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(2) ADMINISTRATIVE
PROVISIONS.—The provi-
sions of subsections (b), (c), and (d) shall take effect
on the date of the enactment of this Act.
SEC. 6004. ACCRUAL RATES RELATING TO CERTAIN JUDGES
WITH SIMILAR TREATMENT AS CONGRES-
SIONAL SERVICE.
(a) JUDGE OF THE UNITED STATES COURT OF MILI-
TARY APPEALS.—Section 8339(d)(7) of title 5, United
States Code, is amended by striking out ‘‘service.’’ and in-
serting in lieu thereof ‘‘service performed before January
1, 1996.’’.
(b) CLAIMS COURT JUDGE, BANKRUPTCY JUDGE,
UNITED STATES MAGISTRATE.—Section 8339(n) of title 5,
United States Code, is amended by striking out ‘‘service.’’
and inserting in lieu thereof ‘‘service performed before Jan-
uary 1, 1996. The annuity of any such employee is, with
respect to any service referred to in the preceding sentence
that is performed on or after January 1, 1996, computed
under subsection (a).’’.
SEC. 6005. REPEAL OF AUTHORIZATION OF TRANSITIONAL
APPROPRIATIONS FOR THE UNITED STATES
POSTAL SERVICE.
(a) REPEAL.—
(1) IN GENERAL.—Section 2004 of title 39, Unit-
ed States Code, is repealed.
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(2) 
TECHNICAL
AND
CONFORMING
AMEND-
MENTS.—
(A) The table of sections for chapter 20 of
such title is amended by repealing the item relat-
ing to section 2004.
(B) Section 2003(e)(2) of such title is
amended by striking ‘‘sections 2401 and 2004’’
each place it appears and inserting ‘‘section
2401’’.
(b) CLARIFICATION THAT LIABILITIES FORMERLY
PAID PURSUANT TO SECTION 2004 REMAIN LIABILITIES
PAYABLE BY THE POSTAL SERVICE.—Section 2003 of title
39, United States Code, is amended by adding at the end
the following:
‘‘(h) Liabilities of the former Post Office Department
to the Employees’ Compensation Fund (appropriations for
which were authorized by former section 2004, as in effect
before the effective date of this subsection) shall be liabilities
of the Postal Service payable out of the Fund.’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—This section and the amend-
ments made by this section shall be effective as of Oc-
tober 1, 1995.
(2) PROVISIONS
RELATING
TO
PAYMENTS
FOR
FISCAL YEAR 1996.—
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(A) AMOUNTS NOT YET PAID.—No payment
may be made to the Postal Service Fund, on or
after the date of the enactment of this Act, pur-
suant to any appropriation for fiscal year 1996
authorized by section 2004 of title 39, United
States Code (as in effect before the effective date
of this section).
(B) AMOUNTS PAID.—If any payment to the
Postal Service Fund is or has been made pursu-
ant to an appropriation for fiscal year 1996 au-
thorized by such section 2004, then an amount
equal to the amount of such payment shall be
paid from such Fund into the Treasury as mis-
cellaneous receipts.
Subtitle B—Patent and Trademark
Fees
SEC. 6011. PATENT AND TRADEMARK FEES.
Section 10101 of the Omnibus Budget Reconciliation
Act of 1990 (35 U.S.C. 41 note) is amended—
(1) in subsection (a) by striking ‘‘1998’’ and in-
serting ‘‘2002’’;
(2) in subsection (b)(2) by striking ‘‘1998’’ and
inserting ‘‘2002’’; and
(3) in subsection (c)—
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(A) by striking ‘‘through 1998’’ and insert-
ing ‘‘through 2002’’; and
(B) by adding at the end the following:
‘‘(9) $119,000,000 in fiscal year 1999.
‘‘(10) $119,000,000 in fiscal year 2000.
‘‘(11) $119,000,000 in fiscal year 2001.
‘‘(12) $119,000,000 in fiscal year 2002.’’.
Subtitle C—GSA Property Sales
SEC. 6021. SALE OF GOVERNORS ISLAND, NEW YORK.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, the Administrator of General Services shall dis-
pose of by sale at fair market value all rights, title, and
interests of the United States in and to the land of, and
improvements to, Governors Island, New York.
(b) RIGHT OF FIRST REFUSAL.—Before a sale is made
under subsection (a) to any other parties, the State of New
York and the city of New York shall be given the right of
first refusal to purchase all or part of Governors Island.
Such right may be exercised by either the State of New York
or the city of New York or by both parties acting jointly.
(c) PROCEEDS.—Proceeds from the disposal of Gov-
ernors Island under subsection (a) shall be deposited in the
general fund of the Treasury and credited as miscellaneous
receipts.
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SEC. 6022. SALE OF AIR RIGHTS.
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, the Administrator of General Services shall sell,
at fair market value and in a manner to be determined
by the Administrator, the air rights adjacent to Washington
Union Station described in subsection (b), including air
rights conveyed to the Administrator under subsection (d).
The Administrator shall complete the sale by such date as
is necessary to ensure that the proceeds from the sale will
be deposited in accordance with subsection (c).
(b) DESCRIPTION.—The air rights referred to in sub-
section (a) total approximately 16.5 acres and are depicted
on the plat map of the District of Columbia as follows:
(1) Part of lot 172, square 720.
(2) Part of lots 172 and 823, square 720.
(3) Part of lot 811, square 717.
(c) PROCEEDS.—Before September 30, 1996, proceeds
from the sale of air rights under subsection (a) shall be de-
posited in the general fund of the Treasury and credited
as miscellaneous receipts.
(d) CONVEYANCE OF AMTRAK AIR RIGHTS.—
(1) GENERAL RULE.—As a condition of future
Federal financial assistance, Amtrak shall convey to
the Administrator of General Services on or before
December 31, 1995, at no charge, all of the air rights
of Amtrak described in subsection (b).
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(2) FAILURE TO COMPLY.—If Amtrak does not
meet the condition established by paragraph (1), Am-
trak shall be prohibited from obligating Federal funds
after March 1, 1996.
SEC. 6023. AVAILABILITY OF SURPLUS PROPERTY FOR
HOMELESS ASSISTANCE.
(a) REPEAL.—(1) Title V of the Stewart B. McKinney
Homeless Assistance Act (42 U.S.C. 11411 et seq.) is re-
pealed.
(2) The table of contents in section 101(b) of that Act
is amended by striking the items relating to title V.
(3) This subsection shall be effective October 1, 1995.
(b) AUTHORITY TO TRANSFER SURPLUS REAL PROP-
ERTY FOR HOUSING USE.—Section 203 of the Federal
Property and Administrative Services Act of 1949 (40
U.S.C. 484) is amended by adding at the end the following:
‘‘(r) Under such regulations as the Administrator may
prescribe, and in consultation with appropriate local gov-
ernmental authorities, the Administrator may transfer to
any nonprofit organization which exists for the primary
purpose of providing housing or housing assistance for
homeless individuals or families, such surplus real prop-
erty, including buildings, fixtures, and equipment situated
thereon, as is needed for housing use.
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‘‘(s)(1) Under such regulations as the Administrator
may prescribe, and in consultation with appropriate local
governmental authorities, the Administrator may transfer
to any non-profit organization which exists for the primary
purpose of providing housing or housing assistance for low-
income individuals or families such surplus real property,
including buildings, fixtures, and equipment situated there-
on, as is needed for housing use.
‘‘(2) In making transfers under this subsection, the Ad-
ministrator shall take such actions, which may include
grant agreements with an organization receiving a grant,
as may be necessary to ensure that—
‘‘(A) assistance provided under this subsection is
used to facilitate and encourage homeownership op-
portunities through the construction of self-help hous-
ing, under terms which require that the person receiv-
ing the assistance contribute a significant amount of
labor toward the construction; and
‘‘(B) the dwellings constructed with property
transferred under this subsection shall be quality
dwellings that comply with local building and safety
codes and standards and shall be available at prices
below the prevailing market prices.’’.
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TITLE VII—TRANSFORMATION
OF THE MEDICAID PROGRAM
SEC. 7000. SHORT TITLE OF TITLE; TABLE OF CONTENTS OF
TITLE.
(a) SHORT TITLE OF TITLE.—This title may be cited
as the ‘‘Medicaid Transformation Act of 1995’’.
(b) TABLE OF CONTENTS OF TITLE.—The table of con-
tents of this title is as follows:
Sec. 7000. Short title of title; table of contents of title.
Sec. 7001. Transformation of medicaid program.
Sec. 7002. Termination of current program and transition.
Sec. 7003. Medicare/MediGrant integration demonstration project.
SEC. 7001. TRANSFORMATION OF MEDICAID PROGRAM.
The Social Security Act is amended by adding at the
end the following new title:
‘‘TITLE XXI—MEDIGRANT PROGRAM FOR LOW-
INCOME INDIVIDUALS AND FAMILIES
‘‘TABLE OF CONTENTS OF TITLE
‘‘Sec. 2100. Purpose; State MediGrant plans.
‘‘PART A—OBJECTIVES, GOALS, AND PERFORMANCE UNDER STATE PLANS
‘‘Sec. 2101. Description of strategic objectives and performance goals.
‘‘Sec. 2102. Annual reports.
‘‘Sec. 2103. Periodic, independent evaluations.
‘‘Sec. 2104. Description of process for MediGrant plan development.
‘‘Sec. 2105. Consultation in MediGrant plan development.
‘‘PART B—ELIGIBILITY, BENEFITS, AND SET-ASIDES
‘‘Sec. 2111. Eligibility and benefits.
‘‘Sec. 2112. Set-asides of funds.
‘‘Sec. 2113. Premiums and cost-sharing.
‘‘Sec. 2114. Description of process for developing capitation payment rates.
‘‘Sec. 2115. Preventing spousal impoverishment.
‘‘Sec. 2116. State flexibility.
‘‘PART C—PAYMENTS TO STATES
‘‘Sec. 2121. Allotment of funds among States.
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‘‘Sec. 2122. Payments to States.
‘‘Sec. 2123. Limitation on use of funds; disallowance.
‘‘PART D—PROGRAM INTEGRITY AND QUALITY
‘‘Sec. 2131. Use of audits to achieve fiscal integrity.
‘‘Sec. 2132. Fraud prevention program.
‘‘Sec. 2133. Information concerning sanctions taken by State licensing authorities
against health care practitioners and providers.
‘‘Sec. 2134. State MediGrant fraud control units.
‘‘Sec. 2135. Recoveries from third parties and others.
‘‘Sec. 2136. Assignment of rights of payment.
‘‘Sec. 2137. Quality assurance requirements for nursing facilities.
‘‘Sec. 2138. Other provisions promoting program integrity.
‘‘PART E—ESTABLISHMENT AND AMENDMENT OF MEDIGRANT PLANS
‘‘Sec. 2151. Submittal and approval of MediGrant plans.
‘‘Sec. 2152. Submittal and approval of plan amendments.
‘‘Sec. 2153. Process for State withdrawal from program.
‘‘Sec. 2154. Sanctions for noncompliance.
‘‘Sec. 2155. Secretarial authority.
‘‘PART F—GENERAL PROVISIONS
‘‘Sec. 2171. Definitions.
‘‘Sec. 2172. Treatment of territories.
‘‘Sec. 2173. Description of treatment of Indian Health Service facilities.
‘‘Sec. 2174. Application of certain general provisions.
‘‘Sec. 2175. MediGrant master drug rebate agreements.
‘‘SEC. 2100. PURPOSE; STATE MEDIGRANT PLANS.
‘‘(a) PURPOSE.—The purpose of this title is to provide
block grants to States to enable them to provide medical
assistance to low-income individuals and families in a more
effective, efficient, and responsive manner.
‘‘(b) STATE PLAN REQUIRED.—A State is not eligible
for payment under section 2122 of this title unless the State
has submitted to the Secretary under part E a plan (in
this title referred to as a ‘MediGrant plan’) that—
‘‘(1) sets forth how the State intends to use the
funds provided under this title to provide medical as-
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sistance to needy individuals and families consistent
with the provisions of this title, and
‘‘(2) is approved under such part.
