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CHAPTER 5—OTHER PROVISIONS 
SEC. 3141. INCREASE IN MEDICAID PAYMENTS TO INSULAR 
AREAS. 
Section 1108(g) of the Social Security Act (42 U.S.C. 
1308(g)) is amended— 
(1) in paragraph (2), by inserting ‘‘and subject 
to paragraph (3)’’ after ‘‘subsection (f)’’; and 
(2) by adding at the end the following new 
paragraph: 
‘‘(3) FISCAL YEARS 2006 AND 2007 FOR CERTAIN 
INSULAR
AREAS.—The amounts otherwise deter-
mined under this subsection for Puerto Rico, the 
Virgin Islands, Guam, the Northern Mariana Is-
lands, and American Samoa for fiscal year 2006 and 
fiscal year 2007 shall be increased by the following 
amounts: 
‘‘(A) For Puerto Rico, $12,000,000 for fis-
cal year 2006 and $12,000,000 for fiscal year 
2007. 
‘‘(B) For the Virgin Islands, $2,500,000 
for fiscal year 2006 and $5,000,000 for fiscal 
year 2007. 
‘‘(C) For Guam, $2,500,000 for fiscal year 
2006 and $5,000,000 for fiscal year 2007.
327 
‘‘(D) For the Northern Mariana Islands, 
$1,000,000 for fiscal year 2006 and $2,000,000 
for fiscal year 2007. 
‘‘(E) For American Samoa, $2,000,000 for 
fiscal year 2006 and $4,000,000 for fiscal year 
2007. 
Such amounts shall not be taken into account in ap-
plying paragraph (2) for fiscal year 2007 but shall 
be taken into account in applying such paragraph 
for fiscal year 2008 and subsequent fiscal years.’’. 
SEC. 3142. MANAGED CARE ORGANIZATION PROVIDER TAX 
REFORM. 
(a) IN GENERAL.—Section 1903(w)(7)(A)(viii) of the 
Social Security Act (42 U.S.C. 1396b(w)(7)(A)(viii)) is 
amended to read as follows: 
‘‘(viii) Services of managed care organiza-
tions (including health maintenance organiza-
tions, preferred provider organizations, and 
such other similar organizations as the Sec-
retary may specify by regulation).’’. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—Subject to paragraph (2), 
the amendment made by subsection (a) shall be ef-
fective as of the date of the enactment of this Act. 
(2) GRANDFATHER.—
328 
(A) IN
GENERAL.—Subject to subpara-
graph (B), in the case of a State that has had 
approved as of the date of the enactment of this 
Act a provider tax on services described in sec-
tion 1903(w)(7)(A)(viii) of the Social Security 
Act, as amended by subsection (a), such amend-
ment shall be effective as of October 1, 2008. 
(B) TRANSITION RULE FOR FISCAL YEAR 
2009.—In the case of a State described in sub-
paragraph (A), the amount of any reduction in 
payment under subsection (a)(1) of section 
1903 of the Social Security Act (42 U.S.C. 
1396b) that would otherwise be required under 
subsection (w) of such section for calendar 
quarters in fiscal year 2009 because of the 
amendment made by section (a) shall be re-
duced by one-half. 
SEC. 3143. MEDICAID TRANSFORMATION GRANTS. 
(a) IN GENERAL.—Section 1903 of the Social Secu-
rity Act (42 U.S.C. 1396b), as amended by section 3123, 
is amended by adding at the end the following new sub-
section: 
‘‘(y) MEDICAID TRANSFORMATION PAYMENTS.— 
‘‘(1) IN
GENERAL.—In addition to the pay-
ments provided under subsection (a), subject to
329 
paragraph (4), the Secretary shall provide for pay-
ments to States for the adoption of innovative meth-
ods to improve the effectiveness and efficiency in 
providing medical assistance under this title. 
‘‘(2) PERMISSIBLE USES OF FUNDS.—The fol-
lowing are examples of innovative methods for which 
funds provided under this subsection may be used: 
‘‘(A) Methods for reducing patient error 
rates through the implementation and use of 
electronic health records, electronic clinical deci-
sion support tools, or e-prescribing programs. 
‘‘(B) Methods for improving rates of collec-
tion from estates of amounts owed under this 
title. 
‘‘(C) Methods for reducing waste, fraud, 
and abuse under the program under this title, 
such as reducing improper payment rates as 
measured by annual payment error rate meas-
urement (PERM) project rates. 
‘‘(D) Implementation of a medication risk 
management program as part of a drug use re-
view program under section 1927(g). 
‘‘(3) APPLICATION; TERMS AND CONDITIONS.— 
‘‘(A) IN GENERAL.—No payments shall be 
made to a State under this subsection unless
330 
the State applies to the Secretary for such pay-
ments in a form, manner, and time specified by 
the Secretary. 
‘‘(B) TERMS AND CONDITIONS.—Such pay-
ments are made under such terms and condi-
tions consistent with this subsection as the Sec-
retary prescribes. 
‘‘(C) ANNUAL
REPORT.—Payment to a 
State under this subsection is conditioned on 
the State submitting to the Secretary an annual 
report on the programs supported by such pay-
ment. Such report shall include information 
on— 
‘‘(A) the specific uses of such payment; 
‘‘(B) an assessment of quality improve-
ments and clinical outcomes under such pro-
grams; and 
‘‘(C) estimates of cost savings resulting 
from such programs. 
‘‘(4) FUNDING.— 
‘‘(A) LIMITATION ON FUNDS.—The total 
amount of payments under this subsection shall 
be equal to, and shall not exceed— 
‘‘(i) $50,000,000 for fiscal year 2007; 
and