187
Title II, Subtitle B
sistance paid based on an eligibility determination
error to the extent the State’s error rate for eligi-
bility determinations exceeds a maximum permissible
error rate to be specified by the Secretary.
‘‘SEC. 2104. ELIGIBILITY DETERMINATIONS.
‘‘(a) IN GENERAL.—The Secretary shall promulgate
regulations specifying requirements for State subsidy pro-
grams with respect to determining eligibility for premium
and cost-sharing assistance, including requirements with
respect to—
‘‘(1) application procedures;
‘‘(2) information verification procedures;
‘‘(3) timeliness of eligibility determinations;
‘‘(4) procedures for applicants to appeal adverse
decisions; and
‘‘(5) any other matters determined appropriate
by the Secretary.
‘‘(b) SPECIFICATIONS FOR REGULATIONS.—The reg-
ulations promulgated by the Secretary under subsection
(a) shall include the following requirements:
‘‘(1) FREQUENCY OF APPLICATIONS.—A State
program shall provide that an individual may file an
application for assistance with an agency designated
by the State at any time, in person.
188
Title II, Subtitle B
‘‘(2) APPLICATION
FORM.—A State program
shall provide for the use of an application form de-
veloped by the Secretary under subsection (c)(2).
‘‘(3) 
DISTRIBUTION
OF
APPLICATIONS.—A
State program shall distribute applications for as-
sistance widely, including to employers, health plan
purchasing organizations, brokers for health cov-
erage, and appropriate public agencies.
‘‘(4) CONVENIENT LOCATION TO SUBMIT APPLI-
CATIONS.—A State program shall provide convenient
locations for premium and cost-sharing assistance el-
igible individuals to apply for premium and cost-
sharing assistance.
‘‘(5) REQUIREMENT TO SUBMIT REVISED AP-
PLICATION.—A State program shall, in accordance
with regulations promulgated by the Secretary, re-
quire individuals to submit revised applications dur-
ing a year to reflect changes in estimated family in-
comes, including changes in employment status of
family members, and changes in eligibility status de-
scribed in section 2002(c) during the year. The
State shall revise the amount of any premium and
cost-sharing assistance based on such a revised ap-
plication.
189
Title II, Subtitle B
‘‘(6) AFDC APPLICANTS.—A State program
shall include a procedure under which individuals
applying for benefits under title IV shall have an op-
portunity to apply for assistance under this part in
connection with such application.
‘‘(7) VERIFICATION.—A State program shall
provide for verification of the information supplied
in applications under this part. Such verification
may include examining return information disclosed
to the State for such purpose under section
6103(l)(15) of the Internal Revenue Code of 1986.
‘‘(c) ADMINISTRATION OF STATE PROGRAM.—
‘‘(1) IN GENERAL.—The Secretary shall estab-
lish standards for States operating programs under
this part which ensure that such programs are oper-
ated in a uniform manner with respect to application
procedures, data standards, and such other adminis-
trative activities as the Secretary determines to be
necessary.
‘‘(2) APPLICATION
FORMS.—The Secretary
shall develop an application form for assistance
which shall—
‘‘(A) be simple in form and understandable
to the average individual;
190
Title II, Subtitle B
‘‘(B) require the provision of information
necessary to make a determination as to wheth-
er an individual is a premium or cost-sharing
assistance eligible individual including a dec-
laration of estimated family income by the indi-
vidual; and
‘‘(C) require attachment of such docu-
mentation as deemed necessary by the Sec-
retary in order to ensure eligibility for assist-
ance.
‘‘(3) OUTREACH ACTIVITIES.—A State operat-
ing a program under this part shall conduct such
outreach activities as the Secretary determines ap-
propriate.
‘‘(d) EFFECTIVENESS OF ELIGIBILITY FOR PREMIUM
AND COST-SHARING ASSISTANCE.—A determination by a
State that an individual is a premium or cost-sharing as-
sistance eligible individual shall be effective for the cal-
endar year for which such determination is made unless
a revised application submitted under subsection (b)(5) in-
dicates that an individual is no longer eligible for premium
or cost-sharing assistance.
‘‘(e) PENALTIES FOR MATERIAL MISREPRESENTA-
TIONS.—
191
Title II, Subtitle B
‘‘(1) IN GENERAL.—Any individual who know-
ingly makes a material misrepresentation of infor-
mation in an application for assistance under this
part shall be liable to the Federal Government for
the amount any premium and cost-sharing assist-
ance received by an individual on the basis of a mis-
representation and interest on such amount at a
rate specified by the Secretary, and shall, in addi-
tion, be liable to the Federal Government for $2,000
or, if greater, 3 times the amount any premium and
cost-sharing assistance provided on the basis of a
misrepresentation.
‘‘(2) COLLECTION OF PENALTY AMOUNTS.—A
State which receives an application for assistance
with respect to which a material misrepresentation
has been made shall collect the penalty amount re-
quired under paragraph (1) and submit 50 percent
of such amount to the Secretary in a timely manner.
‘‘SEC. 2105. END-OF-YEAR RECONCILIATION FOR PREMIUM
ASSISTANCE.
‘‘(a) IN GENERAL.—
‘‘(1) REQUIREMENT TO FILE STATEMENT.—An
individual who received premium assistance under
this part from a State for any month in a calendar
year shall file with the State an income reconcili-
192
Title II, Subtitle B
ation statement to verify the individual’s family in-
come for the year. Such a statement shall be filed
at such time, and contain such information, as the
State may specify in accordance with regulations
promulgated by the Secretary.
‘‘(2) NOTICE OF REQUIREMENT.—A State shall
provide a written notice of the requirement under
paragraph (1) at the end of the year to an individual
who received assistance under this part from such
State in any month during the year.
‘‘(b) RECONCILIATION
OF PREMIUM ASSISTANCE
BASED ON ACTUAL INCOME.—
‘‘(1) IN GENERAL.—Based on and using the in-
come reported in the reconciliation statement filed
under subsection (a) with respect to an individual,
the State shall compute the amount of premium as-
sistance that should have been provided under this
part with respect to the individual for the year in-
volved.
‘‘(2) OVERPAYMENT
OF
ASSISTANCE.—If the
total amount of the premium assistance provided
was greater than the amount computed under para-
graph (1), the excess amount shall be treated as an
underpayment of a tax imposed by chapter 1 of the
Internal Revenue Code of 1986.
193
Title II, Subtitle B
‘‘(3) UNDERPAYMENT OF ASSISTANCE.—If the
total amount of the premium assistance provided
was less than the amount computed under para-
graph (1), the amount of the difference shall be
treated as an overpayment of tax imposed by such
chapter, or in the event the taxpayer involved is enti-
tled to a refund of such a tax, subject to the provi-
sions of section 6402(d) of such Code.
‘‘(c) VERIFICATION.—Each State may use such infor-
mation as it has available to verify income of individuals
with applications filed under this part, including return
information disclosed to the State for such purpose under
section 6103(l)(15) of the Internal Revenue Code of 1986.
‘‘(d) PENALTIES FOR FAILURE TO FILE.—In the
case of an individual who is required to file a statement
under this section in a year who fails to file such a state-
ment by such date as the Secretary shall specify in regula-
tions, the entire amount of the premium assistance pro-
vided in such year shall be considered an excess amount
under subsection (b)(2) and such individual shall not be
eligible for premium assistance under this part until such
statement is filed. A State, using rules established by the
Secretary, shall waive the application of this subsection
if the individual establishes, to the satisfaction of the State
194
Title II, Subtitle B
under such rules, good cause for the failure to file the
statement on a timely basis.
‘‘(e) PENALTIES FOR FALSE INFORMATION.—Any in-
dividual who provides false information in a statement
filed under subsection (a) is subject to the same penalties
as are provided under section 2104(e) for a misrepresenta-
tion of material fact described in such section.
‘‘(f) NO RECONCILIATION FOR COST-SHARING AS-
SISTANCE.—No reconciliation statement is required under
this section with respect to cost-sharing assistance.
‘‘SEC. 2106. PAYMENTS TO STATES.
‘‘(a) PAYMENTS FOR PREMIUM AND COST-SHARING
ASSISTANCE.—Subject to subsection (b) and section 2141,
the Secretary shall provide for payment to each State op-
erating a State subsidy program in an amount equal to
the sum of—
‘‘(1) the amount expended by the State under
the program for premium assistance on behalf of
premium assistance eligible individuals, and
‘‘(2) the amount expended by the State under
the program for cost-sharing assistance on behalf of
cost-sharing assistance eligible individuals.
‘‘(b) NO PAYMENT FOR MAINTENANCE-OF-EFFORT
EXPENDITURES OR ADMINISTRATION.—No payment shall
be made under subsection (a)—
195
Title II, Subtitle B
‘‘(1) for any State maintenance-of-effort ex-
penditures required under section 2107, or
‘‘(2) for any expenditures relating to adminis-
tration of a State subsidy program.
For payment to States for administrative expenditures for
State subsidy programs, see section 2142.
‘‘(c) FUNDING.—The amount paid to States under
subsection (a) shall be paid by the Secretary, from the
Health Care Assurance Trust Fund (established under
section 2143), at such time and in such form as provided
in regulations promulgated by the Secretary, based on the
form and manner in which payments are made to States
under section 1903.
‘‘SEC. 2107. REQUIREMENT OF STATE MAINTENANCE-OF-
EFFORT EXPENDITURES.
‘‘(a) IN GENERAL.—Payment to a State under sec-
tion 2106 for any quarter in a year is conditioned upon—
‘‘(1) the State making expenditures under this
part from non-Federal funds (consistent with sub-
section (d)) for premium assistance on behalf of pre-
mium assistance eligible individuals and for cost-
sharing assistance on behalf of cost-sharing assist-
ance eligible individuals equal to at least the assist-
ance maintenance-of-effort amount computed under
subsection (b) for the quarter, and
196
Title II, Subtitle B
‘‘(2) the State meeting the maintenance-of-
effort requirement of section 2125(a)(1) for the
quarter.
‘‘(b) 
ASSISTANCE
MAINTENANCE-OF-EFFORT
AMOUNT.—
‘‘(1) IN
GENERAL.—The assistance mainte-
nance-of-effort amount computed under this sub-
section for a State for a quarter in a year is equal
to 1⁄4 of the product of the Federal-to-State conver-
sion factor (specified under paragraph (5)) and the
following:
‘‘(A) 1998.—For 1998, the product of—
‘‘(i) the 1997 per capita core benefit
amount (described in paragraph (3)) for
the State, and
‘‘(ii) the average monthly number of
AFDC recipients and non-cash medicaid
beneficiaries 
(as 
defined 
in 
section
1931(a)(2)) in the State during 1997,
increased by the assistance increase factor (as
defined in paragraph (4)) for 1998.
‘‘(B) 1999 AND THEREAFTER.—For quar-
ters in 1999 or any succeeding year, the
amount computed under subparagraph (A) or
this subparagraph for the State for the preced-
197
Title II, Subtitle B
ing year increased by the assistance increase
factor under paragraph (4) for the year.
‘‘(2) ESTIMATIONS OF AND ADJUSTMENTS TO
STATE
TOTAL
FUNDING
AMOUNT.—The Secretary
shall—
‘‘(A) establish a process for estimating the
assistance maintenance-of-effort amount for
each State under paragraph (1) at the begin-
ning of each fiscal year and adjusting such
amount during such fiscal year; and
‘‘(B) notifying each State of the esti-
mations and adjustments referred to in sub-
paragraph (A).
‘‘(3) 1997 PER CAPITA CORE BENEFIT AMOUNT
DEFINED.—For purposes of paragraph (1), the
‘1997 per capita core benefit amount’ for a State is
equal to the base per capita core benefit Federal
payment limit for AFDC recipients and non-cash
medicaid 
beneficiaries 
(specified 
in 
section
1931(c)(2)(A)) multiplied (for each of years 1995,
1996, and 1997) by a factor equal to 1 plus the
FEHBP State rolling increase percentage (as de-
fined in subsection (c)(2)) for the respective year.
‘‘(4) 
ASSISTANCE
INCREASE
FACTOR
DE-
SCRIBED.—For purposes of paragraph (1)(A), the
198
Title II, Subtitle B
‘assistance increase factor’ for a year for a State is
equal to the sum of—
‘‘(A) the FEHBP State rolling increase
factor (described in subsection (c)(2)) for the
year,
‘‘(B) the annual percentage change (which
may be positive or negative) in the population
of the State (as estimated by the Secretary),
and
‘‘(C)(i) 1 percentage point for 1998,
‘‘(ii) 2⁄3 percentage point for 1999,
‘‘(iii) 1⁄3 percentage point for 2000, and
‘‘(iv) 0 percentage points for each subse-
quent year.
‘‘(5) FEDERAL-TO-STATE
CONVERSION
FAC-
TOR.—For purposes of this title, the ‘Federal-to-
State conversion factor’ for a State is equal to the
ratio of—
‘‘(A) 1 minus the Federal medical assist-
ance percentage (as defined in section 1905(b))
for the State for 1994, to
‘‘(B) such Federal medical assistance per-
centage.
