I 
112TH CONGRESS 
1ST SESSION H. R. 2013 
To empower States with programmatic flexibility and financial predictability 
to improve their Medicaid programs and State Children’s Health Insur-
ance Programs by ensuring better health care for low-income pregnant 
women, children, and families, and for elderly individuals and disabled 
individuals in need of long-term care services and supports, whose income 
and resources are insufficient to meet the costs of necessary medical 
services. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 26, 2011 
Mr. NUNES introduced the following bill; which was referred to the Committee 
on Energy and Commerce, and in addition to the Committees on Ways 
and Means, Education and the Workforce, House Administration, Nat-
ural Resources, the Judiciary, Rules, and Appropriations, for a period to 
be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee 
concerned 
A BILL 
To empower States with programmatic flexibility and finan-
cial predictability to improve their Medicaid programs 
and State Children’s Health Insurance Programs by en-
suring better health care for low-income pregnant 
women, children, and families, and for elderly individuals 
and disabled individuals in need of long-term care serv-
ices and supports, whose income and resources are insuf-
ficient to meet the costs of necessary medical services. 
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Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Medicaid Improvement and State Empowerment Act’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
Sec. 1. Short title. 
Sec. 2. Sustainable Medicaid and CHIP programs that meet the needs of each 
State. 
‘‘PART
B—TAXPAYER-PROVIDED
PASS-THROUGH
FUNDING
OF
HEALTH 
CARE GRANTS
TO STATES
FOR PREGNANT WOMEN, LOW-INCOME CHIL-
DREN, AND LOW-INCOME FAMILIES AND FOR LONG-TERM CARE SERVICES 
AND SUPPORTS FOR LOW-INCOME ELDERLY OR DISABLED INDIVIDUALS 
‘‘Sec. 1950. Purposes; application. 
‘‘Sec. 1951. State plans. 
‘‘Sec. 1952. Grants to States. 
‘‘Sec. 1953. Use of grants. 
‘‘Sec. 1954. Administrative provisions. 
‘‘Sec. 1955. Penalties. 
‘‘Sec. 1956. Appeal of adverse decision. 
‘‘Sec. 1957. Annual Reports. 
‘‘Sec. 1958. Definitions. 
Sec. 3. Medical malpractice reform State incentive fund. 
Sec. 4. Repeals. 
Sec. 5. Development of new formula for Federal financial participation for 
State child support and welfare programs to replace the 
FMAP. 
SEC. 2. SUSTAINABLE MEDICAID AND CHIP PROGRAMS 
THAT MEET THE NEEDS OF EACH STATE. 
(a) IN GENERAL.—Title XIX of the Social Security 
Act (42 U.S.C. 1396 et seq.) is amended— 
(1) by inserting after section 1900, the fol-
lowing: 
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‘‘PART A—FMAP-BASED ACUTE CARE STATE HEALTH 
PROGRAMS FOR THE ELDERLY AND DISABLED’’; 
and 
(2) by adding at the end the following: 
‘‘PART B—TAXPAYER-PROVIDED PASS-THROUGH FUND-
ING OF HEALTH CARE GRANTS TO STATES FOR 
PREGNANT WOMEN, LOW-INCOME CHILDREN, AND 
LOW-INCOME FAMILIES AND FOR LONG-TERM CARE 
SERVICES
AND SUPPORTS
FOR LOW-INCOME EL-
DERLY OR DISABLED INDIVIDUALS 
‘‘PURPOSES; APPLICATION 
‘‘SEC. 1950. (a) IN GENERAL.—The purposes of this 
part are to empower States with programmatic flexibility 
and financial predictability in designing and operating 
State programs to— 
‘‘(1) provide medical assistance for pregnant 
women, low-income children, and low-income families 
with children whose income and resources are insuf-
ficient to meet the costs of necessary medical serv-
ices and rehabilitation and other services to help 
such women, children, and families attain or retain 
capability for independence or self-care; and 
‘‘(2) provide long-term care services and sup-
ports for low-income elderly or disabled individuals 
whose income and resources are insufficient to meet 
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the costs of such services and supports and rehabili-
tation and other services to help such individuals at-
tain or retain capability for independence or self- 
care. 
‘‘(b) APPLICATION.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2) and section 1951(a)(1)(B)(iv), with re-
spect to a State, on and after January 1, 2013: 
‘‘(A) Medical assistance for pregnant 
women, low-income children, or low-income fam-
ilies with children shall be provided only in ac-
cordance with the provisions of this part and 
the provisions of title XI applicable to the provi-
sion of such assistance. 