‘‘(c) 
CONTINUED
APPROVAL.—An 
approved
MediGrant plan shall continue in effect unless and until—
‘‘(1) the State amends the plan under section
2152,
‘‘(2) the State terminates participation under
this title under section 2153, or
‘‘(3) the Secretary finds substantial noncompli-
ance of the plan with the requirements of this title
under section 2154.
‘‘(d) STATE ENTITLEMENT.—This title constitutes
budget authority in advance of appropriations Acts, and
represents the obligation of the Federal Government to pro-
vide for the payment to States of amounts provided under
part C.
‘‘PART A—OBJECTIVES, GOALS, AND PERFORMANCE
UNDER STATE PLANS
‘‘SEC. 2101. DESCRIPTION OF STRATEGIC OBJECTIVES AND
PERFORMANCE GOALS.
‘‘(a) DESCRIPTION.—A MediGrant plan shall include
a description of the strategic objectives and performance
goals the State has established for providing health care
services to low-income populations under this title, includ-
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ing a general description of the manner in which the plan
is designed to meet these objectives and goals.
‘‘(b) CERTAIN OBJECTIVES AND GOALS REQUIRED.—
A MediGrant plan shall include strategic objectives and
performance goals relating to rates of childhood immuniza-
tions and reductions in infant mortality and morbidity.
‘‘(c) CONSIDERATIONS.—In specifying these objectives
and goals the State may consider factors such as the follow-
ing:
‘‘(1) The State’s priorities with respect to pro-
viding assistance to low-income populations.
‘‘(2) The State’s priorities with respect to the
general public health and the health status of individ-
uals eligible for assistance under the MediGrant plan.
‘‘(3) The State’s financial resources, the particu-
lar economic conditions in the State, and relative
adequacy of the health care infrastructure in different
regions of the State.
‘‘(d) PERFORMANCE MEASURES.—To the extent prac-
ticable—
‘‘(1) one or more performance goals shall be es-
tablished by the State for each strategic objective iden-
tified in the MediGrant plan; and
‘‘(2) the MediGrant plan shall describe, how pro-
gram performance will be—
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‘‘(A) measured through objective, independ-
ently verifiable means, and
‘‘(B) compared against performance goals,
in order to determine the State’s performance
under this title.
‘‘(e) PERIOD COVERED.—
‘‘(1) STRATEGIC OBJECTIVES.—The strategic ob-
jectives shall cover a period of not less than 5 years
and shall be updated and revised at least every 3
years.
‘‘(2) PERFORMANCE
GOALS.—The performance
goals shall be established for dates that are not more
than 3 years apart.
‘‘SEC. 2102. ANNUAL REPORTS.
‘‘(a) IN GENERAL.—In the case of a State with a
MediGrant plan that is in effect for part or all of a fiscal
year, no later than March 31 following such fiscal year (or
March 31, 1998, in the case of fiscal year 1996) the State
shall prepare and submit to the Secretary and the Congress
a report on program activities and performance under this
title for such fiscal year.
‘‘(b) CONTENTS.—Each annual report under this sec-
tion for a fiscal year shall include the following:
‘‘(1) EXPENDITURE
AND
BENEFICIARY
SUM-
MARY.—
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‘‘(A) INITIAL SUMMARY.—For the report for
fiscal year 1997 (and, if applicable, fiscal year
1996), a summary of all expenditures under the
MediGrant plan during the fiscal year (and dur-
ing any portions of fiscal year 1996 during
which the MediGrant plan was in effect under
this title) as follows:
‘‘(i) Aggregate medical assistance ex-
penditures, disaggregated to the extent re-
quired to determine compliance with the
set-aside requirements of subsections (a)
through (d) of section 2112 and to compute
the 
case 
mix 
index 
under 
section
2121(d)(3).
‘‘(ii) For each general category of eligi-
ble individuals (specified in subsection
(c)(1), aggregate medical assistance expend-
itures and the total and average number of
eligible individuals under the MediGrant
plan.
‘‘(iii) By each general category of eligi-
ble individuals, total expenditures for each
of the categories of health care items and
services (specified in subsection (c)(2))
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which are covered under the MediGrant
plan and provided on a fee-for-service basis.
‘‘(iv) By each general category of eligi-
ble individuals, total expenditures for pay-
ments to capitated health care organizations
(as defined in section 2114(c)(1)).
‘‘(v) Total administrative expenditures.
‘‘(B) SUBSEQUENT
SUMMARIES.—For re-
ports for each succeeding fiscal year, a summary
of—
‘‘(i) 
all 
expenditures 
under 
the
MediGrant plan, and
‘‘(ii) the total and average number of
eligible individuals under the MediGrant
plan for each general category of eligible in-
dividuals.
‘‘(2) UTILIZATION SUMMARY.—
‘‘(A) INITIAL SUMMARY.—For the report for
fiscal year 1997 (and, if applicable, fiscal year
1996), summary statistics on the utilization of
health care services under the MediGrant plan
during the year (and during any portions of fis-
cal year 1996 during which the MediGrant plan
was in effect under this title) as follows:
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‘‘(i) For each general category of eligi-
ble individuals and for each of the cat-
egories of health care items and services
which are covered under the MediGrant
plan and provided on a fee-for-service basis,
the number and percentage of persons who
received such a type of service or item dur-
ing the period covered by the report.
‘‘(ii) Summary of health care utiliza-
tion data reported to the State by capitated
health care organizations.
‘‘(B) SUBSEQUENT
SUMMARIES.—For re-
ports for each succeeding fiscal year, summary
statistics on the utilization of health care services
under the MediGrant plan.
‘‘(3) ACHIEVEMENT OF PERFORMANCE GOALS.—
With respect to each performance goal established
under section 2101 and applicable to the year in-
volved—
‘‘(A) a brief description of the goal;
‘‘(B) a description of the methods to be used
to measure the attainment of such goal;
‘‘(C) data on the actual performance with
respect to the goal;
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‘‘(D) a review of the extent to which the
goal was achieved, based on such data; and
‘‘(E) if a performance goal has not been
met—
‘‘(i) why the goal was not met, and
‘‘(ii) actions to be taken in response to
such performance, including adjustments in
performance goals or program activities for
subsequent years.
‘‘(4) PROGRAM
EVALUATIONS.—A summary of
the findings of evaluations under section 2103 com-
pleted during the fiscal year covered by the report.
‘‘(5) FRAUD AND ABUSE AND QUALITY CONTROL
ACTIVITIES.—A general description of the State’s ac-
tivities under part D to detect and deter fraud and
abuse and to assure quality of services provided under
the program.
‘‘(6) PLAN ADMINISTRATION.—
‘‘(A) A description of the administrative
roles and responsibilities of entities in the State
responsible for administration of this title.
‘‘(B) Organizational charts for each entity
in the State primarily responsible for activities
under this title.
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‘‘(C) A brief description of each interstate
compact (if any) the State has entered into with
other States with respect to activities under this
title.
‘‘(D) General citations to the State statutes
and administrative rules governing the State’s
activities under this title.
‘‘(c) DESCRIPTION OF CATEGORIES.—In this section:
‘‘(1) GENERAL CATEGORIES OF ELIGIBLE INDI-
VIDUALS.—Each of the following is a general category
of eligible individuals:
‘‘(A) Pregnant women.
‘‘(B) Children.
‘‘(C) Blind or disabled adults who are not
elderly individuals.
‘‘(D) Elderly individuals.
‘‘(E) Other adults.
‘‘(2) CATEGORIES OF HEALTH CARE ITEMS AND
SERVICES.—The health care items and services de-
scribed in each paragraph of section 2171(a) shall be
considered a separate category of health care items
and services.
‘‘SEC. 2103. PERIODIC, INDEPENDENT EVALUATIONS.
‘‘(a) IN GENERAL.—During fiscal year 1998 and every
third fiscal year thereafter, each State shall provide for an
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section (c) to the Secretary under part E, a State shall pro-
vide—
‘‘(1) public notice respecting the submittal of the
proposed plan or amendment, including a general de-
scription of the plan or amendment,
‘‘(2) a means for the public to inspect or obtain
a copy (at reasonable charge) of the proposed plan or
amendment,
‘‘(3) an opportunity for submittal and consider-
ation of public comments on the proposed plan or
amendment, and
‘‘(4) for consultation with one or more advisory
committees established and maintained by the State.
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 section 2154(c)(4).
‘‘(b) CONTENTS
OF NOTICE.—A notice under sub-
section (a)(1) for a proposed plan or amendment shall in-
clude a description of—
‘‘(1) the general purpose of the proposed plan or
amendment (including applicable effective dates),
‘‘(2) where the public may inspect the proposed
plan or amendment,
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‘‘(3) how the public may obtain a copy of the
proposed plan or amendment and the applicable
charge (if any) for the copy, and
‘‘(4) how the public may submit comments on
the proposed plan or amendment, including any
deadlines applicable to consideration of such com-
ments.
‘‘(c) AMENDMENTS DESCRIBED.—An amendment to a
MediGrant plan described in this subsection is an amend-
ment which makes a material and substantial change in
eligibility under the MediGrant plan or the benefits pro-
vided under the plan.
‘‘(d) PUBLICATION.—Notices under this section may be
published (as selected by the State) in one or more daily
newspapers of general circulation in the State or in any
publication used by the State to publish State statutes or
rules.
‘‘(e) COMPARABLE PROCESS.—A separate notice, or
notices, shall not be required under this 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 section.
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‘‘PART B—ELIGIBILITY, BENEFITS, AND SET-ASIDES
‘‘SEC. 2111. ELIGIBILITY AND BENEFITS.
‘‘(a) DESCRIPTION
OF GENERAL ELIGIBILITY
AND
BENEFITS.—Each MediGrant plan shall include a descrip-
tion (consistent with this title) of the following:
‘‘(1) GENERAL
ELIGIBILITY
STANDARDS.—The
general eligibility standards of the plan for eligible
low-income individuals (including individuals de-
scribed in subsection (b)), including—
‘‘(A) any limitations as to the duration of
eligibility,
‘‘(B) any eligibility standards relating to
age, income and resources (including any stand-
ards relating to spenddowns and disposition of
resources), residency, disability status, immigra-
tion status, or employment status of individuals,
‘‘(C) methods of establishing and continuing
eligibility and enrollment, including the meth-
odology for computing family income,
‘‘(D) 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 in
order to prevent the impoverishment of the com-
munity spouse, and
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‘‘(E) 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 approach
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 qualifica-
tions of health care providers eligible to provide
such assistance; and
‘‘(B) how the State determines rates of re-
imbursement for providing such assistance.
‘‘(5) COST-SHARING.—Beneficiary cost-sharing
(if any), including variations in such cost-sharing by
population group or type of service and financial re-
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sponsibilities of parents of recipients who are children
and the spouses of recipients.
‘‘(6) UTILIZATION
INCENTIVES.—Incentives or
requirements (if any) to encourage the appropriate
utilization of services.
‘‘(7) SUPPORT FOR CERTAIN HOSPITALS.—
‘‘(A) IN
GENERAL.—With respect to hos-
pitals described in subparagraph (B) located in
the State, a description of the extent to which
provisions are made for expenditures for items
and services furnished by such hospitals and cov-
ered under the MediGrant plan.
‘‘(B) HOSPITALS
DESCRIBED.—A hospital
described in this subparagraph is a short-term
acute care general hospital or a children’s hos-
pital, the low-income utilization rate of which
exceeds the lesser of—
‘‘(i) 1 standard deviation above the
mean low-income utilization rate for hos-
pitals 
receiving 
payments 
under 
a
MediGrant plan in the State in which such
hospital is located, or
‘‘(ii) 11⁄4 standard deviations above the
mean low-income utilization rate for hos-
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pitals receiving such payments in the 50
States and the District of Columbia.
‘‘(C) LOW-INCOME UTILIZATION RATE.—For
purposes of subparagraph (B), the term ‘low-in-
come utilization rate’ means, for a hospital, a
fraction (expressed as a percentage), the numera-
tor of which is the hospital’s number of patient
days attributable to patients who (for such days)
were eligible for medical assistance under a
MediGrant plan or were uninsured in a period,
and the denominator of which is the total num-
ber of the hospital’s patient days in that period.
