(A) A component for quality assessment 
activities (described in title V). 
(B) A component for health professional 
education expenditures. 
(C) A component for administrative costs. 
(D) A component (in this title referred to 
as the ‘‘operating component’’) for operating 
and other expenditures not described in sub-
paragraphs (A) through (C), consisting of 
amounts not included in the other components. 
A State may provide for the allocation of this 
component between capital expenditures and 
other expenditures. 
(3) ALLOCATION AMONG COMPONENTS.—Tak-
ing into account the State health security budgets 
established and submitted under section 603, the 
Board shall allocate the national health security 
budget among the components in a manner that— 
(A) assures a fair allocation for quality as-
sessment activities (consistent with the national 
health security spending growth limit); and 
(B) assures that the health professional 
education expenditure component is sufficient 
to provide for the amount of health professional 
education expenditures sufficient to meet the 
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need for covered health care services (consistent 
with the national health security spending 
growth limit under subsection (b)(2)). 
(b) BASIS FOR TOTAL EXPENDITURES.— 
(1) IN GENERAL.—The total expenditures speci-
fied in such budget shall be the sum of the capita-
tion amounts computed under section 602(a) and 
the amount of Federal administrative expenditures 
needed to carry out this Act. 
(2) NATIONAL
HEALTH
SECURITY
SPENDING 
GROWTH LIMIT.—For purposes of this subtitle, the 
national health security spending growth limit de-
scribed in this paragraph for a year is (A) zero, or, 
if greater, (B) the average annual percentage in-
crease in the gross domestic product (in current dol-
lars) during the 3-year period beginning with the 
first quarter of the fourth previous year to the first 
quarter of the previous year minus the percentage 
increase (if any) in the number of eligible individuals 
residing in any State the United States from the 
first quarter of the second previous year to the first 
quarter of the previous year. 
(c) DEFINITIONS.—In this title: 
(1) CAPITAL EXPENDITURES.—The term ‘‘cap-
ital expenditures’’ means expenses for the purchase, 
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lease, construction, or renovation of capital facilities 
and for equipment and includes return on equity 
capital. 
(2) HEALTH
PROFESSIONAL
EDUCATION
EX-
PENDITURES.—The term ‘‘health professional edu-
cation expenditures’’ means expenditures in hospitals 
and other health care facilities to cover costs associ-
ated with teaching and related research activities. 
SEC. 602. COMPUTATION OF INDIVIDUAL AND STATE CAPI-
TATION AMOUNTS. 
(a) CAPITATION AMOUNTS.— 
(1) INDIVIDUAL CAPITATION AMOUNTS.—In es-
tablishing the national health security budget under 
section 601(a) and in computing the national aver-
age per capita cost under subsection (b) for each 
year, the Board shall establish a method for com-
puting the capitation amount for each eligible indi-
vidual residing in each State. The capitation amount 
for an eligible individual in a State classified within 
a risk group (established under subsection (d)(2)) is 
the product of— 
(A) a national average per capita cost for 
all covered health care services (computed 
under subsection (b)); 
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(B) the State adjustment factor (estab-
lished under subsection (c)) for the State; and 
(C) the risk adjustment factor (established 
under subsection (d)) for the risk group. 
(2) STATE CAPITATION AMOUNT.— 
(A) IN GENERAL.—For purposes of this 
title, the term ‘‘State capitation amount’’ 
means, for a State for a year, the sum of the 
capitation amounts computed under paragraph 
(1) for all the residents of the State in the year, 
as estimated by the Board before the beginning 
of the year involved. 
(B) USE
OF
STATISTICAL
MODEL.—The 
Board may provide for the computation of 
State capitation amounts based on statistical 
models that fairly reflect the elements that com-
prise the State capitation amount described in 
subparagraph (A). 
(C) POPULATION INFORMATION.—The Bu-
reau of the Census shall assist the Board in de-
termining the number, place of residence, and 
risk group classification of eligible individuals. 
(b) COMPUTATION OF NATIONAL AVERAGE PER CAP-
ITA COST.— 
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