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‘‘SEC. 2136. ASSIGNMENT OF RIGHTS OF PAYMENT.
‘‘(a) IN GENERAL.—For the purpose of assisting in the
collection of medical support payments and other payments
for medical care owed to recipients of medical assistance
under the MediGrant plan, each MediGrant plan shall—
‘‘(1) provide that, as a condition of eligibility for
medical assistance under the plan to an individual
who has the legal capacity to execute an assignment
for himself, the individual is required—
‘‘(A) to assign the State any rights, of the
individual or of any other person who is eligible
for medical assistance under the plan and on
whose behalf the individual has the legal author-
ity to execute an assignment of such rights, to
support (specified as support for the purpose of
medical care by a court or administrative order)
and to payment for medical care from any third
party,
‘‘(B) to cooperate with the State (i) in es-
tablishing the paternity of such person (referred
to in subparagraph (A)) if the person is a child
born out of wedlock, and (ii) in obtaining sup-
port and payments (described in subparagraph
(A)) for himself and for such person, unless (in
either case) the individual is a pregnant woman
or the individual is found to have good cause for
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refusing to cooperate as determined by the State,
and
‘‘(C) to cooperate with the State in identify-
ing, and providing information to assist the
State in pursuing, any third party who may be
liable to pay for care and services available
under the plan, unless such individual has good
cause for refusing to cooperate as determined by
the State; and
‘‘(2) provide for entering into cooperative ar-
rangements, including financial arrangements, with
any appropriate agency of any State (including, with
respect to the enforcement and collection of rights of
payment for medical care by or through a parent,
with a State’s agency established or designated under
section 454(3)) and with appropriate courts and law
enforcement officials, to assist the agency or agencies
administering the plan with respect to—
‘‘(A) the enforcement and collection of rights
to support or payment assigned under this sec-
tion, and
‘‘(B) any other matters of common concern.
‘‘(b) USE OF AMOUNTS COLLECTED.—Such part of
any amount collected by the State under an assignment
made under the provisions of this section shall be retained
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by the State as is necessary to reimburse it for medical as-
sistance payments made on behalf of an individual with
respect to whom such assignment was executed (with appro-
priate reimbursement of the Federal Government to the ex-
tent of its participation in the financing of such medical
assistance), and the remainder of such amount collected
shall be paid to such individual.
‘‘SEC. 2137. QUALITY ASSURANCE REQUIREMENTS FOR
NURSING FACILITIES.
‘‘(a) NURSING FACILITY DEFINED.—In this title, the
term ‘nursing facility’ means an institution (or a distinct
part of an institution) which—
‘‘(1) is primarily engaged in providing to resi-
dents—
‘‘(A) skilled nursing care and related serv-
ices for residents who require medical or nursing
care,
‘‘(B) rehabilitation services for the rehabili-
tation of injured, disabled, or sick persons, or
‘‘(C) on a regular basis, health-related care
and services to individuals who because of their
mental or physical condition require care and
services (above the level of room and board)
which can be made available to them only
through institutional facilities,
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and is not primarily for the care and treatment of
mental diseases;
‘‘(2) has in effect a transfer agreement (meeting
the requirements of section 1861(l)) with one or more
hospitals having agreements in effect under section
1866; and
‘‘(3) meets the requirements for a nursing facil-
ity described in subsections (b), (c), and (d) of this
section.
Such term also includes any facility which is located in
a State on an Indian reservation and is certified by the
Secretary as meeting the requirements of paragraph (1) and
subsections (b), (c), and (d).
‘‘(b) REQUIREMENTS RELATING
TO PROVISION
OF
SERVICES.—
‘‘(1) QUALITY OF LIFE.—
‘‘(A) IN GENERAL.—A nursing facility must
care for its residents in such a manner and in
such an environment as will reasonably promote
maintenance or enhancement of the quality of
life of each resident.
‘‘(B) QUALITY
ASSESSMENT
AND
ASSUR-
ANCE.—A nursing facility must maintain a
quality assessment and assurance committee,
consisting of the director of nursing services, a
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physician designated by the facility, and at least
3 other members of the facility’s staff, which (i)
meets at least quarterly to identify issues with
respect to which quality assessment and assur-
ance activities are necessary and (ii) develops
and implements appropriate plans of action to
correct identified quality deficiencies. A State or
the Secretary may not require disclosure of the
records of such committee except insofar as such
disclosure is related to the compliance of such
committee with the requirements of this subpara-
graph.
‘‘(2) SCOPE OF SERVICES AND ACTIVITIES UNDER
PLAN
OF
CARE.—A nursing facility must provide
services and activities in accordance with a written
plan of care which—
‘‘(A) describes the medical, nursing, and
psychosocial needs of the resident and how such
needs will be met;
‘‘(B) is initially prepared, with the partici-
pation to the extent practicable of the resident or
the resident’s family or legal representative, by a
team which includes the resident’s attending
physician and a registered professional nurse
with responsibility for the resident; and
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‘‘(C) is periodically reviewed and revised by
such team after each assessment under para-
graph (3).
‘‘(3) RESIDENTS’ ASSESSMENT.—
‘‘(A) REQUIREMENT.—A nursing facility
must conduct a comprehensive, accurate, stand-
ardized, reproducible assessment of each resi-
dent’s functional capacity, which assessment—
‘‘(i) describes the resident’s capability
to perform daily life functions and signifi-
cant impairments in functional capacity;
‘‘(ii) uses an instrument which is spec-
ified by the State under subsection (e)(5);
and
‘‘(iii) includes the identification of
medical problems.
‘‘(B) CERTIFICATION.—
‘‘(i) IN GENERAL.—Each such assess-
ment must be conducted or coordinated
(with the appropriate participation of
health professionals) by a registered profes-
sional nurse who signs and certifies the
completion of the assessment. Each individ-
ual who completes a portion of such an as-
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sessment shall sign and certify as to the ac-
curacy of that portion of the assessment.
‘‘(ii) PENALTY FOR FALSIFICATION.—
‘‘(I) An individual who willfully
and knowingly certifies under clause
(i) a material and false statement in a
resident assessment is subject to a civil
money penalty of not more than
$1,000 with respect to each assessment.
‘‘(II) An individual who willfully
and knowingly causes another individ-
ual to certify under clause (i) a mate-
rial and false statement in a resident
assessment is subject to a civil money
penalty of not more than $5,000 with
respect to each assessment.
‘‘(III) The provisions of section
1128A (other than subsections (a) and
(b)) shall apply to a civil money pen-
alty under this clause in the same
manner as such provisions apply to a
penalty or proceeding under section
1128A(a).
‘‘(iii) USE
OF
INDEPENDENT
ASSES-
SORS.—If a State determines, under a sur-
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vey under subsection (g) or otherwise, that
there has been a knowing and willful certifi-
cation of false assessments under this para-
graph, the State may require (for a period
specified by the State) that resident assess-
ments under this paragraph be conducted
and certified by individuals who are inde-
pendent of the facility and who are ap-
proved by the State.
‘‘(C) FREQUENCY.—
‘‘(i) IN GENERAL.—Such an assessment
must be conducted—
‘‘(I) promptly upon (but no later
than 14 days after the date of) admis-
sion for each individual admitted;
‘‘(II) promptly after a significant
change in the resident’s physical or
mental condition; and
‘‘(III) in no case less often than
once every 12 months.
‘‘(ii) RESIDENT REVIEW.—The nursing
facility must examine each resident no less
frequently than once every 3 months and, as
appropriate, revise the resident’s assessment
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to assure the continuing accuracy of the as-
sessment.
‘‘(D) USE.—The results of such an assess-
ment shall be used in developing, reviewing, and
revising the resident’s plan of care under para-
graph (2).
‘‘(E) 
COORDINATION.—Such 
assessments
shall be coordinated with any State-required
preadmission screening program to the maxi-
mum extent practicable in order to avoid dupli-
cative testing and effort. In addition, a nursing
facility shall notify the State mental health au-
thority or State mental retardation or devel-
opmental disability authority, as applicable,
promptly after a significant change in the phys-
ical or mental condition of a resident who is
mentally ill or mentally retarded.
‘‘(4) PROVISION OF SERVICES AND ACTIVITIES.—
‘‘(A) IN GENERAL.—To the extent needed to
fulfill all plans of care described in paragraph
(2), a nursing facility must provide (or arrange
for the provision of)—
‘‘(i) nursing and related services and
specialized rehabilitative services;
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‘‘(ii) medically-related social services
to attain or maintain the highest prac-
ticable physical, mental, and psychosocial
well-being of residents;
‘‘(iii) pharmaceutical services (includ-
ing procedures that assure the accurate ac-
quiring, receiving, dispensing, and admin-
istering of all drugs and biologicals) to meet
the needs of residents;
‘‘(iv) dietary services that assure that
the meals meet the daily nutritional and
special dietary needs of residents;
‘‘(v) an on-going program, directed by
a qualified professional, of activities de-
signed to meet the interests and the phys-
ical, mental, and psychosocial well-being of
residents; and
‘‘(vi) routine dental services (to the ex-
tent covered under the State MediGrant
plan) and emergency dental services to meet
the needs of residents.
The services provided or arranged by the facility
must meet professional standards of quality.
‘‘(B) QUALIFIED PERSONS PROVIDING SERV-
ICES.—Services described in clauses (i), (ii),
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(iii), (iv), and (vi) of subparagraph (A) must be
provided by qualified persons in accordance with
each resident’s written plan of care.
‘‘(C) REQUIRED NURSING CARE; FACILITY
WAIVERS.—
‘‘(i) 
GENERAL
REQUIREMENTS.—A
nursing facility—
‘‘(I) except as provided in clause
(ii), must provide 24-hour licensed
nursing services which are sufficient to
meet the nursing needs of its residents,
and
‘‘(II) except as provided in clause
(ii), must use the services of a reg-
istered professional nurse for at least 8
consecutive hours a day, 7 days a
week.
‘‘(ii) WAIVER BY STATE.—To the extent
that a facility is unable to meet the require-
ments of clause (i), a State may waive such
requirements with respect to the facility
if—
‘‘(I) the facility demonstrates to
the satisfaction of the State that the fa-
cility has been unable, despite diligent
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efforts (including offering wages at the
community prevailing rate for nursing
facilities), to recruit appropriate per-
sonnel,
‘‘(II) the State determines that a
waiver of the requirement will not en-
danger the health or safety of individ-
uals staying in the facility,
‘‘(III) the State finds that, for
any such periods in which licensed
nursing services are not available, a
registered professional nurse or a phy-
sician is obligated to respond imme-
diately to telephone calls from the fa-
cility,
‘‘(IV) the State agency granting a
waiver of such requirements provides
notice of the waiver to the State long-
term care ombudsman (established
under section 307(a)(12) of the Older
Americans Act of 1965) and the protec-
tion and advocacy system in the State
for the mentally ill and the mentally
retarded, and
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‘‘(V) the nursing facility that is
granted such a waiver by a State noti-
fies residents of the facility (or, where
appropriate, the guardians or legal
representatives of such residents) and
members of their immediate families of
the waiver.
A waiver under this clause shall be subject
to annual review and to the review of the
Secretary and subject to clause (iii) shall be
accepted by the Secretary for purposes of
this title to the same extent as is the State’s
certification of the facility. In granting or
renewing a waiver, a State may require the
facility to use other qualified, licensed per-
sonnel.
‘‘(iii) ASSUMPTION
OF
WAIVER
AU-
THORITY BY SECRETARY.—If the Secretary
determines that a State has shown a clear
pattern and practice of allowing waivers in
the absence of diligent efforts by facilities to
meet the staffing requirements, the Sec-
retary shall assume and exercise the author-
ity of the State to grant waivers.
‘‘(5) REQUIRED TRAINING OF NURSE AIDES.—
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‘‘(A) IN GENERAL.—(i) Except as provided
in clause (ii), a nursing facility must not use on
a full-time basis any individual as a nurse aide
in the facility, for more than 4 months unless the
individual—
‘‘(I) has completed a training and
competency evaluation program, or a com-
petency evaluation program, approved by
the State under subsection (e)(1)(A), and
‘‘(II) is competent to provide nursing
or nursing-related services.
‘‘(ii) A nursing facility must not use on a
temporary, per diem, leased, or on any other
basis other than as a permanent employee any
individual as a nurse aide in the facility, unless
the individual meets the requirements described
in clause (i).
‘‘(B) OFFERING COMPETENCY EVALUATION
PROGRAMS FOR CURRENT EMPLOYEES.—A nurs-
ing facility must provide, for individuals used as
a nurse aide by the facility, for a competency
evaluation program approved by the State under
subsection (e)(1) and such preparation as may
be necessary for the individual to complete such
a program.
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‘‘(C) COMPETENCY.—The nursing facility
must not permit an individual, other than in a
training and competency evaluation program
approved by the State, to serve as a nurse aide
or provide services of a type for which the indi-
vidual has not demonstrated competency and
must not use such an individual as a nurse aide
unless the facility has inquired of any State reg-
istry established under subsection (e)(2)(A) that
the facility believes will include information con-
cerning the individual.
‘‘(D) RE-TRAINING
REQUIRED.—For pur-
poses of subparagraph (A), if, since an individ-
ual’s most recent completion of a training and
competency evaluation program, there has been a
continuous period of 24 consecutive months dur-
ing none of which the individual performed
nursing or nursing-related services for monetary
compensation, such individual shall complete a
new training and competency evaluation pro-
gram, or a new competency evaluation program.
‘‘(E) REGULAR
IN-SERVICE
EDUCATION.—
The nursing facility must provide such regular
performance review and regular in-service edu-
cation as assures that individuals used as nurse
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aides are competent to perform services as nurse
aides, including training for individuals provid-
ing nursing and nursing-related services to resi-
dents with cognitive impairments.
‘‘(F) NURSE AIDE DEFINED.—In this para-
graph, the term ‘nurse aide’ means any individ-
ual providing nursing or nursing-related services
to residents in a nursing facility, but does not
include an individual—
‘‘(i) who is a licensed health profes-
sional (as defined in subparagraph (G)) or
a registered dietician,
‘‘(ii) who volunteers to provide such
services without monetary compensation, or
‘‘(iii) who is trained, whether com-
pensated or not, to perform a task-specific
function which assists residents in their
daily activities.
‘‘(G) LICENSED HEALTH PROFESSIONAL DE-
FINED.—In this paragraph, the term ‘licensed
health professional’ means a physician, physi-
cian assistant, nurse practitioner, physical,
speech, or occupational therapist, physical or oc-
cupational therapy assistant, registered profes-
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sional nurse, licensed practical nurse, or licensed
or certified social worker.
