785
1511(g)) that are greater than the Federal
expenditures that would have been made
under this title if the State had not made
such election.
‘‘(C) CURRENT
AFDC
INCOME
AND
RE-
SOURCE
STANDARDS
DEFINED.—In this sub-
section, the term ‘current AFDC income and
resource standards’ means, with respect to a
State, the income and resource standards for
the payment of assistance under the State plan
under part A or E of title IV (as in effect as
of March 1, 1996).
‘‘(D) STATE
OPTION
TO
CONTINUE
TO
PROVIDE
MEDICAL
ASSISTANCE
DURING
THE
TRANSITION FROM WELFARE TO WORK.—Noth-
ing in this title shall be construed as preventing
a State from continuing to provide medical as-
sistance under a State plan under this title to
an individual or a member of such individual’s
family who—
‘‘(i) is eligible for medical assistance
under this title as a result of a link be-
tween eligibility for such medical assistance
and aid or assistance under one or more
786
parts of title IV or any other program of
assistance based on need; and
‘‘(ii) because of hours of, or income
from, employment is no longer eligible for
such aid or assistance.
‘‘(b) GUARANTEED COVERAGE OF MEDICARE PRE-
MIUMS
AND COST-SHARING
FOR CERTAIN MEDICARE
BENEFICIARIES.—
‘‘(1) GUARANTEED
ELIGIBILITY.—Each State
plan shall provide—
‘‘(A) for making medical assistance avail-
able for required medicare cost-sharing (as de-
fined in paragraph (2)) for qualified medicare
beneficiaries described in paragraph (3);
‘‘(B) for making medical assistance avail-
able for payment of medicare premiums under
section 1818A for qualified disabled and work-
ing individuals described in paragraph (4); and
‘‘(C) for making medical assistance avail-
able for payment of medicare premiums under
section 1839 for individuals who would be quali-
fied medicare beneficiaries described in para-
graph (3) but for the fact that their income ex-
ceeds 100 percent, but is less than 120 percent,
787
of the poverty line for a family of the size in-
volved.
‘‘(2) REQUIRED
MEDICARE
COST-SHARING
DE-
FINED.—
‘‘(A) IN GENERAL.—In this subsection, the
term ‘required medicare cost-sharing’ means,
with respect to an individual, costs incurred for
medicare cost-sharing described in paragraphs
(1) through (4) of section 1571(c) (and, at the
option of a State, section 1571(c)(5))) without
regard to whether the costs incurred were for
items and services for which medical assistance
is otherwise available under the plan.
‘‘(B) LIMITATION
ON
OBLIGATION
FOR
CERTAIN
COST-SHARING
ASSISTANCE.—In the
case of medical assistance furnished under this
title for medicare cost-sharing described in
paragraph (2), (3), or (4) of section 1571(c) re-
lating to the furnishing of a service or item to
a medicare beneficiary, nothing in this title
shall be construed as preventing a State plan—
‘‘(i) from limiting the assistance to
the amount (if any) by which (I) the
amount that is otherwise payable under
the plan for the item or service for eligible
788
individuals who are not such medicare
beneficiaries (or, if payments for such
items or services are made on a capitated
basis, an amount reasonably related or de-
rived 
from 
such 
capitated 
payment
amount), exceeds (II) amount of payment
(if any) made under title XVIII with re-
spect to the service or item, and
‘‘(ii) if the amount described in sub-
clause (II) of clause (i) exceeds the amount
described in subclause (I) of such clause,
from treating the amount paid under title
XVIII as payment in full and not requiring
or providing for any additional medical as-
sistance under this subsection.
‘‘(3) QUALIFIED MEDICARE BENEFICIARY DE-
FINED.—In this subsection, the term ‘qualified med-
icare beneficiary’ means an individual—
‘‘(A) who is entitled to hospital insurance
benefits under part A of title XVIII (including
an individual entitled to such benefits pursuant
to an enrollment under section 1818, but not
including an individual entitled to such benefits
only pursuant to an enrollment under section
1818A),
789
‘‘(B) whose income (as determined under
section 1612 for purposes of the supplemental
security income program, except as provided in
paragraph (5) does not exceed 100 percent of
the poverty line applicable to a family of the
size involved, and
‘‘(C) whose resources (as determined under
section 1613 for purposes of the supplemental
security income program) do not exceed twice
the maximum amount of resources that an indi-
vidual may have and obtain benefits under that
program.
