‘‘(E) PROVIDER
PAYMENT
RATES
AND 
METHODOLOGIES.—Subject 
to 
paragraph 
(7)(C)(ii), the managed care entity’s payment 
rates and payment methodology for health care 
services under such contract, by provider type 
or service category, including a description of— 
‘‘(i) alternative payment arrangements 
between the managed care entity and pro-
viders; and 
‘‘(ii) payments made by the managed 
care entity to providers that are separate 
from claims for services provided. 
‘‘(F) IDENTIFICATION OF ADMINISTRATIVE 
VENDORS.—With respect to services provided 
under such contract, identification of providers 
and vendors for administrative services under 
contract with the managed care entity. 
‘‘(G) RESERVE
FUND
CONTRIBUTIONS.— 
Contributions that the managed care entity has 
made to its reserve fund under such contract. 
‘‘(H) REINSURANCE.—Data on the amount 
of reinsurance or transfer of risk that the man-
aged care entity has obtained with respect to 
the risk assumed by such entity under such 
contract. 
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‘‘(I) CHARITABLE
CONTRIBUTIONS
AND 
DONATIONS.—Contributions and donations that 
the managed care entity has made to govern-
ment or non-profit entities, the identity of such 
government or non-profit entities, and the 
amount of the contributions and donations 
made to each such entity. 
‘‘(6) 
BIANNUAL
PERFORMANCE-COMPLIANCE 
AUDIT.—A biannual audit under this paragraph 
(4)(A)(ii), with respect to a managed care entity 
with a contract under section 1903(m) in a State, is 
an audit of the performance of such managed care 
entity under such contract (including with respect to 
the performance of risk assessment under the con-
tract) and the compliance of such managed care en-
tity, during the period covered by the audit, with— 
‘‘(A) the terms of the contract; and 
‘‘(B) applicable State and Federal laws, 
regulations, and guidance, including provisions 
of such laws, regulations, and guidance related 
to allowable costs under such contracts. 
‘‘(7) REPORTING AND PUBLIC AVAILABILITY OF 
AUDIT RESULTS.— 
‘‘(A) NOTICE AND OPPORTUNITY FOR COM-
MENT.— 
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‘‘(i) IN GENERAL.—With respect to an 
audit of a managed care entity conducted 
by an independent auditor under this sub-
section, such auditor shall— 
‘‘(I) submit a report on the re-
sults of the audit to the managed care 
entity; and 
‘‘(II) provide the managed care 
entity with the opportunity to submit 
comments on such audit to the audi-
tor during a 30-day period. 
‘‘(ii) REVIEW OF COMMENTS AND RE-
VISION
OF
REPORT.—The independent 
auditor shall review the comments sub-
mitted under clause (i)(II) and may revise 
such report based on such comments. 
‘‘(B) PUBLIC REPORT.— 
‘‘(i) IN GENERAL.—Not later than 45 
days after the end of the 30-day comment 
period 
provided 
under 
subparagraph 
(A)(i)(II), the independent auditor shall 
submit to the Secretary, the State, and the 
managed care entity a report containing 
the results of such audit (including, in the 
case of an annual financial audit under 
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paragraph (4)(A)(i), the information de-
scribed in paragraph (5)(D)), any com-
ments 
received 
under 
subparagraph 
(A)(i)(II), and an executive summary of 
the audit report. The Secretary for good 
cause may extend by not more than 30 
days the deadline for submitting a report 
under the previous sentence. 
‘‘(ii) 
POSTING
ON
PUBLIC
WEB 
SITE.—Subject to subparagraph (C), not 
later than 30 days after the date that the 
State receives a report under clause (i), the 
State shall post such report (including the 
executive summary of the report) on a Web 
site maintained by the State in connection 
with administration of this title and avail-
able to the public. 
‘‘(C) PRIVACY AND CONFIDENTIALITY PRO-
TECTION.— 
‘‘(i) PATIENT
PROTECTIONS.—Noth-
ing in this subsection shall be construed as 
modifying the application of the HIPAA 
privacy regulations (as defined in section 
1180(b)(3)). 
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‘‘(ii) PROTECTION OF CERTAIN PRO-
PRIETARY INFORMATION.—Nothing in this 
subsection shall be construed as author-
izing the public disclosure of the payment 
rates that a managed care entity uses to 
pay any health care provider or the meth-
odology that the managed care entity uses 
to develop such rates. 
