(c) REMEDIAL ACTIONS.—The Council shall develop 
standards for education and sanctions with respect to 
outliers so as to ensure the quality of health care services 
provided under this Act. The Council shall develop criteria 
for referral of providers to the State licensing board if edu-
cation proves ineffective in correcting provider practice be-
havior. 
(d) DISSEMINATION.—The Council shall disseminate 
to the State— 
(1) the methodologies adopted under subsection 
(a); 
(2) the guidelines developed under subsection 
(b); and 
(3) the standards developed under subsection 
(c), 
for use by the States under section 503. 
(e) OUTLIER DEFINED.—In this title, the term 
‘‘outlier’’ means a health care provider whose pattern of 
practice, relative to applicable practice guidelines, suggests 
deficiencies in the quality of health care services being pro-
vided. 
SEC. 503. STATE QUALITY REVIEW PROGRAMS. 
(a) REQUIREMENT.—In order to meet the require-
ment of section 404(b)(1)(H), each State health security 
program shall establish 1 or more qualified entities to con-
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duct quality reviews of persons providing covered services 
under the program, in accordance with standards estab-
lished under subsection (b)(1) (except as provided in sub-
section (b)(2)) and subsection (d). 
(b) FEDERAL STANDARDS.— 
(1) IN GENERAL.—The Council shall establish 
standards with respect to— 
(A) the adoption of practice guidelines 
(whether developed by the Federal Government 
or other entities); 
(B) the identification of outliers (con-
sistent with methodologies adopted under sec-
tion 502(a)); 
(C) the development of remedial programs 
and monitoring for outliers; and 
(D) the application of sanctions (consistent 
with the standards developed under section 
502(c)). 
(2) STATE DISCRETION.—A State may apply 
under subsection (a) standards other than those es-
tablished under paragraph (1) so long as the State 
demonstrates to the satisfaction of the Council on an 
annual basis that the standards applied have been as 
efficacious in promoting and achieving improved 
quality of care as the application of the standards 
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established under paragraph (1). Positive improve-
ments in quality shall be documented by reductions 
in the variations of clinical care process and im-
provement in patient outcomes. 
(c) QUALIFICATIONS.—An entity is not qualified to 
conduct quality reviews under subsection (a) unless the 
entity satisfies the criteria for competence for such entities 
developed by the Council under section 501(b)(3). 
(d) INTERNAL QUALITY REVIEW.—Nothing in this 
section shall preclude an institutional provider from estab-
lishing its own internal quality review and enhancement 
programs. 
SEC. 504. ELIMINATION OF UTILIZATION REVIEW PRO-
GRAMS; TRANSITION. 
(a) INTENT.—It is the intention of this title to re-
place by January 1, 2019, random utilization controls with 
a systematic review of patterns of practice that com-
promise the quality of care. 
(b) SUPERSEDING CASE REVIEWS.— 
(1) IN
GENERAL.—Subject to the succeeding 
provisions of this subsection, the program of quality 
review provided under the previous sections of this 
title supersede all existing Federal requirements for 
utilization review programs, including requirements 
for random case-by-case reviews and programs re-
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quiring pre-certification of medical procedures on a 
case-by-case basis. 
(2) TRANSITION.—Before January 1, 2019, the 
Board and the States may employ existing utiliza-
tion review standards and mechanisms as may be 
necessary to effect the transition to pattern of prac-
tice-based reviews. 
(3) CONSTRUCTION.—Nothing in this sub-
section shall be construed— 
(A) as precluding the case-by-case review 
of the provision of care— 
(i) in individual incidents where the 
quality of care has significantly deviated 
from acceptable standards of practice; and 
(ii) with respect to a provider who has 
been determined to be an outlier; or 
(B) as precluding the case management of 
catastrophic, mental health, or substance abuse 
cases or long-term care where such manage-
ment is necessary to achieve appropriate, cost- 
effective, and beneficial comprehensive medical 
care, as provided for in section 204. 
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TITLE 
VI—HEALTH 
SECURITY 
BUDGET; 
PAYMENTS; 
COST 
CONTAINMENT MEASURES 
Subtitle A—Budgeting and 
Payments to States 
SEC. 601. NATIONAL HEALTH SECURITY BUDGET. 
(a) NATIONAL HEALTH SECURITY BUDGET.— 
(1) IN GENERAL.—By not later than September 
1 before the beginning of each year (beginning with 
2016), the Board shall establish a national health 
security budget, which— 
(A) specifies the total expenditures (includ-
ing expenditures for administrative costs) to be 
made by the Federal Government and the 
States for covered health care services under 
this Act; and 
(B) allocates those expenditures among the 
States consistent with section 604. 
Pursuant to subsection (b), such budget for a year 
shall not exceed the budget for the preceding year 
increased by the percentage increase in gross domes-
tic product. 
(2) DIVISION OF BUDGET INTO COMPONENTS.— 
The national health security budget shall consist of 
at least 4 components: 
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(A) A component for quality assessment 
activities (described in title V). 