‘‘(4) QUALIFIED DISABLED AND WORKING INDI-
VIDUAL
DEFINED.—In this subsection, the term
‘qualified disabled and working individual’ means an
individual—
‘‘(A) who is entitled to enroll for hospital
insurance benefits under part A of title XVIII
under section 1818A;
‘‘(B) whose income (as determined under
section 1612 for purposes of the supplemental
security income program) does not exceed 200
percent of the poverty line applicable to a fam-
ily of the size involved;
790
‘‘(C) whose resources (as determined under
section 1613 for purposes of the supplemental
security income program) do not exceed twice
the maximum amount of resources that an indi-
vidual or a couple (in the case of an individual
with a spouse) may have and obtain benefits for
supplemental security income benefits under
title XVI; and
‘‘(D) who is not otherwise eligible for med-
ical assistance under this title.
‘‘(5) INCOME DETERMINATIONS.—
‘‘(A) IN GENERAL.—In determining under
this subsection the income of an individual who
is entitled to monthly insurance benefits under
title II for a transition month (as defined in
subparagraph (B)) in a year, such income shall
not include any amounts attributable to an in-
crease in the level of monthly insurance benefits
payable under such title which have occurred
pursuant to section 215(i) for benefits payable
for months beginning with December of the
previous year.
‘‘(B) TRANSITION MONTH DEFINED.—For
purposes of subparagraph (A), the term ‘transi-
tion month’ means each month in a year
791
through the month following the month in
which the annual revision of the poverty line is
published.
‘‘SEC. 1502. OTHER PROVISIONS RELATING TO ELIGIBILITY
AND BENEFITS.
‘‘(a) OPTIONAL ELIGIBILITY GROUPS FOR WHICH
UMBRELLA SUPPLEMENTAL FUNDING IS AVAILABLE.—
In addition to the guaranteed coverage categories de-
scribed in section 1501(a)(1), the following are population
groups with respect to which supplemental allotments may
be made under section 1511(g), but only if (for the indi-
vidual involved) medical assistance is made available under
the State plan for the guaranteed benefit package (as de-
fined in section 1501(a)(2)):
‘‘(1) CERTAIN POOR CHILDREN OVER 12 YEARS
OF AGE.—Children born after September 30, 1983,
under 12 years of age, but under 19 years of age,
and whose family income does not exceed 100 per-
cent of the poverty line.
‘‘(2) CERTAIN DISABLED INDIVIDUALS.—Indi-
viduals (not described in section 1501(a)(1)(D)(ii))
who are disabled (as determined under section
1614(a)(3)), covered under the State plan, and meet
the eligibility standards for coverage under the State
792
medicaid plan under title XIX (as in effect as of
May 1, 1996).
‘‘(3) CERTAIN ELDERLY INDIVIDUALS.—Elderly
individuals (not described in section 1501(a)(1)(E))
who are covered under the State plan and who meet
the eligibility standards for coverage under the State
medicaid plan under title XIX (as in effect as of
May 1, 1996) other than solely on the basis of being
an individual described in section 1902(a)(10)(E).
‘‘(b) OTHER PROVISIONS RELATING TO GENERAL
ELIGIBILITY AND BENEFITS.—
‘‘(1) GENERAL DESCRIPTION.—Each State plan
shall include a description (consistent with this title)
of the following:
‘‘(A) 
GENERAL
ELIGIBILITY
GUIDE-
LINES.—The general eligibility guidelines of the
plan for eligible low-income individuals, includ-
ing—
‘‘(i) for individuals other than those
covered under subsection (a) or (b) of sec-
tion 1501, any limitations as to the dura-
tion of eligibility,
‘‘(ii) any eligibility standards relating
to age, income and resources (including
any standards relating to spenddowns and
793
disposition of resources), residency, disabil-
ity status, immigration status, or employ-
ment status of individuals,
‘‘(iii) methods of establishing and con-
tinuing eligibility and enrollment, including
the methodology for computing family in-
come,
‘‘(iv) the eligibility standards in the
plan that protect the income and resources
of a married individual who is living in the
community and whose spouse is residing in
an institution in order to prevent the im-
poverishment of the community spouse,
and
‘‘(v) for individuals other than those
covered under subsection (a) or (b) of sec-
tion 1501, any other standards relating to
eligibility for medical assistance under the
plan.
