‘‘(3) CONTRACT
WITH
MEDICAID
MANAGED 
CARE
ORGANIZATION.—In the case of a contract 
under paragraph (1) between the Secretary and an 
eligible entity administering benefits under the Pro-
gram as a Medicaid managed care organization, with 
respect to one or more coverage gap geographic 
areas, the following shall apply: 
‘‘(A) The provisions of clauses (i) through 
(xi) of section 1903(m)(2)(A), clause (xii) of 
such section (to the extent such clause relates 
to subsections (b) and (f) of section 1932), and 
clause (xiii) of such section 1903(m)(2)(A) 
shall, to the greatest extent practicable, apply 
to the contract, to the Secretary, and to the 
Medicaid managed care organization, with re-
spect to providing medical assistance under the 
Federal Medicaid program with respect to such 
area, in the same manner and to the same ex-
tent as such provisions apply to a contract 
under section 1903(m) between a State and an 
entity that is a Medicaid managed care organi-
zation (as defined in section 1903(m)(1)), to 
the State, and to the entity, with respect to 
providing medical assistance to individuals eligi-
ble for benefits under this title. 
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‘‘(B) The provisions of section 1932(h) 
shall apply to the contract, Secretary, and Med-
icaid managed care organization. 
‘‘(C) The contract shall provide that the 
entity pay claims in a timely manner and in ac-
cordance 
with 
the 
provisions 
of 
section 
1902(a)(37). 
‘‘(D) The contract shall provide that the 
Secretary shall make payments under this sec-
tion to the entity, with respect to coverage of 
each individual enrolled under the Program in 
such a coverage gap geographic area with re-
spect to which the entity administers the Pro-
gram in an amount specified in the contract, 
subject to subparagraph (D)(ii) and paragraph 
(6). 
‘‘(E) The contract shall require— 
‘‘(i) the application of a minimum 
medical loss ratio (as calculated under sub-
section (d) of section 438.8 of title 42, 
Code of Federal Regulations (or any suc-
cessor regulation)) for payment for medical 
assistance administered by the managed 
care organization under the Program, with 
respect to a year, that is equal to or great-
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er than 85 percent (or such higher percent 
as specified by the Secretary); and 
‘‘(ii) in the case, with respect to a 
year, the minimum medical loss ratio (as 
so calculated) for payment for services 
under the benefits so administered is less 
than 85 percent (or such higher percent as 
specified by the Secretary under clause 
(i)), remittance by the organization to the 
Secretary of any payments (or portions of 
payments) made to the organization under 
this section in an amount equal to the dif-
ference in payments for medical assistance, 
with respect to the year, resulting from the 
organization’s failure to meet such ratio 
for such year. 
‘‘(F) The contract shall require that the el-
igible entity submit to the Secretary the num-
ber of individuals enrolled in the Program with 
respect to each coverage gap geographic area 
and month with respect to which the contract 
applies and such additional information as spec-
ified by the Secretary for purposes of payment, 
program integrity, oversight, quality measure-
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ment, or such other purpose specified by the 
Secretary. 
‘‘(G) The contract shall require that the el-
igible entity perform any other activity identi-
fied by the Secretary. 
‘‘(4) CONTRACT WITH A THIRD PARTY PLAN 
ADMINISTRATOR.— 
‘‘(A) IN GENERAL.—In the case of a con-
tract under paragraph (1) between the Sec-
retary and an eligible entity to administer the 
Program as a third party plan administrator, 
with respect to one or more coverage gap geo-
graphic areas, such contract shall provide that, 
with respect to medical assistance provided 
under the Federal Medicaid program to individ-
uals who are enrolled in the Program with re-
spect to such area (or areas)— 
‘‘(i) the third party plan administrator 
shall, consistent with such requirements as 
may be established by the Secretary— 
‘‘(I) establish provider networks, 
payment rates, and utilization man-
agement, consistent with the provi-
sions of section 1902(a)(30)(A), as 
applied by subsection (a)(4); 
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‘‘(II) pay claims in a timely man-
ner and in accordance with the provi-
sions of section 1902(a)(37); 
‘‘(III) submit to the Secretary 
the number of individuals enrolled in 
the Program with respect to each cov-
erage gap geographic area and month 
with respect to which the contract ap-
plies and such additional information 
as specified by the Secretary for pur-
poses of payment, program integrity, 
oversight, quality measurement, or 
such other purpose specified by the 
Secretary; and 
‘‘(IV) perform any other activity 
identified by the Secretary; and 
‘‘(ii) the Secretary shall make pay-
ments (for the claims submitted by the 
third party plan administrator and for an 
economic and efficient administrative fee) 
under this section to the third party plan 
administrator, with respect to coverage of 
each individual enrolled under the Program 
in a coverage gap geographic area with re-
spect to which the third party plan admin-
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istrator administers the Program in an 
amount determined under the contract, 
subject to subclause (VI)(bb) and para-
graph (7). 
‘‘(B) THIRD PARTY PLAN ADMINISTRATOR 
DEFINED.—For purposes of this section, the 
term ‘third party plan administrator’ means an 
entity that satisfies such requirements as estab-
lished by the Secretary, which shall include at 
least that such an entity administers health 
plan benefits, pays claims under the plan, es-
tablishes provider networks, sets payment rates, 
and are not risk-bearing entities. 
‘‘(5) ADMINISTRATIVE AUTHORITY.—The Sec-
retary may take such actions as are necessary to ad-
minister this subsection, including by setting pay-
ment rates, setting network adequacy standards, es-
tablishing quality requirements, establishing report-
ing requirements, and specifying any other program 
requirements or standards necessary in contracting 
with specified entities under this subsection, and 
overseeing such entities, with respect to the adminis-
tration of the Federal Medicaid program. 