‘‘(D) PATIENT DAYS.—For purposes of sub-
paragraph (C), the term ‘patient day’ includes
each day in which—
‘‘(i) an individual, including a new-
born, is an inpatient in the hospital, wheth-
er or not the individual is in a specialized
ward and whether or not the individual re-
mains in the hospital for lack of suitable
placement elsewhere; or
‘‘(ii) an individual makes one or more
outpatient visits to the hospital.
‘‘(b) MANDATORY COVERAGE.—Each MediGrant plan
shall provide for making medical assistance available (sub-
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ject to the eligibility standards described under the plan
pursuant to subsection (a)(1) and State flexibility of bene-
fits under section 2116) to—
‘‘(1) any pregnant woman or child under the age
of 13 whose family income does not exceed the poverty
line applicable to a family of the size involved, and
‘‘(2) any individual who is disabled, as defined
by the State.
‘‘(c) 
IMMUNIZATIONS
FOR
CHILDREN.—The
MediGrant plan shall provide medical assistance for immu-
nizations for children eligible for any medical assistance
under the MediGrant plan, in accordance with a schedule
for immunizations established by the Health Department
of the State in consultation with the individuals and enti-
ties in the State responsible for the administration of the
plan.
‘‘(d) FAMILY PLANNING SERVICES.—The MediGrant
plan shall provide prepregnancy planning services and sup-
plies as specified by the State.
‘‘(e) 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 individ-
ual for benefits under the MediGrant plan for such
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item or service on the basis of a preexisting condition;
and
‘‘(2) if a State contracts or makes other arrange-
ments (through the eligible individual or through an-
other entity) with a capitated health care organiza-
tion, insurer, or other entity, for the provision of
items or services to eligible individuals under the
MediGrant plan and the State permits such organiza-
tion, insurer, or other entity to exclude coverage 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 preexist-
ing condition.
‘‘(f) FAMILY RESPONSIBILITY.—A MediGrant plan
may not require an adult child with a family income below
the State median income (as determined by the State) ap-
plicable to a family of the size involved to contribute to the
cost of covered nursing facility services and other long-term
care services for the child’s parent under the plan.
‘‘(g) SOLVENCY STANDARDS FOR CAPITATED HEALTH
CARE ORGANIZATIONS.—
‘‘(1) IN GENERAL.—A State may not contract
with a capitated health care organization, as defined
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in section 2114(c)(1), for the provision of medical as-
sistance under a MediGrant plan under which the or-
ganization is—
‘‘(A) at full financial risk, as defined by the
State, unless the organization meets solvency
standards established by the State for private
health maintenance organizations, or
‘‘(B) is not at such risk, unless the organi-
zation meets solvency standards that are estab-
lished under the MediGrant plan.
‘‘(2) TREATMENT OF PUBLIC ENTITIES.—Para-
graph (1) shall not apply to an organization that is
a public entity or if the solvency of such organization
is guaranteed by the State.
‘‘(3) TRANSITION.—In the case of a capitated
health care organization that as of the date of the en-
actment of this title has entered into a contract with
a State for the provision of medical assistance under
title XIX under which the organization assumes full
financial risk and is receiving capitation payments,
paragraph (1) shall not apply to such organization
until 3 years after the date of the enactment of this
title.
‘‘SEC. 2112. SET-ASIDES OF FUNDS.
‘‘(a) FOR TARGETED LOW-INCOME FAMILIES.—
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‘‘(1) IN GENERAL.—Subject to subsection (f), a
MediGrant plan shall provide that the amount of
funds expended under the plan for medical assistance
for targeted low-income families (as defined in para-
graph (3)) for a fiscal year shall be not less than the
minimum low-income-family percentage specified in
paragraph (2) of the total funds expended 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 expenditures
under title XIX for medical assistance in the State
during Federal fiscal years 1992 through 1994 which
were attributable to expenditures for medical assist-
ance for mandated benefits (as defined in subsection
(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
‘‘(C) whose eligibility for such coverage (at
such time) was not on a basis directly related to
disability status, including being blind.
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‘‘(3) 
TARGETED
LOW-INCOME
FAMILY
DE-
FINED.—In this subsection, the term ‘targeted low-in-
come family’ means a family (which may be an indi-
vidual)—
‘‘(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 (f)—
‘‘(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 elderly individuals for a fis-
cal year shall be not less than the minimum low-
income-elderly percentage 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
that the amount of funds expended under the
plan for medical assistance for medicare cost-
sharing described in section 2171(c)(1) for a fis-
cal year shall be not less than the minimum
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‘‘(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 90 percent
of the average percentage of the expenditures
under title XIX for medical assistance in the
State during Federal fiscal years 1993 through
1995 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 assistance
for such premiums under a State plan under
title XIX was required under Federal law.
‘‘(3) TARGETED LOW-INCOME ELDERLY INDIVID-
UAL DEFINED.—In this subsection, the term ‘targeted
low-income elderly individual’ means an elderly indi-
vidual whose family income does not exceed 100 per-
cent of the poverty line applicable to a family of the
size involved.
‘‘(c) FOR LOW-INCOME DISABLED PERSONS.—
‘‘(1) IN GENERAL.—Subject to subsection (f), a
MediGrant plan shall provide that the percentage of
funds expended under the plan for medical assistance
for eligible low-income individuals who are not elder-
ly individuals and who are eligible for such assistance
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‘‘(2) MEDICALLY-RELATED SERVICES DEFINED.—
In this title, the term ‘medically-related services’
means services reasonably related to, or in direct sup-
port 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) (re-
lating to the definition of medical assistance).
‘‘(f) 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 percentage of expenditures
than the minimum percentages specified in any
(or all) of paragraphs (2) of subsections (a), (b),
(c), and (d) if the State determines (and certifies
to the Secretary) that—
‘‘(i) the health care needs of the low-in-
come populations described in paragraph
(1) of the subsections (a), (b), (c), or (d)
who are eligible for medical assistance
under the plan during the previous fiscal
year (or medicare premium assistance needs
described in subsection (b)(1)(B)) can be
reasonably met without the expenditure of
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the percentages otherwise required to be ex-
pended,
‘‘(ii) the performance goals established
under section 2101 relating to the respective
population can reasonably be met with the
expenditure of such lower percentage of
funds, and
‘‘(iii) in the case of subsection (d) with
respect to rural health clinic services and
Federally-qualified health center services,
the health care needs of eligible low-income
individuals residing in medically under-
served rural areas can reasonably be met
without the level of expenditure for such
services otherwise required and the perform-
ance goals established under section 2101
relating to such individuals can reasonably
be met with such lower level of expenditures.
‘‘(B) PERIOD OF APPLICATION.—The deter-
mination and certification under subparagraph
(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 (be-
ginning with the first fiscal year for which the
lower percentage is sought). A new determination
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and certification must be made under such
clause for any subsequent period.
‘‘(C) NO
EXCEPTION
PERMITTED
BEFORE
FISCAL
YEAR
1998.—This paragraph may not
apply with respect to the percentages described
in paragraphs (2) of subsections (a), (b), and (c)
for a fiscal year before fiscal year 1998.
‘‘(2) INDEPENDENT CERTIFICATION OF COMPLI-
ANCE WITH GOALS.—
‘‘(A) IN GENERAL.—For purposes of section
2151(c), a MediGrant plan shall not be consid-
ered to be in substantial violation of the require-
ments of this section if the amount of actual
State expenditures specified in any (or all) of
paragraphs (1) of subsections (a), (b), (c), and
(d) is lower than the minimum percentages spec-
ified in any (or all) of paragraphs (2) of such
subsections 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 consistent with the re-
quirements of such subsections.
‘‘(B) LIMIT ON VARIATION.—Subparagraph
(A) shall not apply in the case of a MediGrant
plan for which the actual State expenditures de-
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scribed in any (or all) of paragraphs (1) of sub-
sections (a), (b), (c), and (d) are less than 95
percent of the expenditures which would be made
if the amount of State expenditures specified in
any (or all) of such paragraphs was equal to the
applicable minimum percentage specified in any
(or all) of paragraphs (2) of such subsections.
‘‘(g) COMPUTATIONS.—States shall calculate the mini-
mum percentages under paragraphs (2) of subsections (a),
(b), (c), and (d) in a reasonable manner consistent with
reports submitted to the Secretary for the fiscal years in-
volved and medical assistance attributable to the exception
provided under section 1903(v)(2) shall not be considered
to be expenditures for medical assistance.
‘‘(h) BENEFITS INCLUDED FOR PURPOSES OF COM-
PUTING SET-ASIDES.—In this section, the term ‘mandated
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 services was
required to be provided under title XIX,
‘‘(2) includes medical assistance for medicare
cost-sharing only to the extent such assistance was re-
quired to be provided under section 1902(a)(10)(E),
and
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‘‘(3) does not include medical assistance attrib-
utable to disproportionate share payment adjustments
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.—
‘‘(1) IN GENERAL.—In the case of a pregnant
woman or a child who is a member 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.
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‘‘(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))—
‘‘(1) from imposing cost-sharing to discourage
the inappropriate use of emergency medical services
delivered through a hospital emergency room, a medi-
cal transportation provider, or otherwise,
‘‘(2) from imposing premiums and cost-sharing
differentially in order to encourage the use of primary
and preventive care and discourage unnecessary or
less economical care,
‘‘(3) from scaling cost-sharing in a manner that
reflects economic factors, employment status, and
family size,
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‘‘(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 programs, 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.
‘‘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—
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‘‘(A) to analyze and project health care ex-
penditures and utilization for individuals en-
rolled (or to be enrolled) in such an organization
under the MediGrant plan, and
‘‘(B) to develop capitation payment rates,
including a brief description of the general meth-
odologies used by actuaries.
‘‘(2) QUALIFICATIONS OF ORGANIZATIONS.—The
general qualifications, including any accreditation,
State licensure or certification, or provider network
standards, required by the State for participation of
capitated 
health 
care 
organizations 
under 
the
MediGrant plan.
‘‘(3) DISSEMINATION
PROCESS.—The process
used by the State under subsection (b) and otherwise
to disseminate, before entering into contracts with
capitated health care organizations, actuarial infor-
mation to such organizations on the historical fee-for-
service costs (or, if not available, other recent finan-
cial 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—
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‘‘(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)
amounts of the capitation payments the State ex-
pects to make for the contract year involved,
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 organization’
means a health maintenance organization or any
other entity (including a health insuring organiza-
tion, 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
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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.
‘‘SEC. 2115. PREVENTING SPOUSAL IMPOVERISHMENT.
‘‘(a) SPECIAL TREATMENT FOR INSTITUTIONALIZED
SPOUSES.—
‘‘(1) SUPERSEDES OTHER PROVISIONS.—In de-
termining the eligibility for medical assistance of an
institutionalized spouse (as defined in subsection
(h)(1)), the provisions of this section supersede any
other provision of this title which is inconsistent with
them.
‘‘(2) DOES NOT AFFECT CERTAIN DETERMINA-
TIONS.—Except as this section specifically provides,
this section does not apply to—
‘‘(A) the determination of what constitutes
income or resources, or
‘‘(B) the methodology and standards for de-
termining and evaluating income and resources.
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‘‘(3) NO APPLICATION IN COMMONWEALTHS AND
TERRITORIES.—This section shall only apply to a
State that is one of the 50 States or the District of
Columbia.
‘‘(b) RULES FOR TREATMENT OF INCOME.—
‘‘(1) SEPARATE TREATMENT OF INCOME.—Dur-
ing any month in which an institutionalized spouse
is in the institution, except as provided in paragraph
(2), no income of the community spouse shall be
deemed available to the institutionalized spouse.