‘‘(B) 
SCOPE
OF
ASSISTANCE.—The
amount, duration, and scope of health care
services and items covered under the plan, in-
cluding differences among different eligible pop-
ulation groups.
794
‘‘(C) DELIVERY
METHOD.—The State’s
approach to delivery of medical assistance, in-
cluding a general description of—
‘‘(i) the use (or intended use) of
vouchers, fee-for-service, or managed care
arrangements (such as capitated health
care plans, case management, and case co-
ordination); and
‘‘(ii) utilization control systems.
‘‘(D) FEE-FOR-SERVICE
BENEFITS.—To
the extent that medical assistance is furnished
on a fee-for-service basis—
‘‘(i) how the State determines the
qualifications of health care providers eligi-
ble to provide such assistance; and
‘‘(ii) how the State determines rates
of reimbursement for providing such as-
sistance.
‘‘(E) COST-SHARING.—Beneficiary cost-
sharing (if any), including variations in such
cost-sharing by population group or type of
service and financial responsibilities of parents
of recipients who are children and the spouses
of recipients.
795
‘‘(F) UTILIZATION
INCENTIVES.—Incen-
tives or requirements (if any) to encourage the
appropriate utilization of services.
‘‘(G) 
SUPPORT
FOR
CERTAIN
HOS-
PITALS.—
‘‘(i) IN
GENERAL.—With respect to
hospitals described in clause (ii) located in
the State, a description of the extent to
which provisions are made for expenditures
for items and services furnished by such
hospitals and covered under the State plan.
‘‘(ii) HOSPITALS DESCRIBED.—A hos-
pital described in this clause is a short-
term acute care general hospital or a chil-
dren’s hospital, the low-income utilization
rate of which exceeds the lesser of—
‘‘(I) 1 standard deviation above
the mean low-income utilization rate
for hospitals receiving payments under
a State plan in the State in which
such hospital is located, or
‘‘(II) 11⁄4
standard deviations
above the mean low-income utilization
rate for hospitals receiving such pay-
796
ments in the 50 States and the Dis-
trict of Columbia.
‘‘(iii) 
LOW-INCOME
UTILIZATION
RATE.—For purposes of clause (ii), the
term ‘low-income utilization rate’ means,
for a hospital, a fraction (expressed as a
percentage), the numerator of which is the
hospital’s number of patient days attrib-
utable to patients who (for such days) were
eligible for medical assistance under a
State plan or were uninsured in a period,
and the denominator of which is the total
number of the hospital’s patient days in
that period.
‘‘(iv) PATIENT
DAYS.—For purposes
of clause (iii), the term ‘patient day’ in-
cludes each day in which—
‘‘(I) an individual, including a
newborn, is an inpatient in the hos-
pital, whether or not the individual is
in a specialized ward and whether or
not the individual remains in the hos-
pital for lack of suitable placement
elsewhere; or
797
‘‘(II) an individual makes one or
more outpatient visits to the hospital.
‘‘(2) CONDITIONS FOR GUARANTEES AND RELA-
TION OF GUARANTEES TO FINANCING.—The guaran-
tees of States required under subsection (a) and (b)
of section 1501 and subsection (d) of this section
are subject to the general eligibility guidelines of
States described under the plan under paragraph
(1)(A) and are subject to the limitations on payment
to the States provided under section 1511 (including
the provisions of subsection (g), relating to supple-
mental umbrella allotments). In submitting a plan
under this title, a State voluntarily agrees to accept
payment amounts provided under such section as
full payment from the Federal Government in return
for providing for the benefits (including the guaran-
teed benefit package) under this title.
‘‘(3) SECONDARY PAYMENT.—Nothing in this
section shall be construed as preventing a State
from denying benefits to an individual to the extent
such benefits are available to the individual under
the medicare program under title XVIII or under
another public or private health care insurance pro-
gram.