‘‘(c) FEHBP NATIONAL AND STATE ROLLING IN-
CREASE PERCENTAGES.—
199
Title II, Subtitle B
‘‘(1) NATIONAL INCREASE PERCENTAGE.—For
purposes of this title, the term ‘FEHBP national
rolling increase percentage’ means, for a year, the 5-
year weighted average of the annual national per-
centage increase in the premiums for health plans
offered under the Federal Employees Health Bene-
fits Program (under chapter 89 of title 5, United
States Code) for the 5-year period ending with the
previous year.
‘‘(2) STATE INCREASE PERCENTAGE.—For pur-
poses of this title, the term ‘FEHBP State rolling
increase percentage’ means, for a year with respect
to a State, the 5-year weighted average of the an-
nual percentage increase in the premiums for health
plans offered in the State under the Federal Em-
ployees Health Benefits Program (under chapter 89
of title 5, United States Code) for the 5-year period
ending with the previous year.
‘‘(3) DETERMINATION.—The increase percent-
ages under paragraphs (1) and (2) shall be deter-
mined by the Secretary, in consultation with the Di-
rector of Office of Personnel Management, based on
the best information available. Such increases shall
be adjusted—
200
Title II, Subtitle B
‘‘(A) to take into account the age distribu-
tion in the Federal workforce (not taking into
account individuals 65 years of age or older,
employees of the United States Postal Service,
retirees, and annuitants) relative to the age dis-
tribution in the population of AFDC recipients
and non-cash medicaid beneficiaries, and
‘‘(B) to disregard any changes due to
changes in the benefit package under the Fed-
eral Employees Health Benefits Program after
1994.
‘‘(d) USE OF STATE FUNDS.—Each State subsidy
program shall provide assurances satisfactory to the Sec-
retary that Federal funds will not be used, directly or indi-
rectly, to provide for the State expenditures required
under this section.
‘‘PART C—FINANCING FAILSAFE MECHANISM AND
GENERAL PROVISIONS
‘‘SEC. 2141. ENSURING DEFICIT NEUTRAL SPENDING ON
PREMIUM AND COST-SHARING ASSISTANCE
AND SUPPLEMENTAL ACUTE CARE BENEFITS.
‘‘(a) LIMITATION ON FEDERAL EXPENDITURES.—
‘‘(1) IN GENERAL.—In each fiscal year (begin-
ning with 1998), Federal payments under this title
shall be limited to the amount by which—
201
Title II, Subtitle B
‘‘(A) the aggregate limitation described in
subsection (b) for the year, exceeds
‘‘(B) the amount of the mandatory Federal
expenditures under title XVIII and XIX for the
year, including any offsetting receipts required
under title XVIII but excluding any discre-
tionary expenditures under such title or title
XIX.
‘‘(2) CONTINGENCY.—Any direct payment au-
thority provided under part A or B with respect to
premium and cost-sharing assistance or supple-
mental acute care benefits is subject to the operation
of this section.
‘‘(b) AGGREGATE LIMITATION.—For purposes of this
section, subject to subsection (d), the aggregate limitation
described in this subsection—
‘‘(1) for fiscal year 1998, is $351 billion;
‘‘(2) for fiscal year 1999, is $392 billion;
‘‘(3) for fiscal year 2000, is $433 billion;
‘‘(4) for fiscal year 2001, is $482 billion;
‘‘(5) for fiscal year 2002, is $535 billion;
‘‘(6) for fiscal year 2003, is $594 billion;
‘‘(7) for fiscal year 2004, is $660 billion; and
‘‘(8) for each succeeding fiscal year is the ag-
gregate limitation under this subsection for the pre-
202
Title II, Subtitle B
ceding fiscal year increased by the same percentage
as the percentage growth in national health expendi-
tures (as estimated by the Secretary) from the sec-
ond preceding fiscal year to the preceding fiscal
year.
‘‘(c) MID-SESSION BUDGET REVIEW ESTIMATES.—
As part the President’s supplemental summary providing
revised estimates of the budget (commonly called the ‘mid-
session review of the budget’) for each fiscal year (begin-
ning with fiscal year 1997), the President shall issue the
following:
‘‘(1) ESTIMATE FOR UPCOMING YEAR.—An esti-
mate of expenditures under titles XVIII and XIX
and parts A and B of this title for the upcoming fis-
cal year (determined without regard to this section).
‘‘(2) INFORMATION ON ACTUAL EXPENDITURES
FOR PRECEDING YEAR.—Information on actual ex-
penditures under titles XVIII and XIX and parts A
and B of this title for the preceding fiscal year de-
termined taking into account adjustments under this
section. Such information shall first be provide in
the mid-session review for the fiscal year 1999
budget.
‘‘(3) INFORMATIONAL ESTIMATE FOR CURRENT
YEAR.—An estimate of expenditures under titles
203
Title II, Subtitle B
XVIII and XIX and parts A and B of this title for
the current fiscal year. Such information shall first
be provided in the mid-session review for the fiscal
year 1998 budget.
‘‘(d) RETROSPECTIVE ADJUSTMENT.—If the infor-
mation provided under subsection (c)(2) during a fiscal
year indicates (taking into account any adjustment under
this section) that the amount of mandatory expenditures
described in subsection (a)(1)(B) for the preceding fiscal
year exceeded the aggregate limitation described in sub-
section (b) for the year, for the succeeding fiscal year the
aggregate limitation under subsection (b) shall be de-
creased by the amount of such excess.
‘‘(e) PROSPECTIVE ADJUSTMENT.—
‘‘(1) IN
GENERAL.—If the estimate provided
under subsection (c)(1) during a fiscal year indicates
that the amount of mandatory expenditures de-
scribed in subsection (a)(1)(B) for the upcoming fis-
cal year will exceed the aggregate limitation de-
scribed in subsection (b) for the year, then for the
succeeding fiscal year, the Director of the Office of
Management and Budget, after consultation with the
Secretary—
204
Title II, Subtitle B
‘‘(A) shall apply the adjustments described
in paragraph (2) to the extent necessary to
eliminate such excess, and
‘‘(B) if such adjustments are insufficient
to eliminate such excess, shall apply the adjust-
ments described in paragraph (3).
‘‘(2) REDUCTIONS IN AMOUNTS AVAILABLE FOR
SUPPLEMENTAL
ACUTE
CARE
BENEFITS
PRO-
GRAMS.—
‘‘(A) IN GENERAL.—An adjustment under
this paragraph consists of reduction in the limi-
tations on payments to States established under
section 2124(b).
‘‘(B) MANNER OF REDUCTION.—Such re-
duction shall be made in a proportional manner
and shall provide for an aggregate reduction in
the limits equal to the amount of such the re-
duction required to comply with the require-
ment of subsection (a).
‘‘(3) REDUCTION
IN
PREMIUM
ASSISTANCE
AMOUNT.—
‘‘(A) IN GENERAL.—An adjustment under
this paragraph consists of uniform proportional
reduction in the premium assistance percentage
applied under section 2103(b)(3), but only with
205
Title II, Subtitle B
respect to individuals who are not cost-sharing
assistance eligible individuals.
‘‘(B) MANNER OF REDUCTION.—The pro-
portion of the uniform proportional reduction
shall be calculated by the Director, in consulta-
tion with the Secretary, in a manner that re-
sults in an aggregate reduction in the payments
to States under part A in an amount that
assures (taking into account reductions result-
ing from the adjustment under paragraph (2))
compliance with the requirement of subsection
(a).
‘‘(4) NOTICE TO CONGRESS.—Before effecting
any adjustment under this subsection, the Director
shall submit to Congress a report that describes the
adjustment to be made and the basis for making the
adjustment.
‘‘(5) NO AFFECT ON STATE MAINTENANCE-OF-
EFFORT
REQUIREMENTS.—Any adjustment under
this subsection shall not affect the requirements for
States under sections 2107 or 2125.
‘‘(f) PRESIDENT’S BUDGET TO INCLUDE PREMIUM
ASSISTANCE ESTIMATES.—
206
Title II, Subtitle B
‘‘(1) IN GENERAL.—When the President sub-
mits a budget (as required by section 1105 of title
31), the President shall include in such budget—
‘‘(A) estimates of Federal expenditures
under titles XVIII and XIX and parts A and B
of this title otherwise provided without regard
to this section; and
‘‘(B) a comparison of the Federal expendi-
tures under titles XVIII and XIX with the ag-
gregate limitation established under subsection
(b); and
‘‘(C) estimates of adjustments under sub-
section (d) that are necessary to comply with
enforcement of the limitation under subsection
(a).
‘‘(2) FISCAL YEARS COVERED.—The President
shall submit such estimates for the upcoming fiscal
year and the following 4 fiscal years beginning with
the budget submitted for fiscal year 1997, and
‘‘(A) beginning with the budget for fiscal
year 1998, the current fiscal year; and
‘‘(B) beginning with the budget for fiscal
year 1999, the current fiscal year and the pre-
ceding fiscal year.
‘‘(g) CBO INFORMATION AND ANALYSES.—
207
Title II, Subtitle B
‘‘(1) 
CBO 
TECHNICAL
CORRECTIONS
RE-
PORT.—In or about January of each year when the
Congressional Budget Office changes the economic
and technical assumptions in the budget baseline
used by such Office, the Director of such Office shall
submit to the Congress a report on such changes.
The report shall include an explanation of what the
aggregate limitation amounts under subsection (b)
might have been if they had been computed based on
such changed assumptions.
‘‘(2) CBO ANALYSIS.—In or about March of
each year, after having an opportunity to analyze
the report submitted under subsection (e)(1), the Di-
rector of the Congressional Budget Office shall sub-
mit to Congress a report that contains an analysis
of the differences between the estimates contained in
the President’s report and the estimates of such Of-
fice based on the economic and technical assump-
tions referred to in paragraph (1).
‘‘SEC. 2142. PAYMENTS FOR ADMINISTRATIVE EXPENSES
UNDER TITLE.
‘‘(a) IN GENERAL.—Subject to subsection (b), the
Secretary shall pay to each State operating a State pro-
gram under this part or part B, for each quarter begin-
ning with the quarter commencing January 1, 1998, an
208
Title II, Subtitle B
amount equal to 50 percent of the amounts expended dur-
ing the quarter as found necessary by the Secretary for
the proper and efficient administration of such programs
in the State, not including any State maintenance-of-effort
expenditures required under section 2107 or 2125.
‘‘(b) LIMITATION.—
‘‘(1) IN GENERAL.—The amount of funds which
the Secretary is otherwise obligated to pay a State
for quarters in a year under subsection (a) shall not
exceed such proportion of the amount specified in
paragraph (2) as the Secretary determines, taking
into account relevant factors including the propor-
tion of premium assistance eligible individuals (in-
cluding cost-sharing assistance eligible individuals)
who reside in the State, the relative costs of admin-
istrative services in the State (compared to the na-
tional average costs of administrative services), and
total non-administrative expenditures by the State
under this title.
‘‘(2) 
TOTAL
AVAILABLE
ADMINISTRATIVE
AMOUNT.—For purposes of this subsection, the
amount specified in this paragraph for all calendar
quarters in a year for payments to States shall not
exceed—
‘‘(A) $2.3 billion for 1998,
209
Title II, Subtitle B
‘‘(B) $2.5 billion for 1999,
‘‘(C) $2.7 billion for 2000,
‘‘(D) $2.9 billion for 2001,
‘‘(E) $3.1 billion for 2002,
‘‘(F) $3.3 billion for 2003, and
‘‘(G) $3.6 billion for 2004.
‘‘SEC. 2143. HEALTH CARE ASSURANCE TRUST FUND.
‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund
to be known as the ‘Health Care Assurance Trust Fund’
(in this section referred to as the ‘Trust Fund’), consisting
of such amounts as may be appropriated or credited to
it under this section.
‘‘(b) TRANSFERS TO THE TRUST FUND.—
‘‘(1) IN GENERAL.—There are hereby appro-
priated to the Trust Fund the amount determined
by the Secretary of the Treasury, after consultation
with the Secretary of Health and Human Services,
to be equal to the sum of—
‘‘(A) the decrease in Federal expenditures
resulting from the provisions of, and the
amendments made by, the Bipartisan Health
Care Reform Act of 1994, and
210
Title II, Subtitle B
‘‘(B) amounts received by the Secretary
pursuant to sections 2104(e), 2105(b)(2), and
2105(e).
‘‘(2) 
TRANSFERS
FROM
OTHER
TRUST
FUNDS.—The Secretary of Health and Human Serv-
ices shall transfer each fiscal year to the Trust Fund
from the Federal Hospital Insurance Trust Fund
and the Federal Supplementary Medical Insurance
Trust Fund the amount which the Secretary esti-
mates is equal to the decrease in expenditures in
each such trust fund attributable to the provisions
of the Bipartisan Health Care Reform Act of 1994.