‘‘(6) PHYSICIAN
SUPERVISION
AND
CLINICAL
RECORDS.—A nursing facility must—
‘‘(A) require that the health care of every
resident be provided under the supervision of a
physician (or, at the option of a State, under the
supervision of a nurse practitioner, clinical
nurse specialist, or physician assistant who is
not an employee of the facility but who is work-
ing in collaboration with a physician);
‘‘(B) provide for having a physician avail-
able to furnish necessary medical care in case of
emergency; and
‘‘(C) maintain clinical records on all resi-
dents, which records include the plans of care
(described in paragraph (2)) and the residents’
assessments (described in paragraph (3)).
‘‘(c) REQUIREMENTS
RELATING
TO
RESIDENTS’
RIGHTS.—
‘‘(1) GENERAL RIGHTS.—
‘‘(A) SPECIFIED RIGHTS.—A nursing facil-
ity must protect and promote the rights of each
resident, including each of the following rights:
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‘‘(i) FREE
CHOICE.—The right to
choose a personal attending physician, to be
fully informed in advance about care and
treatment, to be fully informed in advance
of any changes in care or treatment that
may affect the resident’s well-being, and
(except with respect to a resident adjudged
incompetent) to participate in planning
care and treatment or changes in care and
treatment.
‘‘(ii) FREE
FROM
RESTRAINTS.—The
right to be free from physical or mental
abuse, corporal punishment, involuntary se-
clusion, and any physical or chemical re-
straints imposed for purposes of discipline
or convenience and not required to treat the
resident’s medical symptoms. Restraints
may only be imposed—
‘‘(I) to ensure the physical safety
of the resident or other residents, and
‘‘(II) only upon the written order
of a physician that specifies the dura-
tion and circumstances under which
the restraints are to be used (except in
emergency circumstances specified by
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the Secretary until such an order could
reasonably be obtained).
‘‘(iii) PRIVACY.—The right to privacy
with regard to accommodations, medical
treatment, written and telephonic commu-
nications, visits, and meetings of family
and of resident groups.
‘‘(iv) CONFIDENTIALITY.—The right to
confidentiality of personal and clinical
records and to access to current clinical
records of the resident upon request by the
resident or the resident’s legal representa-
tive, within 24 hours (excluding hours oc-
curring during a weekend or holiday) after
making such a request.
‘‘(v) ACCOMMODATION OF NEEDS.—The
right—
‘‘(I) to reside and receive services
with reasonable accommodation of in-
dividual needs and preferences, except
where the health or safety of the indi-
vidual or other residents would be en-
dangered, and
‘‘(II) to receive notice before the
room or roommate of the resident in
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the facility is changed unless a delay
in changing the room or roommate
while notice is given would endanger
the resident or others.
‘‘(vi) GRIEVANCES.—The right to voice
grievances with respect to treatment or care
that is (or fails to be) furnished, without
discrimination or reprisal for voicing the
grievances and the right to prompt efforts
by the facility to resolve grievances the resi-
dent may have, including those with respect
to the behavior of other residents.
‘‘(vii) PARTICIPATION
IN
RESIDENT
AND FAMILY GROUPS.—The right of the resi-
dent to organize and participate in resident
groups in the facility and the right of the
resident’s family to meet in the facility with
the families of other residents in the facil-
ity.
‘‘(viii) PARTICIPATION IN OTHER AC-
TIVITIES.—The right of the resident to par-
ticipate in social, religious, and community
activities that do not interfere with the
rights of other residents in the facility.
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‘‘(ix) EXAMINATION
OF
SURVEY
RE-
SULTS.—The right to examine, upon rea-
sonable request, the results of the most re-
cent survey of the facility conducted by the
Secretary or a State with respect to the fa-
cility and any plan of correction in effect
with respect to the facility.
‘‘(x) OTHER RIGHTS.—Any other right
established by the Secretary.
Clause (iii) shall not be construed as requiring
the provision of a private room.
‘‘(B) NOTICE OF RIGHTS.—A nursing facil-
ity must—
‘‘(i) inform each resident, orally and
in writing at the time of admission to the
facility, of the resident’s legal rights during
the stay at the facility and of the require-
ments and procedures for establishing eligi-
bility for medical assistance under this title,
including the right to request an assessment
under section 2115(c)(1)(B);
‘‘(ii) make available to each resident,
upon reasonable request, a written state-
ment of such rights (which statement is up-
dated upon changes in such rights) includ-
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ing the notice (if any) of the State developed
under subsection (e)(6);
‘‘(iii) inform each resident who is enti-
tled to medical assistance under this title—
‘‘(I) at the time of admission to
the facility or, if later, at the time the
resident becomes eligible for such as-
sistance, of the items and services that
are included in nursing facility serv-
ices under the State MediGrant plan
and for which the resident may not be
charged, and of those other items and
services that the facility offers and for
which the resident may be charged and
the amount of the charges for such
items and services, and
‘‘(II) of changes in the items and
services described in subclause (I) and
of changes in the charges imposed for
items and services described in that
subclause; and
‘‘(iv) inform each other resident, in
writing before or at the time of admission
and periodically during the resident’s stay,
of services available in the facility and of
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related charges for such services, including
any charges for services not covered under
title XVIII or by the facility’s basic per
diem charge.
The written description of legal rights under this
subparagraph shall include a description of the
protection of personal funds under paragraph (6)
and a statement that a resident may file a com-
plaint with a State survey and certification
agency respecting resident abuse and neglect and
misappropriation of resident property in the fa-
cility.
‘‘(C) 
RIGHTS
OF
INCOMPETENT
RESI-
DENTS.—In the case of a resident adjudged in-
competent under the laws of a State, the rights
of the resident under this title shall devolve upon,
and, to the extent judged necessary by a court of
competent jurisdiction, be exercised by, the per-
son appointed under State law to act on the resi-
dent’s behalf.
‘‘(D) 
USE
OF
PSYCHOPHARMACOLOGIC
DRUGS.—Psychopharmacologic drugs may be ad-
ministered only on the orders of a physician and
only as part of a plan (included in the written
plan of care described in paragraph (2)) de-
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signed to eliminate or modify the symptoms for
which the drugs are prescribed and only if, at
least annually an independent, external consult-
ant reviews the appropriateness of the drug plan
of each resident receiving such drugs.
‘‘(2) TRANSFER AND DISCHARGE RIGHTS.—
‘‘(A) IN GENERAL.—A nursing facility must
permit each resident to remain in the facility
and must not transfer or discharge the resident
from the facility unless—
‘‘(i) the transfer or discharge is nec-
essary to meet the resident’s welfare and the
resident’s welfare cannot be met in the facil-
ity;
‘‘(ii) the transfer or discharge is ap-
propriate because the resident’s health has
improved sufficiently so the resident no
longer needs the services provided by the fa-
cility;
‘‘(iii) the safety of individuals in the
facility is endangered;
‘‘(iv) the health of individuals in the
facility would otherwise be endangered;
‘‘(v) the resident has failed, after rea-
sonable and appropriate notice, to pay (or
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to have paid under this title or title XVIII
on the resident’s behalf) for a stay at the fa-
cility; or
‘‘(vi) the facility ceases to operate.
In each of the cases described in clauses (i)
through (iv), the basis for the transfer or dis-
charge must be documented in the resident’s clin-
ical record. In the cases described in clauses (i)
and (ii), the documentation must be made by the
resident’s physician, and in the case described in
clause (iv) the documentation must be made by
a physician. For purposes of clause (v), in the
case of a resident who becomes eligible for assist-
ance under this title after admission to the facil-
ity, only charges which may be imposed under
this title shall be considered to be allowable.
‘‘(B) PRE-TRANSFER
AND
PRE-DISCHARGE
NOTICE.—
‘‘(i) IN GENERAL.—Before effecting a
transfer or discharge of a resident, a nurs-
ing facility must—
‘‘(I) notify the resident (and, if
known, an immediate family member
of the resident or legal representative)
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of the transfer or discharge and the
reasons therefor,
‘‘(II) record the reasons in the
resident’s clinical record (including
any documentation required under
subparagraph (A)), and
‘‘(III) include in the notice the
items described in clause (iii).
‘‘(ii) TIMING OF NOTICE.—The notice
under clause (i)(I) must be made at least 30
days in advance of the resident’s transfer or
discharge except—
‘‘(I) in a case described in clause
(iii) or (iv) of subparagraph (A);
‘‘(II) in a case described in clause
(ii) of subparagraph (A), where the
resident’s health improves sufficiently
to allow a more immediate transfer or
discharge;
‘‘(III) in a case described in
clause (i) of subparagraph (A), where a
more immediate transfer or discharge
is necessitated by the resident’s urgent
medical needs;
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‘‘(IV) in a case where a resident
has not resided in the facility for 30
days; or
‘‘(V) in a case where the provision
of a 30-day notice would be impossible
or impracticable.
In the case of such exceptions, notice must
be given as many days before the date of the
transfer or discharge as is practicable.
‘‘(iii) ITEMS INCLUDED IN NOTICE.—
Each notice under clause (i) must include—
‘‘(I) notice of the resident’s right
to appeal the transfer or discharge
under the State process established
under subsection (e)(3);
‘‘(II) the name, mailing address,
and telephone number of the State
long-term care ombudsman (established
under title III or VII of the Older
Americans Act of 1965);
‘‘(III) in the case of residents with
developmental disabilities, the mailing
address and telephone number of the
agency responsible for the protection
and advocacy system for developmen-
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tally disabled individuals established
under part C of the Developmental
Disabilities Assistance and Bill of
Rights Act; and
‘‘(IV) in the case of mentally ill
residents (as defined in subsection
(e)(7)(G)(i)), the mailing address and
telephone number of the agency respon-
sible for the protection and advocacy
system for mentally ill individuals es-
tablished under the Protection and Ad-
vocacy for Mentally Ill Individuals
Act.
‘‘(iv) EXCEPTION.—This subparagraph
shall not apply to a voluntary transfer or
discharge or a transfer or discharge neces-
sitated by a medical emergency.
‘‘(C) ORIENTATION.—A nursing facility
must provide reasonable preparation and ori-
entation to residents to promote safe and orderly
transfer or discharge from the facility.
‘‘(D) NOTICE ON BED-HOLD POLICY AND RE-
ADMISSION.—
‘‘(i) NOTICE BEFORE TRANSFER.—Be-
fore a resident of a nursing facility is
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transferred for hospitalization or thera-
peutic leave, a nursing facility must pro-
vide written information to the resident and
an immediate family member or legal rep-
resentative concerning—
‘‘(I) the provisions of the State
MediGrant plan under this title re-
garding the period (if any) during
which the resident will be permitted
under the State MediGrant plan to re-
turn and resume residence in the facil-
ity, and
‘‘(II) the policies of the facility re-
garding such a period, which policies
must be consistent with clause (iii).
‘‘(ii) NOTICE UPON TRANSFER.—At the
time of transfer of a resident to a hospital
or for therapeutic leave, a nursing facility
must provide written notice to the resident
and an immediate family member or legal
representative of the duration of any period
described in clause (i).
‘‘(iii) PERMITTING RESIDENT TO RE-
TURN.—A nursing facility must establish
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and follow a written policy under which a
resident—
‘‘(I) who is eligible for medical as-
sistance for nursing facility services
under a State MediGrant plan,
‘‘(II) who is transferred from the
facility for hospitalization or thera-
peutic leave, and
‘‘(III) whose hospitalization or
therapeutic leave exceeds a period paid
for under the State MediGrant plan for
the holding of a bed in the facility for
the resident,
will be permitted to be readmitted to the fa-
cility immediately upon the first availabil-
ity of a bed in a room (not including a pri-
vate room) in the facility if, at the time of
readmission, the resident requires the serv-
ices provided by the facility.
‘‘(3) ACCESS AND VISITATION RIGHTS.—A nurs-
ing facility must—
‘‘(A) permit immediate access to any resi-
dent by any representative of the Secretary, by
any representative of the State, by an ombuds-
man or agency described in subclause (II), (III),
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or (IV) of paragraph (2)(B)(iii), or by the resi-
dent’s individual physician;
‘‘(B) permit immediate access to a resident,
subject to the resident’s right to deny or with-
draw consent at any time, by immediate family
or other relatives of the resident;
‘‘(C) permit immediate access to a resident,
subject to reasonable restrictions and the resi-
dent’s right to deny or withdraw consent at any
time, by others who are visiting with the consent
of the resident, unless such access would endan-
ger the health or safety of the resident or others
in the facility;
‘‘(D) permit reasonable access to a resident
by any entity or individual that provides health,
social, legal, or other services to the resident, sub-
ject to the resident’s right to deny or withdraw
consent at any time; and
‘‘(E) permit representatives of the State om-
budsman 
(described 
in 
paragraph
(2)(B)(iii)(II)), with the permission of the resi-
dent (or the resident’s legal representative) and
consistent with State law, to examine a resi-
dent’s clinical records.
‘‘(4) EQUAL ACCESS TO QUALITY CARE.—
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‘‘(A) IN GENERAL.—A nursing facility must
establish and maintain identical policies and
practices regarding transfer, discharge, and the
provision of services required under the State
MediGrant plan for all individuals regardless of
source of payment.
‘‘(B) CONSTRUCTION.—
‘‘(i) 
NOTHING
PROHIBITING
ANY
CHARGES FOR NON-MEDIGRANT PATIENTS.—
Subparagraph (A) shall not be construed as
prohibiting a nursing facility from charg-
ing any amount for services furnished, con-
sistent with the notice in paragraph (1)(B)
describing such charges.
‘‘(ii) NO
ADDITIONAL
SERVICES
RE-
QUIRED.—Subparagraph (A) shall not be
construed as requiring a State to offer addi-
tional services on behalf of a resident than
are otherwise provided under the State
MediGrant plan.
‘‘(5) PROTECTION OF RESIDENT FUNDS.—
‘‘(A) IN GENERAL.—The nursing facility—
‘‘(i) may not require residents to de-
posit their personal funds with the facility,
and
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‘‘(ii) upon the written authorization of
the resident, must hold, safeguard, and ac-
count for such personal funds under a sys-
tem established and maintained by the fa-
cility in accordance with this paragraph.
‘‘(B) MANAGEMENT OF PERSONAL FUNDS.—
Upon written authorization of a resident under
subparagraph (A)(ii), the facility must manage
and account for the personal funds of the resi-
dent deposited with the facility as follows:
‘‘(i) DEPOSIT.—The facility must de-
posit any amount of personal funds in ex-
cess of $250 with respect to a resident in an
interest bearing account (or accounts) that
is separate from any of the facility’s operat-
ing accounts and credits all interest earned
on such separate account to such account.
With respect to any other personal funds,
the facility must maintain such funds in a
non-interest bearing account or petty cash
fund.