‘‘(iii) PROTECTION
OF
ENCOUNTER 
DATA.—Subject to clause (i), an inde-
pendent auditor, when submitting a report 
under subparagraph (A), may submit en-
counter data to a State. An independent 
auditor, or a State, shall not submit to the 
Federal Government any encounter data 
that are collected for purposes of the au-
dits under this subsection. 
‘‘(D) WITHHOLDING
OF
PAYMENT
FOR 
FAILURE TO REPORT.— 
‘‘(i) IN
GENERAL.—If a report re-
quired under this paragraph is not sub-
mitted to the Secretary as required under 
subparagraph (B)(i) by an independent 
auditor with respect to a managed care en-
tity in a State, the Secretary shall with-
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hold, by the withholding percentage under 
clause (ii), the payment to the State under 
section 1903(a) for expenditures under a 
contract under section 1903(m) for the 
managed care entity for the period during 
which the report is due but not submitted. 
‘‘(ii) WITHHOLDING
PERCENTAGE.— 
The withholding percentage specified in 
this clause is— 
‘‘(I) 5 percentage points; plus 
‘‘(II) if the failure to report con-
tinued beyond 30 days after the date 
on which such report was due under 
subparagraph (B)(i), 5 additional per-
centage points for each subsequent 
30-day period until such report is sub-
mitted. 
‘‘(iii) RESTORATION OF PAYMENT.— 
Any amounts withheld under this subpara-
graph due to the failure to submit a report 
shall be paid to a State not later than 10 
days after the date such report is sub-
mitted. 
‘‘(8) RESPONSE TO DEFICIENCIES.— 
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‘‘(A) REPORT.—If a report submitted 
under paragraph (7) indicates a deficiency with 
respect to the financial reporting, performance, 
or compliance (as applicable) with respect to a 
managed care entity with a contract under sec-
tion 1903(m) with a State, not later than 30 
days after the date of submission of such report 
the State shall submit to the Secretary (and 
post on the Web site referred to in paragraph 
(7)(B)(ii)) documentation of any action that the 
State has taken or intends to take in response 
to a reported deficiency. Such documentation 
shall include documentation of any of the fol-
lowing: 
‘‘(i) Adjustments to the terms of new 
or renewed contracts with such managed 
care entity. 
‘‘(ii) A corrective action plan entered 
into by the managed care entity with such 
State. 
‘‘(iii) Any intermediate sanction under 
subsection (e) against the managed care 
entity. 
‘‘(iv) Termination of the contract with 
the managed care entity. 
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‘‘(B) OIG REPORT
TO
CONGRESS.—The 
Secretary, acting through the Inspector General 
in the Department of Health and Human Serv-
ices, shall annually submit to Congress and 
make available to the public a report on the au-
dits conducted under this subsection and the re-
sponses of States to reports of deficiencies in 
such audits. Such report shall contain such rec-
ommendations for changes in law or regulation 
as may be appropriate to ensure the prudent 
expenditure of funds for items and services fur-
nished through managed care entities. 
‘‘(9) ACCESS
TO
INFORMATION
REQUIRED 
UNDER CONTRACT; SANCTIONS FOR MISREPRESEN-
TATION OR FALSIFICATION OF RECORDS.— 
‘‘(A) ACCESS.—If a State enters into or 
renews a contract under section 1903(m) after 
the date of the enactment of the Medicaid In-
tegrity Act of 2012, such contract shall provide 
that the managed care entity, as a condition of 
receiving payment under such contract, shall 
provide the independent auditor with access to 
all information necessary for purposes of the 
audits under paragraph (4). 
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‘‘(B) SANCTIONS
FOR
MISREPRESENTA-
TION OR FALSIFICATION.—The misrepresenta-
tion or falsification of information that is fur-
nished for purposes of such an audit shall be 
subject to a civil monetary penalty under sub-
paragraph (B)(i) of section 1903(m)(5) in the 
same manner as a misrepresentation or fal-
sification described in subparagraph (A)(iv)(I) 
of such section. 
‘‘(10) APPLICATION
TO
WAIVER
STATES.—In 
the case of any State which is providing medical as-
sistance to its residents under a waiver granted 
under section 1115, the Secretary shall require the 
State to meet the requirements of this subsection 
and subsection (j) in the same manner as the State 
would be required to meet such requirement if the 
State had in effect a plan approved under this title. 