‘‘(B) Long-term care services and supports 
for low-income elderly or disabled individuals 
(including dual eligible individuals) shall only be 
provided in accordance with the provisions of 
this part and the provisions of title XI applica-
ble to the provision of such services and sup-
ports. 
‘‘(C) The provisions of part A of this title 
shall no longer apply to a State program estab-
lished under this title to provide medical assist-
ance for pregnant women, low-income children, 
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or low-income families with children or to pro-
vide long-term care services and supports to 
low-income elderly or disabled individuals and 
the provisions of any drug rebate agreement 
that is in effect under section 1927 on that 
date that relate to the provision of medical as-
sistance for covered outpatient drugs for such 
women, children, or families or to the provision 
of long-term care services and supports for low- 
income elderly or disabled individuals are termi-
nated as of such effective date. 
‘‘(D) A targeted low-income child or a par-
ent of such a child who would be eligible for 
child health assistance or health benefits cov-
erage under a State child health plan under 
title XXI on June 30, 2012, shall no longer re-
ceive such assistance or benefits under title 
XXI and shall be eligible for medical assistance 
under a State program funded under this part 
only to the extent the child or parent satisfies 
the eligibility criteria established by the State in 
its State plan under section 1951. Federal 
funds appropriated for making payments under 
title XXI or for administering title XXI that 
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are unobligated on January 1, 2013, are re-
scinded on that date. 
‘‘(E) No payment shall be made under sec-
tion 1903(a) to a State with respect to any dis-
proportionate share payment adjustment made 
under section 1923 on or after January 1, 
2013. 
‘‘(F) In the case of a State conducting a 
waiver under section 1115 or other authority to 
provide medical assistance for pregnant women, 
low-income children, or low-income families with 
children under a State program established 
under this title or to provide long-term care 
services and supports for low-income elderly or 
disabled individuals that is in effect on such 
date, the State may elect to terminate the waiv-
er as of January 1, 2013, or may submit a re-
quest to continue to provide medical assistance 
or long-term care services and supports for 
such individuals in accordance with the terms of 
the waiver. The Secretary shall approve a re-
quest of a State with such a waiver to extend 
the waiver for additional periods so long as the 
total amount of Federal funds paid to the State 
to conduct the waiver does not exceed the 
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amount of Federal funds that would be paid to 
the State under this part if the waiver were not 
conducted and medical assistance or long-term 
care services and supports are provided under 
the waiver consistent with the requirements of 
this part. 
‘‘(2) HOLD HARMLESS PROVISIONS.— 
‘‘(A) ACUTE CARE FOR LOW-INCOME EL-
DERLY AND DISABLED.— 
‘‘(i) IN GENERAL.—The provisions of 
part A shall apply to State expenditures 
attributable to the provision of medical as-
sistance for acute care for low-income el-
derly or disabled individuals (including 
dual eligible individuals) on and after Jan-
uary 1, 2013. 
‘‘(ii) 
RULE
OF
CONSTRUCTION.— 
Clause (i) shall not be construed as affect-
ing— 
‘‘(I) the termination under para-
graph (1)(E) of payments under sec-
tion 
1903(a) 
for 
disproportionate 
share hospital adjustment payments 
under section 1923; or 
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‘‘(II) State flexibility to provide 
dual eligible individuals with medical 
assistance for acute care through en-
rollment in a managed care entity 
under the amendment made by section 
2(b) of the Medicaid Improvement 
and State Empowerment Act. 
‘‘(B) 
COMMONWEALTHS
AND
TERRI-
TORIES.—This part shall not apply to the Com-
monwealth of Puerto Rico, the United States 
Virgin Islands, Guam, the Commonwealth of 
the Northen Mariana Islands, and American 
Samoa. Any program to provide medical assist-
ance established under this title by any such 
commonwealth or territory shall be operated in 
accordance with the provisions of part A of this 
title and subsections (f) and (g) of section 
1108. 
‘‘(C) VACCINES
FOR
CHILDREN
PRO-
GRAM.—The program for the distribution of pe-
diatric vaccines established under section 1928 
shall continue to be operated in accordance with 
the provisions of that section. 
‘‘(c) BUDGET AUTHORITY.—This part constitutes 
budget authority in advance of appropriations Acts and 
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represents the obligation of the Federal Government to 
provide for the payment to States of amounts provided 
under section 1952. 
‘‘(d) NONENTITLEMENT.—This part shall not be in-
terpreted to entitle any individual or family to medical as-
sistance under any State program funded under this part 
or to entitle any provider or entity to payment for the pro-
vision of items or services under any State program fund-
ed under this part. 