‘‘(ii) ACCOUNTING AND RECORDS.—The
facility must assure a full and complete ac-
counting of each such resident’s personal
funds, maintain a written record of all fi-
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nancial transactions involving the personal
funds of a resident deposited with the facil-
ity, and afford the resident (or a legal rep-
resentative of the resident) reasonable access
to such record.
‘‘(iii) CONVEYANCE
UPON
DEATH.—
Upon the death of a resident with such an
account, the facility must convey promptly
the resident’s personal funds (and a final
accounting of such funds) to the individual
administering the resident’s estate. All other
personal 
property, 
including 
medical
records, shall be considered part of the resi-
dent’s estate and shall only be released to
the administrator of the estate.
‘‘(C) ASSURANCE
OF
FINANCIAL
SECU-
RITY.—The facility must purchase a surety bond,
or otherwise provide assurance satisfactory to the
State, to assure the security of all personal funds
of residents deposited with the facility.
‘‘(D) LIMITATION
ON
CHARGES
TO
PER-
SONAL FUNDS.—The facility may not impose a
charge against the personal funds of a resident
for any item or service for which payment is
made under this title or title XVIII.
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‘‘(6) LIMITATION
ON
CHARGES
IN
CASE
OF
MEDIGRANT-ELIGIBLE INDIVIDUALS.—A nursing facil-
ity may not impose charges, for certain MediGrant-
eligible individuals for nursing facility services cov-
ered by the State under its plan under this title, that
exceed the payment amounts established by the State
for such services under this title.
‘‘(7) POSTING OF SURVEY RESULTS.—A nursing
facility must post in a place readily accessible to resi-
dents, and family members and legal representatives
of residents, the results of the most recent survey of
the facility conducted under subsection (g).
‘‘(d) REQUIREMENTS RELATING TO ADMINISTRATION
AND OTHER MATTERS.—
‘‘(1) ADMINISTRATION.—
‘‘(A) IN GENERAL.—A nursing facility must
be administered in a manner that enables it to
use its resources effectively and efficiently to at-
tain or maintain the highest practicable phys-
ical, mental, and psychosocial well-being of each
resident (consistent with requirements established
under subsection (f)(5)).
‘‘(B) REQUIRED NOTICES.—If a change oc-
curs in—
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‘‘(B) LIFE SAFETY CODE.—A nursing facil-
ity must meet such provisions of such edition (as
specified by the Secretary in regulation) of the
Life Safety Code of the National Fire Protection
Association as are applicable to nursing homes;
except that—
‘‘(i) the Secretary may waive, for such
periods as he deems appropriate, specific
provisions of such Code which if rigidly ap-
plied would result in unreasonable hardship
upon a facility, but only if such waiver
would not adversely affect the health and
safety of residents or personnel, and
‘‘(ii) the provisions of such Code shall
not apply in any State if the Secretary
finds that in such State there is in effect a
fire and safety code, imposed by State law,
which adequately protects residents of and
personnel in nursing facilities.
‘‘(3) SANITARY
AND
INFECTION
CONTROL
AND
PHYSICAL ENVIRONMENT.—A nursing facility must—
‘‘(A) establish and maintain an infection
control program designed to provide a safe, sani-
tary, and comfortable environment in which resi-
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dents reside and to help prevent the development
and transmission of disease and infection, and
‘‘(B) be designed, constructed, equipped, and
maintained in a manner to protect the health
and safety of residents, personnel, and the gen-
eral public.
‘‘(4) MISCELLANEOUS.—
‘‘(A) COMPLIANCE WITH FEDERAL, STATE,
AND
LOCAL
LAWS
AND
PROFESSIONAL
STAND-
ARDS.—A nursing facility, whether freestanding
or hospital-based, must operate and provide serv-
ices in compliance with all applicable Federal,
State, and local laws and regulations (including
the requirements of section 1124) and with ac-
cepted professional standards and principles
which apply to professionals providing services
in such a facility.
‘‘(B) OTHER.—A nursing facility must
meet such other requirements relating to the
health and safety of residents or relating to the
physical facilities thereof as the Secretary may
find necessary.
‘‘(e) STATE REQUIREMENTS RELATING TO NURSING
FACILITY REQUIREMENTS.—A State with a MediGrant
plan shall provide for the following:
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‘‘(1) SPECIFICATION
AND
REVIEW
OF
NURSE
AIDE TRAINING AND COMPETENCY EVALUATION PRO-
GRAMS AND OF NURSE AIDE COMPETENCY EVALUA-
TION PROGRAMS.—The State must—
‘‘(A) specify those training and competency
evaluation programs, and those competency eval-
uation programs, that the State approves for
purposes of subsection (b)(5) and that meet the
requirements established under subsection (f)(2),
and
‘‘(B) provide for the review and reapproval
of such programs, at a frequency and using a
methodology consistent with the requirements es-
tablished under subsection (f)(2)(A)(iii).
‘‘(2) NURSE AIDE REGISTRY.—
‘‘(A) IN GENERAL.—The State shall estab-
lish and maintain a registry of all individuals
who have satisfactorily completed a nurse aide
training and competency evaluation program, or
a nurse aide competency evaluation program,
approved under paragraph (1) in the State, or
any 
individual 
described 
in 
subsection
(f)(2)(B)(ii) or in subparagraph (B), (C), or (D)
of section 6901(b)(4) of the Omnibus Budget Rec-
onciliation Act of 1989.
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‘‘(B) INFORMATION IN REGISTRY.—The reg-
istry under subparagraph (A) shall provide for
the inclusion of specific documented findings by
a State under subsection (g)(1)(C) of resident ne-
glect or abuse or misappropriation of resident
property involving an individual listed in the
registry, as well as any brief statement of the in-
dividual disputing the findings. The State shall
make available to the public information in the
registry. In the case of inquiries to the registry
concerning an individual listed in the registry,
any information disclosed concerning such a
finding shall also include disclosure of any such
statement in the registry relating to the finding
or a clear and accurate summary of such a state-
ment.
‘‘(C) PROHIBITION AGAINST CHARGES.—A
State may not impose any charges on a nurse
aide relating to the registry established and
maintained under subparagraph (A).
‘‘(3) STATE APPEALS PROCESS FOR TRANSFERS
AND DISCHARGES.—The State must provide for a fair
mechanism, meeting the guidelines established under
subsection (f)(3), for hearing appeals on transfers and
discharges of residents of such facilities.
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‘‘(4) NURSING FACILITY ADMINISTRATOR STAND-
ARDS.—The State must implement and enforce the
nursing facility administrator standards developed
under subsection (f)(4) respecting the qualification of
administrators of nursing facilities. Any such stand-
ards promulgated shall apply to administrators of
hospital-based facilities as well as administrators of
freestanding facilities.
‘‘(5) SPECIFICATION OF RESIDENT ASSESSMENT
INSTRUMENT.—The State shall specify the instrument
to be used by nursing facilities in the State in com-
plying 
with 
the 
requirement 
of 
subsection
(b)(3)(A)(iii).
‘‘(6) NOTICE
OF
MEDIGRANT
RIGHTS.—Each
State shall develop (and periodically update) a writ-
ten notice of the rights and obligations of residents of
nursing facilities (and spouses of such residents)
under this title.
‘‘(7) STATE REQUIREMENTS FOR PREADMISSION
SCREENING AND RESIDENT REVIEW.—
‘‘(A) PREADMISSION SCREENING.—
‘‘(i) IN
GENERAL.—The State must
have in effect a preadmission screening pro-
gram, for identifying mentally ill and men-
tally retarded individuals (as defined in
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subparagraph (B)) who are admitted to
nursing facilities.
‘‘(ii) STATE REQUIREMENT FOR RESI-
DENT REVIEW.—The State shall notify the
State mental health authority or the State
mental retardation or developmental dis-
ability authority, as appropriate, of the in-
dividuals so identified.
‘‘(B) DEFINITIONS.—In this paragraph:
‘‘(i) An individual is considered to be
‘mentally ill’ if the individual has a serious
mental illness (as defined by the Secretary
in consultation with the National Institute
of Mental Health) and does not have a pri-
mary diagnosis of dementia (including Alz-
heimer’s disease or a related disorder) or a
diagnosis (other than a primary diagnosis)
of dementia and a primary diagnosis that
is not a serious mental illness.
‘‘(ii) An individual is considered to be
‘mentally retarded’ if the individual is men-
tally retarded or a person with a related
condition.
‘‘(f) RESPONSIBILITIES RELATING TO NURSING FACIL-
ITY REQUIREMENTS.—
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‘‘(1) GENERAL RESPONSIBILITY.—It is the duty
and responsibility of a State with a MediGrant plan
under this title to assure that requirements which gov-
ern the provision of care in nursing facilities under
the plan, and the enforcement of such requirements,
are adequate to protect the health, safety, welfare, and
rights of residents and to promote the effective and ef-
ficient use of public moneys.
‘‘(2) REQUIREMENTS FOR NURSE AIDE TRAINING
AND COMPETENCY EVALUATION PROGRAMS AND FOR
NURSE AIDE COMPETENCY EVALUATION PROGRAMS.—
For purposes of subsections (b)(5) and (e)(1)(A), the
State shall establish—
‘‘(A) requirements for the approval of nurse
aide training and competency evaluation pro-
grams, including requirements relating to (i) the
areas to be covered in such a program (including
at least basic nursing skills, personal care skills,
recognition of mental health and social service
needs, care of cognitively impaired residents,
basic restorative services, and residents’ rights)
and content of the curriculum, (ii) minimum
hours of initial and ongoing training and re-
training, (iii) qualifications of instructors, and
(iv) procedures for determination of competency;
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‘‘(B) requirements for the approval of nurse
aide competency evaluation programs, including
requirement relating to the areas to be covered in
such a program, including at least basic nursing
skills, personal care skills, recognition of mental
health and social service needs, care of cog-
nitively impaired residents, basic restorative
services, and residents’ rights, and procedures for
determination of competency;
‘‘(C) requirements respecting the minimum
frequency and methodology to be used by a State
in reviewing such programs’ compliance with the
requirements for such programs; and
‘‘(D) requirements, under both such pro-
grams, that—
‘‘(i) provide procedures for determining
competency that permit a nurse aide, at the
nurse aide’s option, to establish competency
through procedures or methods other than
the passing of a written examination and to
have the competency evaluation conducted
at the nursing facility at which the aide is
(or will be) employed, and
‘‘(ii) prohibit the imposition on a
nurse aide who is employed by (or who has
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received an offer of employment from) a fa-
cility on the date on which the aide begins
either such program of any charges (includ-
ing any charges for textbooks and other re-
quired course materials and any charges for
the competency evaluation) for either such
program.
‘‘(3) QUALIFICATION OF ADMINISTRATORS.—For
purposes of subsections (d)(1)(C) and (e)(4), the State
shall develop standards to be applied in assuring the
qualifications of administrators of nursing facilities.
Any such standards must apply to administrators of
hospital-based facilities as well as administrators of
freestanding facilities.
‘‘(g) SURVEY AND CERTIFICATION PROCESS.—
‘‘(1) STATE AND FEDERAL RESPONSIBILITY.—
‘‘(A) IN
GENERAL.—Under each State
MediGrant plan under this title, the State shall
be responsible for certifying, in accordance with
surveys conducted under paragraph (2), the com-
pliance of nursing facilities with the require-
ments of subsections (b), (c), and (d). The Sec-
retary shall be responsible for certifying, in ac-
cordance with surveys conducted under para-
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graph (2), the compliance of State nursing facili-
ties with the requirements of such subsections.
‘‘(B) INVESTIGATION
OF
ALLEGATIONS
OF
RESIDENT NEGLECT AND ABUSE AND MISAPPRO-
PRIATION OF RESIDENT PROPERTY.—The State
shall provide, through the agency responsible for
surveys and certification of nursing facilities
under this subsection, for a process for the re-
ceipt and timely review and investigation of al-
legations of neglect and abuse and misappropria-
tion of resident property by a nurse aide of a
resident in a nursing facility or by another indi-
vidual used by the facility in providing services
to such a resident. The State shall, after notice
to the individual involved and a reasonable op-
portunity for a hearing for the individual to
rebut allegations, make a finding as to the accu-
racy of the allegations. If the State finds that a
nurse aide has neglected or abused a resident or
misappropriated resident property in a facility,
the State shall notify the nurse aide and the reg-
istry of such finding. If the State finds that any
other individual used by the facility has ne-
glected or abused a resident or misappropriated
resident property in a facility, the State shall
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notify the appropriate licensure authority. A
State shall not make a finding that an individ-
ual has neglected a resident if the individual
demonstrates that such neglect was caused by
factors beyond the control of the individual.
‘‘(2) SURVEYS.—
‘‘(A) ANNUAL STANDARD SURVEY.—
‘‘(i) IN GENERAL.—Each nursing facil-
ity shall be subject to a standard survey, to
be conducted without any prior notice to the
facility. Any individual who notifies (or
causes to be notified) a nursing facility of
the time or date on which such a survey is
scheduled to be conducted is subject to a
civil money penalty of not to exceed $2,000.
The provisions of section 1128A (other than
subsections (a) and (b)) shall apply to a
civil money penalty under the previous sen-
tence in the same manner as such provi-
sions apply to a penalty or proceeding
under section 1128A(a). The State shall
take all reasonable steps to avoid giving no-
tice of such a survey through the scheduling
procedures and the conduct of the surveys
themselves.
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‘‘(ii) CONTENTS.—Each standard sur-
vey shall include, for a case-mix stratified
sample of residents—
‘‘(I) a survey of the quality of
care furnished, as measured by indica-
tors of medical, nursing, and rehabili-
tative care, dietary and nutrition serv-
ices, activities and social participa-
tion, and sanitation, infection control,
and the physical environment,
‘‘(II) written plans of care pro-
vided under subsection (b)(2) and an
audit of the residents’ assessments
under subsection (b)(3) to determine
the accuracy of such assessments and
the adequacy of such plans of care, and
‘‘(III) a review of compliance
with residents’ rights under subsection
(c).
‘‘(iii) FREQUENCY.—
‘‘(I) IN GENERAL.—Each nursing
facility shall be subject to a standard
survey not later than 24 months after
the date of the previous standard sur-
vey conducted under this subpara-
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graph, except that in the case of a fa-
cility which has been subjected to an
extended survey under subparagraph
(B), a standard survey shall be con-
ducted not later than 12 months after
the date of the preceding extended sur-
vey.
‘‘(II) SPECIAL SURVEYS.—If not
otherwise conducted under subclause
(I), a standard survey (or an abbre-
viated standard survey) may be con-
ducted within 4 months of any change
of ownership, administration, manage-
ment of a nursing facility, or director
of nursing in order to determine
whether the change has resulted in any
decline in the quality of care furnished
in the facility.