(B) A component for health professional 
education expenditures. 
(C) A component for administrative costs. 
(D) A component for operating and other 
expenditures not described in subparagraphs 
(A) through (C) (in this title referred to as the 
‘‘operating component’’), consisting of amounts 
not included in the other components. A State 
may provide for the allocation of this compo-
nent between capital expenditures and other ex-
penditures. 
(3) ALLOCATION AMONG COMPONENTS.—Tak-
ing into account the State health security budgets 
established and submitted under section 603, the 
Board shall allocate the national health security 
budget among the components in a manner that— 
(A) assures a fair allocation for quality as-
sessment activities (consistent with the national 
health security spending growth limit); and 
(B) assures that the health professional 
education expenditure component is sufficient 
to provide for the amount of health professional 
education expenditures sufficient to meet the 
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need for covered health care services (consistent 
with the national health security spending 
growth limit under subsection (b)(2)). 
(b) BASIS FOR TOTAL EXPENDITURES.— 
(1) IN GENERAL.—The total expenditures speci-
fied in such budget shall be the sum of the capita-
tion amounts computed under section 602(a) and 
the amount of Federal administrative expenditures 
needed to carry out this Act. 
(2) NATIONAL
HEALTH
SECURITY
SPENDING 
GROWTH LIMIT.—For purposes of this subtitle, the 
national health security spending growth limit de-
scribed in this paragraph for a year is (A) zero, or, 
if greater, (B) the average annual percentage in-
crease in the gross domestic product (in current dol-
lars) during the 3-year period beginning with the 
first quarter of the fourth previous year to the first 
quarter of the previous year minus the percentage 
increase (if any) in the number of eligible individuals 
residing in any State the United States from the 
first quarter of the second previous year to the first 
quarter of the previous year. 
(c) DEFINITIONS.—In this title: 
(1) CAPITAL EXPENDITURES.—The term ‘‘cap-
ital expenditures’’ means expenses for the purchase, 
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100 
lease, construction, or renovation of capital facilities 
and for equipment and includes return on equity 
capital. 
(2) HEALTH
PROFESSIONAL
EDUCATION
EX-
PENDITURES.—The term ‘‘health professional edu-
cation expenditures’’ means expenditures in hospitals 
and other health care facilities to cover costs associ-
ated with teaching and related research activities. 
SEC. 602. COMPUTATION OF INDIVIDUAL AND STATE CAPI-
TATION AMOUNTS. 
(a) CAPITATION AMOUNTS.— 
(1) INDIVIDUAL CAPITATION AMOUNTS.—In es-
tablishing the national health security budget under 
section 601(a) and in computing the national aver-
age per capita cost under subsection (b) for each 
year, the Board shall establish a method for com-
puting the capitation amount for each eligible indi-
vidual residing in each State. The capitation amount 
for an eligible individual in a State classified within 
a risk group (established under subsection (d)(2)) is 
the product of— 
(A) a national average per capita cost for 
all covered health care services (computed 
under subsection (b)); 
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101 
(B) the State adjustment factor (estab-
lished under subsection (c)) for the State; and 
(C) the risk adjustment factor (established 
under subsection (d)) for the risk group. 
(2) STATE CAPITATION AMOUNT.— 
(A) IN GENERAL.—For purposes of this 
title, the term ‘‘State capitation amount’’ 
means, for a State for a year, the sum of the 
capitation amounts computed under paragraph 
(1) for all the residents of the State in the year, 
as estimated by the Board before the beginning 
of the year involved. 
(B) USE
OF
STATISTICAL
MODEL.—The 
Board may provide for the computation of 
State capitation amounts based on statistical 
models that fairly reflect the elements that com-
prise the State capitation amount described in 
subparagraph (A). 
(C) POPULATION INFORMATION.—The Bu-
reau of the Census shall assist the Board in de-
termining the number, place of residence, and 
risk group classification of eligible individuals. 
(b) COMPUTATION OF NATIONAL AVERAGE PER CAP-
ITA COST.— 
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102 
(1) FOR 2016.—For 2016, the national average 
per capita cost under this paragraph is equal to— 
(A) the average per capita health care ex-
penditures in the United States in 2014 (as es-
timated by the Board); 
(B) increased to 2015 by the Board’s esti-
mate of the actual amount of such per capita 
expenditures during 2015; and 
(C) updated to 2016 by the national health 
security spending growth limit specified in sec-
tion 601(b)(2) for 2016. 
(2) FOR SUCCEEDING YEARS.—For each suc-
ceeding year, the national average per capita cost 
under this subsection is equal to the national aver-
age per capita cost computed under this subsection 
for the previous year increased by the national 
health security spending growth limit (specified in 
section 601(b)(2)) for the year involved. 