‘‘(2) ATTRIBUTION OF INCOME.—In determining
the income of an institutionalized spouse or commu-
nity spouse for purposes of the post-eligibility income
determination described in subsection (d), except as
otherwise provided in this section and regardless of
any State laws relating to community property or the
division of marital property, the following rules
apply:
‘‘(A) NON-TRUST
PROPERTY.—Subject to
subparagraphs (C) and (D), in the case of in-
come not from a trust, unless the instrument
providing the income otherwise specifically pro-
vides—
‘‘(i) if payment of income is made sole-
ly in the name of the institutionalized
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spouse or the community spouse, the income
shall be considered available only to that re-
spective spouse,
‘‘(ii) if payment of income is made in
the names of the institutionalized spouse
and the community spouse, 1⁄2 of the income
shall be considered available to each of
them, and
‘‘(iii) if payment of income is made in
the names of the institutionalized spouse or
the community spouse, or both, and to an-
other person or persons, the income shall be
considered available to each spouse in pro-
portion to the spouse’s interest (or, if pay-
ment is made with respect to both spouses
and no such interest is specified, 1⁄2 of the
joint interest shall be considered available to
each spouse).
‘‘(B) TRUST PROPERTY.—In the case of a
trust—
‘‘(i) except as provided in clause (ii),
income shall be attributed in accordance
with the provisions of this title; and
‘‘(ii) income shall be considered avail-
able to each spouse as provided in the trust,
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or, in the absence of a specific provision in
the trust—
‘‘(I) if payment of income is made
solely to the institutionalized spouse or
the community spouse, the income shall
be considered available only to that re-
spective spouse,
‘‘(II) if payment of income is
made to both the institutionalized
spouse and the community spouse, 1⁄2
of the income shall be considered avail-
able to each of them, and
‘‘(III) if payment of income is
made to the institutionalized spouse or
the community spouse, or both, and to
another person or persons, the income
shall be considered available to each
spouse in proportion to the spouse’s in-
terest (or, if payment is made with re-
spect to both spouses and no such in-
terest is specified, 1⁄2 of the joint inter-
est shall be considered available to each
spouse).
‘‘(C) PROPERTY WITH NO INSTRUMENT.—In
the case of income not from a trust in which
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there is no instrument establishing ownership,
subject to subparagraph (D), 1⁄2 of the income
shall be considered to be available to the institu-
tionalized spouse and 1⁄2 to the community
spouse.
‘‘(D) REBUTTING OWNERSHIP.—The rules of
subparagraphs (A) and (C) are superseded to the
extent that an institutionalized spouse can estab-
lish, by a preponderance of the evidence, that the
ownership interests in income are other than as
provided under such subparagraphs.
‘‘(c) RULES FOR TREATMENT OF RESOURCES.—
‘‘(1) COMPUTATION OF SPOUSAL SHARE AT TIME
OF INSTITUTIONALIZATION.—
‘‘(A) TOTAL
JOINT
RESOURCES.—There
shall be computed (as of the beginning of the first
continuous period of institutionalization of the
institutionalized spouse)—
‘‘(i) the total value of the resources to
the extent either the institutionalized spouse
or the community spouse has an ownership
interest, and
‘‘(ii) a spousal share which is equal to
1⁄2 of such total value.
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‘‘(B) ASSESSMENT.—At the request of an
institutionalized spouse or community spouse, at
the beginning of the first continuous period of
institutionalization 
of 
the 
institutionalized
spouse and upon the receipt of relevant docu-
mentation of resources, the State shall promptly
assess and document the total value described in
subparagraph (A)(i) and shall provide a copy of
such assessment and documentation to each
spouse and shall retain a copy of the assessment
for use under this section. If the request is not
part of an application for medical assistance
under this title, the State may, at its option as
a condition of providing the assessment, require
payment of a fee not exceeding the reasonable ex-
penses of providing and documenting the assess-
ment. At the time of providing the copy of the
assessment, the State shall include a notice indi-
cating that the spouse will have a right to a fair
hearing under subsection (e)(2).
‘‘(2) ATTRIBUTION OF RESOURCES AT TIME OF
INITIAL ELIGIBILITY DETERMINATION.—In determin-
ing the resources of an institutionalized spouse at the
time of application for medical assistance under this
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title, regardless of any State laws relating to commu-
nity property or the division of marital property—
‘‘(A) except as provided in subparagraph
(B), all the resources held by either the institu-
tionalized spouse, community spouse, or both,
shall be considered to be available to the institu-
tionalized spouse, and
‘‘(B) resources shall be considered to be
available to an institutionalized spouse, but only
to the extent that the amount of such resources
exceeds the amount computed under subsection
(f)(2)(A) (as of the time of application for medi-
cal assistance).
‘‘(3) ASSIGNMENT
OF
SUPPORT
RIGHTS.—The
institutionalized spouse shall not be ineligible by rea-
son of resources determined under paragraph (2) to be
available for the cost of care where—
‘‘(A) the institutionalized spouse has as-
signed to the State any rights to support from
the community spouse,
‘‘(B) the institutionalized spouse lacks the
ability to execute an assignment due to physical
or mental impairment but the State has the
right to bring a support proceeding against a
community spouse without such assignment, or
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‘‘(C) the State determines that denial of eli-
gibility would work an undue hardship.
‘‘(4) SEPARATE
TREATMENT
OF
RESOURCES
AFTER ELIGIBILITY FOR MEDICAL ASSISTANCE ESTAB-
LISHED.—During the continuous period in which an
institutionalized spouse is in an institution and after
the month in which an institutionalized spouse is de-
termined to be eligible for medical assistance under
this title, no resources of the community spouse shall
be deemed available to the institutionalized spouse.
‘‘(5) RESOURCES DEFINED.—In this section, the
term ‘resources’ does not include—
‘‘(A) resources excluded under subsection (a)
or (d) of section 1613, and
‘‘(B) resources that would be excluded under
section 1613(a)(2)(A) but for the limitation on
total value described in such section.
‘‘(d) 
PROTECTING
INCOME
FOR
COMMUNITY
SPOUSE.—
‘‘(1) ALLOWANCES TO BE OFFSET FROM INCOME
OF
INSTITUTIONALIZED
SPOUSE.—After an institu-
tionalized spouse is determined or redetermined to be
eligible for medical assistance, in determining the
amount of the spouse’s income that is to be applied
monthly to payment for the costs of care in the insti-
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tution, there shall be deducted from the spouse’s
monthly income the following amounts in the follow-
ing order:
‘‘(A) A personal needs allowance (described
in paragraph (2)(A)), in an amount not less
than the amount specified in paragraph (2)(C).
‘‘(B) A community spouse monthly income
allowance (as defined in paragraph (3)), but
only to the extent income of the institutionalized
spouse is made available to (or for the benefit of)
the community spouse.
‘‘(C) A family allowance, for each family
member, equal to at least 1⁄3 of the amount by
which the amount described in paragraph
(4)(A)(i) exceeds the amount of the monthly in-
come of that family member.
‘‘(D) Amounts for incurred expenses for
medical or remedial care for the institutionalized
spouse as provided under paragraph (6).
In subparagraph (C), the term ‘family member’ only
includes minor or dependent children, dependent par-
ents, or dependent siblings of the institutionalized or
community spouse who are residing with the commu-
nity spouse.
‘‘(2) PERSONAL NEEDS ALLOWANCE.—
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‘‘(A) IN
GENERAL.—The MediGrant plan
must provide that, in the case of an institu-
tionalized individual or couple described in sub-
paragraph (B), in determining the amount of the
individual’s or couple’s income to be applied
monthly to payment for the cost of care in an in-
stitution, there shall be deducted from the month-
ly income (in addition to other allowances other-
wise provided under the plan) a monthly per-
sonal needs allowance—
‘‘(i) which is reasonable in amount for
clothing and other personal needs of the in-
dividual (or couple) while in an institution,
and
‘‘(ii) which is not less (and may be
greater) than the minimum monthly per-
sonal needs allowance described in subpara-
graph (C).
‘‘(B) INSTITUTIONALIZED
INDIVIDUAL
OR
COUPLE DEFINED.—In this paragraph, the term
‘institutionalized individual or couple’ means an
individual or married couple—
‘‘(i) who is an inpatient (or who are
inpatients) in a medical institution or
nursing facility for which payments are
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made under this title throughout a month,
and
‘‘(ii) who is or are determined to be el-
igible for medical assistance under the State
MediGrant plan.
‘‘(C) MINIMUM
ALLOWANCE.—The mini-
mum monthly personal needs allowance de-
scribed in this subparagraph is $40 for an insti-
tutionalized individual and $80 for an institu-
tionalized couple (if both are aged, blind, or dis-
abled, and their incomes are considered available
to each other in determining eligibility).
‘‘(3) COMMUNITY SPOUSE MONTHLY INCOME AL-
LOWANCE DEFINED.—
‘‘(A) IN GENERAL.—In this section (except
as provided in subparagraph (B)), the commu-
nity spouse monthly income allowance for a
community spouse is an amount by which—
‘‘(i) except as provided in subsection
(e), the minimum monthly maintenance
needs allowance (established under and in
accordance with paragraph (4)) for the
spouse, exceeds
‘‘(ii) the amount of monthly income
otherwise available to the community spouse
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(determined without regard to such an al-
lowance).
‘‘(B) COURT
ORDERED
SUPPORT.—If a
court has entered an order against an institu-
tionalized spouse for monthly income for the sup-
port of the community spouse, the community
spouse monthly income allowance for the spouse
shall be not less than the amount of the monthly
income so ordered.
‘‘(4) ESTABLISHMENT
OF
MINIMUM
MONTHLY
MAINTENANCE NEEDS ALLOWANCE.—
‘‘(A) IN GENERAL.—Each State shall estab-
lish a minimum monthly maintenance needs al-
lowance for each community spouse which, sub-
ject to subparagraph (B), is equal to or ex-
ceeds—
‘‘(i) 150 percent of 1⁄12 of the poverty
line applicable to a family unit of 2 mem-
bers, plus
‘‘(ii) an excess shelter allowance (as de-
fined in paragraph (4)).
A revision of the poverty line referred to in
clause (i) shall apply to medical assistance fur-
nished during and after the second calendar
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quarter that begins after the date of publication
of the revision.
‘‘(B) CAP ON MINIMUM MONTHLY MAINTE-
NANCE
NEEDS
ALLOWANCE.—The 
minimum
monthly maintenance needs allowance estab-
lished under subparagraph (A) may not exceed
$1,500 (subject to adjustment under subsections
(e) and (g)).
‘‘(5) EXCESS SHELTER ALLOWANCE DEFINED.—
In paragraph (4)(A)(ii), the term ‘excess shelter al-
lowance’ means, for a community spouse, the amount
by which the sum of—
‘‘(A) the spouse’s expenses for rent or mort-
gage payment (including principal and interest),
taxes and insurance and, in the case of a con-
dominium or cooperative, required maintenance
charge, for the community spouse’s principal res-
idence, and
‘‘(B) the standard utility allowance (used
by the State under section 5(e) of the Food
Stamp Act of 1977) or, if the State does not use
such an allowance, the spouse’s actual utility ex-
penses,
exceeds 30 percent of the amount described in para-
graph (4)(A)(i), except that, in the case of a con-
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dominium or cooperative, for which a maintenance
charge is included under subparagraph (A), any al-
lowance under subparagraph (B) shall be reduced to
the extent the maintenance charge includes utility ex-
penses.
‘‘(6) TREATMENT
OF
INCURRED
EXPENSES.—
With respect to the post-eligibility treatment of in-
come under this section, there shall be disregarded
reparation payments made by the Federal Republic of
Germany and, there shall be taken into account
amounts for incurred expenses for medical or reme-
dial care that are not subject to payment by a third
party, including—
‘‘(A) medicare and other health insurance
premiums, deductibles, or coinsurance, and
‘‘(B) necessary medical or remedial care
recognized under State law but not covered
under the State MediGrant plan under this title,
subject to reasonable limits the State may estab-
lish on the amount of these expenses.