‘‘(3) 
TRANSFERS
FROM
GIFTS
AND
BE-
QUESTS.—The Secretary of Health and Human
Services shall transfer each fiscal year to the Trust
Fund any money gifts or bequests made to or on be-
half of the United States for allocation to the Trust
Fund.
‘‘(c) EXPENDITURES.—Amounts in the Trust Fund
shall be used as follows:
‘‘(1) Amounts shall be appropriated to the Sec-
retary for payments to States in a fiscal year for the
programs under parts A and B of this title (and to
the extent any such amount is not expended during
211
Title II, Subtitle B
any fiscal year, such amount shall be available for
such purpose for subsequent fiscal years).
‘‘(2) Amounts shall be transferred to an ac-
count in the General Fund of the Treasury in an
amount equal to the estimate of the Secretary of the
Treasury of the reductions in revenues deposited in
the General Fund resulting from the amendments
made to the Internal Revenue Code of 1986 by the
Bipartisan Health Care Reform Act of 1994.
‘‘(d) NATURE OF PAYMENT OBLIGATION.—Subject
to section 2141, sections 2106, 2124, and 2142 constitute
budget authority in advance of appropriations Acts, and
represent the obligation of the Federal Government to pro-
vide payments to States under such sections in accordance
with the applicable provisions of this title.
‘‘SEC. 2144. LIMITATION ON USE OF FUNDS FOR ABOR-
TIONS.
‘‘None of the funds appropriated to carry out this
title shall be expended for premium assistance under this
part that provides coverage of any abortion, for cost-shar-
ing assistance under this part with respect to expenses in-
curred for any abortion, or for supplemental acute care
benefits under part B for any abortion, except in the case
of an abortion where the procedure is necessary to save
212
Title II, Subtitle B
the life of the mother or where the pregnancy is the result
of an act of rape or incest.
‘‘SEC. 2145. AUDITS.
‘‘The Secretary shall conduct regular audits of the
activities under the State programs conducted under this
title.
‘‘SEC. 2146. DEMONSTRATION PROJECT AUTHORITY.
‘‘(a) IN GENERAL.—In the case of any experimental,
pilot, or demonstration project which in the judgment of
the Secretary is likely to assist in promoting the objectives
of this title in a State or States, the Secretary may waive
compliance with any of the requirements of this title to
the extent and for the period the Secretary finds necessary
to enable the Secretary to carry out the project.
‘‘(b) RESTRICTION.—
‘‘(1) FINDINGS.—The Secretary may authorize
a waiver under subsection (a) only if the Secretary
determines that under the waiver—
‘‘(A) all individuals who would be premium
assistance eligible individuals remain eligible for
premium assistance,
‘‘(B) benefits under part A are not reduced
below the level of benefits otherwise provided,
and
213
Title II, Subtitle B
‘‘(C) the amount of payments made by the
Federal Government do not exceed the amount
of payments otherwise provided.
‘‘(2) LIMITATION.—The Secretary may not au-
thorize a waiver of sections 2107 or 2125 (relating
to State maintenance-of-effort).
‘‘SEC. 2147. DEFINITIONS AND DETERMINATIONS OF IN-
COME.
‘‘For purposes of this title:
‘‘(1) DETERMINATIONS OF INCOME.—
‘‘(A) FAMILY INCOME.—The term ‘family
income’ means, with respect to an individual
who—
‘‘(i) is not a dependent (as defined in
subparagraph (B)) of another individual,
the sum of the modified adjusted gross in-
comes (as defined in subparagraph (D))
for the individual, the individual’s spouse,
and dependents of the individual; or
‘‘(ii) is a dependent of another indi-
vidual, the sum of the modified adjusted
gross incomes for the other individual, the
other individual’s spouse, and dependents
of the other individual.
214
Title II, Subtitle B
‘‘(B) DEPENDENT.—The term ‘dependent’
shall have the meaning given such term under
paragraphs (1) or (2) of section 152(a) of the
Internal Revenue Code of 1986.
‘‘(C) SPECIAL
RULE
FOR
FOSTER
CHIL-
DREN.—For purposes of subparagraph (A), a
child who is placed in foster care by a State
agency shall not be considered a dependent of
another individual.
‘‘(D) MODIFIED
ADJUSTED
GROSS
IN-
COME.—The term ‘modified adjusted gross in-
come’ means adjusted gross income (as defined
in section 62(a) of the Internal Revenue Code
of 1986)—
‘‘(i) determined without regard to sec-
tions 135, 162(l), 220, 911, 931, and 933
of such Code, and
‘‘(ii) increased by—
‘‘(I) the amount of interest re-
ceived or accrued by the individual
during the taxable year which is ex-
empt from tax,
‘‘(II) the amount of the social se-
curity benefits (as defined in section
86(d) of such Code) received during
215
Title II, Subtitle B
the taxable year to the extent not in-
cluded in gross income under section
86 of such Code,
‘‘(III) the amount of aid to fami-
lies with dependent children received
during the taxable year under part A
of title IV to the extent not included
in gross income under such Code, and
‘‘(IV) the amount of any supple-
mental security income benefits pro-
vided under title XVI.
The determination under the preceding sen-
tence shall be made without regard to any car-
ryover or carryback.
‘‘(E) ELECTION
WITH
RESPECT
TO
IN-
COME DETERMINATION.—As elected by a family
at the time of submission of an application for
a premium or cost-sharing assistance under this
part, family income shall be determined
either—
‘‘(i) by multiplying by a factor of 4
the individual’s family income for the 3-
month period immediately preceding the
month in which the application is made, or
216
Title II, Subtitle B
‘‘(ii) based upon estimated income for
the entire year in which the application is
submitted.
‘‘(2) APPLICABLE
POVERTY
LINE.—The term
‘applicable poverty line’ means the income official
poverty line (as defined by the Office of Manage-
ment and Budget, and revised annually in accord-
ance with section 673(2) of the Omnibus Budget
Reconciliation Act of 1981) that—
‘‘(A) in the case of a family of less than
five individuals, is applicable to a family of the
size involved; and
‘‘(B) in the case of a family of more than
four individuals, is applicable to a family of
four persons.
‘‘(3) PREGNANT WOMAN.—The term ‘pregnant
woman’ includes a woman during the 60-day period
beginning on the last day of the pregnancy.
‘‘(4) PREMIUM.—Any reference to the term
‘premium’ includes a reference to premium equiva-
lence for self-insured plans.’’.
217
Title II, Subtitle B
SEC. 2102. OPERATION OF PROGRAM AS STATE PLAN RE-
QUIREMENT UNDER MEDICAID.
(a) IN GENERAL.—Section 1902(a) of the Social Se-
curity Act (42 U.S.C. 1396a(a)), as amended by sections
3303(a)(1), 3003(a), and 3201(f)(5), is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(63);
(2) by striking the period at the end of para-
graph (64) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (64) the fol-
lowing new paragraph:
‘‘(65) provide for a State program furnishing
premium subsidies for low-income individuals in ac-
cordance with part A of title XXI.’’.
(b) EFFECTIVE DATE.—The requirement of section
1902(a)(65) of the Social Security Act (as added by sub-
section (a)) shall apply to Federal financial participation
for calendar quarters beginning on or after January 1,
1998.
SEC. 2103. APPLICATION OF MISCELLANEOUS PROVISIONS.
(a) APPLICATION OF SAVE PROVISIONS.—Section
1137(b) of the Social Security Act (42 U.S.C. 1320b–
7(b)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(4),
218
Title II, Subtitle B
(2) by striking the period at the end of para-
graph (5) and inserting ‘‘; and’’, and
(3) by adding at the end the following:
‘‘(6) a State subsidy program under part A of
title XXI.’’.
(b) DISCLOSURE OF CERTAIN INFORMATION.
(1) IN
GENERAL.—Subsection (l) of section
6103 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new
paragraph:
‘‘(15) DISCLOSURE OF RETURN INFORMATION
TO CARRY OUT HEALTH PREMIUM ASSISTANCE CER-
TIFICATE
PROGRAM.—The Secretary shall, upon
written request from a State, disclose to officials of
the State return information for purposes of deter-
mining or verifying whether any individual is enti-
tled to a premium assistance certificate under part
A of title XXI of the Social Security Act and the
amount thereof. Return information disclosed under
this paragraph may be used by such officers and em-
ployees only for the purposes of, and to the extent
necessary in, making such determination or verifica-
tion.’’.
(2) CONFORMING CHANGE.—Paragraph (4) of
section 6103(p) of such Code is amended by striking
219
Title III
‘‘or (14)’’ each place it appears and inserting ‘‘(14)
or (15)’’.
(c) APPLICATION OF DEFINITION OF STATE.—Sec-
tion 1001(a)(1) of the Social Security Act (42 U.S.C.
1301(a)(1)) is amended by striking ‘‘title XX’’ and insert-
ing ‘‘titles XX and XXI’’.
TITLE III—MEDICAID REFORMS
TABLE OF CONTENTS OF TITLE
Subtitle A—Treatment of Acute Care Benefits for AFDC and
Non-cash Beneficiaries
Sec. 3001. Division of medicaid benefits into core benefits and supplemental
benefits for AFDC and non-cash beneficiaries; limitation on
Federal financial participation for core benefits; sunset in med-
ical assistance.
Sec. 3002. Continuation of State medicaid eligibility categories.
Subtitle B—Flexibility in Expenditures for Supplemental
Benefits for AFDC and Non-cash Beneficiaries
Sec. 3101. Provision of supplemental acute care benefits through State supple-
mental acute care benefit programs.
‘‘PART B—STATE SUPPLEMENTAL ACUTE CARE BENEFITS PROGRAMS
‘‘Sec. 2121. Establishment of State supplemental acute care benefits pro-
grams.
‘‘Sec. 2122. Eligibility.
‘‘Sec. 2123. Scope and provision of benefits; benefits administration.
‘‘Sec. 2124. Payments to States.
‘‘Sec. 2125. State maintenance of effort requirement.’’
Subtitle C—Increased State Flexibility in Contracting for
Coordinated Care
Sec. 3201. Modification of Federal requirements to allow States more flexibility
in contracting for coordinated care services.
Subtitle D—Additional Medicaid Reforms
Sec. 3301. Reduction in amount of payment adjustments for disproportionate
share hospitals.
Sec. 3302. Elimination of medically needy program for individuals not in an in-
stitution.
Sec. 3303. Elimination of medicaid pediatric immunization program.
220
Title III, Subtitle A
Subtitle A—Treatment of Acute
Care Benefits for AFDC and
Non-cash Beneficiaries
SEC. 3001. DIVISION OF MEDICAID BENEFITS INTO CORE
BENEFITS AND SUPPLEMENTAL BENEFITS
FOR AFDC AND NON-CASH BENEFICIARIES;
LIMITATION ON FEDERAL FINANCIAL PAR-
TICIPATION FOR CORE BENEFITS; SUNSET IN
MEDICAL ASSISTANCE.
(a) IN GENERAL.—Title XIX of the Social Security
Act is amended by redesignating section 1931 as section
1932 and by inserting after section 1930 the following new
section:
‘‘MEDICAID REFORM RULES FOR BENEFITS FOR ACUTE
MEDICAL
SERVICES
FOR
AFDC
RECIPIENTS
AND
NON-CASH MEDICAID BENEFICIARIES
‘‘SEC. 1931. (a) APPLICATION OF SECTION.—
‘‘(1) IN GENERAL.—This section applies with
respect to medical assistance for acute medical serv-
ices (as defined in paragraph (2)) under State plans
under this title for calendar quarters beginning on
or after January 1, 1995, provided to AFDC recipi-
ents and non-cash medicaid categorical beneficiaries.
To the extent this section applies, it supersedes any
221
Title III, Subtitle A
contrary provision of this title or of other applicable
law.
‘‘(2) DEFINITIONS.—In this section:
‘‘(A) ACUTE
MEDICAL
SERVICES.—The
term ‘acute medical services’ means items and
services described in section 1905(a) other than
the following:
‘‘(i) Nursing facility services (as de-
fined in section 1905(f)).
‘‘(ii) Intermediate care facility for the
mentally retarded services (as defined in
section 1905(d)).
‘‘(iii) Personal care services (as de-
scribed in section 1905(a)(24)).
‘‘(iv) Private duty nursing services (as
referred to in section 1905(a)(8)).
‘‘(v) Home or community-based serv-
ices furnished under a waiver granted
under subsection (c), (d), or (e) of section
1915.
‘‘(vi) Home and community care fur-
nished to functionally disabled elderly indi-
viduals under section 1929.
‘‘(vii) Community supported living ar-
rangements services under section 1930.
222
Title III, Subtitle A
‘‘(viii) Case-management services (as
described in section 1915(g)(2)).