(c) STATE ADJUSTMENT FACTORS.— 
(1) IN
GENERAL.—Subject to the succeeding 
paragraphs of this subsection, the Board shall de-
velop for each State a factor to adjust the national 
average per capita costs to reflect differences be-
tween the State and the United States in— 
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103 
(A) average labor and nonlabor costs that 
are necessary to provide covered health services; 
(B) any social, environmental, or geo-
graphic condition affecting health status or the 
need for health care services, to the extent such 
a condition is not taken into account in the es-
tablishment of risk groups under subsection (d); 
(C) the geographic distribution of the 
State’s population, particularly the proportion 
of the population residing in medically under-
served areas, to the extent such a condition is 
not taken into account in the establishment of 
risk groups under subsection (d); and 
(D) any other factor relating to operating 
costs required to ensure equitable distribution 
of funds among the States. 
(2) MODIFICATION OF HEALTH PROFESSIONAL 
EDUCATION COMPONENT.—With respect to the por-
tion of the national health security budget allocated 
to expenditures for health professional education, the 
Board shall modify the State adjustment factors so 
as to take into account— 
(A) differences among States in health 
professional education programs in operation as 
of the date of the enactment of this Act; and 
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104 
(B) differences among States in their rel-
ative need for expenditures for health profes-
sional education, taking into account the health 
professional education expenditures proposed in 
State health security budgets under section 
603(a). 
(3) BUDGET NEUTRALITY.—The State adjust-
ment factors, as modified under paragraph (2), shall 
be applied under this subsection in a manner that 
results in neither an increase nor a decrease in the 
total amount of the Federal contributions to all 
State health security programs under subsection (b) 
as a result of the application of such factors. 
(4) PHASE-IN.—In applying State adjustment 
factors under this subsection during the 5-year pe-
riod beginning with 2016, the Board shall phase-in, 
over such period, the use of factors described in 
paragraph (1) in a manner so that the adjustment 
factor for a State is based on a blend of such factors 
and a factor that reflects the relative actual average 
per capita costs of health services of the different 
States as of the time of enactment of this Act. 
(5) PERIODIC
ADJUSTMENT.—In establishing 
the national health security budget before the begin-
ning of each year, the Board shall provide for appro-
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105 
priate adjustments in the State adjustment factors 
under this subsection. 
(d) ADJUSTMENTS FOR RISK GROUP CLASSIFICA-
TION.— 
(1) IN GENERAL.—The Board shall develop an 
adjustment factor to the national average per capita 
costs computed under subsection (b) for individuals 
classified in each risk group (as designated under 
paragraph (2)) to reflect the difference between the 
average national average per capita costs and the 
national average per capita cost for individuals clas-
sified in the risk group. 
(2) RISK GROUPS.—The Board shall designate 
a series of risk groups, determined by age, health in-
dicators, and other factors that represent distinct 
patterns of health care services utilization and costs. 
(3) PERIODIC
ADJUSTMENT.—In establishing 
the national health security budget before the begin-
ning of each year, the Board shall provide for appro-
priate adjustments in the risk adjustment factors 
under this subsection. 
SEC. 603. STATE HEALTH SECURITY BUDGETS. 
(a) ESTABLISHMENT AND SUBMISSION OF BUDG-
ETS.— 
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106 
(1) IN GENERAL.—Each State health security 
program shall establish and submit to the Board for 
each year a proposed and a final State health secu-
rity budget, which specifies the following: 
(A) The total expenditures (including ex-
penditures for administrative costs) to be made 
under the program in the State for covered 
health care services under this Act, consistent 
with subsection (b), broken down as follows: 
(i) By the 4 components (described in 
section 601(a)(2)), consistent with sub-
section (b). 
(ii) Within the operating component— 
(I) expenditures for operating 
costs of hospitals and other facility- 
based services in the State; 
(II) expenditures for payment to 
comprehensive health service organiza-
tions; 
(III) expenditures for payment of 
services provided by health care prac-
titioners; and 
(IV) expenditures for other cov-
ered items and services. 
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107 
Amounts included in the operating compo-
nent include amounts that may be used by 
providers for capital expenditures. 
(B) The total revenues required to meet 
the State health security expenditures. 
(2) PROPOSED BUDGET DEADLINE.—The pro-
posed budget for a year shall be submitted under 
paragraph (1) not later than June 1 before the year. 
(3) FINAL BUDGET.—The final budget for a 
year shall— 
(A) be established and submitted under 
paragraph (1) not later than October 1 before 
the year, and 
(B) take into account the amounts estab-
lished under the national health security budget 
under section 601 for the year. 
(4) 
ADJUSTMENT
IN
ALLOCATIONS
PER-
MITTED.— 
(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), in the case of a final budg-
et, a State may change the allocation of 
amounts among components. 
(B) NOTICE.—No such change may be 
made unless the State has provided prior notice 
of the change to the Board. 
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108 
(C) DENIAL.—Such a change may not be 
made if the Board, within such time period as 
the Board specifies, disapproves such change. 
(b) EXPENDITURE LIMITS.— 
(1) IN GENERAL.—The total expenditures speci-
fied in each State health security budget under sub-
section (a)(1) shall take into account Federal con-
tributions made under section 604. 