‘‘STATE PLANS 
‘‘SEC. 1951. (a) IN GENERAL.—In order to receive 
a grant under section 1952 for a year and for the purpose 
of ensuring transparency with respect to the expenditure 
of Federal revenues, a State shall submit to the Secretary 
a plan that includes the following: 
‘‘(1) OUTLINE OF MEDICAL ASSISTANCE PRO-
GRAM.— 
‘‘(A) GENERAL
PROVISIONS.—A written 
document that outlines how the State intends to 
conduct a program, designed to serve all polit-
ical subdivisions in the State (not necessarily in 
a uniform manner), that provides— 
‘‘(i) medical assistance to pregnant 
women, low-income children, and low-in-
come families with children whose income 
and resources are insufficient to meet the 
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costs of necessary medical services, and re-
habilitation and other services to help such 
women, children, and families attain or re-
tain capability for independence or self- 
care; and 
‘‘(ii) long-term care services and sup-
ports for low-income elderly or disabled in-
dividuals whose income and resources are 
insufficient to meet the costs of such serv-
ices and supports and rehabilitation and 
other services to help such individuals at-
tain or retain capability for independence 
or self-care. 
‘‘(B) SPECIAL PROVISIONS.— 
‘‘(i) The document shall set forth ob-
jective criteria for— 
‘‘(I) the determination of eligi-
bility for medical assistance and for 
long-term care services and supports 
(which may be based on standards re-
lating to income, family composition, 
patient population, health status, or 
age); and 
‘‘(II) fair and equitable treat-
ment of recipients and providers, in-
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cluding an explanation of how the 
State will provide opportunities for re-
cipients and providers who have been 
adversely affected to be heard in a 
State administrative or appeal proc-
ess. 
‘‘(ii) The document shall include a de-
scription of— 
‘‘(I) the benefits to be provided, 
which, in the case of medical assist-
ance, shall at a minimum be of the 
types listed in paragraph (1) of sec-
tion 8904(a) of title 5, United States 
Code; and 
‘‘(II) the amount (if any) of pre-
miums, deductibles, coinsurance, or 
other cost sharing imposed. 
‘‘(iii) The document shall include a 
description of how medical assistance and 
long-term care services and supports will 
be provided under the State plan, such as 
through contracts with health maintenance 
organizations, managed care organizations, 
or regional preferred provider organization 
care networks, the establishment of cash- 
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for-counseling programs, family health care 
scholarships, or health savings accounts, 
the provision of consumer-driven health 
vouchers, or any other health coverage ben-
efit delivery design determined by the 
State as appropriate for achieving the pur-
pose of this part. 
‘‘(iv) The document shall indicate how 
the State shall satisfy the requirements of 
sections 
1902(a)(46) 
(relating 
to 
verification of declarations of citizenship, 
nationality, or satisfactory immigration 
status). 
‘‘(2) CERTIFICATION OF THE ADMINISTRATION 
OF THE PROGRAM.—A certification by the Governor 
of the State specifying which State agency or agen-
cies will administer and supervise the State plan 
under this part, which shall include assurances that 
local governments and private sector organizations— 
‘‘(A) have been consulted regarding the 
plan and design of the provision of medical as-
sistance and long-term care services and sup-
ports in the State so that such assistance and 
services and supports are provided in a manner 
appropriate to local populations; and 
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‘‘(B) have had at least 45 days to submit 
comments on such plan and design. 
‘‘(3) CERTIFICATION
THAT
THE
STATE
WILL 
PROVIDE
MEDICAL
ASSISTANCE
TO
CHILDREN
IN 
FOSTER
CARE
AND
ADOPTION
ASSISTANCE
PRO-
GRAM.—A certification by the Governor of the State 
that the State will take such actions as are nec-
essary to ensure that children receiving assistance 
under part E of title IV are eligible for medical as-
sistance under the State plan under this part. 
‘‘(4) CERTIFICATION
THAT
THE
STATE
WILL 
PROVIDE INDIANS WITH EQUITABLE ACCESS TO AS-
SISTANCE.—A certification by the Governor of the 
State that the State will provide each member of an 
Indian tribe who is domiciled in the State with equi-
table access to medical assistance and to long-term 
care services and supports under the State plan 
under this part. 
‘‘(5) CERTIFICATION OF STANDARDS AND PRO-
CEDURES
TO
ENSURE
AGAINST
PROGRAM
FRAUD, 
WASTE, AND ABUSE.—A certification by the Gov-
ernor of the State that the State has established and 
is enforcing standards and procedures to ensure 
against program fraud, waste, and abuse, including 
standards and procedures concerning nepotism, con-
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flicts of interest among individuals responsible for 
the administration and supervision of the State pro-
gram, kickbacks, and the use of political patronage. 