‘‘(ix) Home health care services (as
referred to in section 1905(a)(7)), clinic
services, and rehabilitation services that
are furnished to an individual who has a
condition or disability that qualifies the in-
dividual to receive any of the services de-
scribed in a previous clause.
‘‘(x) Hospice care.
‘‘(B) 
AFDC 
RECIPIENT.—The 
term
‘AFDC recipient’ means, for a month, an indi-
vidual who is receiving aid or assistance under
any plan of the State approved under title I, X,
XIV, or XVI, or part A or part E of title IV
for the month.
‘‘(C) CORE
BENEFITS.—The term ‘core
benefits’ means benefits with respect to acute
medical services which the Secretary identifies
under subsection (b)(1) as typically included in
the services covered under benchmark coverage
(as defined in section 1903(1) of the Bipartisan
Health Care Reform Act of 1994).
‘‘(D) 
NON-CASH
MEDICAID
BENE-
FICIARY.—The term ‘non-cash medicaid bene-
223
Title III, Subtitle A
ficiary’ means an individual described in section
1902(a)(10)(A) who is not an AFDC recipient
or an SSI recipient.
‘‘(E) SSI RECIPIENT.—The term ‘SSI re-
cipient’ means, for a month, an individual—
‘‘(i) with respect to whom supple-
mental security income benefits are being
paid under title XVI of the Social Security
Act for the month,
‘‘(ii) who is receiving a supplementary
payment under section 1616 of such Act or
under section 212 of Public Law 93–66 for
the month,
‘‘(iii) who is receiving monthly bene-
fits under section 1619(a) of the Social Se-
curity Act (whether or not pursuant to sec-
tion 1616(c)(3) of such Act) for the
month, or
‘‘(iv) who is treated under section
1619(b) of the Social Security Act as re-
ceiving supplemental security income bene-
fits in a month for purposes of title XIX
of such Act.
‘‘(F) SUPPLEMENTAL ACUTE CARE BENE-
FITS.—The term ‘supplemental acute care bene-
224
Title III, Subtitle A
fits’ means benefits for acute medical services
which are not—
‘‘(i) core benefits, and
‘‘(ii) benefits for items or services de-
scribed in clauses (i) through (x) of sub-
paragraph (A).
‘‘(b) DIVISION OF ACUTE MEDICAL SERVICE BENE-
FITS INTO CORE BENEFITS AND SUPPLEMENTAL ACUTE
CARE BENEFITS.—The Secretary shall divide the class of
benefits for acute medical services into the following bene-
fit groups:
‘‘(1) CORE
BENEFITS.—A group of benefits
consisting of core benefits (as defined in subsection
(a)(2)(C)).
‘‘(2) SUPPLEMENTAL
ACUTE
CARE
BENE-
FITS.—A group of benefits consisting of supple-
mental acute care benefits (as defined in subsection
(a)(2)(F)).
‘‘(c) LIMITATION ON AMOUNT OF FEDERAL FINAN-
CIAL PARTICIPATION FOR BENEFITS FOR ACUTE MEDI-
CAL SERVICES FOR AFDC RECIPIENT AND NON-CASH
MEDICAID BENEFICIARIES.—
‘‘(1) LIMITATION ON CORE BENEFITS FOR 1995
THROUGH 1997.—With respect to expenditures for
medical assistance for core benefits for AFDC re-
225
Title III, Subtitle A
cipients and non-cash medicaid beneficiaries in a
State the following rules shall apply:
‘‘(A) 1995.—For all quarters in calendar
year 1995, Federal financial participation under
section 1903(a)(1) shall not be payable to the
extent that per capita expenditures for such as-
sistance exceed a per capita limiting amount
equal to the base per capita core benefit Fed-
eral payment limit for AFDC recipients and
non-cash medicaid beneficiaries (specified in
paragraph (2)(A)) increased by the FEHBP
national rolling increase percentage (as defined
in section 2107(c)(1)) for 1995.
‘‘(B) 1996 AND 1997.—For all quarters in
calendar year 1996 and for all quarters in cal-
endar year 1997, Federal financial participation
under section 1903(a)(1) shall not be payable
to the extent that per capita expenditures for
such assistance for such year exceed a per cap-
ita limiting amount equal to the per capita lim-
iting amount established under subparagraph
(A) or this subparagraph, respectively, for the
preceding year increased by the FEHBP na-
tional rolling increase percentage (as defined in
226
Title III, Subtitle A
section 2107(c)(1)) for 1996 or 1997, respec-
tively.
‘‘(C) ESTIMATIONS AND ADJUSTMENTS.—
The Secretary shall—
‘‘(i) establish a process for estimating
the limiting amounts under this paragraph
at the beginning of each year and adjust-
ing such amount during such year; and
‘‘(ii) notifying each State of the esti-
mations and adjustments referred to in
clause (i).
‘‘(2) BASE PER CAPITA CORE BENEFIT FED-
ERAL PAYMENT LIMIT FOR AFDC RECIPIENTS AND
NON-CASH MEDICAID BENEFICIARIES.—
‘‘(A) IN GENERAL.—In paragraph (1)(A),
the ‘base per capita core benefit Federal pay-
ment limit for AFDC recipients and non-cash
medicaid beneficiaries’ specified in this subpara-
graph, for a State, is—
‘‘(i) the baseline Federal medicaid
core benefit payments for AFDC recipients
and non-cash medicaid beneficiaries (as de-
fined in subparagraph (B)) for the State,
divided by
227
Title III, Subtitle A
‘‘(ii) the number of AFDC recipients
and non-cash medicaid beneficiaries en-
rolled in the State plan under this title in
1994, as determined under subparagraph
(C).
‘‘(B) DETERMINATION OF BASELINE FED-
ERAL MEDICAID CORE BENEFIT PAYMENTS FOR
AFDC RECIPIENTS AND NON-CASH MEDICAID
BENEFICIARIES.—For purposes of subpara-
graph (A)(i), the ‘baseline medicaid core benefit
expenditures for AFDC recipients and non-cash
medicaid beneficiaries’ for a State is the
amount of Federal payments made under sec-
tion 1903(a)(1) with respect to medical assist-
ance furnished for core benefits for AFDC re-
cipients and non-cash medicaid beneficiaries for
all calendar quarters in 1994.
‘‘(C) DETERMINATION
OF
NUMBER
OF
AFDC
RECIPIENTS
AND
NON-CASH
MEDICAID
BENEFICIARIES.—For purposes of subpara-
graph (A)(ii), the number of AFDC recipients
and non-cash medicaid beneficiaries for a State
for 1994 shall be determined based on actual
reports submitted by the State to the Secretary.
In the case of individuals who were not recipi-
228
Title III, Subtitle A
ents or beneficiaries for the entire fiscal year,
the number shall take into account only the
portion of the year in which they were such re-
cipients. The Secretary may audit such reports.
‘‘(3) LIMITATION
ON
BENEFITS
FOR
ACUTE
MEDICAL SERVICES AFTER 1997.—With respect to
expenditures for medical assistance for acute medical
services benefits for AFDC recipients and non-cash
medicaid beneficiaries in a State for quarters in a
calendar year after 1997—
‘‘(A) no such Federal financial participa-
tion shall be payable under section 1903(a)(1),
and
‘‘(B) such a recipient or beneficiary is not
entitled to receive any medical assistance for
such benefits under the State plan under this
title.
‘‘(4) ADDITIONAL RULES.—For purposes of this
subsection—
‘‘(A) DISPROPORTIONATE
SHARE
PAY-
MENTS NOT INCLUDED.—Payments attributable
to section 1923 shall not be counted in the
amount of Federal payments.
‘‘(B) TREATMENT OF DISALLOWANCES.—
The amount of Federal payments shall take
229
Title III, Subtitle A
into account amounts (or an estimate of
amounts) disallowed.
‘‘(C) APPLICATION TO PARTICULAR ITEMS
AND
SERVICES.—In determining the Federal
payment with respect to a category of items
and services (within the core benefits) furnished
in a State, there shall be counted only that pro-
portion of such expenditures (determined only
with respect to medical assistance furnished to
AFDC recipients and non-cash medicaid bene-
ficiaries) that were attributable to items and
services included in the core benefits (taking
into account any limitation on amount, dura-
tion, or scope of items and services included in
such benefits).
‘‘(d) CONDITIONING FEDERAL FINANCIAL PARTICI-
PATION ON STATE MAINTENANCE-OF-EFFORT.—
‘‘(1) IN GENERAL.—Payment to a State under
section 1903(a) for a quarter during 1995, 1996, or
1997 is conditioned upon the State making expendi-
tures under this title from non-Federal funds (con-
sistent with paragraph (3)) for core benefits for
AFDC recipients and non-cash medicaid bene-
ficiaries equal to at least the State maintenance-of-
230
Title III, Subtitle A
effort amount computed under paragraph (2) for the
year.
‘‘(2) 
STATE
MAINTENANCE-OF-EFFORT
AMOUNT.—The State maintenance-of-effort amount
computed under this paragraph for a State for a
year is equal to the product of—
‘‘(A) the amount that would be computed
as the per capita limiting amount under sub-
section (c)(1) for the State for the year if the
FEHBP State rolling increase percentage (as
defined in section 2107(c)(2)) were substituted
for any reference to the FEHBP national roll-
ing increase percentage in such subsection; and
‘‘(B) the Federal-to-State conversion factor
(as defined in section 2107(b)(5)).
‘‘(3) USE OF STATE FUNDS.—Each State shall
provide assurances satisfactory to the Secretary that
Federal funds will not be used, directly or indirectly,
to provide for the State expenditures required under
this subsection.’’.
(b) CONFORMING AMENDMENT.—Section 1903(i) of
the Social Security Act (42 U.S.C. 1396b(i)), as amended
by section 3303(a)(3), is amended—
(1) by striking ‘‘or’’ at the end of paragraph
(12),
231
Title III, Subtitle A
(2) by striking the period at the end of para-
graph (13) and inserting ‘‘; or’’, and
(3) by inserting after paragraph (13) the
following:
‘‘(14) in accordance with section 1931, with re-
spect to amounts expended for medical assistance—
‘‘(A) for supplemental acute care benefits
(as defined in section 1931(a)(2)(F)) for AFDC
recipients and non-cash medicaid beneficiaries
for calendar quarters beginning on or after
January 1, 1995,
‘‘(B) for core benefits (as defined in sec-
tion 1931(a)(2)(C)) for AFDC recipients and
non-cash medicaid beneficiaries for calendar
quarters beginning on or after January 1,
1995, and before January 1, 1998, to the ex-
tent they exceed limits specified in section
1931(c)(1), and
‘‘(C) for core benefits for AFDC recipients
and non-cash medicaid beneficiaries for cal-
endar quarters beginning on or after January
1, 1998.’’.
232
Title III, Subtitle A
SEC. 3002. CONTINUATION OF STATE MEDICAID ELIGI-
BILITY CATEGORIES.
(a) IN GENERAL.—Section 1902(a) of the Social Se-
curity Act (42 U.S.C. 1369a(a)), as amended by section
3303(a)(1), is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(60);
(2) by striking the period at the end of para-
graph (61) and inserting ‘‘; and ’’; and
(3) by inserting after paragraph (61) the fol-
lowing new paragraph:
‘‘(62) provide for the continuation through De-
cember 31, 1997, of eligibility for medical assistance
under section 1902(a)(10)(A) of any class or cat-
egory of individuals eligible for medical assistance
under such section during fiscal year 1994.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to payments for calendar quar-
ters beginning on or after January 1, 1995.
233
Title III, Subtitle B
Subtitle B—Flexibility in Expendi-
tures for Supplemental Benefits
for AFDC and Non-cash Bene-
ficiaries
SEC. 3101. PROVISION OF SUPPLEMENTAL ACUTE CARE
BENEFITS THROUGH STATE SUPPLEMENTAL
ACUTE CARE BENEFIT PROGRAMS.
(a) IN GENERAL.—Title XXI of the Social Security
Act, as added by section 2101(a), is amended by inserting
after part A the following new part:
‘‘PART B—STATE SUPPLEMENTAL ACUTE CARE
BENEFITS PROGRAMS
‘‘SEC. 2121. ESTABLISHMENT OF STATE SUPPLEMENTAL
ACUTE CARE BENEFITS PROGRAMS.
‘‘(a) IN GENERAL.—Each State shall establish a
State supplemental acute care benefits program (each in
this part referred to as a ‘State supplemental acute care
benefits program’) that provides supplemental acute care
benefits for supplemental benefit eligible individuals.
‘‘(b) AVAILABILITY OF FUNDS.—Each State with a
State supplemental acute care benefits program approved
under this part is entitled, for calendar quarters beginning
on or after January 1, 1995, to payment under section
2124.
234
Title III, Subtitle B
‘‘(c) APPROVAL OF STATE PROGRAMS; PROGRAM DE-
SCRIPTIONS.—The Secretary may not approve a State
supplemental acute care benefits program unless the State
has submitted a detailed description of the form and man-
ner in which it will carry out the program (consistent with
the applicable requirements of this part) and the Secretary
finds that the program meets such applicable require-
ments.