(2) LIMIT ON CLAIMS PROCESSING AND BILL-
ING
EXPENDITURES.—Each State health security 
budget shall provide that State administrative ex-
penditures, including expenditures for claims proc-
essing and billing, shall not exceed 3 percent of the 
total expenditures under the State health security 
program, unless the Board determines, on a case-by- 
case basis, that additional administrative expendi-
tures would improve health care quality and cost ef-
fectiveness. 
(3) WORKER ASSISTANCE.—A State health se-
curity program may provide that, for budgets for 
years before 2019, up to 1 percent of the budget 
may be used for purposes of programs providing as-
sistance to workers who are currently performing 
functions in the administration of the health insur-
ance system and who may experience economic dis-
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109 
location as a result of the implementation of the pro-
gram. 
(c) APPROVAL PROCESS
FOR CAPITAL EXPENDI-
TURES PERMITTED.—Nothing in this title shall be con-
strued as preventing a State health security program from 
providing for a process for the approval of capital expendi-
tures based on information derived from regional planning 
agencies. 
SEC. 604. FEDERAL PAYMENTS TO STATES. 
(a) IN GENERAL.—Each State with an approved 
State health security program is entitled to receive, from 
amounts in the American Health Security Trust Fund, on 
a monthly basis each year, of an amount equal to one- 
twelfth of the product of— 
(1) the State capitation amount (computed 
under section 602(a)(2)) for the State for the year; 
and 
(2) the Federal contribution percentage (estab-
lished under subsection (b)). 
(b) FEDERAL CONTRIBUTION PERCENTAGE.—The 
Board shall establish a formula for the establishment of 
a Federal contribution percentage for each State. Such 
formula shall take into consideration a State’s per capita 
income and revenue capacity and such other relevant eco-
nomic indicators as the Board determines to be appro-
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110 
priate. In addition, during the 5-year period beginning 
with 2016, the Board may provide for a transition adjust-
ment to the formula in order to take into account current 
expenditures by the State (and local governments thereof) 
for health services covered under the State health security 
program. The weighted-average Federal contribution per-
centage for all States shall equal 86 percent and in no 
event shall such percentage be less than 81 percent nor 
more than 91 percent. 
(c) USE OF PAYMENTS.—All payments made under 
this section may only be used to carry out the State health 
security program. 
(d) EFFECT OF SPENDING EXCESS OR SURPLUS.— 
(1) SPENDING EXCESS.—If a State exceeds its 
budget in a given year, the State shall continue to 
fund covered health services from its own revenues. 
(2) SURPLUS.—If a State provides all covered 
health services for less than the budgeted amount 
for a year, it may retain its Federal payment for 
that year for uses consistent with this Act. 
SEC. 605. ACCOUNT FOR HEALTH PROFESSIONAL EDU-
CATION EXPENDITURES. 
(a) SEPARATE ACCOUNT.—Each State health secu-
rity program shall— 
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111 
(1) include a separate account for health pro-
fessional education expenditures; and 
(2) specify the general manner, consistent with 
subsection (b), in which such expenditures are to be 
distributed among different types of institutions and 
the different areas of the State. 
(b) DISTRIBUTION
RULES.—The distribution of 
funds to hospitals and other health care facilities from the 
account shall conform to the following principles: 
(1) The disbursement of funds shall be con-
sistent with achievement of the national and pro-
gram goals (specified in section 701(b)) within the 
State health security program and the distribution 
of funds from the account shall be conditioned upon 
the receipt of such reports as the Board may require 
in order to monitor compliance with such goals. 
(2) The distribution of funds from the account 
shall take into account the potentially higher costs 
of placing health professional students in clinical 
education programs in health professional shortage 
areas. 
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112 
Subtitle B—Payments by States to 
Providers 
SEC. 611. PAYMENTS TO HOSPITALS AND OTHER FACILITY- 
BASED SERVICES FOR OPERATING EXPENSES 
ON THE BASIS OF APPROVED GLOBAL BUDG-
ETS. 
(a) DIRECT PAYMENT UNDER GLOBAL BUDGET.— 
Payment for operating expenses for institutional and facil-
ity-based care, including hospital services and nursing fa-
cility services, under State health security programs shall 
be made directly to each institution or facility by each 
State health security program under an annual prospec-
tive global budget approved under the program. Such a 
budget shall include payment for outpatient care and non- 
facility-based care that is furnished by or through the fa-
cility. In the case of a hospital that is wholly owned (or 
controlled) by a comprehensive health service organization 
that is paid under section 614 on the basis of a global 
budget, the global budget of the organization shall include 
the budget for the hospital. 
(b) ANNUAL NEGOTIATIONS; BUDGET APPROVAL.— 
(1) IN GENERAL.—The prospective global budg-
et for an institution or facility shall— 
(A) be developed through annual negotia-
tions between— 
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113 
(i) a panel of individuals who are ap-
pointed by the Governor of the State and 
who represent consumers, labor, business, 
and the State government; and 
(ii) the institution or facility; and 
(B) be based on a nationally uniform sys-
tem of cost accounting established under stand-
ards of the Board. 
