H. R. 976—87 
as the Comptroller General determines are necessary to address 
any barriers to access to oral health care, including preventive 
and restorative services, under Medicaid and CHIP that may 
exist. 
SEC. 502. MENTAL HEALTH PARITY IN CHIP PLANS. 
(a) ASSURANCE
OF
PARITY.—Section 2103(c) (42 U.S.C. 
1397cc(c)), as amended by section 501(a)(1)(B), is amended by 
inserting after paragraph (5), the following: 
‘‘(6) MENTAL HEALTH SERVICES PARITY.— 
‘‘(A) IN GENERAL.—In the case of a State child health 
plan that provides both medical and surgical benefits and 
mental health or substance abuse benefits, such plan shall 
ensure that the financial requirements and treatment 
limitations applicable to such mental health or substance 
abuse benefits are no more restrictive than the financial 
requirements and treatment limitations applied to substan-
tially all medical and surgical benefits covered by the plan. 
‘‘(B) DEEMED COMPLIANCE.—To the extent that a State 
child health plan includes coverage with respect to an 
individual described in section 1905(a)(4)(B) and covered 
under the State plan under section 1902(a)(10)(A) of the 
services described in section 1905(a)(4)(B) (relating to early 
and periodic screening, diagnostic, and treatment services 
defined in section 1905(r)) and provided in accordance with 
section 1902(a)(43), such plan shall be deemed to satisfy 
the requirements of subparagraph (A).’’. 
(b) CONFORMING
AMENDMENTS.—Section 2103 (42 U.S.C. 
1397cc) is amended— 
(1) in subsection (a), as amended by section 501(a)(1)(A)(i), 
in the matter preceding paragraph (1), by inserting ‘‘, (6),’’ 
after ‘‘(5)’’; and 
(2) in subsection (c)(2), by striking subparagraph (B) and 
redesignating subparagraphs (C) and (D) as subparagraphs (B) 
and (C), respectively. 
SEC. 503. APPLICATION OF PROSPECTIVE PAYMENT SYSTEM FOR 
SERVICES PROVIDED BY FEDERALLY-QUALIFIED HEALTH 
CENTERS AND RURAL HEALTH CLINICS. 
(a) APPLICATION OF PROSPECTIVE PAYMENT SYSTEM.— 
(1) 
IN
GENERAL.—Section 
2107(e)(1) 
(42 
U.S.C. 
1397gg(e)(1)), as amended by section 501(c)(2) is amended by 
inserting after subparagraph (C) the following new subpara-
graph (and redesignating the succeeding subparagraphs accord-
ingly): 
‘‘(D) Section 1902(bb) (relating to payment for services 
provided by Federally-qualified health centers and rural 
health clinics).’’. 
(2) EFFECTIVE DATE.—The amendment made by paragraph 
(1) shall apply to services provided on or after October 1, 
2008. 
(b) TRANSITION GRANTS.— 
(1) APPROPRIATION.—Out of any funds in the Treasury 
not otherwise appropriated, there is appropriated to the Sec-
retary for fiscal year 2008, $5,000,000, to remain available 
until expended, for the purpose of awarding grants to States 
with State child health plans under CHIP that are operated 
separately from the State Medicaid plan under title XIX of
H. R. 976—88 
the Social Security Act (including any waiver of such plan), 
or in combination with the State Medicaid plan, for expendi-
tures related to transitioning to compliance with the require-
ment of section 2107(e)(1)(D) of the Social Security Act (as 
added by subsection (a)) to apply the prospective payment 
system established under section 1902(bb) of the such Act (42 
U.S.C. 1396a(bb)) to services provided by Federally-qualified 
health centers and rural health clinics. 
(2) MONITORING AND REPORT.—The Secretary shall monitor 
the impact of the application of such prospective payment 
system on the States described in paragraph (1) and, not later 
than October 1, 2010, shall report to Congress on any effect 
on access to benefits, provider payment rates, or scope of bene-
fits offered by such States as a result of the application of 
such payment system. 