‘‘(B) EXTENDED SURVEYS.—
‘‘(i) IN GENERAL.—Each nursing facil-
ity which is found, under a standard sur-
vey, to have provided substandard quality
of care shall be subject to an extended sur-
vey. Any other facility may, at the State’s
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discretion, be subject to such an extended
survey (or a partial extended survey).
‘‘(ii) TIMING.—The extended survey
shall be conducted immediately after the
standard survey (or, if not practicable, not
later than 2 weeks after the date of comple-
tion of the standard survey).
‘‘(iii) CONTENTS.—In such an ex-
tended survey, the survey team shall review
and identify the policies and procedures
which produced such substandard quality of
care and shall determine whether the facil-
ity has complied with all the requirements
described in subsections (b), (c), and (d).
Such review shall include an expansion of
the size of the sample of residents’ assess-
ments reviewed and a review of the staffing,
of in-service training, and, if appropriate,
of contracts with consultants.
‘‘(iv) CONSTRUCTION.—Nothing in this
paragraph shall be construed as requiring
an extended or partial extended survey as a
prerequisite to imposing a sanction against
a facility under subsection (h) on the basis
of findings in a standard survey.
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‘‘(C) SURVEY
PROTOCOL.—Standard and
extended surveys shall be conducted—
‘‘(i) based upon the protocol which the
Secretary has developed, tested, and vali-
dated, as of the date of the enactment of this
title, and
‘‘(ii) by individuals, of a survey team,
who meet such minimum qualifications as
the State establishes.
‘‘(D) CONSISTENCY
OF
SURVEYS.—Each
State shall implement programs to measure and
reduce inconsistency in the application of survey
results among surveyors.
‘‘(E) SURVEY TEAMS.—
‘‘(i) IN GENERAL.—Surveys under this
subsection shall be conducted by a multi-
disciplinary team of professionals (includ-
ing a registered professional nurse).
‘‘(ii) PROHIBITION OF CONFLICTS OF
INTEREST.—A State may not use as a
member of a survey team under this sub-
section an individual who is serving (or has
served within the previous 2 years) as a
member of the staff of, or as a consultant to,
the facility surveyed respecting compliance
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with the requirements of subsections (b), (c),
and (d), or who has a personal or familial
financial interest in the facility being sur-
veyed.
‘‘(3) VALIDATION SURVEYS.—
‘‘(A) IN
GENERAL.—The Secretary shall
conduct onsite surveys of a representative sample
of nursing facilities in each State, within 4
months of the date of surveys conducted under
paragraph (2) by the State, in a sufficient num-
ber to allow inferences about the adequacies of
each State’s surveys conducted under paragraph
(2). In conducting such surveys, the Secretary
shall use the same survey protocols as the State
is required to use under paragraph (2). If the
State has determined that an individual nursing
facility meets the requirements of subsections (b),
(c), and (d), but the Secretary determines that
the facility does not meet such requirements, the
Secretary’s determination as to the facility’s
noncompliance with such requirements is bind-
ing and supersedes that of the State survey.
‘‘(B) SCOPE.—With respect to each State,
the Secretary shall conduct surveys under sub-
paragraph (A) at least every third year with re-
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spect to at least 5 percent of the number of nurs-
ing facilities surveyed by the State in the year,
but in no case less than 5 nursing facilities in
the State.
‘‘(C) SPECIAL SURVEYS OF COMPLIANCE.—
Where the Secretary has found substantial evi-
dence of a pattern of noncompliance by a nurs-
ing facility with any of the requirements of sub-
sections (b), (c), and (d), the Secretary may con-
duct a survey of the facility and, on the basis of
that survey, make determinations concerning the
extent to which the nursing facility meets such
requirements.
‘‘(4) INVESTIGATION OF COMPLAINTS AND MON-
ITORING
NURSING
FACILITY
COMPLIANCE.—Each
State shall maintain procedures and adequate staff
to—
‘‘(A) investigate complaints of violations of
requirements by nursing facilities, and
‘‘(B) monitor, on-site, on a regular, as need-
ed basis, a nursing facility’s compliance with the
requirements of subsections (b), (c), and (d), if—
‘‘(i) the facility has been found not to
be in compliance with such requirements
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HR 2491 EAS
and is in the process of correcting defi-
ciencies to achieve such compliance;
‘‘(ii) the facility was previously found
not to be in compliance with such require-
ments, has corrected deficiencies to achieve
such compliance, and verification of contin-
ued compliance is indicated; or
‘‘(iii) the State has reason to question
the compliance of the facility with such re-
quirements.
‘‘(5) DISCLOSURE OF RESULTS OF INSPECTIONS
AND ACTIVITIES.—
‘‘(A) PUBLIC
INFORMATION.—Each State,
and the Secretary, shall make available to the
public—
‘‘(i) information respecting all surveys
and certifications made respecting nursing
facilities, including statements of defi-
ciencies, within a reasonable time after such
information is made available to those fa-
cilities, and approved plans of correction,
‘‘(ii) copies of cost reports of such fa-
cilities filed under this title or under title
XVIII,
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‘‘(iii) copies of statements of ownership
under section 1124, and
‘‘(iv) information disclosed under sec-
tion 1126.
‘‘(B) NOTICE TO OMBUDSMAN.—Each State
shall notify the State long-term care ombudsman
(established under title III or VII of the Older
Americans Act of 1965 in accordance with sec-
tion 712 of the Act) of the State’s findings of
noncompliance with any of the requirements of
subsections (b), (c), and (d), or of any adverse
action taken against a nursing facility under
paragraphs (1), (2), or (3) of subsection (h), with
respect to a nursing facility in the State.
‘‘(C) NOTICE TO PHYSICIANS AND NURSING
FACILITY ADMINISTRATOR LICENSING BOARD.—If
a State finds that a nursing facility has pro-
vided substandard quality of care, the State shall
notify—
‘‘(i) the attending physician of each
resident with respect to which such finding
is made, and
‘‘(ii) any State board responsible for
the licensing of the nursing facility admin-
istrator of the facility.
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‘‘(D) ACCESS TO FRAUD CONTROL UNITS.—
Each State shall provide its State MediGrant
fraud and abuse control unit (established under
section 2134) with access to all information of
the State agency responsible for surveys and cer-
tifications under this subsection.
‘‘(h) ENFORCEMENT PROCESS.—
‘‘(1) IN GENERAL.—If a State finds, on the basis
of a standard, extended, or partial extended survey
under subsection (g)(2) or otherwise, that a nursing
facility no longer meets a requirement of subsection
(b), (c), or (d)—
‘‘(A) the State shall require the facility to
correct the deficiency involved;
‘‘(B) if the State finds that the facility’s de-
ficiencies immediately jeopardize the health or
safety of its residents, the State shall take imme-
diate action to remove the jeopardy and correct
the deficiencies through the remedy specified in
paragraph (2)(A)(iii), or terminate the facility’s
participation under the State MediGrant plan
and may provide, in addition, for one or more
of the other remedies described in paragraph (2);
and
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‘‘(C) if the State finds that the facility’s de-
ficiencies do not immediately jeopardize the
health or safety of its residents, the State may—
‘‘(i) terminate the facility’s participa-
tion under the State MediGrant plan,
‘‘(ii) provide for one or more of the
remedies described in paragraph (2), or
‘‘(iii) do both.
‘‘(2) SPECIFIED REMEDIES.—
‘‘(A) LISTING.—Except as provided in sub-
paragraph (B), each State shall establish by law
(whether statute or regulation) at least the fol-
lowing remedies:
‘‘(i) Denial of payment under the State
MediGrant plan with respect to any indi-
vidual admitted to the nursing facility in-
volved after such notice to the public and to
the facility as may be provided for by the
State.
‘‘(ii) A civil money penalty assessed
and collected, with interest, for each day in
which the facility is or was out of compli-
ance with a requirement of subsection (b),
(c), or (d).
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‘‘(iii) The appointment of temporary
management to oversee the operation of the
facility and to assure the health and safety
of the facility’s residents, where there is a
need for temporary management while—
‘‘(I) there is an orderly closure of
the facility, or
‘‘(II) improvements are made in
order to bring the facility into compli-
ance with all the requirements of sub-
sections (b), (c), and (d).
The temporary management under this
clause shall not be terminated under
subclause (II) until the State has deter-
mined that the facility has the management
capability to ensure continued compliance
with all the requirements of subsections (b),
(c), and (d).
‘‘(iv) The authority, in the case of an
emergency, to close the facility, to transfer
residents in that facility to other facilities,
or both.
The State also shall specify criteria, as to when
and how each of such remedies is to be applied,
the amounts of any fines, and the severity of
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each of these remedies, to be used in the imposi-
tion of such remedies.
‘‘(B) ALTERNATIVE
REMEDIES.—A State
may establish alternative remedies to the rem-
edies described in subparagraph (A), if the State
demonstrates to the Secretary’s satisfaction that
the alternative remedies are as effective in deter-
ring noncompliance and correcting deficiencies
as those described in such subparagraph.
‘‘(C) ASSURING PROMPT COMPLIANCE.—If a
nursing facility has not complied with any of the
requirements of subsections (b), (c), and (d),
within 3 months after the date the facility is
found to be out of compliance with such require-
ments, the State may impose the remedy de-
scribed in subparagraph (A)(i) for all individ-
uals who are admitted to the facility after such
date.
‘‘(D) REPEATED NONCOMPLIANCE.—In the
case of a nursing facility which, on 3 consecutive
standard surveys conducted under subsection
(g)(2), has been found to have provided sub-
standard quality of care, the State shall (regard-
less of what other remedies are provided)—
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‘‘(i) impose the remedy described in
subparagraph (A)(i), and
‘‘(ii) monitor the facility under sub-
section (g)(4)(B),
until the facility has demonstrated, to the satis-
faction of the State, that it is in compliance with
the requirements of subsections (b), (c), and (d),
and that it will remain in compliance with such
requirements.
‘‘(3) SECRETARIAL AUTHORITY.—
‘‘(A) FOR
STATE
NURSING
FACILITIES.—
With respect to a State nursing facility, the Sec-
retary shall have the authority and duties of a
State under this subsection. Nothing in this sub-
paragraph shall be construed as restricting the
remedies available to the Secretary to remedy a
nursing facility’s deficiencies.
‘‘(B) OTHER
NURSING
FACILITIES.—With
respect to any other nursing facility in a State,
if the Secretary finds that a nursing facility no
longer meets a requirement of subsection (b), (c),
or (d), the Secretary shall notify the State of
such deficiency. If, after a reasonable period of
time after such notification is given, the Sec-
retary finds that the State has failed to carry
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out the requirements of paragraph (1)(A) or
paragraph (1)(B) (if appropriate) with respect
to the deficiency involved, or that the deficiency
remains uncorrected—
‘‘(i) the Secretary shall require the fa-
cility to correct the deficiency involved;
‘‘(ii) if the Secretary finds that the de-
ficiency involved immediately jeopardizes
the health or safety of its residents, the Sec-
retary shall, in consultation with the State,
take action to remove the jeopardy and cor-
rect the deficiencies through the remedy
specified in subparagraph (C)(iii), or ter-
minate the facility’s participation under the
State MediGrant plan and may provide, in
addition, for one or more of the other rem-
edies described in subparagraph (C); and
‘‘(iii) in the case of a deficiency that
remains uncorrected, if the Secretary finds
that the deficiency involved does not imme-
diately jeopardize the health or safety of its
residents, the Secretary may impose any of
the remedies described in subparagraph (C).
‘‘(C) SPECIFIED REMEDIES.—The remedies
specified in this subparagraph are as follows:
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‘‘(i) DENIAL OF PAYMENT.—Denial of
any further payments to the State in ac-
cordance with section 2154(f) for medical
assistance furnished by the facility to all in-
dividuals in the facility or to individuals
admitted to the facility after the effective
date of the finding.
‘‘(ii) AUTHORITY
WITH
RESPECT
TO
CIVIL MONEY PENALTIES.—Imposition of a
civil money penalty against the facility in
an amount not to exceed $5,000 for each
day of noncompliance. The provisions of
section 1128A (other than subsections (a)
and (b)) shall apply to a civil money pen-
alty under the previous sentence in the same
manner as such provisions apply to a pen-
alty or proceeding under section 1128A(a).
‘‘(iii) APPOINTMENT
OF
TEMPORARY
MANAGEMENT.—Appointment of temporary
management (in consultation with the
State) to oversee the operation of the facility
and to assure the health and safety of the
facility’s residents, where there is a need for
temporary management while—
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‘‘(I) there is an orderly closure of
the facility, or
‘‘(II) improvements are made in
order to bring the facility into compli-
ance with all the requirements of sub-
sections (b), (c), and (d).
The temporary management under this
clause shall not be terminated under
subclause (II) until the Secretary has deter-
mined that the facility has the management
capability to ensure continued compliance
with all the requirements of subsections (b),
(c), and (d).
The Secretary shall specify criteria, as to when
and how each of such remedies is to be applied,
the amounts of any fines, and the severity of
each of these remedies, to be used in the imposi-
tion of such remedies.
‘‘(4) SPECIAL RULES REGARDING PAYMENTS TO
FACILITIES.—
‘‘(A) CONTINUATION OF PAYMENTS PENDING
REMEDIATION.—The State or the Secretary, as
appropriate, may continue payments, over a pe-
riod of not longer than 6 months after the effec-
tive date of the findings, under this title with re-
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spect to a nursing facility not in compliance
with a requirement of subsection (b), (c), or (d).
‘‘(B) EFFECTIVE
PERIOD
OF
DENIAL
OF
PAYMENT.—A finding to deny payment under
this subsection shall terminate when the State or
Secretary (as the case may be) finds that the fa-
cility is in substantial compliance with all the
requirements of subsections (b), (c), and (d).
‘‘(5) CONSTRUCTION.—The remedies provided
under this subsection are in addition to those other-
wise available under Federal or State law and shall
not be construed as limiting such other remedies, in-
cluding any remedy available to an individual at
common law. The provisions of this subsection shall
apply to a nursing facility (or portion thereof) not-
withstanding that the facility (or portion thereof) also
is a skilled nursing facility for purposes of title XVIII
or is accredited by an entity pursuant to subsection
(i)(2).
‘‘(6) SHARING OF INFORMATION.—Notwithstand-
ing any other provision of law, all information con-
cerning nursing facilities required by this section to
be filed with the Secretary or a State agency shall be
made available by such facilities to Federal or State
employees for purposes consistent with the effective
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administration of programs established under this
title and title XVIII, including investigations by
State MediGrant fraud control units.