‘‘(b) PLAN AMENDMENTS.—Within 30 days after a 
State amends a plan submitted pursuant to subsection (a), 
the State shall notify the Secretary of the amendment. 
‘‘(c) PUBLIC AVAILABILITY OF STATE PLAN SUM-
MARY.—The State shall make a summary of any plan or 
plan amendment submitted by the State under this section 
publicly available on a website and through such other 
means as the State determines appropriate. 
‘‘(d) LIMITATION ON SECRETARIAL AUTHORITY.— 
The Secretary may only review a State plan or plan 
amendment submitted under this section for the purpose 
of confirming that a State has submitted the required doc-
umentation. The Secretary shall not have any authority 
to approve or deny a State plan or plan amendment sub-
mitted under this section or to otherwise inhibit or control 
the expenditure of grants paid to a State under section 
1952. 
‘‘GRANTS TO STATES 
‘‘SEC. 1952. (a) ESTABLISHMENT OF SUSTAINABLE 
MEDICAID FUNDING FOR STATES.— 
‘‘(1) IN
GENERAL.—Beginning January 1, 
2013, and annually thereafter, each State that has 
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submitted a plan under section 1951 shall be enti-
tled to receive from the Secretary for each 12-month 
period, a grant in an amount equal to the State 
health grant determined for the State for the period 
under subsection (b). 
‘‘(2) TERMINATION
OF
OLD
MEDICAID
AND 
CHIP FUNDING.—No payment shall be made by the 
Secretary to any State under part A of this title or 
under title XXI for State expenditures attributable 
to providing on or after January 1, 2013— 
‘‘(A) medical assistance (as defined in sec-
tion 1905(a)), child health assistance (as de-
fined in section 2110(a)), or health benefits 
coverage for pregnant women, low-income chil-
dren, or low-income families with children; or 
‘‘(B) long-term care services and supports 
for elderly or disabled individuals. 
‘‘(b) TAXPAYER-PROVIDED PASS-THROUGH FUND-
ING OF HEALTH GRANTS TO STATES.— 
‘‘(1) APPROPRIATION.—For the purpose of 
making health grants to States under this part, 
there is appropriated, out of any money in the 
Treasury not otherwise appropriated— 
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‘‘(A) for the 12-month period beginning 
January 1, 2013, an amount equal to the prod-
uct of— 
‘‘(i) the base appropriation amount 
determined under paragraph (3); and 
‘‘(ii) the appropriation increase factor 
determined under paragraph (4) for the 
period; and 
‘‘(B) for each 12-month period thereafter, 
an amount equal to the amount appropriated 
under this paragraph for the preceding 12- 
month period, increased by the appropriation 
increase factor determined under paragraph (4) 
for the period. 
‘‘(2) AMOUNT OF GRANTS.— 
‘‘(A) BASED ON POVERTY POPULATION.— 
For each 12-month period beginning on and 
after January 1, 2013, the Secretary shall pay 
each State an amount equal to the product of— 
‘‘(i) the amount appropriated under 
paragraph (1) for the period; and 
‘‘(ii) the ratio of the number of indi-
viduals residing in the State whose income 
does not exceed 100 percent of the poverty 
line applicable to a family of the size in-
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volved to the number of such individuals in 
all States that have submitted a plan 
under section 1951 for the period (based 
on data for the most recent 12-month pe-
riod for which data is available). 
‘‘(B) PRO RATA ADJUSTMENTS.—The Sec-
retary shall make pro rata increases or reduc-
tions in the amounts determined for States 
under subparagraph (A) for a period as nec-
essary to ensure that the total amount appro-
priated for the period is allotted among all 
States and that the total amount of all health 
grants for States determined for a period does 
not exceed the amount appropriated for the pe-
riod. 
‘‘(3) BASE APPROPRIATION AMOUNT.—The base 
appropriation amount determined under this para-
graph is the product of— 
‘‘(A) $165,000,000,000; 
‘‘(B) the appropriation increase factor de-
termined under paragraph (4) with respect to 
the 12-month period beginning on January 1, 
2011; and 
‘‘(C) the appropriation increase factor de-
termined under paragraph (4) with respect to 
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the 12-month period beginning on January 1, 
2012. 
‘‘(4) APPROPRIATION INCREASE FACTOR.—The 
appropriation increase factor determined under this 
paragraph for a 12-month period is equal to the sum 
of 1 plus the sum of following: 
‘‘(A) CPI-U GROWTH FACTOR.—The per-
centage increase, if any, in the consumer price 
index for all urban consumers (all items; United 
States city average) published by the Bureau of 
Labor Statistics, or the successor index thereto, 
for the fiscal year ending on September 30 of 
the preceding 12-month period. 
