The President signed into law H.R. 3590 , the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 ), on March 23, 2010. Seven days later, a second bill, H.R. 4872 , was signed into law by the President to modify ACA. This second law, the Health Care and Education Reconciliation Act of 2010 (the Reconciliation Act or HCERA; P.L. 111-152 ), was signed into law on March 30, 2010. Together these measures constitute what is referred to as the health care reform law, which makes many significant changes to the private and public markets for health insurance, as well as modifies aspects of the publicly financed health care delivery system. It also represents the most significant reform to the Medicaid program since its establishment in 1965. This report highlights some of the major changes to the Medicaid and CHIP programs and provides a timeline of effective dates for these provisions. In general, the Medicaid law (1) raises Medicaid income eligibility levels for certain people up to 133% of the federal poverty level, (2) adds both mandatory and optional benefits to Medicaid, (3) increases the federal matching payments for certain groups of beneficiaries and for particular services provided, (4) provides new requirements and incentives for states to improve quality of care and encourage more use of preventive services, and (5) makes a number of other Medicaid program changes. Regarding CHIP, the law includes a new requirement for states to maintain their current program structures through FY2019 and extends additional CHIP funding through FY2015. To help explain the most important Medicaid and CHIP changes, provision descriptions are grouped into the following six major issue areas: eligibility, benefits, financing, program integrity, demonstrations and grant funding, and miscellaneous. Appendix A provides a detailed implementation timeline of the Medicaid and CHIP provisions. Appendix B is a crosswalk between the provision titles and the amending sections of P.L. 111-148 and P.L. 111-152 for all of the Medicaid and CHIP provisions. Finally, Appendix C is a list of abbreviations used in this report and their definitions. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) issued a cost estimate on March 20, 2010, for ACA and HCERA. CBO estimated that ACA and the HCERA will reduce federal budget deficits by $143 billion over the FY2010-FY2019 period as a result of changes in direct spending and revenue. CBO's $143 billion estimate is composed of $124 billion in reductions and revenue from health care provisions and $19 billion in spending reductions from education. CBO and JCT previously estimated that ACA by itself would reduce federal deficits by $118 billion over the 2010-2019 period. Key Medicaid and CHIP provisions included in the health reform law are summarized below. Eligibility-related reforms. Beginning in 2014, or sooner at state option, the law requires states to expand Medicaid to certain individuals who are under age 65 with income up to 133% of the federal poverty level (FPL). This reform not only expands eligibility to a group that is not currently eligible for Medicaid (low income childless adults), but also raises Medicaid's mandatory income eligibility level for certain existing groups to 133% of the FPL. This represents the single largest eligibility expansion since the start of the program in 1965. The law also modifies income counting rules when determining Medicaid eligibility for certain populations. From 2014 to 2016, the federal government will cover 100% of the Medicaid costs of these "newly eligible" individuals, with the percentage dropping to 90% by 2020. States cover the percentage not paid by the federal government. Maintenance of effort provisions. The law requires states to maintain current Medicaid and CHIP eligibility levels through 2013 (or when the Secretary determines that the state exchange is fully operational) for adults and 2019 for children. Outreach and enrollment provisions. The law includes provisions to encourage states to improve outreach, streamline enrollment, and coordinate with the proposed American Health Benefit Exchanges (exchanges). Benefit reforms. The law adds new mandatory and optional benefits to Medicaid. Such mandatory benefits include coverage of free-standing birth clinics, and tobacco cessation services for pregnant woman. The law also authorizes states to offer new optional benefits such as preventive services for adults and health homes for persons with chronic conditions. Additional options for states to expand home and community-based services as an alternative to institutional care are also included. Payment and financing reforms. Some of the law's reforms affecting payments and financing include (1) increases in federal matching payments for the "newly eligible" individuals in the eligibility expansions up to 133% FPL, (2) reductions in Medicaid disproportionate share hospital (DSH) allotments, (3) expenditure reductions for prescription drugs including revising the definition of the average manufacture's price (AMP) to help make AMP more closely reflect prices retail community pharmacies pay for prescription drugs, (4) reductions in inappropriate hospital