‘‘(i) CONSTRUCTION.—
‘‘(1) MEDICARE
REQUIREMENTS.—Where re-
quirements or obligations under this section are iden-
tical to those provided under section 1819 of this Act,
the fulfillment of those requirements or obligations
under section 1819 shall be considered to be the fulfill-
ment of the corresponding requirements or obligations
under this section.
‘‘(2) EFFECT OF ACCREDITATION.—
‘‘(A) IN
GENERAL.—At the option of a
State, or the Secretary, as appropriate, if a
nursing facility in the State is accredited by a
national accrediting entity meeting such stand-
ards as the State or the Secretary may impose,
such facility shall be deemed to have met the re-
quirements of this section and the State shall be
deemed to have met the survey and certification
requirements under subsection (g).
‘‘(B) REQUIREMENT FOR ACCREDITING EN-
TITY.—A State or the Secretary, as appropriate,
may not find that an accrediting entity meets
standards under subparagraph (A) unless such
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entity applies standards for accreditation for fa-
cilities that meet or exceed the requirements of
this section.
‘‘SEC. 2138. OTHER PROVISIONS PROMOTING PROGRAM IN-
TEGRITY.
‘‘(a) PUBLIC ACCESS TO SURVEY RESULTS.—Each
MediGrant plan shall provide that upon completion of a
survey of any health care facility or organization by a State
agency to carry out the plan, the agency shall make public
in readily available form and place the pertinent findings
of the survey relating to the compliance of the facility or
organization with requirements of law.
‘‘(b) RECORD KEEPING.—Each MediGrant plan shall
provide for agreements with persons or institutions provid-
ing services under the plan under which the person or insti-
tution agrees—
‘‘(1) to keep such records, including ledgers,
books, and original evidence of costs, as are necessary
to fully disclose the extent of the services provided to
individuals receiving assistance under the plan, and
‘‘(2) to furnish the State agency with such infor-
mation regarding any payments claimed by such per-
son or institution for providing services under the
plan, as the State agency may from time to time re-
quest.
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‘‘(c) QUALITY ASSURANCE.—Each MediGrant plan
shall provide a program to assure the quality of services
provided under the plan, including such services provided
to individuals with chronic mental or physical illness.
‘‘PART E—ESTABLISHMENT AND AMENDMENT OF
MEDIGRANT PLANS
‘‘SEC. 2151. SUBMITTAL AND APPROVAL OF MEDIGRANT
PLANS.
‘‘(a) SUBMITTAL.—As a condition of receiving funding
under part C, each State shall submit to the Secretary a
MediGrant plan that meets the applicable requirements of
this title.
‘‘(b) APPROVAL.—Except as the Secretary may provide
under section 2154, a MediGrant plan submitted under sub-
section (a)—
‘‘(1) shall be approved for purposes of this title,
and
‘‘(2) shall be effective beginning with a calendar
quarter that is specified in the plan, but in no case
earlier than the first calendar quarter that begins at
least 60 days after the date the plan is submitted.
‘‘SEC. 2152. SUBMITTAL AND APPROVAL OF PLAN AMEND-
MENTS.
‘‘(a) SUBMITTAL
OF AMENDMENTS.—A State may
amend, in whole or in part, its MediGrant plan at any
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time through transmittal of a plan amendment under this
section.
‘‘(b) APPROVAL.—Except as the Secretary may provide
under section 2154, an amendment to a MediGrant plan
submitted under subsection (a)—
‘‘(1) shall be approved for purposes of this title,
and
‘‘(2) shall be effective as provided in subsection
(c).
‘‘(c) EFFECTIVE DATES FOR AMENDMENTS.—
‘‘(1) IN
GENERAL.—Subject to the succeeding
provisions of this subsection, an amendment to a
MediGrant plan shall take effect on one or more effec-
tive dates specified in the amendment.
‘‘(2) AMENDMENTS RELATING TO ELIGIBILITY OR
BENEFITS.—Except as provided in paragraph (4)—
‘‘(A) NOTICE
REQUIREMENT.—Any plan
amendment that eliminates or restricts eligibility
or benefits under the plan may not take effect
unless the State certifies that it has provided
prior or contemporaneous public notice of the
change, in a form and manner provided under
applicable State law.
‘‘(B) TIMELY
TRANSMITTAL.—Any plan
amendment that eliminates or restricts eligibility
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or benefits under the plan shall not be effective
for longer than a 60 day period unless the
amendment has been transmitted to the Sec-
retary before the end of such period.
‘‘(3) OTHER
AMENDMENTS.—Subject to para-
graph (4), any plan amendment that is not described
in paragraph (2) becomes effective in a State fiscal
year may not remain in effect after the end of such
fiscal year (or, if later, the end of the 90-day period
on which it becomes effective) unless the amendment
has been transmitted to the Secretary.
‘‘(4) EXCEPTION.—The requirements of para-
graphs (2) and (3) shall not apply to a plan amend-
ment that is submitted on a timely basis pursuant to
a court order or an order of the Secretary.
‘‘SEC. 2153. PROCESS FOR STATE WITHDRAWAL FROM PRO-
GRAM.
‘‘(a) IN
GENERAL.—A State may rescind its
MediGrant plan and discontinue participation in the pro-
gram under this title at any time after providing—
‘‘(1) the public with 90 days prior notice in a
publication in one or more daily newspapers of gen-
eral circulation in the State or in any publication
used by the State to publish State statutes or rules,
and
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‘‘(2) the Secretary with 90 days prior written
notice.
‘‘(b) EFFECTIVE DATE.—Such discontinuation shall
not apply to payments under part C for expenditures made
for items and services furnished under the MediGrant plan
before the effective date of the discontinuation.
‘‘(c) PRORATION OF ALLOTMENTS.—In the case of any
withdrawal under this section other than at the end of a
Federal fiscal year, notwithstanding any provision of sec-
tion 2121 to the contrary, the Secretary shall provide for
such appropriate proration of the application of allotments
under section 2121 as is appropriate.
‘‘SEC. 2154. SANCTIONS FOR NONCOMPLIANCE.
‘‘(a) PROMPT REVIEW OF PLAN SUBMITTALS.—The
Secretary shall promptly review MediGrant plans and plan
amendments submitted under this part to determine if they
substantially comply with the requirements of this title.
‘‘(b) DETERMINATIONS OF SUBSTANTIAL NONCOMPLI-
ANCE.—
‘‘(1) AT TIME OF PLAN OR AMENDMENT SUBMIT-
TAL.—
‘‘(A) IN GENERAL.—If the Secretary, during
the 30-day period beginning on the date of sub-
mittal of a MediGrant plan or plan amend-
ment—
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‘‘(i) determines that the plan or
amendment substantially violates (within
the meaning of subsection (c)) a require-
ment of this title, and
‘‘(ii) provides written notice of such
determination to the State,
the Secretary shall issue an order specifying that
the plan or amendment, insofar as it is in sub-
stantial violation of such a requirement, shall
not be effective, except as provided in subsection
(c), beginning at the end of a period of not less
than 30 days (or 120 days in the case of the ini-
tial submission of the MediGrant plan) specified
in the order beginning on the date of the notice
of the determination.
‘‘(B) EXTENSION OF TIME PERIODS.—The
time periods specified in subparagraph (A) may
be extended by written agreement of the Sec-
retary and the State involved.
‘‘(2) 
VIOLATIONS
IN
ADMINISTRATION
OF
PLAN.—
‘‘(A) IN GENERAL.—If the Secretary deter-
mines, after reasonable notice and opportunity
for a hearing for the State, that in the adminis-
tration of a MediGrant plan there is a substan-
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tial violation of a requirement of this title, the
Secretary shall provide the State with written
notice of the determination and with an order to
remedy such violation. Such an order shall be-
come effective prospectively, as specified in the
order, after the date of receipt of such written
notice. Such an order may include the withhold-
ing of funds, consistent with subsection (f), for
parts of the MediGrant plan affected by such vio-
lation, until the Secretary is satisfied that the
violation has been corrected.
‘‘(B) EFFECTIVENESS.—If the Secretary is-
sues an order under paragraph (1), the order
shall become effective, except as provided in sub-
section (c), beginning at the end of a period (of
not less than 30 days) specified in the order be-
ginning on the date of the notice of the deter-
mination to the State.
‘‘(C) TIMELINESS OF DETERMINATIONS RE-
LATING
TO
REPORT-BASED
COMPLIANCE.—The
Secretary shall make determinations under this
paragraph respecting violations relating to infor-
mation contained in an annual report under sec-
tion 2102, an independent evaluation under sec-
tion 2103, or an audit report under section 2131
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not later than 30 days after the date of transmit-
tal of the report or evaluation to the Secretary.
‘‘(3) CONSULTATION WITH STATE.—Before mak-
ing a determination adverse to a State under this sec-
tion, the Secretary shall (within any time periods
provided under this section)—
‘‘(A) reasonably consult with the State in-
volved,
‘‘(B) offer the State a reasonable oppor-
tunity to clarify the submission and submit fur-
ther information to substantiate compliance with
the requirements of this title, and
‘‘(C) reasonably consider any such clarifica-
tions and information submitted.
‘‘(4) JUSTIFICATION OF ANY INCONSISTENCIES IN
DETERMINATIONS.—If the Secretary makes a deter-
mination under this section that is, in whole or in
part, inconsistent with any previous determination
issued by the Secretary under this title, the Secretary
shall include in the determination a detailed expla-
nation and justification for any such difference.
‘‘(5) SUBSTANTIAL
VIOLATION
DEFINED.—For
purposes of this title, a MediGrant plan (or amend-
ment to such a plan) or the administration of the
MediGrant plan is considered to ‘substantially vio-
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late’ a requirement of this title if a provision of the
plan or amendment (or an omission from the plan or
amendment) or the administration of the plan—
‘‘(A) is material and substantial in nature
and effect, and
‘‘(B) is inconsistent with an express re-
quirement of this title.
A failure to meet a strategic objective or performance
goal (as described in section 2101) shall not be con-
sidered to substantially violate a requirement of this
title.
‘‘(c) STATE RESPONSE TO ORDERS.—
‘‘(1) STATE RESPONSE BY REVISING PLAN.—
‘‘(A) IN
GENERAL.—Insofar as an order
under subsection (b)(1) relates to a substantial
violation by a MediGrant plan or plan amend-
ment, a State may respond (before the date the
order becomes effective) to such an order by sub-
mitting a written revision of the MediGrant
plan or plan amendment to substantially comply
with the requirements of this part.
‘‘(B) REVIEW OF REVISION.—In the case of
submission of such a revision, the Secretary shall
promptly review the submission and shall with-
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hold any action on the order during the period
of such review.
‘‘(C) SECRETARIAL
RESPONSE.—The revi-
sion shall be considered to have corrected the de-
ficiency (and the order rescinded insofar as it re-
lates to such deficiency) unless the Secretary de-
termines and notifies the State in writing, with-
in 15 days after the date the Secretary receives
the revision, that the MediGrant plan or amend-
ment, as proposed to be revised, still substan-
tially violates a requirement of this title. In such
case the State may respond by seeking reconsid-
eration or a hearing under paragraph (2).
‘‘(D) REVISION RETROACTIVE.—If the revi-
sion provides for substantial compliance, the re-
vision may be treated, at the option of the State,
as being effective either as of the effective date of
the provision to which it relates or such later
date as the State and Secretary may agree.
‘‘(2) STATE RESPONSE BY SEEKING RECONSIDER-
ATION
OR
AN
ADMINISTRATIVE
HEARING.—A State
may respond to an order under subsection (b) by fil-
ing a request with the Secretary for—
‘‘(A) a reconsideration of the determination,
pursuant to subsection (d)(1), or
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‘‘(B) a review of the determination through
an administrative hearing, pursuant to sub-
section (d)(2).
In such case, the order shall not take effect before the
completion of the reconsideration or hearing.
‘‘(3) STATE RESPONSE BY CORRECTIVE ACTION
PLAN.—
‘‘(A) IN GENERAL.—In the case of an order
described in subsection (b)(2) that relates to a
substantial violation in the administration of the
MediGrant plan, a State may respond to such
an order by submitting a corrective action plan
with the Secretary to correct deficiencies in the
administration of the plan which are the subject
of the order.
‘‘(B) REVIEW
OF
CORRECTIVE
ACTION
PLAN.—In such case, the Secretary shall with-
hold any action on the order for a period (not
to exceed 30 days) during which the Secretary
reviews the corrective action plan.
‘‘(C) SECRETARIAL RESPONSE.—The correc-
tive action plan shall be considered to have cor-
rected the deficiency (and the order rescinded in-
sofar as it relates to such deficiency) unless the
Secretary determines and notifies the State in
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writing, within 15 days after the date the Sec-
retary receives the corrective action plan, that
the State’s administration of the MediGrant
plan, as proposed to be corrected in the plan,
will still substantially violate a requirement of
this title. In such case the State may respond by
seeking reconsideration or a hearing under para-
graph (2).
‘‘(4) STATE RESPONSE BY WITHDRAWAL OF PLAN
AMENDMENT; FAILURE TO RESPOND.—Insofar as an
order relates to a substantial violation in a plan
amendment submitted, a State may respond to such
an order by withdrawing the plan amendment and
the MediGrant plan shall be treated as though the
amendment had not been made.
‘‘(d) ADMINISTRATIVE REVIEW AND HEARING.—
‘‘(1) RECONSIDERATION.—Within 30 days after
the date of receipt of a request under subsection
(b)(2)(A), the Secretary shall notify the State of the
time and place at which a hearing will be held for
the purpose of reconsidering the Secretary’s deter-
mination. The hearing shall be held not less than 20
days nor more than 60 days after the date notice of
the hearing is furnished to the State, unless the Sec-
retary and the State agree in writing to holding the
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hearing at another time. The Secretary shall affirm,
modify, or reverse the original determination within
60 days of the conclusion of the hearing.
‘‘(2) ADMINISTRATIVE
HEARING.—Within 30
days after the date of receipt of a request under sub-
section (b)(2)(B), an administrative law judge shall
schedule a hearing for the purpose of reviewing the
Secretary’s determination. The hearing shall be held
not less than 20 days nor more than 60 days after the
date notice of the hearing is furnished to the State,
unless the Secretary and the State agree in writing
to holding the hearing at another time. The adminis-
trative law judge shall affirm, modify, or reverse the
determination within 60 days of the conclusion of the
hearing.