(2) CONSIDERATIONS.—In developing a budget 
through negotiations, there shall be taken into ac-
count at least the following: 
(A) With respect to inpatient hospital serv-
ices, the number, and classification by diag-
nosis-related group, of discharges. 
(B) An institution’s or facility’s past ex-
penditures. 
(C) The extent to which debt service for 
capital expenditures has been included in the 
proposed operating budget. 
(D) The extent to which capital expendi-
tures are financed directly or indirectly through 
reductions in direct care to patients, including 
reductions in registered nursing staffing pat-
terns or changes in emergency room or primary 
care services or availability. 
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114 
(E) Change in the consumer price index 
and other price indices. 
(F) The cost of reasonable compensation 
to health care practitioners. 
(G) The compensation level of the institu-
tion’s or facility’s work force. 
(H) The extent to which the institution or 
facility is providing health care services to meet 
the needs of residents in the area served by the 
institution or facility, including the institution’s 
or facility’s occupancy level. 
(I) The institution’s or facility’s previous 
financial and clinical performance, based on uti-
lization and outcomes data provided under this 
Act. 
(J) The type of institution or facility, in-
cluding whether the institution or facility is 
part of a clinical education program or serves 
a health professional education, research or 
other training purpose. 
(K) Technological advances or changes. 
(L) Costs of the institution or facility asso-
ciated with meeting Federal and State regula-
tions. 
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115 
(M) The costs associated with necessary 
public outreach activities. 
(N) In the case of a for-profit facility, a 
reasonable rate of return on equity capital, 
independent of those operating expenses nec-
essary to fulfill the objectives of this Act. 
(O) Incentives to facilities that maintain 
costs below previous reasonable budgeted levels 
without reducing the care provided. 
(P) With respect to facilities that provide 
mental health services and substance abuse 
treatment services, any additional costs involved 
in the treatment of dually diagnosed individ-
uals. 
The portion of such a budget that relates to expendi-
tures for health professional education shall be con-
sistent with the State health security budget for 
such expenditures. 
(3) PROVISION OF REQUIRED INFORMATION; DI-
AGNOSIS-RELATED GROUP.—No budget for an insti-
tution or facility for a year may be approved unless 
the institution or facility has submitted on a timely 
basis to the State health security program such in-
formation as the program or the Board shall specify, 
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including in the case of hospitals information on dis-
charges classified by diagnosis-related group. 
(c) ADJUSTMENTS IN APPROVED BUDGETS.— 
(1) ADJUSTMENTS TO GLOBAL BUDGETS THAT 
CONTRACT WITH COMPREHENSIVE HEALTH SERVICE 
ORGANIZATIONS.—Each State health security pro-
gram shall develop an administrative mechanism for 
reducing operating funds to institutions or facilities 
in proportion to payments made to such institutions 
or facilities for services contracted for by a com-
prehensive health service organization. 
(2) AMENDMENTS.—In accordance with stand-
ards established by the Board, an operating and 
capital budget approved under this section for a year 
may be amended before, during, or after the year if 
there is a substantial change in any of the factors 
relevant to budget approval. 
(d) DONATIONS PERMISSIBLE.—The State health se-
curity programs may permit institutions and facilities to 
raise funds from private sources to pay for newly con-
structed facilities, major renovations, and equipment. The 
expenditure of such funds, whether for operating or cap-
ital expenditures, does not obligate the State health secu-
rity program to provide for continued support for such ex-
penditures unless included in an approved global budget. 
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SEC. 612. PAYMENTS TO HEALTH CARE PRACTITIONERS 
BASED ON PROSPECTIVE FEE SCHEDULE. 
(a) FEE FOR SERVICE.— 
(1) IN
GENERAL.—Every independent health 
care practitioner is entitled to be paid, for the provi-
sion of covered health services under the State 
health security program, a fee for each billable cov-
ered service. 
(2) GLOBAL FEE PAYMENT METHODOLOGIES.— 
The Board shall establish models and encourage 
State health security programs to implement alter-
native payment methodologies that incorporate glob-
al fees for related services (such as all outpatient 
procedures for treatment of a condition) or for a 
basic group of services (such as primary care serv-
ices) furnished to an individual over a period of 
time, in order to encourage continuity and efficiency 
in the provision of services. Such methodologies shall 
be designed to ensure a high quality of care. 
(3) BILLING
DEADLINES; ELECTRONIC
BILL-
ING.—A State health security program may deny 
payment for any service of an independent health 
care practitioner for which it did not receive a bill 
and appropriate supporting documentation (which 
had been previously specified) within 30 days after 
the date the service was provided. Such a program 
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may require that bills for services for which payment 
may be made under this section, or for any class of 
such services, be submitted electronically. 