‘‘(B) POPULATION GROWTH FACTOR.—The 
percentage increase (if any) in the population of 
the United States for the fiscal year ending on 
September 30 of the preceding 12-month pe-
riod, as determined by the Secretary based on 
the most recent published estimates of the Bu-
reau of the Census. 
‘‘(c) AVAILABILITY.—A health grant paid to a State 
under this section for a period shall remain available until 
expended. 
‘‘(d) REPORTS TO CONGRESS.—Not later than Janu-
ary 1 of 2018, and of every 5 years thereafter, the Comp-
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troller General of the United States shall submit a report 
to Congress that includes an analysis of changes among 
the States in the population of individuals described in 
each clause of subsection (b)(2)(A) and such recommenda-
tions for legislative changes to the health grant distribu-
tion formula applied under subsection (b)(2) as the Comp-
troller General determines appropriate to achieve the pur-
pose of this part and ensure a fair distribution of the Fed-
eral funds appropriated to carry out this part among the 
States. 
‘‘USE OF GRANTS 
‘‘SEC. 1953. (a) GENERAL RULE.—A State to which 
a grant is made under section 1952 may use the grant 
in any manner that is reasonably demonstrated to accom-
plish the purpose of this part. 
‘‘(b) LIMITATION ON USE OF GRANT FOR ADMINIS-
TRATIVE PURPOSES.— 
‘‘(1) LIMITATION.—A State to which a grant is 
made under section 1952 shall not expend more 
than 5 percent of the grant for administrative pur-
poses. 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to the use of a grant for expenditures related 
to preventing or eliminating waste, fraud, or abuse, 
and expenditures for information technology and 
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computerization needed for tracking or monitoring 
required by or under this part. 
‘‘ADMINISTRATIVE PROVISIONS 
‘‘SEC. 1954. (a) PAYMENTS TO STATES.— 
‘‘(1) QUARTERLY
PAYMENTS.—The Secretary 
shall pay each health grant payable to a State under 
section 1952 in quarterly installments, subject to 
this section. 
‘‘(2) COMPUTATION
AND
CERTIFICATION
OF 
PAYMENTS TO STATES.— 
‘‘(A) COMPUTATION.—The Secretary shall 
estimate the amount to be paid to each State 
for each quarter under this part, with such esti-
mate to be based on a report filed by the State 
containing an estimate by the State of the total 
sum to be expended by the State in the quarter 
under the State program funded under this 
part and such other information as the Sec-
retary may find necessary. 
‘‘(B) CERTIFICATION.—The Secretary of 
Health and Human Services shall certify to the 
Secretary of the Treasury the amount estimated 
under subparagraph (A) with respect to a 
State, reduced or increased to the extent of any 
overpayment or underpayment which the Sec-
retary of Health and Human Services deter-
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mines was made under this part to the State 
for any prior quarter and with respect to which 
adjustment has not been made under this para-
graph. 
‘‘(3) PAYMENT
METHOD.—Upon receipt of a 
certification under paragraph (2)(B) with respect to 
a State, the Secretary of the Treasury shall, through 
the Fiscal Service of the Department of the Treas-
ury and before audit or settlement by the General 
Accounting Office, pay to the State, at the time or 
times fixed by the Secretary of Health and Human 
Services, the amount so certified. 
‘‘(b) NO WAIVER AUTHORITY.—Except as provided 
in section 1950(b)(1)(F), the Secretary may not waive any 
provision of this part under section 1115 or any other au-
thority. 
‘‘(c) LIMITATION ON FEDERAL AUTHORITY.—No of-
ficer or employee of the Federal Government may regulate 
the conduct of States under this part or enforce any provi-
sion of this part, except to the extent expressly provided 
in this part. 
‘‘PENALTIES 
‘‘SEC. 1955. (a) IN GENERAL.—Subject to this sec-
tion: 
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‘‘(1) USE OF GRANT IN VIOLATION OF THIS 
PART.— 
‘‘(A) GENERAL
PENALTY.—If an audit 
conducted under chapter 75 of title 31, United 
States Code, finds that an amount paid to a 
State under section 1952 for a period has been 
used in violation of this part, the Secretary 
shall reduce the grant payable to the State 
under that section for the immediately suc-
ceeding period by the amount so used. 
