(1) FOR 2010.—For 2010, 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 2008 (as es-
timated by the Board); 
(B) increased to 2009 by the Board’s esti-
mate of the actual amount of such per capita 
expenditures during 2009; and 
(C) updated to 2010 by the national health 
security spending growth limit specified in sec-
tion 601(b)(2) for 2010. 
(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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(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 assure 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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(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 2010, 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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