157 
•HR 2642 EAH2 
icaid, and SCHIP Extension Act of 2007 (Public 
Law 110–173) is amended— 
(A) by striking ‘‘June 30, 2008’’ and insert-
ing ‘‘April 1, 2009’’; 
(B) by inserting ‘‘, including the proposed 
regulation published on August 13, 2007 (72 
Federal Register 45201),’’ after ‘‘rehabilitation 
services’’; and 
(C) by inserting ‘‘, including the final regu-
lation published on December 28, 2007 (72 Fed-
eral Register 73635),’’ after ‘‘school-based trans-
portation’’. 
(3) ADDITIONAL MORATORIA.— 
(A) IN
GENERAL.—Notwithstanding any 
other provision of law, the Secretary of Health 
and Human Services shall not, prior to April 1, 
2009, take any action (through promulgation of 
regulation, issuance of regulatory guidance, use 
of Federal payment audit procedures, or other 
administrative action, policy, or practice, in-
cluding a Medical Assistance Manual trans-
mittal or letter to State Medicaid directors) to 
impose any restrictions relating to a provision 
described in subparagraph (B) or (C) if such re-
strictions are more restrictive in any aspect than 
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158 
•HR 2642 EAH2 
those applied to the respective provision as of the 
date specified in subparagraph (D) for such pro-
vision. 
(B) PORTION OF INTERIM FINAL REGULA-
TION RELATING TO MEDICAID TREATMENT OF OP-
TIONAL CASE MANAGEMENT SERVICES.— 
(i) IN
GENERAL.—Subject to clause 
(ii), the provision described in this subpara-
graph is the interim final regulation relat-
ing to optional State plan case management 
services under the Medicaid program pub-
lished on December 4, 2007 (72 Federal 
Register 68077) in its entirety. 
(ii) EXCEPTION.—The provision de-
scribed in this subparagraph does not in-
clude the portion of such regulation as re-
lates directly to implementing section 
1915(g)(2)(A)(ii) of the Social Security Act, 
as amended by section 6052 of the Deficit 
Reduction Act of 2005 (Public Law 109– 
171), through the definition of case manage-
ment services and targeted case manage-
ment services contained in proposed section 
440.169 of title 42, Code of Federal Regula-
tions, but only to the extent that such por-
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159 
•HR 2642 EAH2 
tion is not more restrictive than the policies 
set forth in the Dear State Medicaid Direc-
tor letter on case management issued on 
January 19, 2001 (SMDL #01–013), and 
with respect to community transition case 
management, the Dear State Medicaid Di-
rector letter issued on July 25, 2000 
(Olmstead Update 3). 
(C) PORTION
OF
PROPOSED
REGULATION 
RELATING TO MEDICAID ALLOWABLE PROVIDER 
TAXES.— 
(i) IN
GENERAL.—Subject to clause 
(ii), the provision described in this subpara-
graph is the final regulation relating to 
health-care-related taxes under the Medicaid 
program published on February 22, 2008 
(73 Federal Register 9685) in its entirety. 
(ii) EXCEPTION.—The provision de-
scribed in this subparagraph does not in-
clude the portions of such regulation as re-
late to the following: 
(I) REDUCTION IN THRESHOLD.— 
The reduction from 6 percent to 5.5 
percent in the threshold applied under 
section 433.68(f)(3)(i) of title 42, Code 
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160 
•HR 2642 EAH2 
of Federal Regulations, for determining 
whether or not there is an indirect 
guarantee to hold a taxpayer harmless, 
as required to carry out section 
1903(w)(4)(C)(ii) of the Social Secu-
rity Act, as added by section 403 of the 
Medicare Improvement and Extension 
Act of 2006 (division B of Public Law 
109–432). 
(II) CHANGE
IN
DEFINITION
OF 
MANAGED
CARE.—The change in the 
definition of managed care as proposed 
in the revision of section 433.56(a)(8) 
of title 42, Code of Federal Regula-
tions, as required to carry out section 
1903(w)(7)(A)(viii) of the Social Secu-
rity Act, as amended by section 6051 
of the Deficit Reduction Act of 2005 
(Public Law 109–171). 
