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only if it has in effect an internal quality assur-
ance program that meets the requirements of
paragraph (9).
‘‘(C) CONTRACT WITH STATE AGENCY.—
Subject to paragraph (3), a risk contracting en-
tity meets the requirements of this subsection
only if the entity has a written contract with
the State agency that provides—
‘‘(i) that the entity will comply with
all applicable provisions of this subsection;
‘‘(ii) for a payment methodology based
on experience rating or another actuarially
sound methodology approved by the Sec-
retary, which guarantees (as demonstrated
by such models or formulas as the Sec-
retary may approve) that payments to the
entity under the contract shall not exceed
100 percent of expenditures that would
have been made by the State agency in the
absence of the contract;
‘‘(iii) that the Secretary and the State
(or any person or organization designated
by either) shall have the right to audit and
inspect any books and records of the entity
(and of any subcontractor) that pertain—
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‘‘(I) to the ability of the entity to
bear the risk of potential financial
losses, or
‘‘(II) to services performed or de-
terminations 
of 
amounts 
payable
under the contract;
‘‘(iv) that in the entity’s enrollment,
reenrollment, or disenrollment of individ-
uals eligible for medical assistance under
this title and eligible to enroll, reenroll, or
disenroll with the entity pursuant to the
contract, the entity will not discriminate
among such individuals on the basis of
their health status or requirements for
health care services;
‘‘(v)(I) that individuals eligible for
medical assistance under the State plan
who have enrolled with the entity are per-
mitted to terminate such enrollment with-
out cause as of the beginning of the first
calendar month following a full calendar
month after the request is made for such
termination (or at such times as required
pursuant to paragraph (8)), and
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‘‘(II) for notification of each such in-
dividual, at the time of the individual’s en-
rollment, of the right to terminate enroll-
ment;
‘‘(vi) for reimbursement, either by the
entity or by the State agency, for medically
necessary services provided—
‘‘(I) to an individual eligible for
medical assistance under the State
plan and enrolled with the entity, and
‘‘(II) other than through the en-
tity because the services were imme-
diately required due to an unforeseen
illness, injury, or condition;
‘‘(vii) for disclosure of information in
accordance with paragraph (4) and section
1124;
‘‘(viii) in the case of an entity that
has entered into a contract with a Feder-
ally-qualified health center for the provi-
sion of services of such center—
‘‘(I) that rates of prepayment
from the State are adjusted to reflect
fully the rates of payment specified in
section 1902(a)(13)(E), and
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‘‘(II) that, at the election of such
center, payments made by the entity
to such center for services described
in section 1905(a)(2)(C) are made at
the rates of payment specified in sec-
tion 1902(a)(13)(E);
‘‘(ix) that any physician incentive plan
that the entity operates meets the require-
ments of section 1876(i)(8);
‘‘(x) for maintenance of sufficient pa-
tient encounter data to identify the physi-
cian who delivers services to patients; and
‘‘(xi) that the entity complies with the
requirement of section 1902(w) with re-
spect to each enrollee.