(b) PAYMENT RATES BASED ON NEGOTIATED PRO-
SPECTIVE FEE SCHEDULES.—With respect to any pay-
ment method for a class of services of practitioners, the 
State health security program shall establish, on a pro-
spective basis, a payment schedule. The State health secu-
rity program may establish such a schedule after negotia-
tions with organizations representing the practitioners in-
volved. Such fee schedules shall be designed to provide in-
centives for practitioners to choose primary care medicine, 
including general internal medicine, family medicine, geri-
atrics, gynecology, and pediatrics, over medical specializa-
tion. Nothing in this section shall be construed as pre-
venting a State from adjusting the payment schedule 
amounts on a quarterly or other periodic basis depending 
on whether expenditures under the schedule will exceed 
the budgeted amount with respect to such expenditures. 
(c) BILLABLE COVERED SERVICE DEFINED.—In this 
section, the term ‘‘billable covered service’’ means a service 
covered under section 201 for which a practitioner is enti-
tled to compensation by payment of a fee determined 
under this section. 
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SEC. 613. PAYMENTS TO COMPREHENSIVE HEALTH SERV-
ICE ORGANIZATIONS. 
(a) IN GENERAL.—Payment under a State health se-
curity program to a comprehensive health service organi-
zation to its enrollees shall be determined by the State— 
(1) based on a global budget described in sec-
tion 611; or 
(2) based on the basic capitation amount de-
scribed in subsection (b) for each of its enrollees. 
(b) BASIC CAPITATION AMOUNT.— 
(1) IN GENERAL.—The basic capitation amount 
described in this subsection for an enrollee shall be 
determined by the State health security program on 
the basis of the average amount of expenditures that 
is estimated would be made under the State health 
security program for covered health care services for 
an enrollee, based on actuarial characteristics (as de-
fined by the State health security program). 
(2) 
ADJUSTMENT
FOR
SPECIAL
HEALTH 
NEEDS.—The State health security program shall 
adjust such average amounts to take into account 
the special health needs, including a disproportionate 
number of medically underserved individuals, of pop-
ulations served by the organization. 
(3) ADJUSTMENT
FOR
SERVICES
NOT
PRO-
VIDED.—The State health security program shall ad-
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just such average amounts to take into account the 
cost of covered health care services that are not pro-
vided by the comprehensive health service organiza-
tion under section 303(a). 
SEC. 614. PAYMENTS FOR COMMUNITY-BASED PRIMARY 
HEALTH SERVICES. 
(a) IN GENERAL.—In the case of community-based 
primary health services, subject to subsection (b), pay-
ments under a State health security program shall— 
(1) be based on a global budget described in 
section 611; 
(2) be based on the basic primary care capita-
tion amount described in subsection (c) for each in-
dividual enrolled with the provider of such services; 
or 
(3) be made on a fee-for-service basis under 
section 612. 
(b) PAYMENT ADJUSTMENT.—Payments under sub-
section (a) may include, consistent with the budgets devel-
oped under this title— 
(1) an additional amount, as set by the State 
health security program, to cover the costs incurred 
by a provider which serves persons not covered by 
this Act whose health care is essential to overall 
community health and the control of communicable 
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121 
disease, and for whom the cost of such care is other-
wise uncompensated; 
(2) an additional amount, as set by the State 
health security program, to cover the reasonable 
costs incurred by a provider that furnishes case 
management 
services 
(as 
defined 
in 
section 
1915(g)(2) of the Social Security Act), transpor-
tation services, and translation services; and 
(3) an additional amount, as set by the State 
health security program, to cover the costs incurred 
by a provider in conducting health professional edu-
cation programs in connection with the provision of 
such services. 
(c) BASIC PRIMARY CARE CAPITATION AMOUNT.— 
(1) IN GENERAL.—The basic primary care capi-
tation amount described in this subsection for an en-
rollee with a provider of community-based primary 
health services shall be determined by the State 
health security program on the basis of the average 
amount of expenditures that is estimated would be 
made under the State health security program for 
such an enrollee, based on actuarial characteristics 
(as defined by the State health security program). 
(2) 
ADJUSTMENT
FOR
SPECIAL
HEALTH 
NEEDS.—The State health security program shall 
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adjust such average amounts to take into account 
the special health needs, including a disproportionate 
number of medically underserved individuals, of pop-
ulations served by the provider. 
(3) ADJUSTMENT
FOR
SERVICES
NOT
PRO-
VIDED.—The State health security program shall ad-
just such average amounts to take into account the 
cost of community-based primary health services 
that are not provided by the provider. 
(d) COMMUNITY-BASED PRIMARY HEALTH SERVICES 
DEFINED.—In this section, the term ‘‘community-based 
primary health services’’ has the meaning given such term 
in section 202(a). 
SEC. 615. PAYMENTS FOR PRESCRIPTION DRUGS. 
(a) ESTABLISHMENT OF LIST.— 
(1) IN GENERAL.—The Board shall establish a 
list of approved prescription drugs and biologicals 
that the Board determines are necessary for the 
maintenance or restoration of health or of employ-
ability or self-management and eligible for coverage 
under this Act. 