798
‘‘(4) RESIDENCY REQUIREMENT.—In the case
of an individual who—
‘‘(A) is described in section 1501(a)(1),
‘‘(B) changed residence from another State
to the State, and
‘‘(C) has resided in the State for less than
180 days,
the State may limit the benefits provided to such in-
dividual in the guaranteed benefits package under
paragraph (2) of section 1501(a) to the amount, du-
ration, and scope of benefits available under the
State plan of the individual’s previous State of resi-
dence.
‘‘(c) SET-ASIDE OF FUNDS FOR THE LOW-INCOME
DISABLED.—
‘‘(1) IN GENERAL.—In the case of a State that
has 
elected 
the 
option 
described 
in 
section
1501(a)(1)(D)(i) for a fiscal year, the State plan
shall provide that the percentage of funds expended
under the plan for medical assistance for eligible
low-income individuals who are not elderly individ-
uals and who are eligible for such assistance on the
basis of a disability, including being blind, for the
fiscal year is not less than the minimum low-income-
disabled percentage specified in paragraph (2) of the
799
total funds expended under the plan for medical as-
sistance for the fiscal year.
‘‘(2) MINIMUM
LOW-INCOME-DISABLED
PER-
CENTAGE.—The minimum low-income-disabled per-
centage specified in this paragraph for a State is
equal to 90 percent of the percentage of the expendi-
tures under title XIX for medical assistance in the
State during Federal fiscal year 1995 which was at-
tributable to expenditures for medical assistance for
benefits furnished to individuals whose coverage (at
such time) was on a basis directly related to disabil-
ity status, including being blind.
‘‘(3) COMPUTATIONS.—States shall calculate
the minimum percentage under paragraph (2) in a
reasonable manner consistent with reports submitted
to the Secretary for the fiscal years involved and
medical assistance attributable to the exception pro-
vided under section 1903(v)(2) shall not be consid-
ered to be expenditures for medical assistance.
‘‘(d) TRANSITIONAL PAYMENT
FOR FEDERALLY-
QUALIFIED HEALTH CENTER SERVICES
AND RURAL
HEALTH CLINIC SERVICES.—Each State plan shall pro-
vide that, for Federally-qualified health center services
and rural health clinic services (as defined in section
1571(f)) furnished under the plan during the first 8 cal-
800
endar quarters in which the plan is in effect and for which
payment is made under the plan, payment shall be made
for such services at a rate based on 100 percent of costs
which are reasonable and related to the cost of furnishing
such services or based on such other tests of reasonable-
ness, as the Secretary prescribes in regulations under sec-
tion 1833(a)(3), or, in the case of services to which those
regulations do not apply, on the same methodology used
under section 1833(a)(3).
‘‘(e) PREEXISTING CONDITION EXCLUSIONS.—Not-
withstanding any other provision of this title—
‘‘(1) a State plan may not deny or exclude cov-
erage of any item or service for an eligible individual
for benefits under the State plan for such item or
service on the basis of a preexisting condition; and
‘‘(2) if a State contracts or makes other ar-
rangements (through the eligible individual or
through another entity) with a capitated health care
organization, insurer, or other entity, for the provi-
sion of items or services to eligible individuals under
the State plan and the State permits such organiza-
tion, insurer, or other entity to exclude coverage of
a covered item or service on the basis of a preexist-
ing condition, the State shall provide, through its
State plan, for such coverage (through direct pay-
801
ment or otherwise) for any such covered item or
service denied or excluded on the basis of a preexist-
ing condition.
‘‘(f) 
SOLVENCY
STANDARDS
FOR
CAPITATED
HEALTH CARE ORGANIZATIONS.—
‘‘(1) IN GENERAL.—A State may not contract
with a capitated health care organization, as defined
in section 1504(c)(1), for the provision of medical
assistance under a State plan under which the orga-
nization is—
‘‘(A) at full financial risk, as defined by
the State, unless the organization meets sol-
vency standards established by the State for
private health maintenance organizations, or
‘‘(B) is not at such risk, unless the organi-
zation meets solvency standards that are estab-
lished under the State plan.
‘‘(2) TREATMENT OF PUBLIC ENTITIES.—Para-
graph (1) shall not apply to an organization that is
a public entity or if the solvency of such organiza-
tion is guaranteed by the State.