‘‘(3) EXCEPTIONS TO REQUIREMENTS FOR RISK
CONTRACTING
ENTITIES.—The 
requirements 
of
paragraph (2) (other than subparagraph (C)(viii))
do not apply to an entity that—
‘‘(A)(i) received a grant of at least
$100,000 in the fiscal year ending June 30,
1976, under section 329(d)(1)(A) or 330(d)(1)
of the Public Health Service Act, and for the
period beginning July 1, 1976, and ending on
the expiration of the period for which payments
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are to be made under this title, has been the re-
cipient of a grant under either such section;
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, to the extent
required by section 1902(a)(10)(D) to be pro-
vided under the State plan, the services de-
scribed in section 1905(a)(7);
‘‘(B) is 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) for the period beginning July 1,
1976, and ending on the expiration of the
period for which payments are to be made
under this title either has been the recipi-
ent of a grant, subgrant, or subcontract
under such Act or has provided services
under a contract (initially entered into dur-
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ing a year in which the entity was the re-
cipient of such a grant, subgrant, or sub-
contract) with a State agency under this
title on a prepaid capitation or other risk
basis; or
‘‘(C) which has contracted with the State
agency for the provision of services (but not in-
cluding inpatient hospital services) to persons
eligible for medical assistance under this title
on a prepaid risk basis prior to 1970.’’; and
(2) by adding after paragraph (6) the following
new paragraphs:
‘‘(7) GENERAL REQUIREMENTS FOR PRIMARY
CARE CASE MANAGEMENT.—A State that elects in
its State plan under this title to implement a pri-
mary care case management program under this
subsection shall include in the plan methods for the
selection and monitoring of participating primary
care case management entities to ensure that—
‘‘(A) the numbers, geographic locations,
hours of operation, and other relevant charac-
teristics of such entities are sufficient to afford
individuals eligible for medical assistance rea-
sonable access to and choice among such enti-
ties;
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‘‘(B) such entities and their professional
personnel are qualified to provide health care
case management services, through methods in-
cluding ongoing monitoring of compliance with
applicable requirements for licensing of health
care providers, providing training and certifi-
cation of primary care case managers, and pro-
viding information and technical assistance; and
‘‘(C) such entities are making timely and
appropriate decisions with respect to enrollees’
need for health care items and services, and are
giving timely approval and referral to providers
of adequate quality where such items and serv-
ices are determined to be medically necessary.
‘‘(8) STATE OPTIONS WITH RESPECT TO EN-
ROLLMENT AND DISENROLLMENT.—
‘‘(A) 
MANDATORY
ENROLLMENT
OP-
TION.—A State plan may require an individual
eligible for medical assistance under the State
plan (other than a medicare qualified bene-
ficiary) to enroll with a risk contracting entity
or primary care case management entity, with-
out regard to the requirement of section
1902(a)(1) (concerning Statewideness), the re-
quirements of section 1902(a)(10)(B) (concern-
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ing comparability of benefits), or the require-
ments of section 1902(a)(23) (concerning free-
dom of choice of provider), if the individual is
permitted a choice—
‘‘(i) between or among two or more
risk contracting entities,
‘‘(ii) between a risk contracting entity
and a primary care case management en-
tity, or
‘‘(iii) between or among two or more
primary care case management entities.
‘‘(B)(i) 
RESTRICTIONS
ON
DISENROLLMENT
WITHOUT
CAUSE.—A State
plan may restrict the period in which individ-
uals enrolled with a qualifying risk contracting
entity (as defined in clause (ii)) may terminate
such enrollment without cause to the first
month of each period of enrollment (as defined
in clause (iii)), but only if the State provides
notification, at least once during each such en-
rollment period, to individuals enrolled with
such entity of the right to terminate such en-
rollment and the restriction on the exercise of
this right. Such restriction shall not apply to
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requests for termination of enrollment for
cause.
‘‘(ii) For purposes of this subparagraph,
the term ‘qualifying risk contracting entity’
means a risk contracting entity that is—
‘‘(I) a qualified health maintenance
organization as defined in section 1310(d)
of the Public Health Service Act;
‘‘(II) an eligible organization with a
contract under section 1876;
‘‘(III) 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;
‘‘(IV) 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 Re-
gional Development Act of 1965;
‘‘(V) a program pursuant to an under-
taking described in paragraph (6) in which
at least 25 percent of the membership en-
rolled on a prepaid basis are individuals
who (I) are not insured for benefits under
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part B of title XVIII or eligible for medical
assistance under this title, and (II) (in the
case of such individuals whose prepay-
ments 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 health care costs
that would have been paid in whole or in
part by any governmental entity; or
‘‘(VI) an entity that, on the date of
enactment 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 requirement under this
subsection to permit disenrollment without
cause.
‘‘(iii) For purposes of this subparagraph,
the term ‘period of enrollment’ means—
‘‘(I) a period not to exceed 6 months
in duration, or
‘‘(II) a period not to exceed one year
in duration, in the case of a State that, on
the effective date of this subparagraph,
had in effect a waiver under section 1115
of requirements under this title under
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which the State could establish a 1-year
minimum period of enrollment with risk
contracting entities.