SEC. 504. PREMIUM GRACE PERIOD. 
(a) IN GENERAL.—Section 2103(e)(3) (42 U.S.C. 1397cc(e)(3)) 
is amended by adding at the end the following new subparagraph: 
‘‘(C) PREMIUM GRACE PERIOD.—The State child health 
plan— 
‘‘(i) shall afford individuals enrolled under the plan 
a grace period of at least 30 days from the beginning 
of a new coverage period to make premium payments 
before the individual’s coverage under the plan may 
be terminated; and 
‘‘(ii) shall provide to such an individual, not later 
than 7 days after the first day of such grace period, 
notice— 
‘‘(I) that failure to make a premium payment 
within the grace period will result in termination 
of coverage under the State child health plan; and 
‘‘(II) of the individual’s right to challenge the 
proposed termination pursuant to the applicable 
Federal regulations. 
For purposes of clause (i), the term ‘new coverage period’ 
means the month immediately following the last month 
for which the premium has been paid.’’. 
(b) EFFECTIVE DATE.—The amendment made by subsection (a) 
shall apply to new coverage periods beginning on or after January 
1, 2009. 
SEC. 505. DEMONSTRATION PROJECTS RELATING TO DIABETES 
PREVENTION. 
There is authorized to be appropriated $15,000,000 during the 
period of fiscal years 2008 through 2012 to fund demonstration 
projects in up to 10 States over 3 years for voluntary incentive 
programs to promote children’s receipt of relevant screenings and 
improvements in healthy eating and physical activity with the 
aim of reducing the incidence of type 2 diabetes. Such programs 
may involve reductions in cost-sharing or premiums when children 
receive regular screening and reach certain benchmarks in healthy 
eating and physical activity. Under such programs, a State may 
also provide financial bonuses for partnerships with entities, such 
as schools, which increase their education and efforts with respect 
to reducing the incidence of type 2 diabetes and may also devise 
incentives for providers serving children covered under this title 
and title XIX to perform relevant screening and counseling
H. R. 976—89 
regarding healthy eating and physical activity. Upon completion 
of these demonstrations, the Secretary shall provide a report to 
Congress on the results of the State demonstration projects and 
the degree to which they helped improve health outcomes related 
to type 2 diabetes in children in those States. 
SEC. 506. CLARIFICATION OF COVERAGE OF SERVICES PROVIDED 
THROUGH SCHOOL-BASED HEALTH CENTERS. 
Section 2103(c) (42 U.S.C. 1397cc(c)), as amended by section 
501(a)(1)(B), is amended by adding at the end the following new 
paragraph: 
‘‘(8) AVAILABILITY OF COVERAGE FOR ITEMS AND SERVICES 
FURNISHED
THROUGH
SCHOOL-BASED
HEALTH
CENTERS.— 
Nothing in this title shall be construed as limiting a State’s 
ability to provide child health assistance for covered items 
and services that are furnished through school-based health 
centers.’’. 
TITLE VI—PROGRAM INTEGRITY AND 
OTHER MISCELLANEOUS PROVISIONS 
Subtitle A—Program Integrity and Data 
Collection 
SEC. 601. PAYMENT ERROR RATE MEASUREMENT (‘‘PERM’’). 
(a) EXPENDITURES RELATED TO COMPLIANCE WITH REQUIRE-
MENTS.— 
(1) ENHANCED
PAYMENTS.—Section 2105(c) (42 U.S.C. 
1397ee(c)), as amended by section 301(a), is amended by adding 
at the end the following new paragraph: 
‘‘(12) ENHANCED
PAYMENTS.—Notwithstanding subsection 
(b), the enhanced FMAP with respect to payments under sub-
section (a) for expenditures related to the administration of 
the payment error rate measurement (PERM) requirements 
applicable to the State child health plan in accordance with 
the Improper Payments Information Act of 2002 and parts 
431 and 457 of title 42, Code of Federal Regulations (or any 
related or successor guidance or regulations) shall in no event 
be less than 90 percent.’’. 