‘‘SEC. 2122. ELIGIBILITY.
‘‘(a) IN GENERAL.—In this part, the term ‘supple-
mental benefit eligible individual’ means an individual
who, as of the time of provision of supplemental acute care
benefits, is described as follows:
‘‘(1) 1995 THROUGH 1997.—The individual is
an AFDC recipient or a non-cash medicaid bene-
ficiary (as such terms are defined in section
1931(a)(2)).
‘‘(2) 1998 AND THEREAFTER.—The individual
is a premium assistance eligible individual (as de-
fined in section 2102(a)).
‘‘(b) CONSTRUCTION.—Nothing in this part shall be
construed to create an entitlement for any specific supple-
mental benefit eligible individual.
235
Title III, Subtitle B
‘‘SEC. 2123. SCOPE AND PROVISION OF BENEFITS; BENE-
FITS ADMINISTRATION.
‘‘(a) IN GENERAL.—The supplemental acute care
benefits that may be made available under a State supple-
mental acute care benefits program may include supple-
mental acute care benefits (as defined in section
1931(a)(2)(F)).
‘‘(b) COVERAGE OF BENEFITS.—Each State supple-
mental acute care benefits program—
‘‘(1) shall establish methods and standards to
select the types, and the amount, duration, and
scope, of supplemental acute care benefits included
in the program and to assure access to, and the
quality of, services included in such benefits;
‘‘(2) in providing benefits for supplemental ben-
efit eligible individuals—
‘‘(A) may vary the supplemental acute care
benefits provided among reasonable classes of
such individuals, and
‘‘(B) may take into account the individual
needs of individuals; and
‘‘(3) shall coordinate the provision of such bene-
fits with other health insurance coverage and health
benefit programs in a manner that avoids duplica-
tion of benefits.
236
Title III, Subtitle B
‘‘(c) PAYMENT METHODS.—Benefits under a pro-
gram may be made available in the form of direct provi-
sion of services, reimbursement of providers, prepayment
to providers or health plans on a capitation basis, reim-
bursement of supplemental benefit eligible individuals for
expenses incurred for supplemental acute care benefits, or
a combination of these methods.
‘‘(d) ADMINISTRATION.—
‘‘(1) STATE AGENCY.—Each State supplemental
acute care benefits program shall designate any ap-
propriate State agency to administer the program.
‘‘(2) COORDINATION.—The State supplemental
acute care benefits program shall specify how the
program—
‘‘(A) will be coordinated with the State
medicaid plan, titles V and XX of the Social
Security Act, part A of this title, and any other
Federal or State programs that provide services
or assistance targeted to supplemental benefit
eligible individuals, and
‘‘(B) will be coordinated with qualified
health coverage.
‘‘(e) REPORTS AND INFORMATION TO SECRETARY;
AUDITS.—Each State supplemental acute care benefits
program shall furnish to the Secretary—
237
Title III, Subtitle B
‘‘(1) such reports, and cooperate with such au-
dits, as the Secretary determines are needed con-
cerning the State’s administration of the program
under this part, including the processing of any
claims under the program, and
‘‘(2) such data and information as the Sec-
retary may require in order to carry out the Sec-
retary’s responsibilities.
‘‘SEC. 2124. PAYMENTS TO STATES.
‘‘(a) IN GENERAL.—
‘‘(1) PAYMENTS
FOR
SUPPLEMENTAL
ACUTE
CARE
BENEFITS.—Subject to paragraph (2), sub-
section (b), and sections 2125 and 2141, the Sec-
retary shall provide for payment to each State oper-
ating an approved State supplemental acute care
benefits program in an amount equal to the amount
expended by the State under the program during the
quarter for supplemental acute care benefits for sup-
plemental benefit eligible individuals.
‘‘(2) NO PAYMENT FOR MAINTENANCE-OF-EF-
FORT
EXPENDITURES
OR
ADMINISTRATION.—No
payment shall be made under paragraph (1)—
‘‘(A) for any State maintenance-of-effort
expenditures required under section 2125, or
238
Title III, Subtitle B
‘‘(B) for any expenditures relating to ad-
ministration of a State subsidy program.
‘‘(3) PAYMENTS
FOR
RELATED
ADMINISTRA-
TIVE EXPENSES.—
‘‘(A) 1995 THROUGH 1997.—
‘‘(i) IN
GENERAL.—Subject to sec-
tions 2123(d)(2), 2124(b), 2125, and
2141, and clause (ii), the Secretary shall
pay to each State operating a State supple-
mental acute care benefits program, for
each quarter beginning with the quarter
commencing January 1, 1995, and ending
before January 1, 1998, an amount equal
to 50 percent of the amounts expended
during the quarter as found necessary by
the Secretary for the proper and efficient
administration of such program, not in-
cluding any State maintenance-of-effort ex-
penditures required under section 2125.
‘‘(ii) 
LIMITATION.—The 
Secretary
shall not find under clause (i) amounts ex-
pended to be for the proper and efficient
administration of a State supplemental
acute care benefits program if such
amounts exceed 3 percent of the total ex-
239
Title III, Subtitle B
penditures under the program in the quar-
ter (including State maintenance-of-effort
expenditures under section 2125).
‘‘(B) REFERENCE TO PAYMENT FOR AD-
MINISTRATIVE
EXPENSES
AFTER
1997.—For
payment for administrative expenses under this
part after 1997, see section 2142.
‘‘(4) FUNDING.—Payments to States under this
subsection shall be made by the Secretary, from the
Health Care Assurance Trust Fund (established
under section 2143), at such time and in such form
as provided in regulations promulgated by the Sec-
retary, based on the form and manner in which pay-
ments are made under section 1903.
‘‘(b) LIMITATION
ON
PAYMENTS
FOR
SUPPLE-
MENTAL ACUTE CARE BENEFITS.—
‘‘(1) IN
GENERAL.—Subject to section 2141
and paragraphs (2) and (3), the total amount of
payments that may be made to a State under sub-
section (a)(1) for all quarters in a calendar year may
not exceed the following:
‘‘(A) 1995.—For 1995, the product of—
‘‘(i) the initial per capita supple-
mental acute care benefit Federal payment
240
Title III, Subtitle B
limit (described in subsection (c)) for the
State, and
‘‘(ii) the average monthly number of
supplemental benefit eligible individuals in
the State in 1995.
‘‘(B) 1996 AND
1997.—For each of cal-
endar years 1996 and 1997, the product of—
‘‘(i) the limit specified in this clause
(or subparagraph (A)(i)) for the State for
the previous year increased by the FEHBP
national rolling increase factor for the year
(as defined in section 2107)(c)(1)), and
‘‘(ii) the average monthly number of
supplemental benefit eligible individuals in
the State in the year.
‘‘(C) 1998 AND THEREAFTER.—For 1998
or any succeeding year, the amount computed
under this subparagraph (or subparagraph (B))
for the State for the preceding year increased
by the supplemental acute care benefit increase
factor under subsection (d) for the year.
‘‘(2) ADJUSTMENT FOR AVAILABILITY OF ADDI-
TIONAL FUNDS.—If the Secretary determines for a
year that the total amount of the Federal payments
under section 2124 for a year for all the States is
241
Title III, Subtitle B
less than the sum of the limitations for the year for
all the States established under paragraph (1), the
limitation for each State under this subsection shall
be increased in a pro-rata manner by such an
amount as will not result in such total Federal pay-
ments under section 2124 exceeding the sum of such
limits for all the States for the year.
‘‘(3) ESTIMATIONS
AND
ADJUSTMENTS.—The
Secretary shall—
‘‘(A) establish a process for estimating the
limit established under this subsection for a
year at the beginning of the year and adjusting
such amount during such year; and
‘‘(B) notifying each State of the esti-
mations and adjustments referred to in sub-
paragraph (A).
‘‘(c) INITIAL PER CAPITA SUPPLEMENTAL ACUTE
CARE BENEFIT FEDERAL PAYMENT LIMIT DEFINED.—
‘‘(1) IN GENERAL.—For purposes of subsection
(b)(1)(A), the ‘initial per capita supplemental acute
care benefit Federal payment limit’ for a State for
a year is equal to the base per capita supplemental
acute care Federal payments (described in para-
graph (2)) increased by the FEHBP national rolling
242
Title III, Subtitle B
increase 
percentage 
(as 
defined 
in 
section
2107(c)(1)) for 1995.
‘‘(2) BASE PER CAPITA SUPPLEMENTAL ACUTE
CARE FEDERAL PAYMENTS.—For purposes of para-
graph (1), the ‘base per capita supplemental acute
care Federal payments’ described in this paragraph,
for a State, is—
‘‘(A) the baseline Federal medicaid supple-
mental acute care benefit expenditures (as de-
fined in paragraph (3)) for the State, divided
by
‘‘(B) the number of AFDC recipients and
non-cash medicaid beneficiaries (as described in
section 1931(a)(2)) enrolled in the State plan
under title XIX in 1994, as determined under
paragraph 
(4) 
consistent 
with 
section
1931(c)(3)(C).
‘‘(3) DETERMINATION OF BASELINE FEDERAL
MEDICAID
SUPPLEMENTAL
ACUTE
CARE
PAY-
MENTS.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (2)(A), the ‘baseline Federal medicaid
supplemental acute care payments’ for a State
is the amount of Federal payments made under
section 1903(a)(1) with respect to medical as-
243
Title III, Subtitle B
sistance furnished for supplemental acute care
benefits (as defined in section 1931(b)(2)) for
AFDC recipients and non-cash medicaid bene-
ficiaries for all calendar quarters in 1994.
‘‘(B) DISPROPORTIONATE
SHARE
PAY-
MENTS NOT INCLUDED.—In applying subpara-
graph (A), payments attributable to section
1923 shall not be counted in the amount of
payments.
‘‘(C) TREATMENT OF DISALLOWANCES.—
The amount determined under this paragraph
shall take into account amounts (or an estimate
of amounts) disallowed under title XIX.
‘‘(4) APPLICATION TO PARTICULAR ITEMS AND
SERVICES.—For purposes of this subsection, in de-
termining the per capita supplemental medical bene-
fit expenditure limit for a category of items and
services (within the supplemental acute care bene-
fits) furnished in a State, there shall be counted only
that proportion of such expenditures (determined
only with respect to medical assistance furnished to
AFDC recipients and non-cash medicaid bene-
ficiaries) that were attributable to items and services
included in the supplemental acute care benefits
(taking into account any limitation on amount, dura-
244
Title III, Subtitle B
tion, or scope of items and services included in such
benefits).
‘‘(d) SUPPLEMENTAL ACUTE CARE BENEFIT IN-
CREASE FACTOR DESCRIBED.—For purposes of sub-
section (b)(1)(C), the ‘supplemental medical benefit in-
crease factor’ for a year for a State is equal to the sum
of—
‘‘(1) the FEHBP national rolling increase fac-
tor (as defined in section 2107(c)(1)) for the year,
‘‘(2) the annual percentage change (which may
be positive or negative) in the population of the
State (as estimated by the Secretary for purposes of
section 2107(c)(4)(B)), and
‘‘(3)(A) 1 percentage point for 1998,
‘‘(B) 2⁄3 percentage point for 1999,
‘‘(C) 1⁄3 percentage point for 2000, and
‘‘(D) 0 percentage points for each subsequent
year.
‘‘SEC. 2125. STATE MAINTENANCE-OF-EFFORT REQUIRE-
MENT.
‘‘(a) IN GENERAL.—Payment to a State under sec-
tion 2124 for a quarter in a year (beginning with 1995)
is conditioned upon—
‘‘(1) the State making expenditures for supple-
mental acute care benefits under this part from non-
245
Title III, Subtitle B
Federal funds (consistent with subsection (d)) for
supplemental benefit eligible individuals equal to at
least the supplemental benefit maintenance-of-effort
amount computed under subsection (b) for the quar-
ter, and
‘‘(2) for quarters beginning on or after January
1, 1998, the State meeting the maintenance-of-effort
requirement under section 2107(a)(1) for the quar-
ter.
‘‘(b) SUPPLEMENTAL BENEFITS MAINTENANCE-OF-
EFFORT AMOUNT.—The supplemental benefits mainte-
nance-of-effort amount computed under this subsection
for a State for a quarter in a year is equal to 1⁄4 of the
product of—
‘‘(1) the amount that would be computed as the
minimum limitation under section 2124(b) for the
State for all quarters in the year (determined with-
out regard to section 2124(b)(2)) if the FEHBP
State rolling increase percentage (as defined in sec-
tion 2107(b)(2)) were substituted for the FEHBP
national rolling increase percentage in section
2124(c)(1)(A) and in determining the supplemental
medical benefit increase factor under 2124(d); and
‘‘(2) the Federal-to-State conversion factor
(specified under section 2107(b)(5)).