‘‘(11) REDUCING
DUPLICATE
AUDITS.—Not-
withstanding any other provision of this title, insofar 
as the Secretary determines that the performance of 
an audit under this subsection duplicates the per-
formance of an audit required under another provi-
sion of this title, the completion of the audit under 
this subsection shall satisfy such requirement. 
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‘‘(12) RESERVATION
OF
STATE
POWERS.— 
Nothing in this subsection shall be construed to limit 
the power of a State, including the power of a State 
to pursue civil and criminal penalties under State 
law against any individual or entity that misuses, or 
engages in fraud or abuse related to, the funds pro-
vided to a State under this title. 
‘‘(13) CONSTRUCTION.—Nothing in this sub-
section shall be construed to prevent the Secretary 
from taking any action, including disallowances of 
payment, with respect to violations of this title re-
lated to a contract with a managed care entity. 
‘‘(14) DEFINITIONS.— 
‘‘(A) AFFILIATE OF THE MANAGED CARE 
ENTITY.—For purposes of this subsection and 
subsection (j), the term ‘affiliate of the man-
aged care entity’ means an entity that, to a sig-
nificant extent, is associated or affiliated with, 
or has control of or is controlled by, the man-
aged care entity or that is related to such man-
aged care entity by common ownership. For 
purposes of this definition— 
‘‘(i) common ownership exists if an in-
dividual or individuals possess significant 
ownership or equity in the managed care 
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entity and the affiliate of the managed 
care entity; and 
‘‘(ii) control exists if an entity has the 
power, directly or indirectly, to signifi-
cantly influence or direct the actions or 
policies of another entity. 
‘‘(B) CONTRACT YEAR.—For purposes of 
this subsection, the term ‘contract year’ means, 
with respect to a managed care entity and a 
State, the 12-month period that begins on the 
effective date of a contract under section 
1903(m) between the managed care entity and 
the State, and each subsequent 12-month pe-
riod while such contract is effective.’’. 
(b) INDEPENDENT ACTUARY.—Section 1932 of the 
Social Security Act (42 U.S.C. 1396u–2), as amended by 
section 2, is further amended by adding at the end the 
following: 
‘‘(j) INDEPENDENT ACTUARY.—As a condition of re-
ceiving a payment under section 1903(a) with respect to 
expenditures under a contract between a State and a man-
aged care entity under section 1903(m), a State may not 
enter into an agreement with an entity (referred to in this 
subsection as an ‘actuary’) to provide actuarial services 
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related to the State’s administration of such contract un-
less the following requirements are met: 
‘‘(1) NO ACTUARIAL SERVICES OR FINANCIAL 
RELATIONSHIP FOR CONTRACT PERIOD.—The actu-
ary has not provided actuarial services to the man-
aged care entity for, or otherwise had any financial 
relationship with the managed care entity during, 
any period of the contract (between such managed 
care entity and the State) with respect to which the 
actuarial services under the agreement (between the 
actuary and the State) are to be provided. 
‘‘(2) NO
FINANCIAL
RELATIONSHIP
DURING 
TERM OF AGREEMENT WITH STATE.—The actuary 
agrees not to have such a financial relationship with 
the managed care entity or affiliate during any part 
of the period of the agreement (between the State 
and the actuary). 
‘‘(3) SPECIAL
RULE
FOR
FIRST
CONTRACT 
YEAR.—For the first contract year in which this 
subsection applies, the actuary has not had such a 
financial relationship with the managed care entity 
or affiliate during the 2-year period ending on the 
date the actuary and State enter into an agreement 
subject to this subsection.’’. 
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(c) TRANSITIONAL
FINANCIAL
INCENTIVES
TO 
STATES.—Section 1903(a)(3) of the Social Security Act 
(42 U.S.C. 1396b(a)(3)) is amended by inserting after 
subparagraph (F) the following: 
‘‘(G) 75 percent of so much of the sums 
expended as are attributable to expenditures for 
the first 3 biannual financial audits conducted 
under section 1932(i)(4)(A)(i) after the date of 
enactment of the Medicaid Integrity Act of 
2012, and for the first 2 biannual performance- 
compliance audits conducted under section 
1932(i)(4)(A)(ii) after such date; plus’’. 
Æ 
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