(2) EXCLUSION OF FROM CAP ON ADMINISTRATIVE EXPENDI-
TURES.—Section 2105(c)(2)(C) (42 U.S.C. 1397ee(c)(2)C)), as 
amended by section 302(b)), is amended by adding at the end 
the following: 
‘‘(iv) PAYMENT ERROR RATE MEASUREMENT (PERM) 
EXPENDITURES.—Expenditures related to the adminis-
tration of the payment error rate measurement 
(PERM) requirements applicable to the State child 
health plan in accordance with the Improper Payments 
Information Act of 2002 and parts 431 and 457 of 
title 42, Code of Federal Regulations (or any related 
or successor guidance or regulations).’’. 
(b) FINAL RULE REQUIRED TO BE IN EFFECT FOR ALL STATES.— 
Notwithstanding parts 431 and 457 of title 42, Code of Federal 
Regulations (as in effect on the date of enactment of this Act), 
the Secretary shall not calculate or publish any national or State-
H. R. 976—90 
specific error rate based on the application of the payment error 
rate measurement (in this section referred to as ‘‘PERM’’) require-
ments to CHIP until after the date that is 6 months after the 
date on which a final rule implementing such requirements in 
accordance with the requirements of subsection (c) is in effect 
for all States. Any calculation of a national error rate or a State 
specific error rate after such final rule in effect for all States 
may only be inclusive of errors, as defined in such final rule or 
in guidance issued within a reasonable time frame after the effective 
date for such final rule that includes detailed guidance for the 
specific methodology for error determinations. 
(c) REQUIREMENTS FOR FINAL RULE.—For purposes of subsection 
(b), the requirements of this subsection are that the final rule 
implementing the PERM requirements shall— 
(1) include— 
(A) clearly defined criteria for errors for both States 
and providers; 
(B) a clearly defined process for appealing error deter-
minations by— 
(i) review contractors; or 
(ii) the agency and personnel described in section 
431.974(a)(2) of title 42, Code of Federal Regulations, 
as in effect on September 1, 2007, responsible for the 
development, direction, implementation, and evalua-
tion of eligibility reviews and associated activities; and 
(C) clearly defined responsibilities and deadlines for 
States in implementing any corrective action plans; and 
(2) provide that the payment error rate determined for 
a State shall not take into account payment errors resulting 
from the State’s verification of an applicant’s self-declaration 
or self-certification of eligibility for, and the correct amount 
of, medical assistance or child health assistance, if the State 
process for verifying an applicant’s self-declaration or self-cer-
tification satisfies the requirements for such process applicable 
under regulations promulgated by the Secretary or otherwise 
approved by the Secretary. 
(d) OPTION FOR APPLICATION OF DATA FOR STATES IN FIRST 
APPLICATION CYCLE UNDER THE INTERIM FINAL RULE.—After the 
final rule implementing the PERM requirements in accordance 
with the requirements of subsection (c) is in effect for all States, 
a State for which the PERM requirements were first in effect 
under an interim final rule for fiscal year 2007 may elect to accept 
any payment error rate determined in whole or in part for the 
State on the basis of data for that fiscal year or may elect to 
not have any payment error rate determined on the basis of such 
data and, instead, shall be treated as if fiscal year 2010 were 
the first fiscal year for which the PERM requirements apply to 
the State. 
(e) HARMONIZATION OF MEQC AND PERM.— 
(1) REDUCTION
OF
REDUNDANCIES.—The Secretary shall 
review the Medicaid Eligibility Quality Control (in this sub-
section referred to as the ‘‘MEQC’’) requirements with the 
PERM requirements and coordinate consistent implementation 
of both sets of requirements, while reducing redundancies. 
(2) STATE OPTION TO APPLY PERM DATA.—A State may elect, 
for purposes of determining the erroneous excess payments 
for medical assistance ratio applicable to the State for a fiscal