(D) DATE SPECIFIED.—The date specified 
in this subparagraph for the provision described 
in— 
(i) subparagraph (B) is December 3, 
2007; or 
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161 
•HR 2642 EAH2 
(ii) subparagraph (C) is February 21, 
2008. 
(b) FUNDS
TO
REDUCE
MEDICAID
FRAUD
AND 
ABUSE.— 
(1) IN
GENERAL.—For purposes of reducing 
fraud and abuse in the Medicaid program under title 
XIX of the Social Security Act— 
(A) there is appropriated to the Office of the 
Inspector General of the Department of Health 
and Human Services, out of any money in the 
Treasury 
not 
otherwise 
appropriated, 
$25,000,000, for fiscal year 2009; and 
(B) there is authorized to be appropriated 
to such Office $25,000,000 for fiscal year 2010 
and each subsequent fiscal year. 
Amounts appropriated under this section shall re-
main available for expenditure until expended and 
shall be in addition to any other amounts appro-
priated or made available to such Office for such pur-
poses with respect to the Medicaid program. 
(2) ANNUAL REPORT.—Not later than September 
30 of 2009 and of each subsequent year, the Inspector 
General of the Department of Health and Human 
Services shall submit to the Committees on Energy 
and Commerce and Appropriations of the House of 
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162 
•HR 2642 EAH2 
Representatives and the Committees on Finance and 
Appropriations of the Senate a report on the activi-
ties (and the results of such activities) funded under 
paragraph (1) to reduce waste, fraud, and abuse in 
the Medicaid program under title XIX of the Social 
Security Act during the previous 12 month period, 
including the amount of funds appropriated under 
such paragraph for each such activity and an esti-
mate of the savings to the Medicaid program resulting 
from each such activity. 
(c) STUDY AND REPORTS TO CONGRESS.— 
(1) SECRETARIAL
REPORT
IDENTIFYING
PROB-
LEMS.—Not later than January 1, 2009, the Sec-
retary of Health and Human Services shall submit to 
the Committee on Energy and Commerce of the House 
of Representatives and the Committee on Finance of 
the Senate a report that— 
(A) outlines the specific problems the Med-
icaid regulations referred to in the amendments 
made by paragraphs (1) and (2) of subsection 
(a) were intended to address; 
(B) details how these regulations were de-
signed to address these specific problems; and 
(C) cites the legal authority for such regula-
tions. 
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163 
•HR 2642 EAH2 
(2) INDEPENDENT COMPREHENSIVE STUDY AND 
REPORT.— 
(A) IN GENERAL.—Not later than January 
1, 2009, the Secretary of Health and Human 
Services shall enter into a contract with an inde-
pendent organization for the purpose of— 
(i) producing a comprehensive report 
on the prevalence of the problems outlined 
in the report submitted under paragraph 
(1); 
(ii) identifying strategies in existence 
to address these problems; and 
(iii) assessing the impact of each regu-
lation referred to in such paragraph on 
each State and the District of Columbia. 
(B) 
ADDITIONAL
MATTER.—The 
report 
under subparagraph (A) shall also include— 
(i) an identification of which claims 
for items and services (including adminis-
trative activities) under title XIX of the So-
cial Security Act are not processed through 
systems described in section 1903(r) of such 
Act; 
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164 
•HR 2642 EAH2 
(ii) an examination of the reasons why 
these claims for such items and services are 
not processed through such systems; and 
(iii) recommendations on actions by 
the Federal government and the States that 
can make claims for such items and services 
more accurate and complete consistent with 
such title. 
(C) DEADLINE.—The report under subpara-
graph (A) shall be submitted to the Committee 
on Energy and Commerce of the House of Rep-
resentatives and the Committee on Finance of the 
Senate not later than September 1, 2009. 