‘‘(e) NOTICE AND HEARING.—
‘‘(1) NOTICE.—Upon—
‘‘(A) a determination of eligibility for medi-
cal assistance of an institutionalized spouse, or
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‘‘(B) a request by either the institutional-
ized spouse, or the community spouse, or a rep-
resentative acting on behalf of either spouse,
each State shall notify both spouses (in the case de-
scribed in subparagraph (A)) or the spouse making
the request (in the case described in subparagraph
(B)) of the amount of the community spouse monthly
income allowance (described in subsection (d)(1)(B)),
of the amount of any family allowances (described in
subsection (d)(1)(C)), of the method for computing the
amount of the community spouse resources allowance
permitted under subsection (f), and of the spouse’s
right to a hearing under the MediGrant plan respect-
ing ownership or availability of income or resources,
and the determination of the community spouse
monthly income or resource allowance.
‘‘(2) RESULTS OF HEARING.—
‘‘(A) REVISION
OF
MINIMUM
MONTHLY
MAINTENANCE
NEEDS
ALLOWANCE.—If either
such spouse establishes in a hearing under this
subsection that the community spouse needs in-
come, above the level otherwise provided by the
minimum monthly maintenance needs allow-
ance, due to exceptional circumstances resulting
in significant financial duress, there shall be
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substituted, for the minimum monthly mainte-
nance needs allowance in subsection (d)(2)(A),
an amount adequate to provide such additional
income as is necessary.
‘‘(B) REVISION OF COMMUNITY SPOUSE RE-
SOURCE ALLOWANCE.—If either such spouse es-
tablishes in such a hearing that the community
spouse resource allowance (in relation to the
amount of income generated by such an allow-
ance) is inadequate to raise the community
spouse’s income to the minimum monthly main-
tenance needs allowance, there shall be sub-
stituted, for the community spouse resource al-
lowance under subsection (f)(2), an amount ade-
quate to provide such a minimum monthly
maintenance needs allowance.
‘‘(f) PERMITTING TRANSFER OF RESOURCES TO COM-
MUNITY SPOUSE.—
‘‘(1) IN GENERAL.—An institutionalized spouse
may, without regard to any other provision of the
MediGrant plan to the contrary, transfer an amount
equal to the community spouse resource allowance (as
defined in paragraph (2)), but only to the extent the
resources of the institutionalized spouse are trans-
ferred to, or for the sole benefit of, the community
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spouse. The transfer under the preceding sentence
shall be made as soon as practicable after the date of
the initial determination of eligibility, taking into ac-
count such time as may be necessary to obtain a court
order under paragraph (3).
‘‘(2) COMMUNITY SPOUSE RESOURCE ALLOWANCE
DEFINED.—In paragraph (1), the ‘community spouse
resource allowance’ for a community spouse is an
amount (if any) by which—
‘‘(A) the greatest of—
‘‘(i) $12,000 (subject to adjustment
under subsection (g)), or, if greater (but not
to exceed the amount specified in clause
(ii)(II)) an amount specified under the
State MediGrant plan,
‘‘(ii) the lesser of (I) the spousal share
computed under subsection (c)(1), or (II)
$60,000 (subject to adjustment under sub-
section (g)), or
‘‘(iii) the amount established under
subsection (e)(2);
exceeds
‘‘(B) the amount of the resources otherwise
available to the community spouse (determined
without regard to such an allowance).
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‘‘(g) INDEXING DOLLAR AMOUNTS.—For services fur-
nished during a calendar year after 1989, the dollar
amounts specified in subsections (d)(3)(C), (f)(2)(A)(i), and
(f)(2)(A)(ii)(II) shall be increased by the same percentage
as the percentage increase in the consumer price index for
all urban consumers (all items; U.S. city average) between
September 1988 and the September before the calendar year
involved.
‘‘(h) DEFINITIONS.—In this section:
‘‘(1) INSTITUTIONALIZED
SPOUSE.—The term
‘institutionalized spouse’ means an individual—
‘‘(A)(i) who is in a medical institution or
nursing facility, or
‘‘(ii) at the option of the State (I) who
would be eligible under the MediGrant plan
under this title if such individual was in a med-
ical institution, (II) with respect to whom there
has been a determination that but for the provi-
sion of home or community-based services such
individual would require the level of care pro-
vided in a hospital, nursing facility or inter-
mediate care facility for the mentally retarded
the cost of which could be reimbursed under the
plan, and (III) who will receive home or commu-
nity-based services pursuant the plan; and
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‘‘(B) is married to a spouse who is not in
a medical institution or nursing facility;
but does not include any such individual who is not
likely to meet the requirements of subparagraph (A)
for at least 30 consecutive days.
‘‘(2) COMMUNITY SPOUSE.—The term ‘commu-
nity spouse’ means the spouse of an institutionalized
spouse.
‘‘SEC. 2116. STATE FLEXIBILITY.
‘‘(a) STATE FLEXIBILITY
IN BENEFITS, PROVIDER
PAYMENTS, GEOGRAPHICAL COVERAGE AREA, AND SELEC-
TION OF PROVIDERS.—Nothing in this title (other than sub-
sections (c) and (d) of section 2111) shall be construed as
requiring a State—
‘‘(1) to provide medical assistance for any par-
ticular items or services,
‘‘(2) to provide for any payments with respect to
any specific health care providers or any level of pay-
ments for any services,
‘‘(3) to provide for the same medical assistance
in all geographical areas or political subdivisions of
the State, so long as medical assistance is made avail-
able in all such areas or subdivisions,
‘‘(4) to provide that the medical assistance made
available to any individual eligible for medical assist-
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ance must not be less in amount, duration, or scope
than the medical assistance made available to any
other such individual, or
‘‘(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.
‘‘(b) 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 capita-
tion rates on the basis of competition among health
care plans or negotiations between the State and one
or more health care plans.
‘‘PART C—PAYMENTS TO STATES
‘‘SEC. 2121. ALLOTMENT OF FUNDS AMONG STATES.
‘‘(a) ALLOTMENTS.—
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‘‘(1) COMPUTATION.—The Secretary shall pro-
vide for the computation of State obligation and out-
lay allotments in accordance with this section for
each fiscal year beginning with fiscal year 1996.
‘‘(2) LIMITATION ON OBLIGATIONS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the Secretary shall not enter into ob-
ligations with any State under this title for a
fiscal year in excess of the obligation allotment
for that State for the fiscal year under para-
graph (4). The sum of such obligation allotments
for all States in any fiscal year (excluding
amounts carried over under subparagraph (B)
and excluding changes in allotments effected
under paragraph (4)(D)) shall not exceed the ag-
gregate limit on new obligation authority speci-
fied in paragraph (3) for that fiscal year.
‘‘(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
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to the amount of the State obligation allot-
ment otherwise provided under this section
for the succeeding fiscal year. This clause
shall be applied separately with respect to
the portion of the obligation allotment that
is attributable to the supplemental outlay
allotment under subsection (f).
‘‘(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 title.
‘‘(C) NO EFFECT ON PRIOR YEAR OBLIGA-
TIONS.—Subparagraph (A) shall not apply to or
affect obligations for a fiscal year prior to fiscal
year 1996.
‘‘(D) OBLIGATION.—For purposes of this
section, the Secretary’s establishment of an esti-
mate under section 2123(b) of the amount a
State is entitled to receive for a quarter (taking
into account any adjustments described in such
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subsection) shall be treated as the obligation of
such amount for the State as of the first day of
the quarter.
‘‘(3) AGGREGATE LIMIT ON NEW OBLIGATION AU-
THORITY.—
‘‘(A) IN
GENERAL.—For purposes of this
subsection, subject to subparagraph (C), the ‘ag-
gregate limit on new obligation authority’, for a
fiscal year, is the pool amount under subsection
(b) for the fiscal year, divided by the payout ad-
justment factor (described in subparagraph (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 0.950,
‘‘(ii) for fiscal year 1997 is 0.986, and
‘‘(iii) for a subsequent fiscal year is
0.998.
‘‘(C) TRANSITIONAL ADJUSTMENT FOR PRE-
ENACTMENT-OBLIGATION OUTLAYS.—In order to
account for pre-enactment-obligation outlays de-
scribed in paragraph (4)(C)(iv), in determining
the aggregate limit on new obligation authority
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under subparagraph (A) for fiscal year 1996, the
pool amount for such fiscal year is equal to—
‘‘(i) the pool amount for such year, re-
duced by
‘‘(ii) $24,624,000,000.
‘‘(4) OBLIGATION ALLOTMENTS.—
‘‘(A) GENERAL RULE FOR 50 STATES AND
THE DISTRICT OF COLUMBIA.—Except as pro-
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 subsection
(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.
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‘‘(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 determined
under subsection (c)(5)) for the fiscal year di-
vided by the payout adjustment factor for the fis-
cal year (as defined in paragraph (3)(B)).
‘‘(C) TRANSITIONAL RULE FOR FISCAL YEAR
1996.—
‘‘(i) 
IN
GENERAL.—The 
obligation
amount for fiscal year 1996 for any State
(including the District of Columbia, a Com-
monwealth, or territory) is determined ac-
cording 
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 de-
termined under subsection (c),
‘‘(III) ‘C’ is the amount of the
pre-enactment-obligation outlays (as
established for such State under clause
(ii)), and
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‘‘(IV) ‘D’ is the payout adjust-
ment factor for such fiscal year (as de-
fined 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-
obligation outlays (as defined in clause (iv))
for each State (including the District of Co-
lumbia, 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’
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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 formula
under subsection (c)(4) which increases or de-
creases the dollar amount of an outlay allotment
for a fiscal year is deemed to have increased or
decreased, respectively, its obligation amount for
such fiscal year by the amount of such increase
or decrease.
‘‘(E) TRANSITIONAL CORRECTION FOR FIS-
CAL YEAR 1997.—
‘‘(i) 
IN
GENERAL.—The 
obligation
amount for fiscal year 1997 for any State
described in clause (ii) shall be increased by
90 percent of the amount by which 90 per-
cent of the amount described in clause
(ii)(I) exceeds the amount described in
clause (ii)(II), divided by the payout ad-
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justment factor specified in paragraph
(3)(B) for fiscal year 1996. The increase
under this clause shall be paid to a State in
the first quarter of fiscal year 1997.
‘‘(ii) STATES DESCRIBED.—A State de-
scribed in this clause is a State for which—
‘‘(I) the amount of the pre-enact-
ment-obligation outlays (as established
for such State under subparagraph
(C)(ii)), exceeded
‘‘(II) the outlays of the Federal
Government during fiscal year 1996
that are attributable to obligations that
were incurred under title XIX with re-
spect to the State before the date of the
enactment of this title, but for which
payments to States had not been made
as of such date of enactment,
by at least 10 percent of the amount de-
scribed in subclause (I).
‘‘(b) POOL OF AVAILABLE FUNDS.—
‘‘(1) IN GENERAL.—For purposes of this section,
the ‘pool amount’ under this subsection for—
‘‘(A) fiscal year 1996 is $96,386,037,894,
‘‘(B) fiscal year 1997 is $103,233,603,164,
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‘‘(A) IN
GENERAL.—For each of the 50
States and the District of Columbia, the amount
of the State outlay allotment under this sub-
section for fiscal year 1996 is, subject to para-
graph (4), determined in accordance with the fol-
lowing table:
‘‘State or District:
Outlay allotment (in dollars):
Alabama ..................................................................................
1,517,652,207
Alaska ......................................................................................
204,933,213
Arizona ....................................................................................
1,370,781,297
Arkansas ..................................................................................
1,011,457,933
California ................................................................................
8,946,838,461
Colorado ..................................................................................
757,492,679
Connecticut .............................................................................
1,463,011,635
Delaware .................................................................................
212,327,763
District of Columbia ..............................................................
501,412,091
Florida ....................................................................................
3,715,624,180
Georgia ....................................................................................
2,426,320,602
Hawaii ....................................................................................
323,124,375
Idaho .......................................................................................
278,329,686
Illinois .....................................................................................
3,467,274,342
Indiana ...................................................................................
1,952,467,267
Iowa .........................................................................................
835,235,895
Kansas .....................................................................................
713,700,869
Kentucky .................................................................................
1,577,828,832
Louisiana ................................................................................
2,622,000,000
Maine ......................................................................................
694,220,790
Maryland ................................................................................
1,369,699,847
Massachusetts ..........................................................................