246
Title III, Subtitle B
‘‘(c) USE OF STATE FUNDS.—Each State supple-
mental acute care benefits program shall provide assur-
ances satisfactory to the Secretary that Federal funds will
not be used, directly or indirectly, to provide for the State
expenditures required under this section.’’.
(b) CONFORMING AMENDMENT TO MEDICAID PRO-
GRAM.—Section 1931 of the Social Security Act, as added
by section 3001, is amended by adding at the end the fol-
lowing:
‘‘(e) ELIMINATION OF ENTITLEMENT FOR SUPPLE-
MENTAL ACUTE CARE BENEFITS.—With respect to medi-
cal assistance for supplemental acute care benefits for
AFDC recipients and non-cash medicaid beneficiaries in
a State for quarters in 1995 or any succeeding year—
‘‘(1) no Federal financial participation shall be
payable under section 1903(a)(1),
‘‘(2) the State may receive payments for such
supplemental acute care benefits under part B of
title XXI, and
‘‘(3) such a recipient or beneficiary is not enti-
tled to receive any medical assistance for such bene-
fits under the State plan under this title.’’.
247
Title III, Subtitle C
Subtitle C—Increased State Flexi-
bility in Contracting for Coordi-
nated Care
SEC. 3201. MODIFICATION OF FEDERAL REQUIREMENTS TO
ALLOW STATES MORE FLEXIBILITY IN CON-
TRACTING FOR COORDINATED CARE SERV-
ICES.
(a) IN GENERAL.—
(1) PAYMENT
PROVISIONS.—Section 1903(m)
of the Social Security Act (42 U.S.C. 1396b(m)) is
amended to read as follows:
‘‘(m)(1) No payment shall be made under this title
to a State with respect to expenditures incurred by such
State for payment to an entity which is at risk (as defined
in section 1932(a)(4)) for services provided by such entity
to individuals eligible for medical assistance under the
State plan under this title, unless the entity is a risk con-
tracting entity (as defined in section 1932(a)(3)) and the
State and such entity comply with the applicable provi-
sions of section 1932.
‘‘(2) No payment shall be made under this title to
a State with respect to expenditures incurred by such
State for payment for services provided to an individual
eligible for medical assistance under the State plan under
this title if such payment by the State is contingent upon
248
Title III, Subtitle C
the individual receiving such services from a specified
health care provider or subject to the approval of a speci-
fied health care provider, unless the entity receiving pay-
ment is a primary care case management entity (as de-
fined in section 1932(a)(2)) and the State and such entity
comply with the applicable provisions of section 1932.’’.
(2) REQUIREMENTS FOR COORDINATED CARE
SERVICES.—Title XIX of such Act (42 U.S.C. 1396
et seq.), as amended by section 2001(a), is amended
by redesignating section 1932 as section 1933 and
by inserting after section 1931 the following new
section:
‘‘REQUIREMENTS FOR COORDINATED CARE SERVICES
‘‘SEC. 1932. (a) DEFINITIONS.—For purposes of this
title—
‘‘(1) PRIMARY
CARE
CASE
MANAGEMENT
PRO-
GRAM.—The term ‘primary care case management
program’ means a program operated by a State
agency under which such State agency enters into
contracts with primary care case management enti-
ties for the provision of health care items and serv-
ices which are specified in such contracts and the
provision of case management services to individuals
who are—
‘‘(A) eligible for medical assistance under
the State plan,
249
Title III, Subtitle C
‘‘(B) enrolled with such primary care case
management entities, and
‘‘(C) entitled to receive such specified
health care items and services and case man-
agement services only as approved and ar-
ranged for, or provided, by such entities.
‘‘(2) PRIMARY CARE CASE MANAGEMENT EN-
TITY.—The term ‘primary care case management
entity’ means a health care provider which—
‘‘(A) must be a physician, group of physi-
cians, a Federally qualified health center, a
rural health clinic, a community health author-
ity (under section 1934), or an entity employing
or having other arrangements with physicians
operating under a contract with a State to pro-
vide services under a primary care case man-
agement program,
‘‘(B) receives payment on a fee for service
basis (or, in the case of a Federally qualified
health center or a rural health clinic, on a rea-
sonable cost per encounter basis) for the provi-
sion of health care items and services specified
in such contract to enrolled individuals,
‘‘(C) receives an additional fixed fee per
enrollee for a period specified in such contract
250
Title III, Subtitle C
for providing case management services (includ-
ing approving and arranging for the provision
of health care items and services specified in
such contract on a referral basis) to enrolled
individuals, and
‘‘(D) is not an entity that is at risk (as de-
fined in paragraph (4)) for such case manage-
ment services.
‘‘(3) RISK
CONTRACTING
ENTITY.—The term
‘risk contracting entity’ means an entity which has
a contract with the State agency (or a health insur-
ing organization described in subsection (n)(2))
under which the entity—
‘‘(A) provides or arranges for the provision
of health care items or services which are speci-
fied in such contract to individuals eligible for
medical assistance under the State plan, and
‘‘(B) is at risk (as defined in paragraph
(4)) for part or all of the cost of such items or
services furnished to individuals eligible for
medical assistance under such plan.
‘‘(4) AT RISK.—The term ‘at risk’ means an
entity which—
‘‘(A) has a contract with the State agency
under which such entity is paid a fixed amount
251
Title III, Subtitle C
for providing or arranging for the provision of
health care items or services specified in such
contract to an individual eligible for medical as-
sistance under the State plan and enrolled with
such entity, regardless of whether such items or
services are furnished to such individual, and
‘‘(B) is liable for all or part of the cost of
furnishing such items or services, regardless of
whether such cost exceeds such fixed payment.
‘‘(b) GENERAL REQUIREMENTS
FOR RISK CON-
TRACTING ENTITIES.—
‘‘(1) ORGANIZATION.—A risk contracting entity
meets the requirements of this section only if such
entity—
‘‘(A)(i) is a qualified health maintenance
organization as defined in section 1310(d) of
the Public Health Service Act, as determined by
the Secretary pursuant to section 1312 of such
Act; or
‘‘(ii) is described in subparagraph (C), (D),
(E), (F), or (G) of subsection (e)(4);
‘‘(B) is a Federally qualified health center,
a rural health clinic, or a community health au-
thority (under section 1934) which has made
adequate provision against the risk of insol-
252
Title III, Subtitle C
vency (pursuant to the guidelines and regula-
tions issued by the Secretary under this sec-
tion), and ensures that individuals eligible for
medical assistance under the State plan are not
held liable for such entity’s debts in case of
such entity’s insolvency; or
‘‘(C) is an entity which meets all applicable
State licensing requirements and has made ade-
quate provision against the risk of insolvency
(pursuant to the guidelines and regulations is-
sued by the Secretary under this section), and
ensures that individuals eligible for medical as-
sistance under the State plan are not held liable
for such entity’s debts in case of such entity’s
insolvency.
‘‘(2) GUARANTEES OF ENROLLEE ACCESS.—A
risk contracting entity meets the requirements of
this section only if—
‘‘(A) the geographic locations, hours of op-
eration, patient to staff ratios, and other rel-
evant characteristics of such entity are suffi-
cient to afford individuals eligible for medical
assistance under the State plan access to such
entities that is at least equivalent to the access
to health care providers that would be available
253
Title III, Subtitle C
to such individuals if such individuals were not
enrolled with such entity;
‘‘(B) such entity has reasonable and ade-
quate hours of operation, including 24-hour
availability of—
‘‘(i)(I) treatment for an unforeseen ill-
ness, injury, or condition of an individual
eligible for medical assistance under the
State plan and enrolled with such entity;
or
‘‘(II) referral to other health care pro-
viders for such treatment; and
‘‘(ii) other information, as determined
by the Secretary or the State; and
‘‘(C) such entity complies with such other
requirements relating to access to care as the
Secretary or the State may impose.
‘‘(3) CONTRACT WITH STATE AGENCY.—A risk
contracting entity meets the requirements of this
section only if such entity has a written contract
with the State agency which provides—
‘‘(A) that the entity will comply with all
applicable provisions of this section, that the
State has the right to penalize the entity for
failure to comply with such requirements and to
254
Title III, Subtitle C
terminate the contract in accordance with sub-
section (j), and that the entity will be subject
to penalties imposed by the Secretary under
subsection (i) for failure to comply with such
requirements;
‘‘(B) for a payment methodology based on
experience rating or another actuarially sound
methodology approved by the Secretary, which
guarantees (as demonstrated by such models or
formulas as the Secretary may approve) that—
‘‘(i) payments to the entity under the
contract shall not exceed an amount equal
to 100 percent of the costs (which shall in-
clude administrative costs and which may
include costs for inpatient hospital services
that would have been incurred in the ab-
sence of such contract) that would have
been incurred by the State agency in the
absence of the contract; and
‘‘(ii) the financial risk for inpatient
hospital services is limited to an extent
established by the State;
‘‘(C) that the Secretary and the State (or
any person or organization designated by ei-
ther) shall have the right to audit and inspect
255
Title III, Subtitle C
any books and records of the entity (and of any
subcontractor) that pertain—
‘‘(i) to the ability of the entity (or a
subcontractor) to bear the risk of potential
financial losses; or
‘‘(ii) to services performed or deter-
minations of amounts payable under the
contract;
‘‘(D) that in the entity’s enrollment,
reenrollment, or disenrollment of individuals eli-
gible for medical assistance under the State
plan and eligible to enroll, reenroll, or disenroll
with the entity pursuant to the contract, the en-
tity will not discriminate among such individ-
uals on the basis of such individuals’ health
status or requirements for health care services;
‘‘(E)(i) individuals eligible for medical as-
sistance under the State plan who have enrolled
with the entity are permitted to terminate such
enrollment without cause as of the beginning of
the first calendar month (or in the case of an
entity described in subsection (e)(4), as of the
beginning of the first enrollment period) follow-
ing a full calendar month after a request is
made for such termination;
257
Title III, Subtitle C
‘‘(G) for disclosure of information in ac-
cordance with subsection (h) and section 1124;
‘‘(H) that any physician incentive plan op-
erated by the entity meets the requirements of
section 1876(i)(8);
‘‘(I) for maintenance of sufficient patient
encounter data to identify the physician who de-
livers services to patients;
‘‘(J) that the entity will comply with the
requirement of section 1902(w) with respect to
each enrollee;
‘‘(K) that the entity will implement a
grievance system, inform enrollees in writing
about how to use such grievance system, ensure
that grievances are addressed in a timely man-
ner, and report grievances to the State at inter-
vals to be determined by the State;
‘‘(L) that contracts between the entity and
each subcontractor of such entity will require
each subcontractor—
‘‘(i) to cooperate with the entity in the
implementation of its internal quality as-
surance program under paragraph (4) and
adhere to the standards set forth in the
quality 
assurance 
program, 
including
258
Title III, Subtitle C
standards with respect to access to care,
facilities in which patients receive care,
and availability, maintenance, and review
of medical records;
‘‘(ii) to cooperate with the Secretary,
the State agency and any contractor to the
State in monitoring and evaluating the
quality and appropriateness of care pro-
vided to enrollees as required by Federal or
State laws and regulations; and
‘‘(iii) where applicable, to adhere to
regulations and program guidance with re-
spect to reporting requirements under sec-
tion 1905(r);
‘‘(M) that, where the State deems it nec-
essary to ensure the timely provision to enroll-
ees 
of 
the 
services 
listed 
in 
subsection
(f)(2)(C)(ii), the State may arrange for the pro-
vision of such services by health care providers
other than the entity and may adjust its pay-
ments to the entity accordingly;
‘‘(N) that the entity and the State will
comply with guidelines and regulations issued
by the Secretary with respect to procedures for
marketing and information that must be pro-
259
Title III, Subtitle C
vided to individuals eligible for medical assist-
ance under the State plan;
‘‘(O) that the entity must provide pay-
ments to hospitals for inpatient hospital serv-
ices furnished to infants who have not attained
the age of 1 year, and to children who have not
attained the age of 6 years and who receive
such services in a disproportionate share hos-
pital, in accordance with paragraphs (2) and
(3) of section 1902(s);
‘‘(P) that the entity shall report to the
State, at such time and in such manner as the
State shall require, on the rates paid for hos-
pital services (by type of hospital and type of
service) furnished to individuals enrolled with
the entity;
‘‘(Q) detailed information regarding the
relative responsibilities of the entity and the
State, for providing (or arranging for the provi-
sion of), and making payment for, the following
items and services:
‘‘(i) immunizations;
‘‘(ii) the purchase of vaccines;
‘‘(iii) lead screening and treatment
services;
260
Title III, Subtitle C
‘‘(iv) screening and treatment for tu-
berculosis;
‘‘(v) screening and treatment for, and
preventive services related to, sexually
transmitted diseases, including HIV infec-
tion;
‘‘(vi) screening, diagnostic, and treat-
ment services required under section
1905(r);
‘‘(vii) family planning services;
‘‘(viii) services prescribed under—
‘‘(I) an Individual Education
Plan or Individualized Family Service
Plan under part B or part H of the
Individuals with Disabilities Edu-
cation Act; and
‘‘(II) any other individual plan of
care or treatment developed under
this title or title V;
‘‘(ix) transportation needed to obtain
services to which the enrollee is entitled
under the State plan or pursuant to an in-
dividual plan of care or treatment de-
scribed in subclauses (I) and (II) of clause
(viii); and
261
Title III, Subtitle C
‘‘(x) such other services as the Sec-
retary may specify;
‘‘(R) detailed information regarding the
procedures for coordinating the relative respon-
sibilities of the entity and the State to ensure
prompt delivery of, compliance with any appli-
cable reporting requirements related to, and ap-
propriate record keeping with respect to, the
items and services described in subparagraph
(Q); and
‘‘(S) such other provisions as the Secretary
may require.