‘‘(e) JUDICIAL REVIEW.—
‘‘(1) IN GENERAL.—A State which is dissatisfied
with a final determination made by the Secretary
under subsection (d)(1) or a final determination of an
administrative law judge under subsection (d)(2)
may, within 60 days after it has been notified of such
determination, file with the United States court of
appeals for the circuit in which the State is located
a petition for review of such determination. A copy
of the petition shall be forthwith transmitted by the
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clerk of the court to the Secretary and, in the case of
a determination under subsection (d)(2), to the ad-
ministrative law judge involved. The Secretary (or
judge involved) thereupon shall file in the court the
record of the proceedings on which the final deter-
mination was based, as provided in section 2112 of
title 28, United States Code. Only the Secretary, in
accordance with this title, may compel a State under
Federal law to comply with the provisions of this title
or a MediGrant plan, or otherwise enforce a provision
of this title against a State, and no action may be
filed under Federal law against a State in relation to
the State’s compliance, or failure to comply, with the
provisions of this title or of a MediGrant plan except
by the Secretary as provided under this subsection.
‘‘(2) STANDARD FOR REVIEW.—The findings of
fact by the Secretary or administrative law judge, if
supported by substantial evidence, shall be conclusive,
but the court, for good cause shown, may remand the
case to the Secretary or judge to take further evidence,
and the Secretary or judge may thereupon make new
or modified findings of fact and may modify a pre-
vious determination, and shall certify to the court the
transcript and record of the further proceedings. Such
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new or modified findings of fact shall likewise be con-
clusive if supported by substantial evidence.
‘‘(3) JURISDICTION OF APPELLATE COURT.—The
court shall have jurisdiction to affirm the action of
the Secretary or judge or to set it aside, in whole or
in part. The judgment of the court shall be subject to
review by the Supreme Court of the United States
upon certiorari or certification as provided in section
1254 of title 28, United States Code.
‘‘(f) WITHHOLDING OF FUNDS.—
‘‘(1) IN GENERAL.—Any order under this section
relating to the withholding of funds shall be effective
not earlier than the effective date of the order and
shall only relate to the portions of a MediGrant plan
or administration thereof which substantially violate
a requirement of this title. In the case of a failure to
meet a set-aside requirement under section 2112, any
withholding shall only apply to the extent of such
failure.
‘‘(2) SUSPENSION OF WITHHOLDING.—The Sec-
retary may suspend withholding of funds under para-
graph (1) during the period reconsideration or ad-
ministrative and judicial review is pending under
subsection (d) or (e).
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‘‘(3) RESTORATION OF FUNDS.—Any funds with-
held under this subsection under an order shall be im-
mediately restored to a State—
‘‘(A) to the extent and at the time the order
is—
‘‘(i) modified or withdrawn by the Sec-
retary upon reconsideration,
‘‘(ii) modified or reversed by an ad-
ministrative law judge, or
‘‘(iii) set aside (in whole or in part) by
an appellate court; or
‘‘(B) when the Secretary determines that the
deficiency which was the basis for the order is
corrected;
‘‘(C) when the Secretary determines that
violation which was the basis for the order is re-
solved or the amendment which was the basis for
the order is withdrawn; or
‘‘(D) at any time upon the initiative of the
Secretary.
‘‘(g) INDIVIDUAL COMPLAINT PROCESS.—The Sec-
retary shall provide for a process under which an individ-
ual may notify the Secretary concerning a State’s failure
to provide medical assistance as required under the State
MediGrant plan or otherwise comply with the requirements
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of this title or such plan. If the Secretary finds that there
is a pattern of complaints with respect to a State or that
a particular failure or finding of noncompliance is egre-
gious, the Secretary shall notify the chief executive officer
of the State of such finding and shall notify the Congress
if the State fails to respond to such notification within a
reasonable period of time.
‘‘SEC. 2155. SECRETARIAL AUTHORITY.
‘‘(a) NEGOTIATED AGREEMENT AND DISPUTE RESO-
LUTION.—
‘‘(1) NEGOTIATIONS.—Nothing in this part shall
be construed as preventing the Secretary and a State
from at any time negotiating a satisfactory resolution
to any dispute concerning the approval of a
MediGrant plan (or amendments to a MediGrant
plan) or the compliance of a MediGrant plan (includ-
ing its administration) with requirements of this
title.
‘‘(2) COOPERATION.—The Secretary shall act in
a cooperative manner with the States in carrying out
this title. In the event of a dispute between a State
and the Secretary, the Secretary shall, whenever prac-
ticable, engage in informal dispute resolution activi-
ties in lieu of formal enforcement or sanctions under
section 2154.
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‘‘(b) LIMITATIONS ON DELEGATION OF DECISION-MAK-
ING AUTHORITY.—The Secretary may not delegate (other
than to the Administrator of the Health Care Financing
Administration) the authority to make determinations or
reconsiderations respecting the approval of MediGrant
plans (or amendments to such plans) or the compliance of
a MediGrant plan (including its administration) with re-
quirements of this title. Such Administrator may not fur-
ther delegate such authority to any individual, including
any regional official of such Administration.
‘‘(c) REQUIRING FORMAL RULEMAKING FOR CHANGES
IN SECRETARIAL ADMINISTRATION.—The Secretary shall
carry out the administration of the program under this title
only through a prospective formal rulemaking process, in-
cluding issuing notices of proposed rulemaking, publishing
proposed rules or modifications to rules in the Federal Reg-
ister, and soliciting public comment.
‘‘PART F—GENERAL PROVISIONS
‘‘SEC. 2171. DEFINITIONS.
‘‘(a) MEDICAL ASSISTANCE.—For purposes of this
title, the term ‘medical assistance’ means payment of part
or all of the cost of any of the following, or assistance in
the purchase, in whole or in part, of health benefit coverage
that includes any of the following, for eligible low-income
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individuals (as defined in subsection (b)) as specified under
the MediGrant plan:
‘‘(1) Inpatient hospital services.
‘‘(2) Outpatient hospital services.
‘‘(3) Physician services.
‘‘(4) Surgical services.
‘‘(5) Clinic services and other ambulatory health
care services.
‘‘(6) Nursing facility services.
‘‘(7) Intermediate care facility services for the
mentally retarded.
‘‘(8) Prescription drugs and biologicals and the
administration of such drugs and biologicals, only if
such drugs and biologicals are not furnished for the
purpose of causing, or assisting in causing, the death,
suicide, euthanasia, or mercy killing of a person.
‘‘(9) Over-the-counter medications.
‘‘(10) Laboratory and radiological services.
‘‘(11) Family planning services and supplies.
‘‘(12) Inpatient mental health services, including
services furnished in a State-operated mental hospital
and including residential or other 24-hour therapeuti-
cally planned structured services in the case of a
child.
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‘‘(13) Outpatient mental health services, includ-
ing services furnished in a State-operated mental hos-
pital and including community-based services in the
case of a child.
‘‘(14) Durable medical equipment and other
medically-related or remedial devices (such as pros-
thetic devices, implants, eyeglasses, hearing aids, den-
tal devices, and adaptive devices).
‘‘(15) Disposable medical supplies.
‘‘(16) Home and community-based health care
services and related supportive services (such as home
health nursing services, home health aide services,
personal care, assistance with activities of daily liv-
ing, chore services, day care services, respite care serv-
ices, training for family members, and minor modi-
fications to the home).
‘‘(17) Community supported living arrange-
ments.
‘‘(18) Nursing care services (such as nurse prac-
titioner services, nurse midwife services, advanced
practice nurse services, private duty nursing care, pe-
diatric nurse services, and respiratory care services)
in a home, school, or other setting.
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‘‘(19) Abortion only if necessary to save the life
of the mother or if the pregnancy is the result of an
act of rape or incest.
‘‘(20) Dental services.
‘‘(21) Inpatient substance abuse treatment serv-
ices and residential substance abuse treatment serv-
ices.
‘‘(22) Outpatient substance abuse treatment serv-
ices.
‘‘(23) Case management services.
‘‘(24) Care coordination services.
‘‘(25) Physical therapy, occupational therapy,
and services for individuals with speech, hearing, and
language disorders.
‘‘(26) Hospice care.
‘‘(27) Any other medical, diagnostic, screening,
preventive, restorative, remedial, therapeutic, or reha-
bilitative services (whether in a facility, home, school,
or other setting) if recognized by State law and only
if the service is—
‘‘(A) prescribed by or furnished by a physi-
cian or other licensed or registered practitioner
within the scope of practice as defined by State
law,
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‘‘(B) performed under the general super-
vision or at the direction of a physician, or
‘‘(C) furnished by a health care facility that
is operated by a State or local government or is
licensed under State law and operating within
the scope of the license.
‘‘(28) Premiums for private health care insur-
ance coverage, including private long-term care insur-
ance coverage.
‘‘(29) Medical transportation.
‘‘(30) Medicare cost-sharing (as defined in sub-
section (c)).
‘‘(31) Enabling services (such as transportation,
translation, and outreach services) only if designed to
increase the accessibility of primary and preventive
health care services for eligible low-income individ-
uals.
‘‘(32) Any other health care services or items
specified by the Secretary and not excluded under this
section.
‘‘(b) ELIGIBLE LOW-INCOME INDIVIDUAL.—
‘‘(1) IN
GENERAL.—The term ‘eligible low-in-
come individual’ means an individual—
‘‘(A) who has been determined eligible by
the State for medical assistance under the
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MediGrant plan and is not an inmate of a pub-
lic institution (except as a patient in a State
psychiatric hospital), and
‘‘(B) whose family income (as determined
under the plan) does not exceed a percentage
(specified in the MediGrant plan and not to ex-
ceed 275 percent) of the poverty line for a family
of the size involved.
‘‘(2) AMOUNT OF INCOME.—In determining the
amount of income under paragraph (1)(B), a State
may exclude costs incurred for medical care or other
types of remedial care recognized by the State.
‘‘(c) MEDICARE COST-SHARING.—For purposes of this
title, the term ‘medicare cost-sharing’ means any of the fol-
lowing:
‘‘(1)(A) Premiums under section 1839.
‘‘(B) Premiums under section 1818 or 1818A.
‘‘(2) Coinsurance under title XVIII (including
coinsurance described in section 1813).
‘‘(3) Deductibles established under title XVIII
(including those described in sections 1813 and
1833(b)).
‘‘(4) The difference between the amount that is
paid under section 1833(a) and the amount that
would be paid under such section if any reference to
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‘80 percent’ therein were deemed a reference to ‘100
percent’.
‘‘(5) Premiums for enrollment of an individual
with an eligible organization under section 1876 or
with a MedicarePlus organization under part C of
title XVIII.
‘‘(d) ADDITIONAL DEFINITIONS.—For purposes of this
title:
‘‘(1) CHILD.—The term ‘child’ means an indi-
vidual under 19 years of age.
‘‘(2) ELDERLY INDIVIDUAL.—The term ‘elderly
individual’ means an individual who has attained re-
tirement age, as defined under section 216(l)(1).
‘‘(3) POVERTY LINE DEFINED.—The term ‘pov-
erty line’ has the meaning given such term in section
673(2) of the Community Services Block Grant Act
(42 U.S.C. 9902(2)), including any revision required
by such section).
‘‘(4) PREGNANT
WOMAN.—The term ‘pregnant
woman’ includes a woman during the 60-day period
beginning on the last day of the pregnancy.
‘‘SEC. 2172. TREATMENT OF TERRITORIES.
‘‘Notwithstanding any other requirement of this title,
the Secretary may waive or modify any requirement of this
title with respect to the medical assistance program for a
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State other than the 50 States and the District of Columbia,
other than a waiver of—
‘‘(1) the applicable Federal medical assistance
percentage,
‘‘(2) the limitation on total payments in a fiscal
year to the amount of the allotment under section
2121(c), or
‘‘(3) the requirement that payment may be made
for medical assistance only with respect to amounts
expended by the State for care and services described
in section 2171(a) and medically-related services (as
defined in section 2112(e)(2)).
‘‘SEC. 2173. DESCRIPTION OF TREATMENT OF INDIAN
HEALTH SERVICE FACILITIES.
‘‘In the case of a State in which one or more facilities
of the Indian Health Service are located, the MediGrant
plan shall include a description of—
‘‘(1) what provision (if any) has been made for
payment for items and services furnished by such fa-
cilities, and
‘‘(2) the manner in which medical assistance for
low-income eligible individuals who are Indians will
be provided, as determined by the State in consulta-
tion with the appropriate Indian tribes and tribal or-
ganizations.
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‘‘SEC. 2174. APPLICATION OF CERTAIN GENERAL PROVI-
SIONS.
‘‘The following sections in part A of title XI shall
apply to States under this title in the same manner as they
applied to a State under title XIX:
‘‘(1) Section 1101(a)(1) (relating to definition of
State).
‘‘(2) Section 1116 (relating to administrative
and judicial review), but only insofar as consistent
with the provisions of part C.
‘‘(3) Section 1124 (relating to disclosure of own-
ership and related information).
‘‘(4) Section 1126 (relating to disclosure of infor-
mation about certain convicted individuals).
‘‘(5) Section 1128B(d) (relating to criminal pen-
alties for certain additional charges).
‘‘(6) Section 1132 (relating to periods within
which claims must be filed).
‘‘SEC. 2175. MEDIGRANT MASTER DRUG REBATE AGREE-
MENTS.
‘‘(a) REQUIREMENT FOR MANUFACTURER TO ENTER
INTO AGREEMENT.—
‘‘(1) IN GENERAL.—Pursuant to section 2123(f),
in order for payment to be made to a State under
part C for medical assistance for covered outpatient
drugs of a manufacturer, the manufacturer shall enter
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into and have in effect a MediGrant master rebate
agreement described in subsection (b) with the Sec-
retary on behalf of States electing to participate in
the agreement.
‘‘(2) COVERAGE OF DRUGS NOT COVERED UNDER
REBATE AGREEMENTS.—Nothing in this section shall
be construed to prohibit a State in its discretion from
providing coverage under its MediGrant plan of a
covered outpatient drug for which no rebate agree-
ment is in effect under this section.
‘‘(3) EFFECT ON EXISTING AGREEMENTS.—If a
State has a rebate agreement in effect with a manu-
facturer on the date of the enactment of this section
which provides for a minimum aggregate rebate equal
to or greater than the minimum aggregate rebate
which would otherwise be paid under the MediGrant
master agreement under this section, at the option of
the State—
‘‘(A) such agreement shall be considered to
meet the requirements of the MediGrant master
rebate agreement, and
‘‘(B) the State shall be considered to have
elected to participate in the MediGrant master
rebate agreement.
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‘‘(4) LIMITATION
ON
PRICES
OF
DRUGS
PUR-
CHASED BY COVERED ENTITIES.—
‘‘(A) AGREEMENT
WITH
SECRETARY.—A
manufacturer meets the requirements of this
paragraph if the manufacturer has entered into
an agreement with the Secretary that meets the
requirements of section 340B of the Public
Health Service Act with respect to covered out-
patient drugs purchased by a covered entity on
or after the first day of the first month that be-
gins after the date of the enactment of title VI
of the Veterans Health Care Act of 1992.