(D) COOPERATION OF STATES.—If the Sec-
retary of Health and Human Services deter-
mines that a State or the District of Columbia 
has not cooperated with the independent organi-
zation for purposes of the report under this para-
graph, the Secretary shall reduce the amount 
paid to the State or District under section 
1903(a) of the Social Security Act (42 U.S.C. 
1396b(a)) by $25,000 for each day on which the 
Secretary determines such State or District has 
not so cooperated. Such reduction shall be made 
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165 
•HR 2642 EAH2 
through a process that permits the State or Dis-
trict to challenge the Secretary’s determination. 
(3) FUNDING.— 
(A) IN GENERAL.—Out of any money in the 
Treasury of the United States not otherwise ap-
propriated, there are appropriated to the Sec-
retary without further appropriation, $5,000,000 
to carry out this subsection. 
(B) AVAILABILITY; AMOUNTS IN ADDITION 
TO OTHER AMOUNTS APPROPRIATED FOR SUCH 
ACTIVITIES.—Amounts appropriated pursuant to 
subparagraph (A) shall— 
(i) remain available until expended; 
and 
(ii) be in addition to any other 
amounts appropriated or made available to 
the Secretary of Health and Human Serv-
ices with respect to the Medicaid program. 
(d) ASSET VERIFICATION THROUGH ACCESS TO IN-
FORMATION HELD BY FINANCIAL INSTITUTIONS.— 
(1) ADDITION OF AUTHORITY.—Title XIX of the 
Social Security Act is amended by inserting after sec-
tion 1939 the following new section: 
‘‘ASSET VERIFICATION THROUGH ACCESS TO INFORMATION 
HELD BY FINANCIAL INSTITUTIONS 
‘‘SEC. 1940. (a) IMPLEMENTATION.— 
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166 
•HR 2642 EAH2 
‘‘(1) IN GENERAL.—Subject to the provisions of 
this section, each State shall implement an asset 
verification program described in subsection (b), for 
purposes of determining or redetermining the eligi-
bility of an individual for medical assistance under 
the State plan under this title. 
‘‘(2) PLAN SUBMITTAL.—In order to meet the re-
quirement of paragraph (1), each State shall— 
‘‘(A) submit not later than a deadline speci-
fied by the Secretary consistent with paragraph 
(3), a State plan amendment under this title 
that describes how the State intends to imple-
ment the asset verification program; and 
‘‘(B) provide for implementation of such 
program for eligibility determinations and rede-
terminations made on or after 6 months after the 
deadline established for submittal of such plan 
amendment. 
‘‘(3) PHASE-IN.— 
‘‘(A) IN GENERAL.— 
‘‘(i) IMPLEMENTATION
IN
CURRENT 
ASSET
VERIFICATION
DEMO
STATES.—The 
Secretary shall require those States specified 
in subparagraph (C) (to which an asset 
verification program has been applied be-
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167 
•HR 2642 EAH2 
fore the date of the enactment of this sec-
tion) to implement an asset verification 
program under this subsection by the end of 
fiscal year 2009. 
‘‘(ii) 
IMPLEMENTATION
IN
OTHER 
STATES.—The Secretary shall require other 
States to submit and implement an asset 
verification program under this subsection 
in such manner as is designed to result in 
the application of such programs, in the ag-
gregate for all such other States, to enroll-
ment of approximately, but not less than, 
the following percentage of enrollees, in the 
aggregate for all such other States, by the 
end of the fiscal year involved: 
‘‘(I) 12.5 percent by the end of fis-
cal year 2009. 
‘‘(II) 25 percent by the end of fis-
cal year 2010. 
‘‘(III) 50 percent by the end of fis-
cal year 2011. 
‘‘(IV) 75 percent by the end of fis-
cal year 2012. 
‘‘(V) 100 percent by the end of fis-
cal year 2013. 
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168 
•HR 2642 EAH2 
‘‘(B) CONSIDERATION.—In selecting States 
under subparagraph (A)(ii), the Secretary shall 
consult with the States involved and take into 
account the feasibility of implementing asset 
verification programs in each such State. 