‘‘(C) REENROLLMENT
OF
INDIVIDUALS
WHO REGAIN ELIGIBILITY.—In the case of an
individual who—
‘‘(i) in a month is eligible for medical
assistance under the State plan and en-
rolled with a risk contracting entity with a
contract under this subsection,
‘‘(ii) in the next month (or next 2
months) is not eligible for such medical as-
sistance, but
‘‘(iii) in the succeeding month is again
eligible for such benefits,
the State plan 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 subsection.
‘‘(9) REQUIREMENTS FOR INTERNAL QUALITY
ASSURANCE PROGRAMS.—The requirements for an
internal quality assurance program of a risk con-
tracting entity are that program is written and the
program—
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priate credentialing and recredentialing proce-
dures;
‘‘(E) includes policies addressing enrollee
rights and responsibilities, including grievance
mechanisms and mechanisms to inform enroll-
ees about access to and use of services provided
by the entity;
‘‘(F) provides for continuous monitoring of
the delivery of health care, including—
‘‘(i) identification of clinical areas to
be monitored,
‘‘(ii) use of quality indicators and
standards for assessing care delivered, in-
cluding availability and accessibility of
care,
‘‘(iii) monitoring, through use of epi-
demiological data or chart review, the care
of individuals, as appropriate, and patterns
of care overall, and
‘‘(iv) implementation of corrective ac-
tions; and
‘‘(G) meets any other requirements pre-
scribed by the Secretary after consultation with
States.
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‘‘(10) INDEPENDENT REVIEW AND QUALITY AS-
SURANCE.—
‘‘(A) STATE GRIEVANCE PROCEDURE.—A
State contracting with a risk contracting entity
or primary care case management entity under
this subsection shall provide for a grievance
procedure for enrollees of such entity with at
least the following elements:
‘‘(i) A toll-free telephone number for
enrollee questions and grievances.
‘‘(ii) A State-operated enrollee griev-
ance procedure.
‘‘(iii) Periodic notification of enrollees
of their rights with respect to such entity
or program.
‘‘(iv) Periodic sample reviews of griev-
ances registered with such entity or pro-
gram or with the State.
‘‘(v) Periodic survey and analysis of
enrollee satisfaction with such entity or
program.
‘‘(B) STATE
MONITORING
OF
RISK
CON-
TRACTING ENTITIES’ QUALITY ASSURANCE PRO-
GRAMS.—A State contracting with a risk con-
tracting entity under this subsection shall peri-
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odically review such entity’s quality assurance
program to ensure that it meets the require-
ments of paragraph (9).
‘‘(C) EXTERNAL
INDEPENDENT
REVIEW
OF INTERNAL QUALITY ASSURANCE.—A State
contracting with a risk contracting entity under
this subsection shall provide for annual external
independent review (by a utilization control and
peer review organization with a contract under
section 1153, or another organization unaffili-
ated with the State government approved by the
Secretary) of such entity’s internal quality as-
surance activities. Such independent review
shall include—
‘‘(i) review of the entity’s medical
care, through sampling of medical records
or other appropriate methods, for indica-
tions of inappropriate utilization and treat-
ment,
‘‘(ii) review of enrollee inpatient and
ambulatory data, through sampling of
medical records or other appropriate meth-
ods, to determine quality trends,
‘‘(iii) review of the entity’s internal
quality assurance activities, and
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‘‘(iv) notification of the entity and the
State, and appropriate followup activities,
when the review under this subparagraph
indicates inappropriate care or treat-
ment.’’.
(b) STATE OPTION TO GUARANTEE MEDICAID ELI-
GIBILITY.—Section 1902(e)(2) of such Act (42 U.S.C.