‘‘(B) COVERED ENTITY DEFINED.—In this
subsection, the term ‘covered entity’ means an
entity described in section 340B(a)(4) of the
Public Health Service Act provided that—
‘‘(i) an entity is licensed by the State
to purchase and take possession of covered
outpatient drugs and furnishes the drugs to
patients at a cost no greater than acquisi-
tion plus such dispensing fee as may be al-
lowable under a State pharmaceutical as-
sistance program, and
‘‘(ii) such entity is certified pursuant
to section 340B(a)(7) of such Act.
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‘‘(C) ESTABLISHMENT
OF
ALTERNATIVE
MECHANISM
TO
ENSURE
AGAINST
DUPLICATE
DISCOUNTS OR REBATES.—If the Secretary does
not 
establish 
a 
mechanism 
under 
section
340B(a)(5)(A) of the Public Health Service Act
within 12 months of the date of the enactment of
such section, the following requirements shall
apply:
‘‘(i) Each covered entity shall inform
the single State agency under this title
when it is seeking reimbursement from the
medicaid plan for medical assistance with
respect to a unit of any covered outpatient
drug which is subject to an agreement under
section 340B(a) of such Act.
‘‘(ii) Each such single State agency
shall provide a means by which a covered
entity shall indicate on any drug reim-
bursement claims form (or format, where
electronic claims management is used) that
a unit of the drug that is the subject of the
form is subject to an agreement under sec-
tion 340B of such Act, and not submit to
any manufacturer a claim for a rebate pay-
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ment under subsection (b) with respect to
such a drug.
‘‘(D) EFFECT
OF
SUBSEQUENT
AMEND-
MENTS.—In determining whether an agreement
under subparagraph (A) meets the requirements
of section 340B of the Public Health Service Act,
the Secretary shall not take into account any
amendments to such section that are enacted
after the enactment of title VI of the Veterans
Health Care Act of 1992.
‘‘(E) DETERMINATION OF COMPLIANCE.—A
manufacturer is deemed to meet the requirements
of this paragraph if the manufacturer establishes
to the satisfaction of the Secretary that the man-
ufacturer would comply (and has offered to com-
ply) with the provisions of section 340B of the
Public Health Service Act (as in effect imme-
diately after the enactment title VI of the Veter-
ans Health Care Act of 1992, and would have
entered into an agreement under such section (as
such section was in effect at such time), but for
a legislative change in such section after such en-
actment.
‘‘(b) TERMS OF REBATE AGREEMENT.—
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‘‘(1) PERIODIC REBATES.—The MediGrant mas-
ter rebate agreement under this section shall require
the manufacturer to provide, to the MediGrant plan
of each State participating in the agreement, a rebate
for a rebate period in an amount specified in sub-
section (c) for covered outpatient drugs of the manu-
facturer dispensed after the effective date of the agree-
ment, for which payment was made under the plan
for such period. Such rebate shall be paid by the man-
ufacturer not later than 30 days after the date of re-
ceipt of the information described in paragraph (2)
for the period involved.
‘‘(2) STATE PROVISION OF INFORMATION.—
‘‘(A) STATE RESPONSIBILITY.—Each State
participating in the MediGrant master rebate
agreement shall report to each manufacturer not
later than 60 days after the end of each rebate
period and in a form consistent with a standard
reporting format established by the Secretary, in-
formation on the total number of units of each
dosage form and strength and package size of
each covered outpatient drug, for which payment
was made under the MediGrant plan for the pe-
riod, and shall promptly transmit a copy of such
report to the Secretary.
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‘‘(B) AUDITS.—A manufacturer may audit
the information provided (or required to be pro-
vided) under subparagraph (A). Adjustments to
rebates shall be made to the extent that informa-
tion indicates that utilization was greater or less
than the amount previously specified.
‘‘(3) MANUFACTURER PROVISION OF PRICE IN-
FORMATION.—
‘‘(A) IN
GENERAL.—Each manufacturer
which is subject to the MediGrant master rebate
agreement under this section shall report to the
Secretary—
‘‘(i) not later than 30 days after the
last day of each rebate period under the
agreement, on the average manufacturer
price (as defined in subsection (i)(1)) and,
for single source drugs and innovator mul-
tiple source drugs, the manufacturer’s best
price (as defined in subsection (c)(1)(C)) for
each covered outpatient drug for the rebate
period under the agreement, and
‘‘(ii) not later than 30 days after the
date of entering into an agreement under
this section, on the average manufacturer
price (as defined in subsection (i)(1)) as of
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October 1, 1990, for each of the manufactur-
er’s covered outpatient drugs.
‘‘(B) VERIFICATION SURVEYS OF AVERAGE
MANUFACTURER
PRICE.—The Secretary may
survey wholesalers and manufacturers that di-
rectly distribute their covered outpatient drugs,
when necessary, to verify manufacturer prices re-
ported under subparagraph (A). The Secretary
may impose a civil monetary penalty in an
amount not to exceed $10,000 on a wholesaler,
manufacturer, or direct seller, if the wholesaler,
manufacturer, or direct seller of a covered out-
patient drug refuses a request for information by
the Secretary in connection with a survey under
this subparagraph. The provisions of section
1128A (other than subsections (a) (with respect
to amounts of penalties or additional assess-
ments) and (b)) shall apply to a civil money
penalty under this subparagraph in the same
manner as such provisions apply to a penalty or
proceeding under section 1128A(a).
‘‘(C) PENALTIES.—
‘‘(i) FAILURE TO PROVIDE TIMELY IN-
FORMATION.—In the case of a manufacturer
which is subject to the MediGrant master
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rebate agreement that fails to provide infor-
mation required under subparagraph (A)
on a timely basis, the amount of the penalty
shall be $10,000 for each day in which such
information has not been provided and such
amount shall be paid to the Treasury. If
such information is not reported within 90
days of the deadline imposed, the agreement
shall be suspended for services furnished
after the end of such 90-day period and
until the date such information is reported
(but in no case shall such suspension be for
a period of less than 30 days).
‘‘(ii) FALSE INFORMATION.—Any man-
ufacturer which is subject to the MediGrant
master rebate agreement, or a wholesaler or
direct seller, that knowingly provides false
information under subparagraph (A) or (B)
is subject to a civil money penalty in an
amount not to exceed $100,000 for each
item of false information. Any such civil
money penalty shall be in addition to other
penalties as may be prescribed by law. The
provisions of section 1128A (other than sub-
sections (a) and (b)) shall apply to a civil
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money penalty under this subparagraph in
the same manner as such provisions apply
to a penalty or proceeding under section
1128A(a).
‘‘(D) CONFIDENTIALITY OF INFORMATION.—
Notwithstanding any other provision of law, in-
formation disclosed by manufacturers or whole-
salers under this paragraph or under an agree-
ment with the Secretary of Veterans Affairs de-
scribed in section 2123(f) is confidential and
shall not be disclosed by the Secretary or the Sec-
retary of Veterans Affairs or a State agency (or
contractor therewith) in a form which discloses
the identity of a specific manufacturer or whole-
saler or the prices charged for drugs by such
manufacturer or wholesaler, except—
‘‘(i) as the Secretary determines to be
necessary to carry out this section,
‘‘(ii) to permit the Comptroller General
to review the information provided, and
‘‘(iii) to permit the Director of the
Congressional Budget Office to review the
information provided.
‘‘(4) LENGTH OF AGREEMENT.—
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‘‘(A) IN GENERAL.—The MediGrant master
rebate agreement under this section shall be effec-
tive for an initial period of not less than 1 year
and shall be automatically renewed for a period
of not less than one year unless terminated under
subparagraph (B).
‘‘(B) TERMINATION.—
‘‘(i) BY
THE
SECRETARY.—The Sec-
retary may provide for termination of the
MediGrant master rebate agreement with
respect to a manufacturer for violation of
the requirements of the agreement or other
good cause shown. Such termination shall
not be effective earlier than 60 days after
the date of notice of such termination. The
Secretary shall provide, upon request, a
manufacturer with a hearing concerning
such a termination, but such hearing shall
not delay the effective date of the termi-
nation. Failure of a State to provide any
advance notice of such a termination as re-
quired by regulation shall not affect the
State’s right to terminate coverage of the
drugs affected by such termination as of the
effective date of such termination.
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‘‘(ii) BY A MANUFACTURER.—A manu-
facturer may terminate its participation in
the MediGrant master rebate agreement
under this section for any reason. Any such
termination shall not be effective until the
calendar quarter beginning at least 60 days
after the date the manufacturer provides no-
tice to the Secretary.
‘‘(iii) 
EFFECTIVENESS
OF
TERMI-
NATION.—Any termination under this sub-
paragraph shall not affect rebates due under
the agreement before the effective date of its
termination.
‘‘(iv) NOTICE TO STATES.—In the case
of a termination under this subparagraph,
the Secretary shall provide notice of such
termination to the States within not less
than 30 days before the effective date of such
termination.
‘‘(v) APPLICATION
TO
TERMINATIONS
OF OTHER AGREEMENTS.—The provisions of
this subparagraph shall apply to the termi-
nations of master agreements described in
section 8126(a) of title 38, United States
Code.
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‘‘(C) DELAY BEFORE REENTRY.—In the case
of any rebate agreement with a manufacturer
under this section which is terminated, another
such agreement with the manufacturer (or a suc-
cessor manufacturer) may not be entered into
until a period of 1 calendar quarter has elapsed
since the date of the termination, unless the Sec-
retary finds good cause for an earlier reinstate-
ment of such an agreement.
‘‘(5) SETTLEMENT OF DISPUTES.—
‘‘(A) SECRETARY.—The Secretary shall
have the authority to resolve, settle, and com-
promise disputes regarding the amounts of re-
bates owed under this section and section 1927.
‘‘(B) STATE.—Each State, with respect to
covered outpatient drugs paid for under the
State’s MediGrant plan, shall have authority,
independent of the Secretary’ authority under
subparagraph (A), to resolve, settle, and com-
promise disputes regarding the amounts of re-
bates owed under this section. Any such action
shall be deemed to comply with the requirements
of this title, and such covered outpatient drugs
shall 
be 
eligible 
for 
payment 
under 
the
MediGrant plan under this title.
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‘‘(C) AMOUNT OF REBATE.—The Secretary
shall limit the amount of the rebate payable in
any case in which the Secretary determines that,
because of unusual circumstances or questionable
data, the provisions of subsection (c) result in a
rebate amount that is inequitable or otherwise
inconsistent with the purposes of this section.
‘‘(c) DETERMINATION OF AMOUNT OF REBATE.—
‘‘(1) BASIC REBATE FOR SINGLE SOURCE DRUGS
AND INNOVATOR MULTIPLE SOURCE DRUGS.—
‘‘(A) IN GENERAL.—Except as provided in
paragraph (2), the amount of the rebate specified
in this subsection with respect to a State partici-
pating in the MediGrant master rebate agree-
ment for a rebate period (as defined in sub-
section (i)(7)) with respect to each dosage form
and strength of a single source drug or an inno-
vator multiple source drug shall be equal to the
product of—
‘‘(i) the total number of units of each
dosage form and strength paid for under the
State MediGrant plan in the rebate period
(as reported by the State); and
‘‘(ii) the greater of—
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‘‘(I) the difference between the av-
erage manufacturer price and the best
price (as defined in subparagraph (C))
for the dosage form and strength of the
drug, or
‘‘(II) the minimum rebate per-
centage (specified in subparagraph
(B)) of such average manufacturer
price,
for the rebate period.
‘‘(B) MINIMUM REBATE PERCENTAGE.—For
purposes of subparagraph (A)(ii)(II), the ‘mini-
mum rebate percentage’ is 15 percent.
‘‘(C) BEST PRICE DEFINED.—For purposes
of this section—
‘‘(i) IN
GENERAL.—The term ‘best
price’ means, with respect to a single source
drug or innovator multiple source drug of a
manufacturer, the lowest price available
from the manufacturer during the rebate pe-
riod to any wholesaler, retailer, provider,
health maintenance organization, nonprofit
entity, or governmental entity within the
United States, excluding—
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‘‘(I) any prices charged on or
after October 1, 1992, to the Indian
Health Service, the Department of Vet-
erans Affairs, a State home receiving
funds under section 1741 of title 38,
United States Code, the Department of
Defense, the Public Health Service, or
a covered entity described in section
340B(a)(4) of the Public Health Serv-
ice Act,
‘‘(II) any prices charged under
the Federal Supply Schedule of the
General Services Administration,
‘‘(III) any prices used under a
State pharmaceutical assistance pro-
gram, and
‘‘(IV) any depot prices and single
award contract prices, as defined by
the Secretary, of any agency of the
Federal Government.
‘‘(ii) SPECIAL RULES.—The term ‘best
price’—
‘‘(I) shall be inclusive of cash dis-
counts, free goods that are contingent
on any purchase requirement, volume
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discounts, and rebates (other than re-
bates under this section),
‘‘(II) shall be determined without
regard to special packaging, labeling,
or identifiers on the dosage form or
product or package,
‘‘(III) shall not take into account
prices that are merely nominal in
amount, and
‘‘(IV) shall exclude rebates paid
under this section or any other rebates
paid to a State participating in the
MediGrant master rebate agreement.
‘‘(2) ADDITIONAL REBATE FOR SINGLE SOURCE
AND INNOVATOR MULTIPLE SOURCE DRUGS.—
‘‘(A) IN GENERAL.—The amount of the re-
bate specified in this subsection with respect to
a State participating in the MediGrant master
rebate agreement for a rebate period, with re-
spect to each dosage form and strength of a sin-
gle source drug or an innovator multiple source
drug, shall be increased by an amount equal to
the product of—
‘‘(i) the total number of units of such
dosage form and strength dispensed after
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December 31, 1990, for which payment was
made under the MediGrant plan for the re-
bate period; and
‘‘(ii) the amount (if any) by which—
‘‘(I) the average manufacturer
price for the dosage form and strength
of the drug for the period, exceeds
‘‘(II) the average manufacturer
price for such dosage form and strength
for the calendar quarter beginning
July 1, 1990 (without regard to wheth-
er or not the drug has been sold or
transferred to an entity, including a
division or subsidiary of the manufac-
turer, after the first day of such quar-
ter), increased by the percentage by
which the Consumer Price Index for
All Urban Consumers (United States
city average) for the month before the
month in which the rebate period be-
gins exceeds such index for September
1990.