‘‘(B) ENHANCED
PENALTY
FOR
INTEN-
TIONAL
VIOLATIONS.—If the State does not 
prove to the satisfaction of the Secretary that 
the State did not intend to use the amount in 
violation of this part, the Secretary shall fur-
ther reduce the grant payable to the State 
under section 1952 for the immediately suc-
ceeding period by an amount equal to 5 percent 
of the State health grant determined for that 
period. 
‘‘(2) FAILURE
TO
SUBMIT
REQUIRED
RE-
PORT.—If the Secretary determines that a State has 
not, within 45 days after the end of a period for 
which a grant is made under section 1952, sub-
mitted the report required by section 1957 for the 
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period, the Secretary shall reduce the grant payable 
to the State under section 1952 for the immediately 
succeeding period by an amount equal to 5 percent 
of the State health grant determined for that period. 
‘‘(b) REASONABLE CAUSE EXCEPTION.—The Sec-
retary may not impose a penalty on a State under sub-
section (a) with respect to a requirement if the Secretary 
determines that the State has reasonable cause for failing 
to comply with the requirement. 
‘‘(c) CORRECTIVE COMPLIANCE PLAN.— 
‘‘(1) IN GENERAL.— 
‘‘(A) NOTIFICATION
OF
VIOLATION.—Be-
fore imposing a penalty against a State under 
subsection (a) with respect to a violation of this 
part, the Secretary shall notify the State of the 
violation and allow the State the opportunity to 
enter into a corrective compliance plan in ac-
cordance with this subsection which outlines 
how the State will correct or discontinue, as ap-
propriate, the violation and how the State will 
insure continuing compliance with this part. 
‘‘(B) 60-DAY PERIOD TO PROPOSE A COR-
RECTIVE COMPLIANCE PLAN.—During the 60- 
day period that begins on the date the State re-
ceives a notice provided under subparagraph 
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‘‘(3) EFFECT OF FAILING TO CORRECT OR DIS-
CONTINUE VIOLATION.—The Secretary shall assess 
some or all of a penalty imposed on a State under 
subsection (a) with respect to a violation if the State 
does not, in a timely manner, correct or discontinue, 
as appropriate, the violation pursuant to a State cor-
rective compliance plan accepted by the Secretary. 
‘‘(d) LIMITATION ON AMOUNT OF PENALTIES.— 
‘‘(1) IN GENERAL.—In imposing the penalties 
described in subsection (a), the Secretary shall not 
reduce any health grant payable to a State for a pe-
riod by more than 10 percent. 
‘‘(2) CARRYFORWARD OF UNRECOVERED PEN-
ALTIES.—To the extent that paragraph (1) of this 
subsection prevents the Secretary from recovering 
during a period the full amount of penalties imposed 
on a State under subsection (a) of this section for 
a prior period, the Secretary shall apply any remain-
ing amount of such penalties to the health grant 
payable to the State under section 1952 for the im-
mediately succeeding period. 
‘‘APPEAL OF ADVERSE DECISION 
‘‘SEC. 1956. (a) IN GENERAL.—Within 5 days after 
the date the Secretary takes any adverse action under this 
part with respect to a State, the Secretary shall notify the 
Governor of the State of the adverse action, including any 
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action with respect to the State plan submitted under sec-
tion 1951 or the imposition of a penalty under section 
1955. 
‘‘(b) ADMINISTRATIVE REVIEW.— 
‘‘(1) IN GENERAL.—Within 60 days after the 
date a State receives notice under subsection (a) of 
an adverse action, the State may appeal the action, 
in whole or in part, to the Departmental Appeals 
Board established in the Department of Health and 
Human Services (in this section referred to as the 
‘Board’) by filing an appeal with the Board. 
‘‘(2) PROCEDURAL
RULES.—The Board shall 
consider an appeal filed by a State under paragraph 
(1) on the basis of such documentation as the State 
may submit and as the Board may require to sup-
port the final decision of the Board. In deciding 
whether to uphold an adverse action or any portion 
of such an action, the Board shall conduct a thor-
ough review of the issues and take into account all 
relevant evidence. The Board shall make a final de-
termination with respect to an appeal filed under 
paragraph (1) not less than 60 days after the date 
the appeal is filed. 
‘‘(c) JUDICIAL REVIEW OF ADVERSE DECISION.— 
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‘‘(1) IN GENERAL.—Within 90 days after the 
date of a final decision by the Board under this sec-
tion with respect to an adverse action taken against 
a State, the State may obtain judicial review of the 
final decision (and the findings incorporated into the 
final decision) by filing an action in— 
‘‘(A) the district court of the United States 
for the judicial district in which the principal or 
headquarters office of the State agency is lo-
cated; or 
‘‘(B) the United States District Court for 
the District of Columbia. 