‘‘(6) PREEMPTION.—In carrying out the duties 
under a contract entered into under paragraph (1) 
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between the Secretary and a Medicaid managed care 
organization or a third party plan administrator, 
with respect to a coverage gap State— 
‘‘(A) the Secretary may establish minimum 
standards and licensure requirements for such a 
Medicaid managed care organization or third 
party plan administrator for purposes of car-
rying out such duties; and 
‘‘(B) any provisions of law of that State 
which relate to the licensing of the organization 
or administrator and which prohibit the organi-
zation or administrator from providing coverage 
pursuant to a contract under this section shall 
be superseded. 
‘‘(7) PENALTIES.—In the case of an eligible en-
tity with a contract under this section that fails to 
comply with the requirements of such entity pursu-
ant to this section or such contract, the Secretary 
may withhold payment (or any portion of such pay-
ment) to such entity under this section in accord-
ance with a process specified by the Secretary, im-
pose a corrective action plan on such entity, or im-
pose a civil monetary penalty on such entity in an 
amount not to exceed $10,000 for each such failure. 
In implementing this paragraph, the Secretary shall 
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have the authorities provided the Secretary under 
section 1932(e) and subparts F and I of part 438 
of title 42, Code of Federal Regulations. 
‘‘(8) COVERAGE GAP GEOGRAPHIC AREA.—For 
purposes of this section, the term ‘coverage gap geo-
graphic area’ means an area of one or more coverage 
gap States, as specified by the Secretary, or any 
area within such a State, as specified by the Sec-
retary. 
‘‘(c) PERIODIC DATA MATCHING.—The Secretary 
shall, including through contract, periodically verify the 
income of an individual enrolled in the Federal Medicaid 
program for a year, before the end of such year, to deter-
mine if there has been any change in the individual’s eligi-
bility for benefits under the program. For purposes of the 
previous sentence, the Secretary may verify income of an 
individual based on the prospective income of the indi-
vidual for such year or based on current monthly income 
of the individual, as specified by the Secretary. In the case 
that, pursuant to such verification, an individual is deter-
mined to have had a change in income that results in such 
individual no longer be included as an individual described 
in section 1902(a)(10)(A)(i)(VIII), the Secretary shall 
apply the same processes and protections as States are 
required under this title to apply with respect to an indi-
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vidual who is determined to have had a change in income 
that results in such individual no longer being included 
as eligible for medical assistance under this title (other 
than pursuant to this section). 
‘‘(d) DRUG REBATES.—For purposes of subsection 
(a)(2)(B), in applying section 1927, the Secretary shall 
(either directly or through contracts)— 
‘‘(1) require an eligible entity with a contract 
under subsection (b) to report the data required to 
be reported under section 1927(b)(2) by a State 
agency and require such entity to submit to the Sec-
retary rebate data, utilization data, and any other 
information that would otherwise be required under 
section 1927 to be submitted to the Secretary by a 
State; 
‘‘(2) shall take such actions as are necessary 
and develop or adapt such processes and mecha-
nisms as are necessary to report and collect data as 
is necessary and to bill and track rebates under sec-
tion 1927, as applied pursuant to subsection 
(a)(2)(B) for drugs that are provided under the Fed-
eral Medicaid program; 
‘‘(3) provide that the coverage requirements of 
prescription drugs under the Federal Medicaid pro-
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gram comply with the coverage requirements section 
1927; and 
‘‘(4) require that in order for payment to be 
available under the Federal Medicaid program or 
under section 1903(a) for covered outpatient drugs 
of a manufacturer, the manufacturer must have en-
tered into and have in effect a rebate agreement to 
provide rebates under section 1927 to the Federal 
Medicaid program in the same form and manner as 
the manufacturer is required to provide rebates 
under an agreement described in section 1927(b) to 
a State Medicaid program under this title. 
‘‘(e) TRANSITIONS.— 
‘‘(1) FROM EXCHANGE PLANS ONTO FEDERAL 
MEDICAID PROGRAM.—The Secretary shall provide 
for a process under which, in the case of individuals 
described in section 1902(a)(10)(A)(i)(VIII) who are 
enrolled in qualified health plans through an Ex-
change in a coverage gap State, the Secretary takes 
such steps as are necessary to transition such indi-
viduals to coverage under the Federal Medicaid pro-
gram. Such process shall apply procedures described 
in section 1943(b)(1)(C) to screen for eligibility and 
enrollment under the Federal Medicaid program in 
the same manner as such procedures screen for eligi-
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bility and enrollment under qualified health plans 
through an Exchange established under title I of the 
Patient Protection and Affordable Care Act. 
‘‘(2) IN CASE COVERAGE GAP STATE BEGINS 
PROVIDING
COVERAGE
UNDER
STATE
PLAN.—The 
Secretary shall provide for a process for, in the case 
of a coverage gap State in which the State begins 
to provide medical assistance to individuals described 
in section 1902(a)(10)(A)(i)(VIII) under the State 
plan (or waiver of such plan) and the Federal Med-
icaid program ceases to be offered, transitioning in-
dividuals from such program to the State plan (or 
waiver), 
as 
eligible, 
including 
a 
process 
for 
transitioning all eligibility redeterminations. 
‘‘(f) COORDINATION
WITH
AND
ENROLLMENT 
THROUGH EXCHANGES.—The Secretary shall take such 
actions as are necessary to provide, in the case of a cov-
erage gap State in which the Federal Medicaid program 
is offered, for the availability of information on, deter-
minations of eligibility for, and enrollment in such pro-
gram through and coordinated with the Exchange estab-
lished with respect to such State under title I of the Pa-
tient Protection and Affordable Care Act. 
‘‘(g) THIRD PARTY LIABILITY.—The provisions of 
section 1902(a)(25) shall apply with respect to the Fed-
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