2,870,346,862
Michigan .................................................................................
3,465,182,886
Minnesota ................................................................................
1,793,776,356
Mississippi ..............................................................................
1,261,781,330
Missouri ..................................................................................
1,849,248,945
Montana ..................................................................................
312,212,472
Nebraska ..................................................................................
463,900,417
Nevada .....................................................................................
257,896,453
New Hampshire ......................................................................
360,000,000
New Jersey ..............................................................................
2,854,621,241
New Mexico .............................................................................
634,756,945
New York .................................................................................
12,901,793,038
North Carolina .......................................................................
2,587,883,809
North Dakota ..........................................................................
241,168,563
Ohio .........................................................................................
4,034,049,690
Oklahoma ................................................................................
911,198,775
Oregon .....................................................................................
1,088,670,440
Pennsylvania ..........................................................................
4,454,423,400
Rhode Island ...........................................................................
545,686,262
South Carolina .......................................................................
1,621,021,815
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‘‘State or District:
Outlay allotment (in dollars):
South Dakota ..........................................................................
262,804,959
Tennessee .................................................................................
2,519,934,251
Texas .......................................................................................
6,351,909,343
Utah .........................................................................................
484,274,254
Vermont ...................................................................................
248,158,729
Virginia ...................................................................................
1,144,962,509
Washington .............................................................................
1,763,460,996
West Virginia ..........................................................................
1,156,813,157
Wisconsin ................................................................................
1,709,500,642
Wyoming .................................................................................
132,925,390.
‘‘(2) COMPUTATION
OF
STATE
OUTLAY
ALLOT-
MENTS.—
‘‘(A) IN GENERAL.—Subject to the succeed-
ing provisions of this subsection, the amount of
the State outlay allotment under this subsection
for one of the 50 States and the District of Co-
lumbia 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 such
State or District for the fiscal year, and
‘‘(ii) the scalar factor described in sub-
paragraph (C) for the fiscal year.
‘‘(B) NEEDS-BASED
AMOUNT.—The needs-
based amount under this subparagraph for a
State or the District of Columbia for a fiscal
year is equal to the product of—
‘‘(i) the State’s or District’s aggregate
expenditure need for the fiscal year (as de-
termined under subsection (d)), and
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‘‘(ii) the State’s or District’s old Fed-
eral medical assistance percentage (as de-
fined in section 2122(d)) for the fiscal year
(or, in the case of fiscal year 1997, the Fed-
eral medical assistance percentage deter-
mined 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 sub-
paragraph (A)(ii) for the fiscal year (taking into
account the floors and ceilings under paragraph
(3)), the total of the outlay allotments under this
subsection for all the 50 States and the District
of Columbia for the fiscal year (not taking into
account any increase in an outlay allotment for
a fiscal year attributable to the election of an al-
ternative 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
allotments provided under paragraph (5) for the
Commonwealths and territories for the fiscal
year.
‘‘(3) FLOORS AND CEILINGS.—
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‘‘(A) FLOORS.—Subject to the ceiling estab-
lished under subparagraph (B), in no case shall
the amount of the State outlay allotment under
paragraph (2) for a fiscal year be less than the
greatest of the following:
‘‘(i) IN GENERAL.—Beginning with fis-
cal year 1998, 0.24 percent of the pool
amount for the fiscal year.
‘‘(ii) FLOOR
BASED
ON
PREVIOUS
YEAR’S
OUTLAY
ALLOTMENT.—Subject to
clause (iii)—
‘‘(I) FISCAL YEAR 1997.—For fis-
cal year 1997, 103.5 percent of the
amount of the State outlay allotment
under this subsection for fiscal year
1996.
‘‘(II) FISCAL YEAR 1998.—For fis-
cal year 1998, 103 percent of the
amount of the State outlay allotment
under this subsection for fiscal year
1997.
‘‘(III) 
SUBSEQUENT
FISCAL
YEARS.—For a fiscal year after 1998,
102 percent of the amount of the State
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outlay allotment under this subsection
for the previous fiscal year.
‘‘(iii) 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 sub-
section for the previous fiscal year by more
than the national MediGrant growth per-
centage for fiscal year 1997, 104 percent of
the amount of the State outlay allotment
under this subsection for the previous fiscal
year (or, if less, beginning with fiscal year
2003, 95 percent of the national MediGrant
growth percentage for the year).
‘‘(B) CEILINGS.—
‘‘(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
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‘‘(II) the applicable percent (spec-
ified in clause (ii) or (iii)) for the fis-
cal year involved.
‘‘(ii) GENERAL RULE FOR APPLICABLE
PERCENT.—For purposes of clause (i), sub-
ject to clause (iii), the ‘applicable percent’—
‘‘(I) for fiscal year 1997 is 109
percent, and
‘‘(II) for a subsequent fiscal year
is 105.33 percent.
‘‘(iii) SPECIAL
RULE.—For a fiscal
year after fiscal year 1997, in the case of a
State (among the 50 States and the District
of Columbia) that is one of the 10 States
with the lowest Federal MediGrant spending
per resident-in-poverty rates (as determined
under clause (iv)) for the fiscal year, the
‘applicable percent’ is 107 percent.
‘‘(iv) DETERMINATION
OF
FEDERAL
MEDIGRANT
SPENDING
PER
RESIDENT-IN-
POVERTY
RATE.—For purposes of clause
(iii), the ‘Federal MediGrant spending per
resident-in-poverty rate’ for a State for a
fiscal year is equal to—
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‘‘(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 re-
spect to the fiscal year.
‘‘(C) SPECIAL RULE.—
‘‘(i) IN
GENERAL.—Notwithstanding
the preceding subparagraphs of this para-
graph, the State outlay allotment for—
‘‘(I) New Hampshire for each of
the fiscal years 1997 through 2000, is
$360,000,000,
‘‘(II) 
Louisiana, 
subject 
to
subclause (III), for each of the fiscal
years 
1997 
through 
2000, 
is
$2,622,000,000, and
‘‘(III) Louisiana and Nebraska
for fiscal year 1997, as otherwise deter-
mined, 
shall 
be 
increased 
by
$37,048,207 and $106,132,408, respec-
tively.
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‘‘(IV) Nevada for each of fiscal
years 1996, 1997, and 1998, as other-
wise determined, shall be increased by
$90,000,000.
‘‘(ii) EXCEPTION.—A State described
in subclause (I) or (II) of clause (i) may
apply to the Secretary for use of the State
outlay 
allotment 
otherwise 
determined
under this subsection for any fiscal year, if
such State notifies the Secretary not later
than March 1 preceding such fiscal year
that such State will be able to expend suffi-
cient State funds in such fiscal year to
qualify for such allotment.
‘‘(iii) TREATMENT
OF
INCREASE
AS
SUPPLEMENTAL ALLOTMENT.—Any increase
in an outlay allotment under clause (i)(III)
or (i)(IV) shall not be taken into account
for purposes of determining the scalar factor
under paragraph (2) for fiscal year 1997,
any State outlay allotment for a fiscal year
after fiscal year 1997, the pool amount for
a fiscal year after fiscal year 1997, or deter-
mination of the national MediGrant growth
percentage for any fiscal year.
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‘‘(4) ELECTION OF ALTERNATIVE GROWTH FOR-
MULA.—
‘‘(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
increase in the amount of such allotment in sub-
sequent 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 subsequent
fiscal years does not exceed the amount of the
outlay allotment deferred from fiscal year 1996.
‘‘(5) COMMONWEALTHS AND TERRITORIES.—
‘‘(A) IN
GENERAL.—The outlay allotment
for each of the Commonwealths and territories
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for a fiscal year is the maximum amount that
could have been certified under section 1108(c)
(as in effect on the day before the date of the en-
actment of this title) with respect to the Com-
monwealth or territory for the fiscal year with
respect to title XIX, if the national MediGrant
growth percentage (as determined under sub-
section (b)(2)) for the fiscal year had been sub-
stituted (beginning with fiscal year 1997) for the
percentage 
increase 
referred 
to 
in 
section
1108(c)(1)(B) (as so in effect).
‘‘(B) DISREGARD OF ROUNDING REQUIRE-
MENTS.—For purposes of subparagraph (A), the
rounding requirements under section 1108(c)
shall not apply.
‘‘(C) LIMITATION ON TOTAL AMOUNT FOR
FISCAL YEAR 1996.—Notwithstanding the provi-
sions of subparagraph (A), the total amount of
the outlay allotments for the Commonwealths
and territories for fiscal year 1996 may not ex-
ceed $139,950,000.
‘‘(d) STATE AGGREGATE EXPENDITURE NEED DETER-
MINED.—
‘‘(1) IN GENERAL.—For purposes of subsection
(c), the ‘State aggregate expenditure need’ for a State
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or the District of Columbia for a fiscal year is equal
to the product of the following 4 factors:
‘‘(A) RESIDENTS IN POVERTY.—The average
annual number of residents in poverty of such
State or District with respect to the fiscal year
(as determined under paragraph (2)).
‘‘(B) CASE MIX INDEX.—The case mix index
for such State or District (as determined under
paragraph (3)) for the most recent fiscal year for
which data are available, but in no case less
than 0.9 or greater than 1.15.
‘‘(C) INPUT COST INDEX.—The input cost
index for the State (as determined under para-
graph (4)) for the most recent fiscal year 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 section—
‘‘(A) IN GENERAL.—The term ‘average an-
nual number of residents in poverty’ means,
with respect to a State or the District of Colum-
bia and a fiscal year, the average annual num-
ber of residents in poverty (as defined in sub-
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paragraph (B)) in such State or District (based
on data made generally available by the Bureau
of the Census from the Current Population Sur-
vey) 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 individual
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 or the District of Co-
lumbia for a fiscal year is equal to—
‘‘(i) the sum of—
‘‘(I) the projected per recipient ex-
penditures with respect to elderly indi-
viduals in such State or District for
the fiscal year (determined under sub-
paragraph (B)),
‘‘(II) the projected per recipient
expenditures with respect to the blind
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and disabled individuals in such State
or District for the fiscal year (deter-
mined under subparagraph (C)), and
‘‘(III) the projected per recipient
expenditures with respect to other indi-
viduals in such State or District (de-
termined under subparagraph (D));
divided by—
‘‘(ii) the national average spending per
recipient determined under subparagraph
(E) for the fiscal year involved.
‘‘(B) PROJECTED PER RECIPIENT EXPENDI-
TURES FOR THE ELDERLY.—For purposes of sub-
paragraph (A)(i)(I), the ‘projected per recipient
expenditures with respect to elderly individuals’
in a State or the District of Columbia for a fis-
cal 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 elderly individuals, and
‘‘(ii) the proportion, of all individuals
who received medical assistance under this
title in such State or District in the most
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recent fiscal year referred to in clause (i),
that were individuals described in such
clause.
‘‘(C) PROJECTED PER RECIPIENT EXPENDI-
TURES
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 or the
District of Columbia 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 such individuals
are blind or disabled and are not elderly in-
dividuals, 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.
‘‘(D) PROJECTED PER RECIPIENT EXPENDI-
TURES FOR OTHER INDIVIDUALS.—For purposes
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of subparagraph (A)(i)(III), the ‘projected per
recipient expenditures with respect to other indi-
viduals’ in a State or the District of Columbia
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 such State or District in the most
recent fiscal year referred to in clause (i),
that were individuals 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—
‘‘(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
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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 av-
erage 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.
‘‘(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), respectively,
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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 indi-
viduals receiving medical assistance under
this title, the Secretary may compute such
averages based on expenditures and num-
bers 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 ‘elderly individuals’ is
deemed a reference to ‘individuals
whose eligibility for medical assistance
is based on being 65 years of age or
older’,
‘‘(II) the reference in subpara-
graph (C)(i) to ‘and are not elderly in-
dividuals’ shall be considered to be de-
leted, and
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‘‘(III) individuals whose basis for
eligibility for medical assistance was
reported as unknown shall not be
counted as individuals under subpara-
graph (D)(i).
‘‘(iii) EXPENDITURE
DEFINED.—For
purposes of this paragraph, the term ‘ex-
penditure’ means medical vendor payments
by basis of eligibility as reported by HCFA
Form 2082.