1396a(e)(2)) is amended—
(A) in subparagraph (A), by striking all
that precedes ‘‘(but for this paragraph)’’ and
inserting ‘‘In the case of an individual who is
enrolled—
‘‘(i) with a risk contracting entity (as
defined in section 1903(m)(1)(B)(i)) re-
sponsible for the provision of inpatient hos-
pital services and any other service de-
scribed in paragraphs (2), (3), (4), (5),
and (7) of section 1905(a),
‘‘(ii) with any risk contracting entity
(as so defined) in a State that, on the ef-
fective date of this provision, had in effect
a waiver under section 1115 of require-
ments under this title under which the
State could extend eligibility for medical
assistance for enrollees of such entity, or
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‘‘(iii) with an eligible organization
with a contract under section 1876 and
who would’’, and
(B) in subparagraph (B), by striking ‘‘or-
ganization or’’ each place it appears.
(c) CONFORMING AMENDMENTS.—
(1) Section 1128(b)(6)(C)(i) of such Act (42
U.S.C. 1320a–7(b)(6)(C)(i)) is amended by striking
‘‘health maintenance organization’’ and inserting
‘‘risk contracting entity’’.
(2) Section 1902(a)(25)(A) of such Act (42
U.S.C. 1396a(a)(25)(A)), as amended by section
13622(a)(1) of the Omnibus Budget Reconciliation
Act of 1993, is amended by striking ‘‘health mainte-
nance organizations’’ and inserting ‘‘risk contracting
entities’’.
(3) Section 1902(a)(25)(H) of such Act (42
U.S.C. 1396a(a)(25)(H)), as added by section
13622(b)(3) of the Omnibus Budget Reconciliation
Act of 1993, is amended by striking ‘‘health mainte-
nance organization’’ and inserting ‘‘risk contracting
entity’’.
(4) Section 1902(a)(30)(C) of such Act (42
U.S.C. 1396a(a)(30)(C)) is amended by striking all
that precedes ‘‘with the results’’ and inserting ‘‘pro-
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vide for independent review and quality assurance of
entities with contracts under section 1903(m), in ac-
cordance with paragraph (10) of such section,’’.
(5) Section 1902(a)(57) of such Act (42 U.S.C.
1396a(a)(57)) is amended by striking ‘‘or health
maintenance organization’’ and inserting ‘‘or risk
contracting entity’’.
(6) Section 1902(a) of such Act (42 U.S.C.
1396a(a)), as amended by sections 13623(a),
13625(a), and 13631(a) of the Omnibus Budget
Reconciliation Act of 1993, is amended—
(A) by striking ‘‘and’’ at the end of para-
graph (61);
(B) by striking the period at the end of
paragraph (62) and inserting ‘‘; and’’; and
(C) by adding at the end the following new
paragraph:
‘‘(63) at State option, provide for a primary
care case management program in accordance with
section 1903(m)(7).’’.
(7) Section 1902(p)(2) of such Act (42 U.S.C.
1396a(p)(2)) is amended by striking ‘‘health mainte-
nance organization’’ and inserting ‘‘risk contracting
entity’’.
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(8) Section 1902(w) of such Act (42 U.S.C.
1396a(w)) is amended—
(A) in paragraph (1), by striking ‘‘section
1903(m)(1)(A)’’ 
and 
inserting 
‘‘section
1903(m)(2)(C)(xi)’’, and
(B) in paragraph (2)(E), by striking
‘‘health maintenance organization’’ and ‘‘the or-
ganization’’ and inserting ‘‘risk contracting en-
tity’’ and ‘‘the entity’’, respectively.
(9) Section 1903(k) of such Act (42 U.S.C.
1396b(k)) is amended by striking ‘‘health mainte-
nance organization’’ and inserting ‘‘risk contracting
entity’’.
(10) Section 1903(m)(4)(A) of such Act (42
U.S.C. 1396b(m)(4)(A)) is amended—
(A) in the first sentence, by striking ‘‘Each
health maintenance organization’’ and inserting
‘‘Each risk contracting entity’’,
(B) in the first sentence, by striking ‘‘the
organization’’ each place it appears and insert-
ing ‘‘the entity’’, and
(C) in the second sentence, by striking ‘‘an
organization’’ and ‘‘the organization’’ and in-
serting ‘‘a risk contracting entity’’ and ‘‘the
risk contracting entity’’, respectively.