‘‘(C) STATES SPECIFIED.—The States speci-
fied in this subparagraph are California, New 
York, and New Jersey. 
‘‘(D) CONSTRUCTION.—Nothing in subpara-
graph (A)(ii) shall be construed as preventing a 
State from requesting, and the Secretary from 
approving, the implementation of an asset 
verification program in advance of the deadline 
otherwise established under such subparagraph. 
‘‘(4) EXEMPTION OF TERRITORIES.—This section 
shall only apply to the 50 States and the District of 
Columbia. 
‘‘(b) ASSET VERIFICATION PROGRAM.— 
‘‘(1) IN GENERAL.—For purposes of this section, 
an asset verification program means a program de-
scribed in paragraph (2) under which a State— 
‘‘(A) requires each applicant for, or recipi-
ent of, medical assistance under the State plan 
under this title on the basis of being aged, blind, 
or disabled to provide authorization by such ap-
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169 
•HR 2642 EAH2 
plicant or recipient (and any other person whose 
resources are required by law to be disclosed to 
determine the eligibility of the applicant or re-
cipient for such assistance) for the State to ob-
tain (subject to the cost reimbursement require-
ments of section 1115(a) of the Right to Finan-
cial Privacy Act but at no cost to the applicant 
or recipient) from any financial institution 
(within the meaning of section 1101(1) of such 
Act) any financial record (within the meaning of 
section 1101(2) of such Act) held by the institu-
tion with respect to the applicant or recipient 
(and such other person, as applicable), whenever 
the State determines the record is needed in con-
nection with a determination with respect to 
such eligibility for (or the amount or extent of) 
such medical assistance; and 
‘‘(B) uses the authorization provided under 
subparagraph (A) to verify the financial re-
sources of such applicant or recipient (and such 
other person, as applicable), in order to deter-
mine or redetermine the eligibility of such appli-
cant or recipient for medical assistance under 
the State plan. 
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170 
•HR 2642 EAH2 
‘‘(2) PROGRAM
DESCRIBED.—A program de-
scribed in this paragraph is a program for verifying 
individual assets in a manner consistent with the ap-
proach used by the Commissioner of Social Security 
under section 1631(e)(1)(B)(ii). 
‘‘(c) 
DURATION
OF
AUTHORIZATION.—Notwith-
standing section 1104(a)(1) of the Right to Financial Pri-
vacy Act, an authorization provided to a State under sub-
section (b)(1) shall remain effective until the earliest of— 
‘‘(1) the rendering of a final adverse decision on 
the applicant’s application for medical assistance 
under the State’s plan under this title; 
‘‘(2) the cessation of the recipient’s eligibility for 
such medical assistance; or 
‘‘(3) the express revocation by the applicant or 
recipient (or such other person described in subsection 
(b)(1), as applicable) of the authorization, in a writ-
ten notification to the State. 
‘‘(d) TREATMENT OF RIGHT TO FINANCIAL PRIVACY 
ACT REQUIREMENTS.— 
‘‘(1) An authorization obtained by the State 
under subsection (b)(1) shall be considered to meet the 
requirements of the Right to Financial Privacy Act 
for purposes of section 1103(a) of such Act, and need 
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171 
•HR 2642 EAH2 
not be furnished to the financial institution, notwith-
standing section 1104(a) of such Act. 
‘‘(2) The certification requirements of section 
1103(b) of the Right to Financial Privacy Act shall 
not apply to requests by the State pursuant to an au-
thorization provided under subsection (b)(1). 
‘‘(3) A request by the State pursuant to an au-
thorization provided under subsection (b)(1) is 
deemed to meet the requirements of section 1104(a)(3) 
of the Right to Financial Privacy Act and of section 
1102 of such Act, relating to a reasonable description 
of financial records. 
‘‘(e) REQUIRED DISCLOSURE.—The State shall inform 
any person who provides authorization pursuant to sub-
section (b)(1)(A) of the duration and scope of the authoriza-
tion. 