‘‘(2) PROCEDURAL RULES.—The district court 
in which an action is filed under paragraph (1) shall 
review the final decision of the Board on the record 
established in the administrative proceeding, in ac-
cordance with the standards of review prescribed by 
subparagraphs (A) through (E) of section 706(2) of 
title 5, United States Code. The review shall be on 
the basis of the documents and supporting data sub-
mitted to the Board. 
‘‘ANNUAL REPORTS 
‘‘SEC. 1957. Each State shall submit an annual re-
port to the Secretary that describes the State’s expendi-
tures of the amount paid to the State under section 1952 
for the most recently ended period, and includes the num-
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ber of individuals provided medical assistance and the 
number of individuals provided long-term care services 
and supports under the State plan under this part and 
such other information as the Secretary may require. The 
Secretary shall submit to Congress copies of all State re-
ports submitted under this section with respect to a pe-
riod. 
‘‘DEFINITIONS 
‘‘SEC. 1958. In this part: 
‘‘(1) DISABLED
INDIVIDUAL.—The term ‘dis-
abled individual’ means an individual who would be 
considered disabled under section 1614(a)(3) or 
under criteria applied under the State plan under 
part A (as in effect on March 22, 2010). 
‘‘(2) DUAL ELIGIBLE.—The term ‘dual eligible 
individual’ means an individual who is entitled to, or 
enrolled for, benefits under part A of title XVIII of 
the Social Security Act, or enrolled for benefits 
under part B of title XVIII of such Act, and is eligi-
ble for medical assistance under a State plan under 
this title or under a waiver of such plan (as in effect 
on March 22, 2010). 
‘‘(3) ELDERLY INDIVIDUAL.—The term ‘elderly 
individual’ means an individual who has attained age 
65 or the age specified in section 226(a)(1), which-
ever is greater. 
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‘‘(4) LONG-TERM
CARE
SERVICES
AND
SUP-
PORTS.— 
‘‘(A) IN GENERAL.—The term ‘long-term 
care services and supports’ means any of the 
services or supports described in subparagraph 
(B) that may be provided in a nursing facility, 
an institution, a home, or other setting. 
‘‘(B) 
SERVICES
AND
SUPPORTS
DE-
SCRIBED.—For purposes of subparagraph (A), 
the services and supports described in this sub-
paragraph include assistive technology, adaptive 
equipment, remote monitoring equipment, case 
management for the aged, case management for 
individuals with disabilities, nursing home serv-
ices, long-term rehabilitative services necessary 
to restore functional abilities, services provided 
in intermediate care facilities for people with 
disabilities, habilitation services (including adult 
day care programs), community treatment 
teams for individuals with mental illness, home 
health services, services provided in an institu-
tion for mental disease, a Program of All-Inclu-
sive Care for the Elderly (PACE), personal care 
(including personal assistance services), recov-
ery support including peer counseling, sup-
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portive employment, training skills necessary to 
assist the individual in achieving or maintaining 
independence, training of family members in-
cluding foster parents in supportive and behav-
ioral modification skills, ongoing and periodic 
training to maintain life skills, transitional care 
including room and board not to exceed 60 days 
within a 12-month period. 
‘‘(5) LOW-INCOME.—The term ‘low-income’ 
means income (as determined under standards es-
tablished by the State) that does not exceed such 
percentage of the poverty line for a family of the size 
involved as the State shall establish. 
‘‘(6) MEDICAL ASSISTANCE.—The term ‘med-
ical assistance’ means health care coverage, as deter-
mined by a State and described in the State plan in 
accordance with section 1951(a)(1)(B)(ii). 
‘‘(7) POVERTY LINE DEFINED.—The term ‘pov-
erty line’ has the meaning given such term in section 
673(2) of the Community Services Block Grant Act 
(42 U.S.C. 9902(2)), including any revision required 
by such section. 
‘‘(8) PREGNANT WOMAN.—The term ‘pregnant 
woman’ includes a woman during the 60-day period 
beginning on the last day of the pregnancy. 
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‘‘(9) STATE.—The term ‘State’ means each of 
the 50 States and the District of Columbia.’’. 
(b) REMOVAL OF BARRIER TO PROVIDING DUAL ELI-
GIBLE INDIVIDUALS WITH ACUTE CARE THROUGH
A 
MANAGED CARE ENTITY.— 
(1) IN GENERAL.—Section 1932(a)(2) of the 
Social Security Act (42 U.S.C. 1396u–2(a)(2)) is 
amended by striking subparagraph (B). 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) takes effect on January 1, 2013. 
SEC. 3. MEDICAL MALPRACTICE REFORM STATE INCEN-
TIVE FUND. 