(2) EXCLUSIONS.—The Board may exclude re-
imbursement under this Act for ineffective, unsafe, 
or over-priced products where better alternatives are 
determined to be available. 
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(b) PRICES.—For each such listed prescription drug 
or biological covered under this Act, for insulin, and for 
medical foods, the Board shall from time to time deter-
mine a product price or prices which shall constitute the 
maximum to be recognized under this Act as the cost of 
a drug to a provider thereof. The Board may conduct ne-
gotiations, on behalf of State health security programs, 
with product manufacturers and distributors in deter-
mining the applicable product price or prices. 
(c) CHARGES
BY INDEPENDENT PHARMACIES.— 
Each State health security program shall provide for pay-
ment for a prescription drug or biological or insulin fur-
nished by an independent pharmacy based on the drug’s 
cost to the pharmacy (not in excess of the applicable prod-
uct price established under subsection (b)) plus a dis-
pensing fee. In accordance with standards established by 
the Board, each State health security program, after con-
sultation with representatives of the pharmaceutical pro-
fession, shall establish schedules of dispensing fees, de-
signed to afford reasonable compensation to independent 
pharmacies after taking into account variations in their 
cost of operation resulting from regional differences, dif-
ferences in the volume of prescription drugs dispensed, dif-
ferences in services provided, the need to maintain expend-
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124 
itures within the budgets established under this title, and 
other relevant factors. 
SEC. 616. PAYMENTS FOR APPROVED DEVICES AND EQUIP-
MENT. 
(a) ESTABLISHMENT OF LIST.—The Board shall es-
tablish a list of approved durable medical equipment and 
therapeutic devices and equipment (including eyeglasses, 
hearing aids, and prosthetic appliances), that the Board 
determines are necessary for the maintenance or restora-
tion of health or of employability or self-management and 
eligible for coverage under this Act. 
(b) CONSIDERATIONS AND CONDITIONS.—In estab-
lishing the list under subsection (a), the Board shall take 
into consideration the efficacy, safety, and cost of each 
item contained on such list, and shall attach to any item 
such conditions as the Board determines appropriate with 
respect to the circumstances under which, or the frequency 
with which, the item may be prescribed. 
(c) PRICES.—For each such listed item covered under 
this Act, the Board shall from time to time determine a 
product price or prices which shall constitute the max-
imum to be recognized under this Act as the cost of the 
item to a provider thereof. The Board may conduct nego-
tiations, on behalf of State health security programs, with 
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equipment and device manufacturers and distributors in 
determining the applicable product price or prices. 
(d) EXCLUSIONS.—The Board may exclude from cov-
erage under this Act ineffective, unsafe, or overpriced 
products where better alternatives are determined to be 
available. 
SEC. 617. PAYMENTS FOR OTHER ITEMS AND SERVICES. 
In the case of payment for other covered health serv-
ices, the amount of payment under a State health security 
program shall be established by the program— 
(1) in accordance with payment methodologies 
which are specified by the Board, after consultation 
with the American Health Security Advisory Coun-
cil, or methodologies established by the State under 
section 619; and 
(2) consistent with the State health security 
budget. 
SEC. 618. PAYMENT INCENTIVES FOR MEDICALLY UNDER-
SERVED AREAS. 
(a) MODEL PAYMENT METHODOLOGIES.—In addi-
tion to the payment amounts otherwise provided in this 
title, the Board shall establish model payment methodolo-
gies and other incentives that promote the provision of 
covered health care services in medically underserved 
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areas, particularly in rural and inner-city underserved 
areas. 
(b) CONSTRUCTION.—Nothing in this title shall be 
construed as limiting the authority of State health security 
programs to increase payment amounts or otherwise pro-
vide additional incentives, consistent with the State health 
security budget, to encourage the provision of medically 
necessary and appropriate services in underserved areas. 
SEC. 619. AUTHORITY FOR ALTERNATIVE PAYMENT METH-
ODOLOGIES. 
A State health security program, as part of its plan 
under section 404(a), may use a payment methodology 
other than a methodology required under this subtitle so 
long as— 
(1) such payment methodology does not affect 
the entitlement of individuals to coverage, the 
weighting of fee schedules to encourage an increase 
in the number of primary care providers, the ability 
of individuals to choose among qualified providers, 
the benefits covered under the program, or the com-
pliance of the program with the State health security 
budget under subtitle A; and 
(2) the program submits periodic reports to the 
Board showing the operation and effectiveness of the 
alternative methodology, in order for the Board to 
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127 
evaluate the appropriateness of applying the alter-
native methodology to other States. 
Subtitle C—Mandatory Assignment 
and Administrative Provisions 
SEC. 631. MANDATORY ASSIGNMENT. 
(a) NO BALANCE BILLING.—Payments for benefits 
under this Act shall constitute payment in full for such 
benefits and the entity furnishing an item or service for 
which payment is made under this Act shall accept such 
payment as payment in full for the item or service and 
may not accept any payment or impose any charge for 
any such item or service other than accepting payment 
from the State health security program in accordance with 
this Act. 