‘‘(4) INTERNAL QUALITY ASSURANCE.—A risk
contracting entity meets the requirements of this
section only if such entity has in effect a written in-
ternal quality assurance program which includes a
systematic process to achieve specified and measur-
able goals and objectives for access to, and quality
of, care, which—
‘‘(A) identifies the organizational units re-
sponsible for performing specific quality assur-
ance functions, and ensures that such units are
accountable to the governing body of the entity
and that such units have adequate supervision,
262
Title III, Subtitle C
staff, and other necessary resources to perform
these functions effectively,
‘‘(B) if any quality assurance functions are
delegated to other entities, ensures that the risk
contracting entity remains accountable for all
quality assurance functions and has mecha-
nisms to ensure that all quality assurance ac-
tivities are carried out,
‘‘(C) includes methods to ensure that phy-
sicians and other health care professionals
under contract with the entity are licensed or
certified as required by State law, or are other-
wise qualified to perform the services such phy-
sicians and other professionals provide, and
that these qualifications are ensured through
appropriate credentialing and recredentialing
procedures,
‘‘(D) provides for continuous monitoring of
the delivery of health care, through—
‘‘(i) identification of clinical areas to
be monitored, including immunizations,
prenatal care, services required under sec-
tion 1905(r), and other appropriate clinical
areas, to reflect care provided to enrollees
263
Title III, Subtitle C
eligible for medical assistance under the
State plan,
‘‘(ii) use of quality indicators and
standards for assessing the quality and ap-
propriateness of care delivered, and the
availability and accessibility of all services
for which the entity is responsible under
such entity’s contract with the State,
‘‘(iii) use of epidemiological data or
chart review, as appropriate, and patterns
of care overall,
‘‘(iv) patient surveys, spot checks, or
other appropriate methods to determine
whether—
‘‘(I) enrollees are able to obtain
timely appointments with primary
care providers and specialists, and
‘‘(II) 
enrollees 
are 
otherwise
guaranteed access and care as pro-
vided under paragraph (2),
‘‘(v) provision of written information
to health care providers and other person-
nel on the outcomes, quality, availability,
accessibility, and appropriateness of care,
and
264
Title III, Subtitle C
‘‘(vi) implementation of corrective ac-
tions,
‘‘(E) includes standards for timely enrollee
access to information and care which at a mini-
mum shall incorporate standards used by the
State or professional or accreditation bodies for
facilities furnishing perinatal and neonatology
care and other forms of specialized medical and
surgical care,
‘‘(F) includes standards for the facilities in
which patients receive care,
‘‘(G) includes standards for managing and
treating medical conditions prevalent among
such entity’s enrollees eligible for medical as-
sistance under the State plan,
‘‘(H) includes mechanisms to ensure that
enrollees eligible for medical assistance under
the State plan receive services for which the en-
tity is responsible under the contract which are
consistent with standards established by the ap-
plicable professional societies or government
agencies,
‘‘(I) includes standards for the availability,
maintenance, and review of medical records
265
Title III, Subtitle C
consistent with generally accepted medical prac-
tice,
‘‘(J) provides for dissemination of quality
assurance procedures to health care providers
under contract with the entity, and
‘‘(K) meets any other requirements pre-
scribed by the Secretary or the State.
‘‘(5) TRANSITIONAL AGREEMENTS WITH ESSEN-
TIAL COMMUNITY PROVIDERS.—A risk contracting
entity meets the requirements of this section only if
such entity complies with the requirements of section
1013 of the Bipartisan Health Care Reform Act of
1994 (subject to the sunset contained in subsection
(j) of such section).
‘‘(c) GENERAL REQUIREMENTS FOR PRIMARY CARE
CASE MANAGEMENT PROGRAMS.—A primary care case
management program implemented by a State under this
section shall—
‘‘(1) provide that each primary care case man-
agement entity participating in such program has a
written contract with the State agency,
‘‘(2) include methods for selection and monitor-
ing of participating primary care case management
entities to ensure—
266
Title III, Subtitle C
‘‘(A) that the geographic locations, hours
of operation, patient to staff ratio, and other
relevant characteristics of such entities are suf-
ficient to afford individuals eligible for medical
assistance under the State plan access to such
entities that is at least equivalent to the access
to health care providers that would be available
to such individuals if such individuals were not
enrolled with such entity,
‘‘(B) that such entities and their profes-
sional personnel are licensed as required by
State law and qualified to provide case manage-
ment services, through methods such as ongo-
ing monitoring of compliance with applicable re-
quirements and providing information and tech-
nical assistance, and
‘‘(C) that such entities—
‘‘(i) provide timely and appropriate
primary care to such enrollees consistent
with standards established by applicable
professional 
societies 
or 
governmental
agencies, or such other standards pre-
scribed by the Secretary or the State, and
‘‘(ii) where other items and services
are determined to be medically necessary,
267
Title III, Subtitle C
give timely approval of such items and
services and referral to appropriate health
care providers,
‘‘(3) provide that no preapproval shall be re-
quired for emergency health care items or services,
and
‘‘(4) permit individuals eligible for medical as-
sistance under the State plan who have enrolled with
a primary care case management entity to terminate
such enrollment without cause not later than the be-
ginning of the first calendar month following a full
calendar month after the request is made for such
termination.
‘‘(d) EXEMPTIONS FROM STATE PLAN REQUIRE-
MENTS.—A State plan may permit or require an individ-
ual eligible for medical assistance under such plan to en-
roll with a risk contracting entity or a primary care case
management entity without regard to the requirements set
forth in the following paragraphs of section 1902(a):
‘‘(1) Paragraph (1) (concerning statewideness).
‘‘(2) Paragraph (10)(B) (concerning com-
parability of benefits), to the extent benefits not in-
cluded in the State plan are provided.
‘‘(3) Paragraph (23) (concerning freedom of
choice of provider), except with respect to services
268
Title III, Subtitle C
described in section 1905(a)(4)(C) and except as re-
quired under subsection (e).
‘‘(e) STATE OPTIONS WITH RESPECT TO ENROLL-
MENT AND DISENROLLMENT.—
‘‘(1) MANDATORY ENROLLMENT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), a State plan may require an
individual eligible for medical assistance under
such plan to enroll with a risk contracting en-
tity or a primary care case management entity
only if the individual is permitted a choice with-
in a reasonable service area (as defined by the
State)—
‘‘(i) between or among 2 or more risk
contracting entities,
‘‘(ii) among a risk contracting entity
and a primary care case management pro-
gram, or
‘‘(iii) among primary care case man-
agement entities.
‘‘(B) SPECIAL NEEDS CHILDREN.—
‘‘(i) IN GENERAL.—A State may not
require a child with special health care
needs (as defined in clause (ii)) to enroll
269
Title III, Subtitle C
with a risk contracting entity or a primary
care case management entity.
‘‘(ii) DEFINITION.—For purposes of
this subparagraph, the term ‘child with
special health care needs’ refers to an indi-
vidual eligible for supplemental security in-
come under title XVI, a child described
under section 501(a)(1)(D), or a child de-
scribed in section 1902(e)(3).
‘‘(2) REENROLLMENT
OF
INDIVIDUALS
WHO
REGAIN ELIGIBILITY.—In the case of an individual
who—
‘‘(A) in a month is eligible for medical as-
sistance under the State plan and enrolled with
a risk contracting entity with a contract under
this section,
‘‘(B) in the next month (or next 2 months)
is not eligible for such medical assistance, but
‘‘(C) in the succeeding month is again eli-
gible for such benefits,
the State agency (subject to subsection (b)(3)(E))
may enroll the individual for that succeeding month
with such entity, if the entity continues to have a
contract with the State agency under this sub-
section.
270
Title III, Subtitle C
‘‘(3) DISENROLLMENT.—
‘‘(A) RESTRICTIONS ON DISENROLLMENT
WITHOUT CAUSE.—Except as provided in sub-
paragraph (C), a State plan may restrict the
period in which individuals enrolled with risk
contracting entities described in paragraph (4)
may terminate such enrollment without cause to
the first month of each period of enrollment (as
defined in subparagraph (B)), but only if the
State provides notification, at least once during
each such enrollment period, to individuals en-
rolled with such entity of the right to terminate
such enrollment and the restriction on the exer-
cise of this right. Such restriction shall not
apply to requests for termination of enrollment
for cause.
‘‘(B) PERIOD OF ENROLLMENT.—For pur-
poses of this paragraph, the term ‘period of en-
rollment’ means—
‘‘(i) a period not to exceed 6 months
in duration, or
‘‘(ii) a period not to exceed 1 year in
duration, in the case of a State that, on
the effective date of this paragraph, had in
effect a waiver under section 1115 of re-
271
Title III, Subtitle C
quirements under this title under which
the State could establish a 1-year mini-
mum period of enrollment with risk con-
tracting entities.
‘‘(C) SPECIAL NEEDS CHILDREN.—A State
may not restrict disenrollment of a child with
special health care needs (as defined in para-
graph (1)(B)(ii)).
‘‘(4) ENTITIES ELIGIBLE FOR DISENROLLMENT
RESTRICTIONS.—A risk contracting entity described
in this paragraph is—
‘‘(A) a qualified health maintenance orga-
nization as defined in section 1310(d) of the
Public Health Service Act,
‘‘(B) an eligible organization with a con-
tract under section 1876,
‘‘(C) an entity that is receiving (and has
received during the previous 2 years) a grant of
at least $100,000 under section 329(d)(1)(A)
or 330(d)(1) of the Public Health Service Act,
‘‘(D) an entity that—
‘‘(i) received a grant of at least
$100,000 under section 329(d)(1)(A) or
section 330(d)(1) of the Public Health
Service Act in the fiscal year ending June
272
Title III, Subtitle C
30, 1976, and has been a grantee under ei-
ther such section for all periods after that
date, and
‘‘(ii) provides to its enrollees, on a
prepaid capitation or other risk basis, all
of the services described in paragraphs (1),
(2), (3), (4)(C), and (5) of section 1905(a)
(and the services described in section
1905(a)(7), to the extent required by sec-
tion 1902(a)(10)(D)),
‘‘(E) an entity that is receiving (and has
received during the previous 2 years) at least
$100,000 (by grant, subgrant, or subcontract)
under the Appalachian Regional Development
Act of 1965,
‘‘(F) a nonprofit primary health care en-
tity located in a rural area (as defined by the
Appalachian Regional Commission)—
‘‘(i) which received in the fiscal year
ending June 30, 1976, at least $100,000
(by grant, subgrant, or subcontract) under
the Appalachian Regional Development Act
of 1965, and
‘‘(ii) which, for all periods after such
date, either has been the recipient of a
273
Title III, Subtitle C
grant, subgrant, or subcontract under such
Act or has provided services on a prepaid
capitation or other risk basis under a con-
tract with the State agency initially en-
tered into during a year in which the entity
was the recipient of such a grant,
subgrant, or subcontract,
‘‘(G) an entity that had contracted with
the State agency prior to 1970 for the provi-
sion, on a prepaid risk basis, of services (which
did not include inpatient hospital services) to
individuals eligible for medical assistance under
the State plan,
‘‘(H) a program pursuant to an undertak-
ing described in subsection (n)(3) in which at
least 25 percent of the membership enrolled on
a prepaid basis are individuals who—
‘‘(i) are not insured for benefits under
part B of title XVIII or eligible for medical
assistance under the State plan, and
‘‘(ii) (in the case of such individuals
whose prepayments are made in whole or
in part by any government entity) had the
opportunity at the time of enrollment in
the program to elect other coverage of
274
Title III, Subtitle C
health care costs that would have been
paid in whole or in part by any govern-
mental entity,
‘‘(I) an entity that, on the date of enact-
ment of this provision, had a contract with the
State agency under a waiver under section 1115
or 1915(b) and was not subject to a require-
ment under this title to permit disenrollment
without cause, or
‘‘(J) an entity that has a contract with the
State agency under a waiver under section
1915(b)(5).