(a) GRANTS.—The Secretary of Health and Human 
Services (referred to in this section as the ‘‘Secretary’’) 
shall award grants to eligible States to assist such States 
in implementing State-based medical malpractice reforms. 
(b) ELIGIBILITY.— 
(1) IN GENERAL.—To be eligible to receive a 
grant under subsection (a), a State shall— 
(A) submit to the Secretary an application, 
at such time, in such manner, and containing 
such information as the Secretary may require; 
and 
(B) shall certify, as part of the application 
under subparagraph (A), that the State has 
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carried out activities, including enacting State 
laws, that have been demonstrated to lower 
medical malpractice claim or premiums costs 
for physicians or to lower health care costs for 
patients. 
(2) STUDY.—As part of a certification provided 
under paragraph (1)(B), the State shall include the 
results of at least one longitudinal, empirically based 
study that demonstrates cost reductions of the type 
described in such paragraph. Such results shall be 
provided in a manner that enables the Comptroller 
General of the United States to make a determina-
tion as to whether such results are the reasonable 
and demonstrable conclusion of the State activities 
involved. 
(3) TYPES OF LAWS.—Laws described in para-
graph (1)(B) may include caps on non-economic 
damages, the establishment of health courts, the es-
tablishment of a comprehensive patient compensa-
tion program, providing for administrative deter-
minations of compensation, providing for early of-
fers, establishing safe harbors for the practice of evi-
dence-based medicine, or other demonstrated meth-
ods to reduce costs. 
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(c) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated to carry out this section— 
(1) $500,000,000 for the period of fiscal years 
2012 through 2016; and 
(2) $500,000,000 for the period of fiscal years 
2017 through 2021. 
(d) SUNSET.—The authority established under this 
section shall not apply after September 30, 2021. 
SEC. 4. REPEALS. 
(a) PPACA AND THE HEALTH CARE-RELATED PRO-
VISIONS IN THE HEALTH CARE AND EDUCATION REC-
ONCILIATION ACT OF 2010.— 
(1) IN GENERAL.—Except as provided in para-
graph (2): 
(A) Effective as of the enactment of Public 
Law 111–148, such Act is repealed, and the 
provisions of law amended or repealed by such 
Act are restored or revived as if such Act had 
not been enacted. 
(B) Effective as of the enactment of the 
Health Care and Education Reconciliation Act 
of 2010 (Public Law 111–152), title I and sub-
title B of title II of such Act are repealed, and 
the provisions of law amended or repealed by 
such title or subtitle, respectively, are restored 
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or revived as if such title and subtitle had not 
been enacted. 
(2) NONAPPLICATION TO PROGRAM INTEGRITY 
PROVISIONS.—The repeals under paragraph (1) do 
not apply to the provisions of, and amendments 
made by the following: 
(A) Section 2801 of Public Law 111–148 
(relating to MACPAC). 
(B) Title IV of Public Law 111–148 (re-
lating to transparency and program integrity). 
(C) Subtitle D of title I of Public Law 
111–152 (relating to reducing fraud, waste, and 
abuse). 
(b) REPEAL OF ARRA MAINTENANCE OF EFFORT.— 
Subsection (f) of section 5001 of the American Recovery 
and Reinvestment Act of 2009 (Public Law 111–5) is 
amended by striking paragraph (1). 
(c) CHIP.—Effective January 1, 2013, title XXI of 
the Social Security Act (42 U.S.C. 1397aa et seq.) is re-
pealed. 
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SEC. 5. DEVELOPMENT OF NEW FORMULA FOR FEDERAL 
FINANCIAL 
PARTICIPATION 
FOR 
STATE 
CHILD SUPPORT AND WELFARE PROGRAMS 
TO REPLACE THE FMAP. 
Not later than January 1, 2012, the Secretary of 
Health and Human Services, in consultation with the 
States, shall establish a new formula for payments made 
to or received from States under parts D and E of title 
IV of the Social Security Act that are based on the Fed-
eral medical assistance percentage applicable to the State 
under title XIX of the Social Security Act. On and after 
January 1, 2013, the Federal medical assistance percent-
age shall only be used for purposes of making payments 
to States under part A of title XIX of that Act for expend-
itures attributable to providing medical assistance for el-
derly individuals, disabled individual, and dual eligible in-
dividuals in accordance with section 1958 of such Act (as 
added by section 3). Payments made to or received from 
a State under parts D or E of title IV of such Act shall 
be made on and after January 1, 2013, by applying the 
formula developed by the Secretary of Health and Human 
Services under this section in lieu of the Federal medical 
assistance percentage. 
Æ 
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