expenditures for health care-acquired conditions, and (5) increases in primary care physician payment rates for selected services. Increased funding for the territories. The law permits the territories to establish exchanges and provides federal funds for premium and cost-sharing assistance for individuals who obtain health insurance coverage through an exchange. Territories that do not opt to establish an exchange will receive their share of the appropriations earmarked for the state exchanges in addition to an increase in their Medicaid spending caps also established under the law. The law also increases the Medicaid FMAP rate available to all of the territories from 50% to 55% beginning with the fourth quarter of FY2011. Program integrity reforms. The law creates enforcement and monitoring tools and imposes new data reporting and oversight requirements on states and providers. States will also be required to implement initiatives used by the Medicare program, such as a national correct coding initiative and a recovery audit contract program for their Medicaid programs. The law provides additional program integrity funding through indexing of the Medicaid Integrity Program for fiscal years beginning with FY2010. Nursing home accountability. The law adds a number of requirements to improve the transparency of information within facilities and chains, and provides long-term care (LTC) consumers with information on the quality and performance of nursing homes. Demonstrations, pilot programs, and grants. The law provides the Secretary of the Department of Health and Human Services (the Secretary) and state Medicaid and CHIP programs with opportunities to test models for improving the delivery, quality, and cost of services. CHIP-related provisions. The law requires states to maintain the current CHIP structure through FY2019, but does not provide federal CHIP appropriations beyond FY2015, at which point, if future appropriations are insufficient, CHIP children will obtain comparable coverage through the exchanges or Medicaid, as applicable. If new funding is made available, states will receive higher federal matching rates for CHIP services beginning in FY2016. Upon enactment, states are required to maintain CHIP eligibility levels through FY2019 as a condition of receiving federal matching funds for Medicaid expenditures (notwithstanding the lack of corresponding federal CHIP appropriations for FY2016 through FY2019). Miscellaneous Medicaid and CHIP reforms. The law adds several offices within the Centers for Medicare and Medicaid Services (CMS) to better coordinate care across the Medicare and Medicaid/CHIP programs. One of these offices will be dedicated to improving coordination for beneficiaries eligible for both Medicare and Medicaid (dual eligibles). Another will add a Medicare and Medicaid Innovation Center to develop and test new payment and service delivery models to reduce Medicare, Medicaid, and CHIP expenditures, while preserving and enhancing quality of care for beneficiaries. Medicaid is a means-tested entitlement program operated by states within broad federal guidelines. To qualify, an individual must meet both categorical (i.e., must be a member of a covered group, such as children, pregnant women, families with dependent children, the elderly, or the disabled) and financial eligibility requirements. Of the approximately 50 different eligibility "pathways" into Medicaid, including those that existed even before the health reform law was enacted, some are mandatory while others are offered at state option. Examples of groups that states must provide Medicaid to include pregnant women and children below specified income levels and poor individuals with disabilities or poor individuals over age 64 who qualify for cash assistance under the Supplemental Security Income (SSI) program. Examples of groups that states may choose to cover under Medicaid include pregnant women and infants with family income between 133% FPL and 185% FPL, and "medically needy" individuals who meet categorical requirements with income up to 133% of the maximum payment amount applicable under states' former Aid to Families with Dependent Children (AFDC) programs based on family size. Under prior law, "childless adults" (nonelderly adults who are not disabled, not pregnant and not parents of dependent children) were generally not eligible for Medicaid, regardless of their income. The health reform law makes several changes to Medicaid eligibility. ACA adds two new mandatory eligibility groups, and several new optional eligibility groups. In addition, it makes several modifications to existing eligibility groups, changes the way income is counted for certain groups to determine if an individual meets Medicaid's income eligibility requirements, and adds provisions to facilitate outreach and enrollment in Medicaid, CHIP, and the Health Insurance exchanges. In their March 20, 2010, final cost estimate for ACA and HCERA, CBO and JCT estimated that coverage expansion provisions in the health reform law would result in a Medicaid enrollment increase over the baseline of approximately 16 million by FY2019. ( P.L. 111-148 : §2001 as modified by §10201; P.L.