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(11) Section 1903(m)(4)(B) of such Act (42
U.S.C. 1396b(m)(4)(B)) is amended by striking ‘‘or-
ganization’’ and inserting ‘‘risk contracting entity’’.
(12) Section 1903(m)(5) of such Act (42
U.S.C. 1396b(m)(5)) is amended in paragraphs
(A)(iii) and (B)(ii) by striking ‘‘organization’’ and
inserting ‘‘entity’’.
(13) Section 1903(o) (42 U.S.C. 1396b(o)), as
amended by section 13622(a)(2) of the Omnibus
Budget Reconciliation Act of 1993, is amended by
striking ‘‘health maintenance organization’’ and in-
serting ‘‘risk contracting entity’’.
(14) Section 1903(w)(7)(A)(viii) of such Act
(42 U.S.C. 1396b(w)(7)(A)(viii)) is amended by
striking ‘‘health maintenance organizations (and
other organizations with contracts under section
1903(m))’’ and inserting ‘‘risk contracting entities
with contracts under section 1903(m)’’.
(15) Section 1905(a) of such Act (42 U.S.C.
1396d(a)) is amended, in the matter preceding
clause (i), by inserting ‘‘(which may be on a prepaid
capitation or other risk basis)’’ after ‘‘payment’’ the
first place it appears.
(16) Section 1908(b) of such Act, as added by
section 13623(b) of the Omnibus Budget Reconcili-
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ation Act of 1993, is amended by striking ‘‘health
maintenance organization’’ and inserting ‘‘risk con-
tracting entity’’.
(17) Section 1916(b)(2)(D) of such Act (42
U.S.C. 1396o(b)(2)(D)) is amended by striking
‘‘health maintenance organization’’ and inserting
‘‘risk contracting entity’’.
(18) Section 1925(b)(4)(D)(iv) of such Act (42
U.S.C. 1396r–6(b)(4)(D)(iv)) is amended—
(A) in the heading, by striking ‘‘HMO’’ and
inserting ‘‘RISK CONTRACTING ENTITY’’,
(B) by striking ‘‘health maintenance orga-
nization’’ and inserting ‘‘risk contracting en-
tity’’ each place it appears, and
(C) by striking ‘‘section 1903(m)(1)(A)’’
and inserting ‘‘section 1903(m)(1)(B)(i)’’.
(19) Paragraphs (1) and (2) of section 1926(a)
of such Act (42 U.S.C. 1396r–7(a)) are each amend-
ed by striking ‘‘health maintenance organizations’’
and inserting ‘‘risk contracting entities’’.
(20) Section 1927 of such Act (42 U.S.C.
1396s) is amended—
(A) in subsection (c)(1)(C)(i), as amended
by section 13602(a)(1) of the Omnibus Budget
Reconciliation Act of 1993, by striking ‘‘health
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maintenance organization’’ and inserting ‘‘risk
contracting entity’’ , and
(B) in subsection (j)(1), by striking ‘‘***
Health Maintenance Organizations, including
those organizations’’ and inserting ‘‘risk con-
tracting entities’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall become effective with respect to calendar
quarters beginning on or after January 1, 1994.
SEC. 1702. PERIOD OF CERTAIN WAIVERS.
(a) IN GENERAL.—Section 1915(h) of the Social Se-
curity Act (42 U.S.C. 1396n(h)) is amended by striking
‘‘No waiver’’ and all that follows through ‘‘unless the Sec-
retary’’ and inserting ‘‘A waiver under this section (other
than under subsection (c), (d), or (e)) shall be for an ini-
tial term of 3 years and, upon the request of a State, shall
be extended for additional 5 year periods unless the Sec-
retary’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to waivers pursuant to applica-
tions which are approved, and with respect to continu-
ations of waivers for which requests are made, later than
30 days after the date of the enactment of this Act.