106 
tures would improve health care quality and cost ef-
fectiveness. 
(3) WORKER ASSISTANCE.—A State health se-
curity program may provide that, for budgets for 
years before 2009, up to 1 percent of the budget 
may be used for purposes of programs providing as-
sistance to workers who are currently performing 
functions in the administration of the health insur-
ance system and who may experience economic dis-
location as a result of the implementation of the pro-
gram. 
(c) APPROVAL PROCESS
FOR CAPITAL EXPENDI-
TURES PERMITTED.—Nothing in this title shall be con-
strued as preventing a State health security program from 
providing for a process for the approval of capital expendi-
tures based on information derived from regional planning 
agencies. 
SEC. 604. FEDERAL PAYMENTS TO STATES. 
(a) IN GENERAL.—Each State with an approved 
State health security program is entitled to receive, from 
amounts in the American Health Security Trust Fund, on 
a monthly basis each year, of an amount equal to one- 
twelfth of the product of—
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(1) the State capitation amount (computed 
under section 602(a)(2)) for the State for the year; 
and 
(2) the Federal contribution percentage (estab-
lished under subsection (b)). 
(b) FEDERAL CONTRIBUTION PERCENTAGE.—The 
Board shall establish a formula for the establishment of 
a Federal contribution percentage for each State. Such 
formula shall take into consideration a State’s per capita 
income and revenue capacity and such other relevant eco-
nomic indicators as the Board determines to be appro-
priate. In addition, during the 5-year period beginning 
with 2006, the Board may provide for a transition adjust-
ment to the formula in order to take into account current 
expenditures by the State (and local governments thereof) 
for health services covered under the State health security 
program. The weighted-average Federal contribution per-
centage for all States shall equal 86 percent and in no 
event shall such percentage be less than 81 percent nor 
more than 91 percent. 
(c) USE OF PAYMENTS.—All payments made under 
this section may only be used to carry out the State health 
security program. 
(d) EFFECT OF SPENDING EXCESS OR SURPLUS.—
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(1) SPENDING EXCESS.—If a State exceeds it’s 
budget in a given year, the State shall continue to 
fund covered health services from its own revenues. 
(2) SURPLUS.—If a State provides all covered 
health services for less than the budgeted amount 
for a year, it may retain its Federal payment for 
that year for uses consistent with this Act. 
SEC. 605. ACCOUNT FOR HEALTH PROFESSIONAL EDU-
CATION EXPENDITURES. 
(a) SEPARATE ACCOUNT.—Each State health secu-
rity program shall— 
(1) include a separate account for health pro-
fessional education expenditures; and 
(2) specify the general manner, consistent with 
subsection (b), in which such expenditures are to be 
distributed among different types of institutions and 
the different areas of the State. 
(b) DISTRIBUTION
RULES.—The distribution of 
funds to hospitals and other health care facilities from the 
account must conform to the following principles: 
(1) The disbursement of funds must be con-
sistent with achievement of the national and pro-
gram goals (specified in section 701(b)) within the 
State health security program and the distribution 
of funds from the account must be conditioned upon
109 
the receipt of such reports as the Board may require 
in order to monitor compliance with such goals. 
(2) The distribution of funds from the account 
must take into account the potentially higher costs 
of placing health professional students in clinical 
education programs in health professional shortage 
areas. 
Subtitle B—Payments by States to 
Providers 
SEC. 611. PAYMENTS TO HOSPITALS AND OTHER FACILITY- 
BASED SERVICES FOR OPERATING EXPENSES 
ON THE BASIS OF APPROVED GLOBAL BUDG-
ETS. 
(a) DIRECT PAYMENT UNDER GLOBAL BUDGET.— 
Payment for operating expenses for institutional and facil-
ity-based care, including hospital services and nursing fa-
cility services, under State health security programs shall 
be made directly to each institution or facility by each 
State health security program under an annual prospec-
tive global budget approved under the program. Such a 
budget shall include payment for outpatient care and non- 
facility-based care that is furnished by or through the fa-
cility. In the case of a hospital that is wholly owned (or 
controlled) by a comprehensive health service organization 
that is paid under section 614 on the basis of a global
110 
budget, the global budget of the organization shall include 
the budget for the hospital. 
(b) Annual Negotiations; Budget Approval— 
(1) IN GENERAL.—The prospective global budg-
et for an institution or facility shall— 
(A) be developed through annual negotia-
tions between— 
(i) a panel of individuals who are ap-
pointed by the Governor of the State and 
who represent consumers, labor, business, 
and the State government; and 
(ii) the institution or facility; and 
(B) be based on a nationally uniform sys-
tem of cost accounting established under stand-
ards of the Board. 
(2) CONSIDERATIONS.—In developing a budget 
through negotiations, there shall be taken into ac-
count at least the following: 
(A) With respect to inpatient hospital serv-
ices, the number, and classification by diag-
nosis-related group, of discharges. 
(B) An institution’s or facility’s past ex-
penditures.