(b) ENFORCEMENT.—If an entity knowingly and will-
fully bills for an item or service or accepts payment in 
violation of subsection (a), the Board may apply sanctions 
against the entity in the same manner as sanctions could 
have been imposed under section 1842(j)(2) of the Social 
Security Act for a violation of section 1842(j)(1) of such 
Act. Such sanctions are in addition to any sanctions that 
a State may impose under its State health security pro-
gram. 
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128 
SEC. 632. PROCEDURES FOR REIMBURSEMENT; APPEALS. 
(a) PROCEDURES FOR REIMBURSEMENT.—In accord-
ance with standards issued by the Board, a State health 
security program shall establish a timely and administra-
tively simple procedure to ensure payment within 60 days 
of the date of submission of clean claims by providers 
under this Act. 
(b) APPEALS PROCESS.—Each State health security 
program shall establish an appeals process to handle all 
grievances pertaining to payment to providers under this 
title. 
TITLE VII—PROMOTION OF PRI-
MARY HEALTH CARE; DEVEL-
OPMENT OF HEALTH SERV-
ICE CAPACITY; PROGRAMS TO 
ASSIST THE MEDICALLY UN-
DERSERVED 
Subtitle A—Promotion and Expan-
sion of Primary Care Profes-
sional Training 
SEC. 701. ROLE OF BOARD; ESTABLISHMENT OF PRIMARY 
CARE PROFESSIONAL OUTPUT GOALS. 
(a) IN GENERAL.—The Board is responsible for— 
(1) coordinating health professional education 
policies and goals, in consultation with the Secretary 
of Health and Human Services (in this title referred 
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129 
to as the ‘‘Secretary’’), to achieve the national goals 
specified in subsection (b); 
(2) overseeing the health professional education 
expenditures of the State health security programs 
from the account established under section 602(c); 
(3) developing and maintaining, in cooperation 
with the Secretary, a system to monitor the number 
and specialties of individuals through their health 
professional education, any postgraduate training, 
and professional practice; and 
(4) developing, coordinating, and promoting 
other policies that expand the number of primary 
care practitioners. 
(b) NATIONAL GOALS.—The national goals specified 
in this subsection are as follows: 
(1) GRADUATE MEDICAL EDUCATION.—By not 
later than 5 years after the date of the enactment 
of this Act, at least 50 percent of the residents in 
medical residency education programs (as defined in 
subsection (e)(1)) are primary care residents (as de-
fined in subsection (e)(3)). 
(2) 
MIDLEVEL
PRIMARY
CARE
PRACTI-
TIONERS.—To ensure an adequate supply of primary 
care practitioners, there shall be a number, specified 
by the Board, of midlevel primary care practitioners 
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(as defined in subsection (e)(2)) employed in the 
health care system as of January 1, 2019. 
(3) DENTISTRY.—To ensure an adequate sup-
ply of dental care practitioners, there shall be a 
number, specified by the Board, of dentists (as de-
fined in subsection (e)(1)) employed in the health 
care system as of January 1, 2019. 
(c) METHOD FOR ATTAINMENT OF NATIONAL GOAL 
FOR
GRADUATE
MEDICAL
EDUCATION; 
PROGRAM 
GOALS.— 
(1) IN GENERAL.—The Board shall establish a 
method of applying the national goal in subsection 
(b)(1) to program goals for each medical residency 
education program or to medical residency education 
consortia. 
(2) 
CONSIDERATION.—The 
program 
goals 
under paragraph (1) shall be based on the distribu-
tion of medical schools and other teaching facilities 
within each State health security program, and the 
number of positions for graduate medical education. 
(3) MEDICAL RESIDENCY EDUCATION CONSOR-
TIUM.—In this subsection, the term ‘‘medical resi-
dency education consortium’’ means a consortium of 
medical residency education programs in a contig-
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uous geographic area (which may be an interstate 
area) if the consortium— 
(A) includes at least 1 medical school with 
a teaching hospital and related teaching set-
tings; and 
(B) has an affiliation with qualified com-
munity-based primary health service providers 
described in section 202(a) and with at least 1 
comprehensive health service organization es-
tablished under section 303. 
(4) ENFORCEMENT THROUGH STATE HEALTH 
SECURITY
BUDGETS.—The Board shall develop a 
formula for reducing payments to State health secu-
rity programs (that provide for payments to a med-
ical residency education program) that failed to meet 
the goal for the program established under this sub-
section. 
(d) METHOD FOR ATTAINMENT OF NATIONAL GOAL 
FOR MIDLEVEL PRIMARY CARE PRACTITIONERS.—To as-
sist in attaining the national goal identified in subsection 
(b)(2), the Board shall— 
(1) advise the Public Health Service on alloca-
tions of funding under titles VII and VIII of the 
Public Health Service Act, the National Health 
Service Corps, and other programs in order to in-
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