‘‘(3) TRANSITION.—In the case of a capitated
health care organization that as of the date of the
enactment of this title has entered into a contract
with a State for the provision of medical assistance
802
under title XIX under which the organization as-
sumes full financial risk and is receiving capitation
payments, paragraph (1) shall not apply to such or-
ganization until 3 years after the date of the enact-
ment of this title.
‘‘SEC. 1503. PREMIUMS AND COST-SHARING.
‘‘(a) IN GENERAL.—Subject to subsection (b), if any
charges are imposed under the State plan for cost-sharing
(as defined in subsection (d)), such cost-sharing shall be
pursuant to a public cost-sharing schedule.
‘‘(b) LIMITATION ON PREMIUM AND CERTAIN COST-
SHARING FOR LOW-INCOME FAMILIES INCLUDING CHIL-
DREN OR PREGNANT WOMEN.—
‘‘(1) IN GENERAL.—In the case of a pregnant
woman or a child who is a member of a family de-
scribed in paragraph (2)—
‘‘(A) the plan shall not impose any pre-
mium, and
‘‘(B) the plan shall not (except as provided
in subsection (c)(1)) impose any cost-sharing
with respect to primary and preventive care
services (as defined by the State) covered under
the State plan for children or pregnant women
unless such cost-sharing is nominal in nature.
803
‘‘(2) FAMILY DESCRIBED.—A family described
in this paragraph is a family (which may be an indi-
vidual) which—
‘‘(A) includes a child or a pregnant
woman,
‘‘(B) is made eligible for medical assistance
under the State plan, and
‘‘(C) the income of which does not exceed
100 percent of the poverty line applicable to a
family of the size involved.
‘‘(c) CERTAIN COST-SHARING PERMITTED.—Nothing
in this section shall be construed as preventing a State
plan (consistent with subsection (b))—
‘‘(1) from imposing cost-sharing to discourage
the inappropriate use of emergency medical services
delivered through a hospital emergency room, a med-
ical transportation provider, or otherwise,
‘‘(2) from imposing premiums and cost-sharing
differentially in order to encourage the use of pri-
mary and preventive care and discourage unneces-
sary or less economical care,
‘‘(3) from scaling cost-sharing in a manner that
reflects economic factors, employment status, and
family size,
804
‘‘(4) from scaling cost-sharing based on the
availability to the individual or family of other
health insurance coverage, or
‘‘(5) from scaling cost-sharing based on partici-
pation in employment training programs, drug or al-
cohol abuse treatment, counseling programs, or
other programs promoting personal responsibility.
‘‘(d) COST-SHARING DEFINED.—In this section, the
term ‘cost-sharing’ includes copayments, deductibles, coin-
surance, and other charges for the provision of health care
services.
‘‘SEC. 1504. DESCRIPTION OF PROCESS FOR DEVELOPING
CAPITATION PAYMENT RATES.
‘‘(a) IN GENERAL.—If a State contracts (or intends
to contract) with a capitated health care organization (as
defined in subsection (c)(1)) under which the State makes
a capitation payment (as defined in subsection (c)(2)) to
the organization for providing or arranging for the provi-
sion of medical assistance under the State plan for a group
of services, including at least inpatient hospital services
and physicians’ services, the plan shall include a descrip-
tion of the following:
‘‘(1) USE OF ACTUARIAL SCIENCE.—The extent
and manner in which the State uses actuarial
science—
805
‘‘(A) to analyze and project health care ex-
penditures and utilization for individuals en-
rolled (or to be enrolled) in such an organiza-
tion under the State plan, and
‘‘(B) to develop capitation payment rates,
including a brief description of the general
methodologies used by actuaries.
‘‘(2) QUALIFICATIONS
OF
ORGANIZATIONS.—
The general qualifications, including any accredita-
tion, State licensure or certification, or provider net-
work standards, required by the State for participa-
tion of capitated health care organizations under the
State plan.
‘‘(3) DISSEMINATION
PROCESS.—The process
used by the State under subsection (b) and other-
wise to disseminate, before entering into contracts
with capitated health care organizations, actuarial
information to such organizations on the historical
fee-for-service costs (or, if not available, other recent
financial data associated with providing covered
services) and utilization associated with individuals
described in paragraph (1)(A).