‘‘(4) INPUT COST INDEX.—
‘‘(A) IN
GENERAL.—In this section, the
‘input cost index’ for a State or the District of
Columbia 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 em-
ployees in such State or District for the fis-
cal year (as determined under subpara-
graph (B)), to (II) the annual average
wages for hospital employees in the 50
States and the District of Columbia for such
year (as determined under such subpara-
graph).
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‘‘(B) DETERMINATION OF ANNUAL AVERAGE
WAGES
OF
HOSPITAL
EMPLOYEES.—The Sec-
retary shall provide for the determination of an-
nual average wages for hospital employees in a
State or the District of Columbia and, collec-
tively, in the 50 States and the District of Co-
lumbia for a fiscal year based on the area wage
data applicable to hospitals under section
1886(d)(2)(E) (or, if such data no longer exists,
comparable data of hospital wages) for dis-
charges occurring during the fiscal year involved.
‘‘(5) NATIONAL AVERAGE SPENDING PER RESI-
DENT IN POVERTY.—For purposes of this subsection,
the ‘national average spending per resident in pov-
erty’—
‘‘(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 percentage by
which (I) the pool amount for fiscal year
1997, exceeds (II) $83,213,431,458 (which
represents Federal medicaid expenditures
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for such States and District for fiscal year
1994); divided by
‘‘(ii) the sum of the number of resi-
dents in poverty (as defined in paragraph
(2)(A)) for all of the 50 States and the Dis-
trict of Columbia for fiscal year 1994; and
‘‘(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 Sec-
retary 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 section (not tak-
ing into account subsection (a)(2)(B)) for the fiscal
year. The Secretary shall include in the notice a de-
scription of the methodology and data used in deriv-
ing such allotments for the year.
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‘‘(2) REVIEW BY GAO.—The Comptroller General
shall submit to Congress by not later than May 15 of
each such fiscal year, a report analyzing such allot-
ments 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 Comptroller
General under paragraph (2), shall compute and pub-
lish in the Federal Register notice of the final allot-
ments under this section (both taking into account
and not taking into account subsection (a)(2)(B)) for
the fiscal year. The Secretary shall include in the no-
tice a description of any changes in such allotments
from the initial allotments published under para-
graph (1) for the fiscal year and the reasons 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 paragraph (3)
and the extent to which they comply with the precise
requirements of this section.
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‘‘(f) SUPPLEMENTAL ALLOTMENT
FOR EMERGENCY
HEALTH CARE SERVICES TO CERTAIN ALIENS.—
‘‘(1) IN
GENERAL.—Notwithstanding the pre-
vious provisions of this section, the amount of the
State outlay allotment for each of fiscal years 1996
through 2000 for each supplemental allotment eligible
State shall be increased by the amount of the supple-
mental outlay allotment provided under paragraph
(2) for the State for that year. The amount of such
increased allotment may only be used for the purpose
of providing medical assistance for care and services
for aliens described in paragraph (1) of section
2123(e) and for which the exception described in
paragraph (2) of such section applies. Section
2122(f)(3) shall apply to such assistance in the same
manner as it applies to medical assistance described
in such section.
‘‘(2) SUPPLEMENTAL OUTLAY ALLOTMENT.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the amount of the supplemental out-
lay allotment for a supplemental allotment eligi-
ble State for a fiscal year is equal to the supple-
mental allotment ratio (as defined in subpara-
graph (C)) multiplied by the supplemental pool
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amount (specified in subparagraph (D)) for the
fiscal year.
‘‘(B) SUPPLEMENTAL ALLOTMENT ELIGIBLE
STATE.—In this subsection, the term ‘supple-
mental allotment eligible State’ means one of the
15 States with the highest number of undocu-
mented alien residents of all the States.
‘‘(C) SUPPLEMENTAL ALLOTMENT RATIO.—
In this paragraph, the ‘supplemental allotment
ratio’ for a State is the ratio of—
‘‘(i) the number of undocumented
aliens residing in the State, to
‘‘(ii) the sum of such numbers for all
supplemental allotment eligible States.
‘‘(D) SUPPLEMENTAL
POOL
AMOUNT.—In
this 
paragraph, 
the 
‘supplemental 
pool
amount’—
‘‘(i) 
for 
fiscal 
year 
1996 
is
$627,325,551,
‘‘(ii) 
for 
fiscal 
year 
1997 
is
$673,388,855,
‘‘(iii) 
for 
fiscal 
year 
1998 
is
$702,313,450,
‘‘(iv) 
for 
fiscal 
year 
1999 
is
$733,140,258, and
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‘‘(v) 
for 
fiscal 
year 
2000 
is
$763,831,886.
‘‘(E) DETERMINATION OF NUMBER.—
‘‘(i) IN GENERAL.—The number of un-
documented aliens residing in a State
under this paragraph—
‘‘(I) for fiscal year 1996 shall be
determined based on estimates of the
resident illegal alien population resid-
ing in each State prepared by the Sta-
tistics Division of the Immigration
and Naturalization Service as of Octo-
ber 1992, and
‘‘(II) for a subsequent fiscal year
shall be determined based on the most
recent updated estimate made under
clause (ii).
‘‘(ii) UPDATING ESTIMATE.—For each
fiscal year beginning with fiscal year 1997,
the Secretary, in consultation with the
Commission of the Immigration and Natu-
ralization Service, States, and outside ex-
perts, shall estimate the number of undocu-
mented aliens residing in each of the 50
States and the District of Columbia.
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‘‘(3) TREATMENT FOR OBLIGATION PURPOSES.—
For purposes of computing obligation allotments
under subsection (a)—
‘‘(A) the amount of the supplemental pool
amount for a fiscal year shall be added to the
pool amount under subsection (b) for that fiscal
year, and
‘‘(B) the amount of the supplemental allot-
ment to a State provided under paragraph (1)
shall be added to the outlay allotment of the
State for that fiscal year.
‘‘(4) SEQUENCE OF OBLIGATIONS.—For purposes
of carrying out this title, payments to a supplemental
allotment eligible State under section 2122 that are
attributable to expenditures for medical assistance de-
scribed in the second sentence of paragraph (1) shall
first be counted toward the supplemental outlay allot-
ment provided under this subsection, rather than to-
ward the outlay allotment otherwise provided under
this section.
‘‘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
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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 ex-
pended 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 informa-
tion systems and for providing incentives to pro-
mote the enforcement of medical support orders,
plus
‘‘(B) an amount equal to 75 percent of the
amounts expended during such quarter for medi-
cal personnel, administrative support of medical
personnel, operation and maintenance of infor-
mation systems, modification of information sys-
tems, quality assurance activities, utilization re-
view, medical and peer review, anti-fraud activi-
ties, independent evaluations, coordination of
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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 expended
during such quarter as are expended by the State
in the administration of the State MediGrant
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 sub-
sections, 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 expenditures,
the source or sources from which the difference is ex-
pected to be derived, and (B) such other investigation
as the Secretary may find necessary.
‘‘(2) PAYMENT.—
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‘‘(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.—Ex-
penditures 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 reim-
bursed for such expenditures by a third party
pursuant to the provisions of its plan in compli-
ance with section 2135.
‘‘(C) RECOVERY
OF
OVERPAYMENTS.—For
purposes of this subsection, when an overpay-
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-
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tempt to recover such overpayment before adjust-
ment is made in the Federal payment to such
State on account of such overpayment. Except as
otherwise provided in subparagraph (D), the ad-
justment in the Federal payment shall be made
at the end of the 60 days, whether or not recov-
ery was made.
‘‘(D) 
NO
ADJUSTMENT
FOR
UNCOLLECTABLES.—In any case where the State
is unable to recover a debt which represents an
overpayment (or any portion thereof) made to a
person or other entity on account of such debt
having been discharged in bankruptcy or other-
wise being uncollectable, no adjustment shall be
made in the Federal payment to such State on
account of such overpayment (or portion thereof).
‘‘(3) FEDERAL SHARE OF RECOVERIES.—The pro
rata share to which the United States is equitably en-
titled, as determined by the Secretary, of the net
amount recovered during any quarter by the State or
any political subdivision thereof with respect to medi-
cal assistance furnished under the State MediGrant
plan shall be considered an overpayment to be ad-
justed under this subsection.
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‘‘(4) TIMING OF OBLIGATION OF FUNDS.—Upon
the making of any estimate by the Secretary under
this subsection, any appropriations available for pay-
ments under this section shall be deemed obligated.
‘‘(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 dis-
putes such disallowance, the amount of the Federal
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 respect
to such payment amount. If such final determination
is to the effect that any amount was properly dis-
allowed, and the State chose to retain payment 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 dis-
allowed for the period beginning on the date such
amount was disallowed and ending on the date of
such final determination at a rate (determined by the
Secretary) based on the average of the bond equivalent
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of the weekly 90-day treasury bill auction rates dur-
ing such period.
‘‘(c) APPLICABLE FEDERAL MEDICAL ASSISTANCE
PERCENTAGE DEFINED.—In this section, except as pro-
vided in subsection (f), the term ‘applicable Federal medical
assistance percentage’ means, with respect to one of the 50
States or the District of Columbia, at the State’s or Dis-
trict’s option—
‘‘(1) the old Federal medical assistance percent-
age (as determined in subsection (d));
‘‘(2) the lesser of—
‘‘(A) new Federal medical assistance per-
centage (as determined under subsection (e)) or
‘‘(B) the old Federal medical assistance per-
centage plus 10 percentage points; or
‘‘(3) 60 percent.
‘‘(d) OLD FEDERAL MEDICAL ASSISTANCE PERCENT-
AGE.—
‘‘(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 income
of such State bears to the square of the per capita in-
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come of the continental United States (including
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 provi-
sions of section 1101(a)(8)(B).
‘‘(e) NEW FEDERAL MEDICAL ASSISTANCE PERCENT-
AGE 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 District
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),
to—
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‘‘(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 pur-
poses 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 in-
come of the District of Columbia, as deter-
mined in accordance with the provisions of
section 1101(a)(8)(B), divided by
‘‘(ii) an amount equal to the total per-
sonal income of the continental United
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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 aggregate ex-
penditure 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 medical
assistance percentage for any State shall be promul-
gated in a timely manner consistent with the promul-
gation of the old Federal medical assistance percent-
age under section 1101(a)(8)(B).
‘‘(f) SPECIAL RULES.—For purposes of this title—
‘‘(1) COMMONWEALTHS
AND
TERRITORIES.—In
the case of Puerto Rico, the Virgin Islands, Guam, the
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Northern Mariana Islands, and American Samoa, the
old and new Federal medical assistance percentages
are 50 percent.
‘‘(2) ALASKA.—In the case of Alaska, the old
Federal medical assistance percentage is that percent-
age which bears the same ratio to 45 percent as the
square of the adjusted per capita income of such State
bears to the square of the per capita income of the
continental United States. For purposes of the preced-
ing sentence, the adjusted per capita income for Alas-
ka shall be determined by dividing the State’s most
recent 3-year average per capita by the input cost
index for such State (as determined under section
2121(d)(4)).
‘‘(3) 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 received
through a facility described in subparagraph (B)
of an Indian tribe or tribal organization or
through an Indian Health Service facility wheth-
er operated by the Indian Health Service or by
an Indian tribe or tribal organization (as de-
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fined in section 4 of the Indian Health Care Im-
provement 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
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 fa-
cilities, and
‘‘(iv) the tribe has at least 50,000
members (as of the date of the enactment of
this title).
‘‘(4) 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(f)(2), payment shall be made for the
amount of such assistance without regard to any need
for a State match.
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‘‘(5) SPECIAL TRANSITIONAL RULE.—
‘‘(A) IN
GENERAL.—Notwithstanding sub-
sections (a) and (f), in order to receive the full
State outlay allotment described in section
2121(c)(3)(C)(i), a State described in subpara-
graph (C) shall expend State funds in a fiscal
year 
(before 
fiscal 
year 
2000) 
under 
a
MediGrant plan under this title in an amount
not less than the adjusted base year State ex-
penditures, plus the applicable percentage of the
difference between such expenditures and the
amount necessary to qualify for the full State
outlay allotment so described in such fiscal year
as determined under this section without regard
to this paragraph.
