SEC. 2. INDEPENDENT AUDIT AND ACTUARY REQUIRE-
MENTS 
FOR 
STATE 
MEDICAID 
MANAGED 
CARE PROGRAMS. 
(a) IN GENERAL.—Section 1932 of the Social Secu-
rity Act (42 U.S.C. 1396u–2) is amended by adding at 
the end the following: 
‘‘(i) INDEPENDENT AUDIT REQUIREMENTS.— 
‘‘(1) IN GENERAL.—As a condition of receiving 
a payment under section 1903(a) with respect to ex-
penditures under a contract with a managed care 
entity under section 1903(m), a State, acting 
through the State agency under the State plan or 
another State entity, shall, in accordance with this 
subsection, enter into a contract with an inde-
pendent auditor to— 
‘‘(A) conduct audits of such managed care 
entity under such contract; and 
‘‘(B) report the results of such audits 
under paragraph (7). 
‘‘(2) INDEPENDENT
AUDITOR
DEFINED.—In 
this subsection, subject to subparagraph (B), the 
term ‘independent auditor’ means, with respect to 
the audit of a managed care entity in a State for a 
period of time, an auditing entity that— 
‘‘(A) had no financial relationship with the 
managed care entity or an affiliate of such 
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managed care entity for activities occurring 
during the period for which the audit is con-
ducted; 
‘‘(B) has no such financial relationship 
with the managed care entity or affiliate for the 
period during which the audit is being con-
ducted; and 
‘‘(C) with respect to the initial audits 
under paragraph (4) of a managed care entity, 
has not had such a financial relationship with 
the managed care entity or affiliate during the 
2-year period ending on the date the auditing 
entity and State enter into a contract under 
paragraph (1). 
‘‘(3) STANDARDS FOR AUDITS.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
set uniform standards for the audits required 
under paragraph (4). 
‘‘(B) REQUIREMENTS FOR STANDARDS.— 
The standards under subparagraph (A) shall— 
‘‘(i) be consistent with Federal Gov-
ernment auditing standards issued by the 
Comptroller General of the United States; 
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‘‘(ii) specify a uniform reporting for-
mat for the reporting of such audits under 
paragraph (7); and 
‘‘(iii) require that any report for an 
audit required under paragraph (7) include 
a certification by a certified public ac-
countant. 
‘‘(4) TYPES OF AUDITS AND INFORMATION RE-
QUIRED.— 
‘‘(A) IN GENERAL.—The independent audi-
tor contracting with a State under paragraph 
(1) shall conduct and complete, for each man-
aged care entity with a contract under section 
1903(m) in such State the following: 
‘‘(i) A biannual financial audit de-
scribed in paragraph (5). 
‘‘(ii) A biannual performance-compli-
ance audit described in paragraph (6). 
‘‘(B) TIMING OF AUDITS.— 
‘‘(i) INITIAL, STAGGERED
AUDITS.— 
For the purpose of establishing baseline 
data, with respect to each managed care 
entity with a contract under section 
1903(m) with a State, the State shall com-
plete— 
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‘‘(I) an initial audit under sub-
paragraph (A)(i) not later than 6 
months after the date of enactment of 
the Medicaid Integrity Act of 2013; 
and 
‘‘(II) an initial audit under sub-
paragraph (A)(ii) not later than 18 
months after such date. 
The initial audit of an entity under sub-
paragraph (A)(ii) shall be completed ap-
proximately 1 year after the initial audit of 
the entity under subparagraph (A)(i). 
‘‘(ii) SUBSEQUENT, STAGGERED
AU-
DITS.—Subsequent audits under each such 
subparagraph shall be completed every two 
years. 
‘‘(C) PERIOD COVERED BY AUDIT.— 
‘‘(i) IN GENERAL.—Each audit under 
this paragraph shall cover a 2-calendar- 
year period. 
‘‘(ii) INITIAL FINANCIAL AUDIT.—The 
first biennial financial audit under sub-
paragraph (A)(i) shall cover the 2-cal-
endar-year period that ends on the last day 
of the calendar year that ends 6 months 
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before the deadline for completion of such 
initial audit under (B)(i)(I). 
‘‘(iii) INITIAL PERFORMANCE-COMPLI-
ANCE AUDIT.—The first biennial perform-
ance-compliance audit under subparagraph 
(A)(ii) shall cover the 2-calendar-year pe-
riod that ends on the last day of the cal-
endar year that ends 6 months before the 
deadline for completion of such initial 
audit under (B)(i)(II). 
‘‘(5) BIANNUAL FINANCIAL AUDIT.—A biannual 
financial audit under paragraph (4)(A)(i), with re-
spect to a managed care entity with a contract 
under section 1903(m) in a State, is an audit of the 
finances of the managed care entity relating to such 
contract. Each such audit shall include an audit of 
at least the following information: 
‘‘(A) EXPENSES
AND
REVENUES.—With 
respect to services provided under such con-
tract, the managed care entity’s— 
‘‘(i) administrative expenses; 
‘‘(ii) revenues, including investment 
income; and 
‘‘(iii) payments made by the managed 
care entity for nonadministrative services. 
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‘‘(B) CLAIMS
AND
ENCOUNTER
DATA.— 
Subject to paragraph (7)(C)— 
‘‘(i) claims data related to services 
provided by such managed care entity 
under such contract; and 
‘‘(ii) encounter data that relate to 
such services and support such claims. 
‘‘(C) EXPENDITURES ON PATIENT SERV-
ICES.—With respect to services provided under 
such contract, the managed care entity’s pay-
ments to health care providers, that have been 
issued a national provider identifier under title 
XI, for items and services furnished on behalf 
of beneficiaries based on the claims and encoun-
ter data described in subparagraph (B). 
‘‘(D) PROVIDER PAYMENT RATIO.— 
‘‘(i) IN GENERAL.—The ratio of the 
payments to health care providers de-
scribed in subparagraph (C) to the aggre-
gate payments to the managed care entity 
under the contract. 
‘‘(ii) 
CONSTRUCTION.—The 
ratio 
under clause (i) is not a medical loss ratio 
and is not comparable to a medical loss 
ratio. 
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