‘‘(f) REFUSAL OR REVOCATION OF AUTHORIZATION.— 
If an applicant for, or recipient of, medical assistance 
under the State plan under this title (or such other person 
described in subsection (b)(1), as applicable) refuses to pro-
vide, or revokes, any authorization made by the applicant 
or recipient (or such other person, as applicable) under sub-
section (b)(1)(A) for the State to obtain from any financial 
institution any financial record, the State may, on that 
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172 
•HR 2642 EAH2 
basis, determine that the applicant or recipient is ineligible 
for medical assistance. 
‘‘(g) USE OF CONTRACTOR.—For purposes of imple-
menting an asset verification program under this section, 
a State may select and enter into a contract with a public 
or private entity meeting such criteria and qualifications 
as the State determines appropriate, consistent with re-
quirements in regulations relating to general contracting 
provisions and with section 1903(i)(2). In carrying out ac-
tivities under such contract, such an entity shall be subject 
to the same requirements and limitations on use and disclo-
sure of information as would apply if the State were to 
carry out such activities directly. 
‘‘(h) TECHNICAL ASSISTANCE.—The Secretary shall 
provide States with technical assistance to aid in imple-
mentation of an asset verification program under this sec-
tion. 
‘‘(i) REPORTS.—A State implementing an asset 
verification program under this section shall furnish to the 
Secretary such reports concerning the program, at such 
times, in such format, and containing such information as 
the Secretary determines appropriate. 
‘‘(j) TREATMENT OF PROGRAM EXPENSES.—Notwith-
standing any other provision of law, reasonable expenses 
of States in carrying out the program under this section 
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173 
•HR 2642 EAH2 
shall be treated, for purposes of section 1903(a), in the same 
manner as State expenditures specified in paragraph (7) 
of such section.’’. 
(2) 
STATE
PLAN
REQUIREMENTS.—Section 
1902(a) of such Act (42 U.S.C. 1396a(a)) is amend-
ed— 
(A) in paragraph (69) by striking ‘‘and’’ at 
the end; 
(B) in paragraph (70) by striking the pe-
riod at the end and inserting ‘‘; and’’; and 
(C) by inserting after paragraph (70), as so 
amended, the following new paragraph: 
‘‘(71) provide that the State will implement an 
asset verification program as required under section 
1940.’’. 
(3) WITHHOLDING OF FEDERAL MATCHING PAY-
MENTS FOR NONCOMPLIANT STATES.—Section 1903(i) 
of such Act (42 U.S.C. 1396b(i)) is amended— 
(A) in paragraph (22) by striking ‘‘or’’ at 
the end; 
(B) in paragraph (23) by striking the pe-
riod at the end and inserting ‘‘; or’’; and 
(C) by adding after paragraph (23) the fol-
lowing new paragraph: 
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•HR 2642 EAH2 
‘‘(24) if a State is required to implement an 
asset verification program under section 1940 and 
fails to implement such program in accordance with 
such section, with respect to amounts expended by 
such State for medical assistance for individuals sub-
ject to asset verification under such section, unless— 
‘‘(A) the State demonstrates to the Sec-
retary’s satisfaction that the State made a good 
faith effort to comply; 
‘‘(B) not later than 60 days after the date 
of a finding that the State is in noncompliance, 
the State submits to the Secretary (and the Sec-
retary approves) a corrective action plan to rem-
edy such noncompliance; and 
‘‘(C) not later than 12 months after the date 
of such submission (and approval), the State ful-
fills the terms of such corrective action plan.’’. 
(4) REPEAL.—Section 4 of Public Law 110–90 
is repealed. 
SEC. 7002. (a) MEDICARE IMPROVEMENT FUND.— 
Title XVIII of the Social Security Act (42 U.S.C. 1395 et 
seq.) is amended by adding at the end the following new 
section: 
‘‘MEDICARE IMPROVEMENT FUND 
‘‘SEC. 1898. (a) ESTABLISHMENT.—The Secretary 
shall establish under this title a Medicare Improvement 
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