‘‘(B) REDUCTION
IN
ALLOTMENT
IF
EX-
PENDITURE NOT MET.—In the event a State de-
scribed in subparagraph (C) fails to expend
State funds in an amount required by subpara-
graph (A) for a fiscal year, the outlay allotment
described in section 2121(c)(3)(C)(i) for such
year for such State shall be reduced by an
amount which bears the same ratio to such out-
lay allotment as the State funds expended in
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such fiscal year bears to the amount required by
subparagraph (A).
‘‘(C) ADJUSTED BASE YEAR STATE EXPEND-
ITURES.—For purposes of this paragraph, the
term ‘adjusted base year State expenditures’
means—
‘‘(i) for New Hampshire, $203,000,000,
and
‘‘(ii) for Louisiana, $355,000,000.
‘‘(D) APPLICABLE PERCENTAGE.—For pur-
poses of this paragraph, the applicable percent-
age for a fiscal year is specified in the following
table:
Applicable
‘‘Fiscal year:
Percentage:
1996 ................................................................................................
1997 ................................................................................................
1998 ................................................................................................
1999 ................................................................................................
80.
‘‘(g) 
STATE
FINANCIAL
PARTICIPATION.—Each
MediGrant plan shall provide for financial participation
by the State equal to not less than 40 percent of the non-
Federal share of the expenditures under the plan with re-
spect to which payments may be made under this section.
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‘‘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 PROVIDERS.—
‘‘(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 reason
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—
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‘‘(A) medically-related services for a quarter
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) during
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 expendi-
tures 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.
‘‘(C) Utilization review activities, including
medical activities and activities of peer review
organizations.
‘‘(D) Inspection and oversight of providers
and capitated health care organizations.
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‘‘(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-
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 organiza-
tion) 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 obligation because the
individual is eligible for or is provided medical assistance
under the plan.
‘‘(e) MEDIGRANT AS SECONDARY PAYER.—Except as
otherwise provided by law, no payment shall be made to
a State under this part for expenditures for medical assist-
ance provided for an individual under its MediGrant plan
to the extent that payment has been made or can reasonably
be expected to be made promptly (as determined in accord-
ance with regulations) under any other federally operated
or financed health care program, other than a program op-
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erated or financed by the Indian Health Service, as identi-
fied by the Secretary. For purposes of this subsection, rules
similar to the rules for overpayments under section 2122(b)
shall apply.
‘‘(f) LIMITATION ON PAYMENTS TO EMERGENCY SERV-
ICES FOR NONLAWFUL ALIENS.—
‘‘(1) IN GENERAL.—Notwithstanding the preced-
ing provisions of this section, except as provided in
paragraph (2), no payment may be made to a State
under this part for medical assistance furnished to an
alien who is not lawfully admitted for permanent res-
idence or otherwise permanently residing in the Unit-
ed 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—
‘‘(A) such care and services are necessary
for the treatment of an emergency medical condi-
tion 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,
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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 se-
verity (including severe pain) such that the absence of
immediate medical attention could reasonably be ex-
pected to result in—
‘‘(A) placing the patient’s health in serious
jeopardy,
‘‘(B) serious impairment to bodily func-
tions, or
‘‘(C) serious dysfunction of any bodily
organ or part.
‘‘(g) 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 cov-
ered 
outpatient 
drugs 
(as 
defined 
in 
section
2175(i)(2)) of a manufacturer provided under the
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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,
‘‘(B) is otherwise complying with the provi-
sions of such section,
‘‘(C) 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 Af-
fairs under such section, and
‘‘(D) subject to paragraph (4), is complying
with the provisions of section 340B of the Public
Health Service Act, including the requirement of
entering into an agreement with the Secretary
under such section.
‘‘(2) CONSTRUCTION.—Nothing in this subsection
shall be construed as requiring a State to participate
in the MediGrant master rebate agreement under sec-
tion 2175.
‘‘(3) EFFECT OF SUBSEQUENT AMENDMENTS.—
For purposes of subparagraphs (C) and (D), in deter-
mining whether a manufacturer is in compliance
with the requirements of section 8126 of title 38,
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United States Code, or section 340B of the Public
Health Service Act—
‘‘(A) the Secretary shall not take into ac-
count any amendments to such sections that are
enacted after the enactment of title VI of the Vet-
erans Health Care Act of 1992, and
‘‘(B) a manufacturer is deemed to meet such
requirements if the manufacturer establishes to
the satisfaction of the Secretary that the manu-
facturer would comply (and has offered to com-
ply) with the provisions of such sections (as in
effect immediately after the enactment of the Vet-
erans Health Care Act of 1992) and would have
entered into an agreement under such section (as
such section was in effect at such time), but for
a legislative change in such section after the date
of the enactment of the Veterans Health Care Act
of 1992.
‘‘(4) EFFECT
OF
ESTABLISHMENT
OF
ALTER-
NATIVE MECHANISM UNDER PUBLIC HEALTH SERVICE
ACT.—If the Secretary does not establish a mechanism
to ensure against duplicate discounts or rebates under
section 340B(a)(5)(A) of the Public Health Service
Act within 12 months of the date of the enactment of
such section, the following requirements shall apply:
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‘‘(A) Each covered entity under such section
shall inform the State when it is seeking reim-
bursement from the MediGrant plan for medical
assistance with respect to a unit of any covered
outpatient drug which is subject to an agreement
under section 340B(a) of such Act.
‘‘(B) Each such State shall provide a means
by which such an entity shall indicate on any
drug reimbursement claims form (or format,
where electronic claims management is used)
that a unit of the drug that is the subject of the
form is subject to an agreement under section
340B of such Act, and not submit to any manu-
facturer a claim for a rebate payment with re-
spect to such a drug.
‘‘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-
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
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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.—Within
30 days after completion of each audit or verification
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.—
‘‘(1) IN GENERAL.—With respect to the account-
ing and expenditure of funds under this title, each
State shall adopt and maintain such fiscal controls,
accounting procedures, and data processing safe-
guards as the State deems reasonably necessary to as-
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sure the fiscal integrity of the State’s activities under
this title.
‘‘(2) CONSISTENCY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES.—Such controls and proce-
dures shall be generally consistent with generally ac-
cepted 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.
‘‘(b) PROGRAM REQUIREMENTS.—The program estab-
lished 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-
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ing payments under the MediGrant plan shall comply
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.
‘‘(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
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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 sanc-
tioned or prohibited from participating under the
plan, the State agency responsible for administering
the plan shall promptly notify the Secretary and, in
the case of a physician, the State medical licensing
board of such action.
‘‘(5) ACCESS TO INFORMATION.—The MediGrant
plan shall provide that the State will provide infor-
mation and access to certain information respecting
sanctions taken against health care practitioners and
providers by State licensing authorities in accordance
with section 2133.
‘‘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
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following information with respect to formal proceed-
ings (as defined by the Secretary in regulations) con-
cluded against a health care practitioner or entity by
any authority of the State (or of a political subdivi-
sion thereof) responsible for the licensing of health
care practitioners (or any peer review organization or
private accreditation entity reviewing the services
provided by health care practitioners) or entities:
‘‘(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
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 regarding
the practitioner or entity.
‘‘(2) ACCESS TO DOCUMENTS.—The State must
provide the Secretary (or an entity designated by the
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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 Act and
in order to provide, directly or through suitable arrange-
ments 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)),
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‘‘(4) to utilization and quality control peer re-
view organizations described in part B of title XI and
to appropriate entities with contracts under section
1154(a)(4)(C) with respect to eligible organizations
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 Quality
Improvement Act of 1986), with respect to physicians
or other licensed health care practitioners that have
entered (or may be entering) into an employment or
affiliation relationship with, or have applied for clin-
ical privileges or appointments to the medical staff of,
such hospitals or other health care entities (and such
information shall be deemed to be disclosed 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 appro-
priate, 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
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health care through such programs, and to protect the
fiscal integrity of such programs.
‘‘(c) CONFIDENTIALITY OF INFORMATION PROVIDED.—
The Secretary shall provide for suitable safeguards for the
confidentiality of the information furnished under sub-
section (a). Nothing in this subsection shall prevent the dis-
closure of such information by a party which is otherwise
authorized, under applicable State law, to make such disclo-
sure.
‘‘(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 and section 1128E.
‘‘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 eligible individuals
under the plan, and that beneficiaries under the plan will
be protected from abuse and neglect in connection with the
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provision of medical assistance under the plan without the
existence of such a unit.
‘‘(b) UNITS DESCRIBED.—For purposes of this section,
the term ‘State MediGrant fraud control unit’ means a sin-
gle 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 authority
to prosecute individuals for criminal violations;
‘‘(B) is in a State the constitution of which
does not provide for the criminal prosecution of
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 authority
or authorities in the State for prosecution,
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
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has formal procedures (including procedures for
its referral of suspected criminal violations to
such office) which provide effective coordination
of activities between the entity and such office
with respect to the detection, investigation, and
prosecution of suspected criminal violations re-
lating 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.
‘‘(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 connection
with any aspect of the provision of medical assistance
and the activities of providers of such assistance
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 re-
ceive 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 action.
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‘‘(5) OVERPAYMENTS.—
‘‘(A) IN GENERAL.—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 provid-
ers and that are discovered by the entity in car-
rying out its activities.
‘‘(B) TREATMENT
OF
CERTAIN
OVERPAY-
MENTS.—If an overpayment is the direct result
of the failure of the provider (or the provider’s
billing agent) to adhere to a change in the
State’s billing instructions, the entity may re-
cover the overpayment only if the entity dem-
onstrates that the provider (or the provider’s bill-
ing agent) received prior written or electronic
notice of the change in the billing instructions
before the submission of the claims on which the
overpayment is based.
‘‘(6) PERSONNEL.—The entity employs such
auditors, attorneys, investigators, and other necessary
personnel and is organized in such a manner as is
necessary to promote the effective and efficient con-
duct of the entity’s activities.
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‘‘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 information
to enable States to pursue claims against third par-
ties, 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 rel-
ative) payment of an amount for the service
more than could be collected under the plan in
the absence of such third party liability, and
‘‘(B) may not refuse to furnish services to
such an individual because of a third party’s po-
tential liability for payment for the service.
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‘‘(2) PENALTY.—A MediGrant plan may provide
for a reduction of any payment amount otherwise due
with respect to a person who furnishes services under
the plan in an amount equal to up to 3 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 assistance
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 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.
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‘‘(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.
‘‘(B) In any case in which a parent is re-
quired by a court or administrative order to pro-
vide health coverage for a child and the parent
is eligible for family health coverage through an
insurer, a law that requires such insurer—
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‘‘(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 coverage
of such child, to enroll such child under
such family coverage upon application 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 cov-
erage 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
‘‘(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 pro-
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vide health coverage for a child and the parent
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 coverage
of such child, to enroll such child under
such family coverage upon application 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—
‘‘(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
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than 
the 
effective 
date 
of 
such
disenrollment, or
‘‘(II) the employer has eliminated
family health coverage for all of its em-
ployees; and
‘‘(iv) to withhold from such employee’s
compensation the employee’s share (if any)
of premiums for health coverage (except 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 ap-
propriate circumstances under which an
employer may withhold less than such em-
ployee’s share of such premiums.
‘‘(D) A law that prohibits an insurer from
imposing requirements on a State agency, which
has been assigned the rights of an individual eli-
gible 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 cov-
ered.
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‘‘(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 cov-
erage,
‘‘(ii) to permit the custodial parent (or
provider, with the custodial parent’s ap-
proval) 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 provider,
or the State agency.
‘‘(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 eligible
for medical assistance under this title,
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‘‘(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 pro-
vider 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 services.
‘‘(2) DEFINITION.—For purposes of this sub-
section, the term ‘insurer’ includes a group health
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 PERMITTED.—
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 be-
half of the individual under the MediGrant plan, including
through the imposition of liens against the property or es-
tate of the individual.