‘‘(B) TREATMENT
OF
SUBSEQUENTLY
AP-
PROVED DRUGS.—In the case of a covered out-
patient drug approved by the Food and Drug
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Administration after October 1, 1990, clause
(ii)(II) of subparagraph (A) shall be applied by
substituting ‘the first full calendar quarter after
the day on which the drug was first marketed’
for ‘the calendar quarter beginning July 1, 1990’
and ‘the month prior to the first month of the
first full calendar quarter after the day on which
the drug was first marketed’ for ‘September
1990’.
‘‘(3) REBATE FOR OTHER DRUGS.—
‘‘(A) IN GENERAL.—The amount of the re-
bate paid to a State participating in the
MediGrant master rebate agreement for a rebate
period with respect to each dosage form and
strength of covered outpatient drugs (other than
single source drugs and innovator multiple
source drugs) shall be equal to the product of—
‘‘(i) the applicable percentage (as de-
scribed in subparagraph (B)) of the average
manufacturer price for the dosage form and
strength for the rebate period, and
‘‘(ii) the total number of units of such
dosage form and strength dispensed after
December 31, 1990, for which payment was
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made under the MediGrant plan for the re-
bate period.
‘‘(B) APPLICABLE PERCENTAGE DEFINED.—
For purposes of subparagraph (A)(i), the ‘appli-
cable percentage’ is 11 percent.
‘‘(4) LIMITATION
ON
AMOUNT
OF
REBATE
TO
AMOUNTS PAID FOR CERTAIN DRUGS.—
‘‘(A) IN
GENERAL.—Upon request of the
manufacturer of a covered outpatient drug, the
Secretary shall limit, in accordance with sub-
paragraph (B), the amount of the rebate under
this subsection with respect to a dosage form and
strength of such drug if the majority of the esti-
mated number of units of such dosage form and
strength that are subject to rebates under this
section were dispensed to inpatients of nursing
facilities.
‘‘(B) AMOUNT OF REBATE.—In the case of
a covered outpatient drug subject to subpara-
graph (A), the amount of the rebate specified in
this subsection for a rebate period, with respect
to each dosage form and strength of such drug,
shall not exceed the amount paid under the
MediGrant plan with respect to such dosage form
and strength of the drug in the rebate period
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(without consideration of any dispensing fees
paid).
‘‘(5) SUPPLEMENTAL
REBATES
PROHIBITED.—
No rebates shall be required to be paid by manufac-
turers with respect to covered outpatient drugs fur-
nished to individuals in any State that provides for
the collection of such rebates in excess of the rebate
amount payable under this section.
‘‘(d) LIMITATIONS
ON
COVERAGE
OF
DRUGS
BY
STATES PARTICIPATING IN MASTER AGREEMENT.—
‘‘(1) PERMISSIBLE RESTRICTIONS.—A State par-
ticipating in the MediGrant master rebate agreement
under this section may—
‘‘(A) subject to prior authorization under its
MediGrant plan any covered outpatient drug so
long as any such prior authorization program
complies with the requirements of paragraph (5);
and
‘‘(B) exclude or otherwise restrict coverage
under its plan of a covered outpatient drug if—
‘‘(i) the drug is contained in the list
referred to in paragraph (2);
‘‘(ii) the drug is subject to such restric-
tions pursuant to the MediGrant master re-
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bate agreement or any agreement described
in subsection (a)(4); or
‘‘(iii) the State has excluded coverage
of the drug from its formulary established
in accordance with paragraph (4).
‘‘(2) LIST
OF
DRUGS
SUBJECT
TO
RESTRIC-
TION.—The following drugs or classes of drugs, or
their medical uses, may be excluded from coverage or
otherwise restricted by a State participating in the
MediGrant master rebate agreement:
‘‘(A) Agents when used for anorexia, weight
loss, or weight gain.
‘‘(B) Agents when used to promote fertility.
‘‘(C) Agents when used for cosmetic pur-
poses or hair growth.
‘‘(D) Agents when used for the symptomatic
relief of cough and colds.
‘‘(E) Agents when used to promote smoking
cessation.
‘‘(F) Prescription vitamins and mineral
products, except prenatal vitamins and fluoride
preparations.
‘‘(G) Nonprescription drugs.
‘‘(H) Covered outpatient drugs which the
manufacturer seeks to require as a condition of
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sale that associated tests or monitoring services
be purchased exclusively from the manufacturer
or its designee.
‘‘(I) Barbiturates.
‘‘(J) Benzodiazepines.
‘‘(3) ADDITIONS TO DRUG LISTINGS.—The Sec-
retary shall, by regulation, periodically update the
list of drugs or classes of drugs described in para-
graph (2), or their medical uses, which the Secretary
has determined to be subject to clinical abuse or inap-
propriate use.
‘‘(4) REQUIREMENTS
FOR
FORMULARIES.—A
State participating in the MediGrant master rebate
agreement may establish a formulary if the formulary
meets the following requirements:
‘‘(A) The formulary is developed by a com-
mittee consisting of physicians, pharmacists, and
other appropriate individuals appointed by the
Governor of the State.
‘‘(B) Except as provided in subparagraph
(C), the formulary includes the covered out-
patient drugs of any manufacturer which has en-
tered into and complies with the agreement
under subsection (a) (other than any drug ex-
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cluded from coverage or otherwise restricted
under paragraph (2)).
‘‘(C) A covered outpatient drug may be ex-
cluded with respect to the treatment of a specific
disease or condition for an identified population
(if any) only if, based on the drug’s labeling (or,
in the case of a drug the prescribed use of which
is not approved under the Federal Food, Drug,
and Cosmetic Act but is a medically accepted in-
dication, based on information from the appro-
priate compendia described in subsection (i)(5)),
the excluded drug does not have a significant,
clinically meaningful therapeutic advantage in
terms of safety, effectiveness, or clinical outcome
of such treatment for such population over other
drugs included in the formulary and there is a
written explanation (available to the public) of
the basis for the exclusion.
‘‘(D) The State MediGrant plan permits
coverage of a drug excluded from the formulary
(other than any drug excluded from coverage or
otherwise restricted under paragraph (2)) pursu-
ant to a prior authorization program that is
consistent with paragraph (5).
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‘‘(E) The formulary meets such other re-
quirements as the Secretary may impose in
order to achieve program savings consistent with
protecting the health of program beneficiaries.
A prior authorization program established by a State
under paragraph (5) is not a formulary subject to the
requirements of this paragraph.
‘‘(5) REQUIREMENTS OF PRIOR AUTHORIZATION
PROGRAMS.—The MediGrant plan of a State partici-
pating in the MediGrant master rebate agreement
may require, as a condition of coverage or payment
for a covered outpatient drug for which Federal fi-
nancial participation is available in accordance with
this section, the approval of the drug before its dis-
pensing for any medically accepted indication (as de-
fined in subsection (i)(5)) only if the system provid-
ing for such approval—
‘‘(A) provides response by telephone or other
telecommunication device within 24 hours of a
request for prior authorization, and
‘‘(B) except with respect to the drugs on the
list referred to in paragraph (2), provides for the
dispensing of at least a 72-hour supply of a cov-
ered outpatient prescription drug in an emer-
gency situation (as defined by the Secretary).
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‘‘(6) OTHER
PERMISSIBLE
RESTRICTIONS.—A
State participating in the MediGrant master rebate
agreement may impose limitations, with respect to all
such drugs in a therapeutic class, on the minimum or
maximum quantities per prescription or on the num-
ber of refills, if such limitations are necessary to dis-
courage waste, and may address instances of fraud or
abuse by individuals in any manner authorized
under this Act.
‘‘(e) DRUG USE REVIEW.—
‘‘(1) IN GENERAL.—A State participating in the
MediGrant master rebate agreement may provide for
a drug use review program to educate physicians and
pharmacists to identify and reduce the frequency of
patterns of fraud, abuse, gross overuse, or inappropri-
ate or medically unnecessary care, among physicians,
pharmacists, and patients, or associated with specific
drugs or groups of drugs, as well as potential and ac-
tual severe adverse reactions to drugs.
‘‘(2) APPLICATION OF STATE STANDARDS.—Ex-
cept as provided in subparagraph (B), a State with
a drug use review program under this subsection shall
establish and operate the program under such stand-
ards as it may establish.
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‘‘(f) ELECTRONIC CLAIMS MANAGEMENT.—In accord-
ance with chapter 35 of title 44, United States Code (relat-
ing to coordination of Federal information policy), the Sec-
retary shall encourage each State to establish, as its prin-
cipal means of processing claims for covered outpatient
drugs under its MediGrant plan, a point-of-sale electronic
claims management system, for the purpose of performing
on-line, real time eligibility verifications, claims data cap-
ture, adjudication of claims, and assisting pharmacists
(and other authorized persons) in applying for and receiv-
ing payment.
‘‘(g) ANNUAL REPORT.—
‘‘(1) IN GENERAL.—Not later than May 1 of each
year, the Secretary shall transmit to the Committee
on Finance of the Senate, and the Committee on
Commerce of the House of Representatives, a report
on the operation of this section in the preceding fiscal
year.
‘‘(2) DETAILS.—Each report shall include infor-
mation on—
‘‘(A) ingredient costs paid under this title
for single source drugs, multiple source drugs,
and nonprescription covered outpatient drugs,
‘‘(B) the total value of rebates received and
number of manufacturers providing such rebates,
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‘‘(C) the effect of inflation on the value of
rebates required under this section,
‘‘(D) trends in prices paid under this title
for covered outpatient drugs, and
‘‘(E) Federal and State administrative costs
associated with compliance with the provisions
of this title.
‘‘(h) EXEMPTION FOR CAPITATED HEALTH CARE OR-
GANIZATIONS, HOSPITALS, AND NURSING FACILITIES.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the requirements of the MediGrant master
rebate agreement under this section shall not apply
with respect to covered outpatient drugs dispensed by
or through—
‘‘(A) a capitated health care organization
(as defined in section 2114(c)(1)), or
‘‘(B) a hospital or nursing facility that dis-
penses covered outpatient drugs using a drug for-
mulary system and bills the State no more than
the hospital’s or facility’s purchasing costs for
covered outpatient drugs.
‘‘(2) CONSTRUCTION
IN
DETERMINING
BEST
PRICE.—Nothing in paragraph (1) shall be construed
as excluding amounts paid by the entities described
in such paragraph for covered outpatient drugs from
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the determination of the best price (as defined in sub-
section (c)(1)(C)) for such drugs.
‘‘(i) DEFINITIONS.—In the section—
‘‘(1) AVERAGE
MANUFACTURER
PRICE.—The
term ‘average manufacturer price’ means, with re-
spect to a covered outpatient drug of a manufacturer
for a rebate period, the average price paid to the
manufacturer for the drug in the United States by
wholesalers for drugs distributed to the retail phar-
macy class of trade, after deducting customary
prompt pay discounts.
‘‘(2) COVERED OUTPATIENT DRUG.—Subject to
the exceptions in paragraph (3), the term ‘covered
outpatient drug’ means—
‘‘(A) of those drugs which are treated as
prescribed 
drugs 
for 
purposes 
of 
section
2171(a)(8), a drug which may be dispensed only
upon prescription (except as provided in sub-
paragraph (D)), and—
‘‘(i) which is approved as a prescrip-
tion drug under section 505 or 507 of the
Federal Food, Drug, and Cosmetic Act;
‘‘(ii)(I) which was commercially used
or sold in the United States before the date
of the enactment of the Drug Amendments
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of 1962 or which is identical, similar, or re-
lated (within the meaning of section
310.6(b)(1) of title 21 of the Code of Federal
Regulations) to such a drug, and (II) which
has not been the subject of a final deter-
mination by the Secretary that it is a ‘new
drug’ (within the meaning of section 201(p)
of the Federal Food, Drug, and Cosmetic
Act) or an action brought by the Secretary
under section 301, 302(a), or 304(a) of such
Act to enforce section 502(f) or 505(a) of
such Act; or
‘‘(iii)(I) which is described in section
107(c)(3) of the Drug Amendments of 1962
and for which the Secretary has determined
there is a compelling justification for its
medical need, or is identical, similar, or re-
lated (within the meaning of section
310.6(b)(1) of title 21 of the Code of Federal
Regulations) to such a drug, and (II) for
which the Secretary has not issued a notice
of an opportunity for a hearing under sec-
tion 505(e) of the Federal Food, Drug, and
Cosmetic Act on a proposed order of the
Secretary to withdraw approval of an ap-
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plication for such drug under such section
because the Secretary has determined that
the drug is less than effective for some or all
conditions of use prescribed, recommended,
or suggested in its labeling;
‘‘(B) a biological product, other than a vac-
cine which—
‘‘(i) may only be dispensed upon pre-
scription,
‘‘(ii) is licensed under section 351 of
the Public Health Service Act, and
‘‘(iii) is produced at an establishment
licensed under such section to produce such
product;
‘‘(C) insulin certified under section 506 of
the Federal Food, Drug, and Cosmetic Act; and
‘‘(D) a drug which may be sold without a
prescription (commonly referred to as an ‘over-
the-counter drug’), if the drug is prescribed by a
physician (or other person authorized to pre-
scribe under State law).
‘‘(3) LIMITING DEFINITION.—The term ‘covered
outpatient drug’ does not include any drug, biological
product, or insulin provided as part of, or as incident
to and in the same setting as, any of the following
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TITLE VIII—MEDICARE
SEC. 8000. SHORT TITLE OF TITLE; AMENDMENTS AND REF-
ERENCES TO OBRA; TABLE OF CONTENTS OF
TITLE.
(a) SHORT TITLE.—This title may be cited as the
‘‘Medicare Preservation Act of 1995’’.
(b) AMENDMENTS TO SOCIAL SECURITY ACT.—Except
as otherwise specifically provided, whenever in this title an
amendment is expressed in terms of an amendment to or
repeal of a section or other provision, the reference shall
be considered to be made to that section or other provision
of the Social Security Act.
(c) REFERENCES TO OBRA.—In this title, the terms
‘‘OBRA–1986’’, ‘‘OBRA–1987’’, ‘‘OBRA–1989’’, ‘‘OBRA–
1990’’, and ‘‘OBRA–1993’’ refer to the Omnibus Budget
Reconciliation Act of 1986 (Public Law 99–509), the Omni-
bus Budget Reconciliation Act of 1987 (Public Law 100–
203), the Omnibus Budget Reconciliation Act of 1989 (Pub-
lic Law 101–239), the Omnibus Budget Reconciliation Act
of 1990 (Public Law 101–508), and the Omnibus Budget
Reconciliation Act of 1993 (Public Law 103–66), respec-
tively.
(d) TABLE OF CONTENTS OF TITLE.—The table of con-
tents of this title is as follows:
Sec. 8000. Short title of title; amendments and references to OBRA; table of con-
tents of title.