‘‘(b) PUBLIC NOTICE AND COMMENT.—Under the
State plan the State shall provide a process for providing,
before the beginning of each contract year—
806
‘‘(1) public notice of—
‘‘(A) the amounts of the capitation pay-
ments (if any) made under the plan for the con-
tract year preceding the public notice, and
‘‘(B)(i) the information described under
subsection (a)(1) with respect to capitation pay-
ments for the contract year involved, or (ii)
amounts of the capitation payments the State
expects to make for the contract year involved,
unless such information is designated as proprietary
and not subject to public disclosure under State law,
and
‘‘(2) an opportunity for receiving public com-
ment on the amounts and information for which no-
tice is provided under paragraph (1).
‘‘(c) DEFINITIONS.—In this title:
‘‘(1) CAPITATED
HEALTH
CARE
ORGANIZA-
TION.—The term ‘capitated health care organiza-
tion’ means a health maintenance organization or
any other entity (including a health insuring organi-
zation, managed care organization, prepaid health
plan, integrated service network, or similar entity)
which under State law is permitted to accept capita-
tion payments for providing (or arranging for the
provision of) a group of items and services including
807
at least inpatient hospital services and physicians’
services.
‘‘(2) CAPITATION PAYMENT.—The term ‘capita-
tion payment’ means, with respect to payment, pay-
ment on a prepaid capitation basis or any other risk
basis to an entity for the entity’s provision (or ar-
ranging for the provision) of a group of items and
services, including at least inpatient hospital services
and physicians’ services.
‘‘SEC. 1505. PREVENTING SPOUSAL IMPOVERISHMENT.
‘‘(a) SPECIAL TREATMENT FOR INSTITUTIONALIZED
SPOUSES.—
‘‘(1) SUPERSEDES OTHER PROVISIONS.—In de-
termining the eligibility for medical assistance of an
institutionalized spouse (as defined in subsection
(h)(1)), the provisions of this section supersede any
other provision of this title which is inconsistent
with them.
‘‘(2) DOES NOT AFFECT CERTAIN DETERMINA-
TIONS.—Except as this section specifically provides,
this section does not apply to—
‘‘(A) the determination of what constitutes
income or resources, or
808
‘‘(B) the methodology and standards for
determining and evaluating income and re-
sources.
‘‘(3) NO
APPLICATION
IN
COMMONWEALTHS
AND TERRITORIES.—This section shall only apply to
a State that is one of the 50 States or the District
of Columbia.
‘‘(b) RULES FOR TREATMENT OF INCOME.—
‘‘(1) SEPARATE TREATMENT OF INCOME.—Dur-
ing any month in which an institutionalized spouse
is in the institution, except as provided in paragraph
(2), no income of the community spouse shall be
deemed available to the institutionalized spouse.
‘‘(2) ATTRIBUTION OF INCOME.—In determin-
ing the income of an institutionalized spouse or com-
munity spouse for purposes of the post-eligibility in-
come determination described in subsection (d), ex-
cept as otherwise provided in this section and re-
gardless of any State laws relating to community
property or the division of marital property, the fol-
lowing rules apply:
‘‘(A) NON-TRUST PROPERTY.—Subject to
subparagraphs (C) and (D), in the case of in-
come not from a trust, unless the instrument
819
‘‘(i) 150 percent of 1⁄12 of the poverty
line applicable to a family unit of 2 mem-
bers, plus
‘‘(ii) an excess shelter allowance (as
defined in paragraph (4)).
A revision of the poverty line referred to in
clause (i) shall apply to medical assistance fur-
nished during and after the second calendar
quarter that begins after the date of publication
of the revision.
‘‘(B) CAP ON MINIMUM MONTHLY MAINTE-
NANCE
NEEDS
ALLOWANCE.—The minimum
monthly maintenance needs allowance estab-
lished under subparagraph (A) may not exceed
$1,500 (subject to adjustment under sub-
sections (e) and (g)).
‘‘(5) 
EXCESS
SHELTER
ALLOWANCE
DE-
FINED.—In paragraph (4)(A)(ii), the term ‘excess
shelter allowance’ means, for a community spouse,
the amount by which the sum of—
‘‘(A) the spouse’s expenses for rent or
mortgage payment (including principal and in-
terest), taxes and insurance and, in the case of
a condominium or cooperative, required mainte-