant master rebate agreement, or a
wholesaler or direct seller, that knowingly
provides false information under subpara-
graph (A) or (B) is subject to a civil
money penalty in an amount not to exceed
$100,000 for each item of false informa-
tion. Any such civil money penalty shall be
in addition to other penalties as may be
prescribed by law. The provisions of sec-
tion 1128A (other than subsections (a) and
(b)) shall apply to a civil money penalty
1391
nonprofit entity, or governmental entity
within the United States, excluding—
‘‘(I) any prices charged on or
after October 1, 1992, to the Indian
Health Service, the Department of
Veterans Affairs, a State home receiv-
ing funds under section 1741 of title
38, United States Code, the Depart-
ment of Defense, the Public Health
Service, or a covered entity described
in section 340B(a)(4) of the Public
Health Service Act;
‘‘(II) any prices charged under
the Federal Supply Schedule of the
General Services Administration;
‘‘(III) any prices used under a
State pharmaceutical assistance pro-
gram; and
‘‘(IV) any depot prices and single
award contract prices, as defined by
the Secretary, of any agency of the
Federal Government.
‘‘(ii) SPECIAL RULES.—The term ‘best
price’—