‘‘(f) STATE MONITORING AND EXTERNAL REVIEW.—
‘‘(1) STATE GRIEVANCE PROCEDURE.—A State
contracting with a risk contracting entity or a pri-
mary care case management entity under this sec-
tion shall provide for a grievance procedure for en-
rollees of such entity with at least the following ele-
ments:
‘‘(A) A toll-free telephone number for en-
rollee questions and grievances.
‘‘(B) Periodic notification of enrollees of
their rights with respect to such entity or pro-
gram.
275
Title III, Subtitle C
‘‘(C) Periodic sample reviews of grievances
registered with such entity or program or with
the State.
‘‘(D) Periodic survey and analysis of en-
rollee satisfaction with such entity or program,
including 
interviews 
with 
individuals 
who
disenroll from the entity or program.
‘‘(2) STATE MONITORING OF QUALITY AND AC-
CESS.—
‘‘(A) RISK
CONTRACTING
ENTITIES.—A
State contracting with a risk contracting entity
under this section shall provide for ongoing
monitoring of such entity’s compliance with the
requirements of subsection (b), including com-
pliance with the requirements of such entity’s
contract under subsection (b)(3), and shall un-
dertake appropriate followup activities to ensure
that any problems identified are rectified and
that compliance with the requirements of sub-
section (b) and the requirements of the contract
under subsection (b)(3) is maintained.
‘‘(B) PRIMARY CARE CASE MANAGEMENT
ENTITIES.—A State electing to implement a
primary care case management program shall
provide for ongoing monitoring of the pro-
276
Title III, Subtitle C
gram’s compliance with the requirements of
subsection (c) and shall undertake appropriate
followup activities to ensure that any problems
identified are rectified and that compliance with
subsection (c) is maintained.
‘‘(C) SERVICES.—
‘‘(i) IN
GENERAL.—The State shall
establish procedures (in addition to those
required under subparagraphs (A) and
(B)) to ensure that the services listed in
clause (ii) are available in a timely manner
to an individual enrolled with a risk con-
tracting entity or a primary care case man-
agement entity. Where necessary to ensure
the timely provision of such services, the
State shall arrange for the provision of
such services by health care providers
other than the risk contracting entity or
the primary care case management entity
in which an individual is enrolled.
‘‘(ii) SERVICES LISTED.—The services
listed in this clause are—
‘‘(I) prenatal care;
‘‘(II) immunizations;
277
Title III, Subtitle C
‘‘(III) lead screening and treat-
ment;
‘‘(IV) prevention, diagnosis and
treatment of tuberculosis, sexually
transmitted diseases (including HIV
infection), and other communicable
diseases; and
‘‘(V) such other services as the
Secretary may specify.
‘‘(iii) REPORT.—The procedures re-
ferred to in clause (i) shall be described in
an annual report to the Secretary provided
by the State.
‘‘(3) EXTERNAL INDEPENDENT REVIEW.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (4), a State contracting with a risk
contracting entity under this section shall pro-
vide for an annual external independent review
of the quality and timeliness of, and access to,
the items and services specified in such entity’s
contract with the State agency. Such review
shall be conducted by a utilization control and
peer review organization with a contract under
section 1153 or another organization unaffili-
ated with the State government or with any
278
Title III, Subtitle C
risk contracting entity and approved by the
Secretary.
‘‘(B) CONTENTS OF REVIEW.—An external
independent review conducted under this para-
graph shall include the following:
‘‘(i) A review of the entity’s medical
care, through sampling of medical records
or other appropriate methods, for indica-
tions of quality of care and inappropriate
utilization (including overutilization) and
treatment.
‘‘(ii) A review of enrollee inpatient
and ambulatory data, through sampling of
medical records or other appropriate meth-
ods, to determine trends in quality and ap-
propriateness of care.
‘‘(iii) Notification of the entity and
the State when the review under this para-
graph indicates inappropriate care, treat-
ment, or utilization of services (including
overutilization).
‘‘(iv) Other activities as prescribed by
the Secretary or the State.
‘‘(C) AVAILABILITY.—The results of each
external independent review conducted under
279
Title III, Subtitle C
this paragraph shall be available to the public
consistent with the requirements for disclosure
of information contained in section 1160.
‘‘(4) DEEMED
COMPLIANCE
WITH
EXTERNAL
INDEPENDENT QUALITY OF CARE REVIEW REQUIRE-
MENTS.—
‘‘(A) IN
GENERAL.—The Secretary may
deem the State to have fulfilled the requirement
for independent external review of quality of
care with respect to an entity which has been
accredited by an organization described in sub-
paragraph (B) and approved by the Secretary.
‘‘(B) ACCREDITING
ORGANIZATION.—An
accrediting organization described in this sub-
paragraph must—
‘‘(i) exist for the primary purpose of
accrediting coordinated care organizations;
‘‘(ii) be governed by a group of indi-
viduals representing health care providers,
purchasers, regulators, and consumers (a
minority of which shall be representatives
of health care providers);
‘‘(iii) have substantial experience in
accrediting coordinated care organizations,
280
Title III, Subtitle C
including an organization’s internal quality
assurance program;
‘‘(iv) be independent of health care
providers or associations of health care
providers;
‘‘(v) be a nonprofit organization; and
‘‘(vi) have an accreditation process
which meets requirements specified by the
Secretary.
‘‘(5) 
FEDERAL
MONITORING
RESPONSIBIL-
ITIES.—The Secretary shall review the external inde-
pendent reviews conducted pursuant to paragraph
(3) and shall monitor the effectiveness of the State’s
monitoring and followup activities required under
subparagraph (A) of paragraph (2). If the Secretary
determines that a State’s monitoring and followup
activities are not adequate to ensure that the re-
quirements of paragraph (2) are met, the Secretary
shall undertake appropriate followup activities to en-
sure that the State improves its monitoring and fol-
lowup activities.
‘‘(g) PARTICIPATION
OF CERTAIN PROVIDERS.—
Each risk contracting entity shall meet the requirements
of section 1013 of the Bipartisan Health Care Reform Act
281
Title III, Subtitle C
of 1994 in the same manner as they would apply to a
group health plan (when such section becomes effective).
‘‘(h) TRANSACTIONS WITH PARTIES IN INTEREST.—
‘‘(1) IN GENERAL.—Each risk contracting en-
tity which is not a qualified health maintenance or-
ganization (as defined in section 1310(d) of the
Public Health Service Act) must report to the State
and, upon request, to the Secretary, the Inspector
General of the Department of Health and Human
Services, and the Comptroller General of the United
States a description of transactions between the en-
tity and a party in interest (as defined in section
1318(b) of such Act), including the following trans-
actions:
‘‘(A) Any sale or exchange, or leasing of
any property between the entity and such a
party.
‘‘(B) Any furnishing for consideration of
goods, services (including management serv-
ices), or facilities between the entity and such
a party, but not including salaries paid to em-
ployees for services provided in the normal
course of their employment.
282
Title III, Subtitle C
‘‘(C) Any lending of money or other exten-
sion of credit between the entity and such a
party.
The State or the Secretary may require that infor-
mation reported with respect to a risk contracting
entity which controls, or is controlled by, or is under
common control with, another entity be in the form
of a consolidated financial statement for the risk
contracting entity and such entity.
‘‘(2) AVAILABILITY
OF
INFORMATION.—Each
risk contracting entity shall make the information
reported pursuant to paragraph (1) available to its
enrollees upon reasonable request.
‘‘(i) REMEDIES FOR FAILURE TO COMPLY.—
‘‘(1) IN GENERAL.—If the Secretary determines
that a risk contracting entity or a primary care case
management entity—
‘‘(A) fails substantially to provide services
required under section 1905(r), when such an
entity is required to do so, or provide medically
necessary items and services that are required
to be provided to an individual enrolled with
such an entity, if the failure has adversely af-
fected (or has substantial likelihood of adversely
affecting) the individual;
283
Title III, Subtitle C
‘‘(B) imposes premiums on individuals en-
rolled with such an entity in excess of the pre-
miums permitted under this title;
‘‘(C) acts to discriminate among individ-
uals in violation of the provision of subsection
(b)(3)(D), including expulsion or refusal to
reenroll an individual or engaging in any prac-
tice that would reasonably be expected to have
the effect of denying or discouraging enrollment
(except as permitted by this section) by eligible
individuals with the entity whose medical condi-
tion or history indicates a need for substantial
future medical services;
‘‘(D) misrepresents or falsifies information
that is furnished—
‘‘(i) to the Secretary or the State
under this section; or
‘‘(ii) to an individual or to any other
entity under this section; or
‘‘(E) fails to comply with the requirements
of section 1876(i)(8),
the Secretary may provide, in addition to any other
remedies available under law, for any of the rem-
edies described in paragraph (2).
284
Title III, Subtitle C
‘‘(2) ADDITIONAL
REMEDIES.—The remedies
described in this paragraph are—
‘‘(A) civil money penalties of not more
than $25,000 for each determination under
paragraph (1), or, with respect to a determina-
tion under subparagraph (C) or (D)(i) of such
paragraph, of not more than $100,000 for each
such determination, plus, with respect to a de-
termination under paragraph (1)(B), double the
excess amount charged in violation of such
paragraph (and the excess amount charged
shall be deducted from the penalty and returned
to the individual concerned), and plus, with re-
spect to a determination under paragraph
(1)(C), $15,000 for each individual not enrolled
as a result of a practice described in such para-
graph, or
‘‘(B) denial of payment to the State for
medical assistance furnished by a risk contract-
ing entity or a primary care case management
entity under this section for individuals enrolled
after the date the Secretary notifies the entity
of a determination under paragraph (1) and
until the Secretary is satisfied that the basis for
285
Title III, Subtitle C
such determination has been corrected and is
not likely to recur.
The provisions of section 1128A (other than sub-
sections (a) and(b)) shall apply to a civil money pen-
alty under subparagraph (A) in the same manner as
such provisions apply to a penalty or proceeding
under section 1128A(a).
‘‘(j) TERMINATION OF CONTRACT BY STATE.—Any
State which has a contract with a risk contracting entity
or a primary care case management entity may terminate
such contract if such entity fails to comply with the terms
of such contract or any applicable provision of this section.
‘‘(k) FAIR HEARING.—Nothing in this section shall
affect the rights of an individual eligible to receive medical
assistance under the State plan to obtain a fair hearing
under section 1902(a)(3) or under applicable State law.
‘‘(l) DISPROPORTIONATE SHARE HOSPITALS.—Noth-
ing in this section shall affect any requirement on a State
to comply with section 1923.
‘‘(m) REFERRAL PAYMENTS.—For 1 year following
the date on which individuals eligible for medical assist-
ance under the State plan in a service area are required
to enroll with a risk contracting entity or a primary care
case management entity, Federally qualified health cen-
ters and rural health centers located in such service area
286
Title III, Subtitle C
or providing care to such enrollees, shall receive a fee for
educating such enrollees about the availability of services
from the risk contracting entity or primary care case man-
agement entity with which such enrollees are enrolled.
‘‘(n) SPECIAL RULES.—
‘‘(1) NONAPPLICABILITY
OF
CERTAIN
PROVI-
SIONS TO CERTAIN RISK CONTRACTING ENTITIES.—
In the case of any risk contracting entity which—
‘‘(A)(i) is an individual physician or a phy-
sician group practice of less than 50 physicians,
and
‘‘(ii) is not described in paragraphs (A)
and (B) of subsection (b)(1), and
‘‘(B) is at risk only for the health care
items and services directly provided by such en-
tity,
paragraphs (3)(K), (3)(L), (3)(O), (3)(P), and (4)
of subsection (b), and paragraph (3) of subsection
(f), shall not apply to such entity.
‘‘(2) EXCEPTION
FROM
DEFINITION
OF
RISK
CONTRACTING ENTITY.—For purposes of this sec-
tion, the term ‘risk contracting entity’ shall not in-
clude a health insuring organization which was used
by a State before April 1, 1986, to administer a por-
287
Title III, Subtitle C
tion of the State plan of such State on a statewide
basis.
‘‘(3) NEW
JERSEY.—The rules under section
1903(m)(6) as in effect on the day before the effec-
tive date of this section shall apply in the case of an
undertaking by the State of New Jersey (as de-
scribed in such section 1903(m)(6)).
‘‘(o) CONTINUATION
OF CERTAIN COORDINATED
CARE PROGRAMS.—The Secretary may provide for the
continuation of any coordinated care program operating
under section 1115 or 1915 without requiring compliance
with any provision of this section which conflicts with the
continuation of such program and without requiring any
additional waivers under such sections 1115 and 1915 if
the program has been successful in assuring quality and
containing costs (as determining by the Secretary) and is
likely to continue to be successful in the future.
‘‘(p) GUIDELINES, REGULATIONS, AND MODEL CON-
TRACT.—
‘‘(1) GUIDELINES AND REGULATIONS ON SOL-
VENCY.—At the earliest practicable time after the
date of enactment of this section, the Secretary shall
issue guidelines and regulations concerning solvency
standards for risk contracting entities and sub-
contractors of such risk contracting entities. Such