This report summarizes key provisions applicable to Medicaid and the Children's Health Insurance Program (CHIP) in H.R. 3590 , the Patient Protection and Affordable Care Act (PPACA), as passed by the Senate on December 24, 2009. The bill, a comprehensive health reform proposal, resulted from the merger of two separate Senate health reform bills, , the Affordable Health Choices Act, and S. 1796 , America's Healthy Future Act of 2009. S. 1679 was ordered reported by the Senate Committee on Health, Education, Labor and Pensions (HELP), July 15, 2009, while S. 1796 was ordered reported by the Senate Committee on Finance, October 19, 2009. The Senate voted to take up S.Amdt. 2786 on November 21, 2009, after invoking cloture on the motion to proceed to consider the legislation. The Patient Protection and Affordable Care Act was passed by the Senate on December 24, 2009, as an amendment in the nature of a substitute to H.R. 3590 , a homeowner tax credit bill that passed the House unanimously on October 8, 2009. On March 11, 2010, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) updated their estimate of the direct spending and revenue effects of H.R. 3590 , the Patient Protection and Affordable Car Act (PPACA). The updated estimate reflects the bill as it was passed by the Senate on December 24, 2009. The revised projection of PPACA assumes that federal deficits would be reduced by $118 billion over the 10-year period of 2010-2019 and, by 2019, would insure 94% of the non-elderly, legally present U.S. population. According to the CBO, the gross 10-year cost of the exchange subsidies ($449 billion), increased federal Medicaid and CHIP outlays ($386 billion), and tax credits for small employers ($40 billion) would total $875 billion. These costs would be partially offset by $251 billion over the 10-year budget window, from four sources: net revenues from the excise tax on high-premium insurance plans ($149 billion); penalty payments by uninsured individuals ($15 billion); penalty payments by employers whose workers received subsidies via the exchanges ($27 billion); and other budgetary effects, mostly on tax revenues, associated with the expansion of federally subsidized insurance ($60 billion). Taking into account these offsets, the net cost of the coverage provisions, according to the CBO analysis, would be $624 billion over 10 years. The Patient Protection and Affordable Care Act—herein referred to as the Senate bill—consists of 10 titles that cover the following general topics: Title I–health insurance; Title II–Medicaid, maternal and child health; Title III–Medicare, quality of care; Title IV–prevention and wellness; Title V–health workforce; Title VI–transparency, program integrity; Title VII–drugs and biologics; Title VIII–long-term care insurance; Title IX–revenues; and Title X-strengthening quality, affordable health care for all Americans. This report summarizes key Medicaid and CHIP provisions in the bill. To help highlight the Senate bill's most important Medicaid and CHIP health reforms, applicable provisions were grouped into the following six major issue areas: eligibility, benefits, financing, program integrity, demonstrations and grant funding, and miscellaneous Medicaid and CHIP provisions. The eligibility issue area may include the bill's most dramatic health reforms applicable to Medicaid, namely a coverage expansion for nonelderly, non-pregnant individuals with income up to 133% of the federal poverty level (FPL). This reform not only would expand eligibility to a group of individuals who were previously ineligible for Medicaid (low income childless adults), but also would raise Medicaid's mandatory income eligibility level for certain existing groups from 100% to 133% of the FPL. In addition, federal financial participation (FFP) would be increased for these new eligibility groups. Further, the bill would encourage states to improve outreach, streamline enrollment, and coordinate with the American Health Benefit Exchanges (Exchange). Other eligibility reforms would require states to maintain current Medicaid and CHIP coverage levels—through 2013 for adults and 2019 for children. The bill also would require states to maintain the current CHIP structure through FY2019, but would not provide federal CHIP appropriations beyond FY2013. The benefit reforms proposed in the bill for Medicaid and CHIP, would add new mandatory and optional benefits. Mandatory benefit additions would include premium assistance for employer-sponsored health insurance, coverage of free standing birth clinics, and tobacco cessation services for pregnant woman. The bill also would authorize states to offer new optional benefits such as preventive services for adults, health homes, and a program to permit Medicaid beneficiaries first choice to remain in their community, rather than institutional care. Under financing reforms, the bill would introduce measures to reduce the growth of Medicaid expenditures and would increase federal matching payments for eligibility expansion. Cost control reforms include proposed reductions in Medicaid disproportionate share hospital (DSH) payments, reduced expenditures for prescription drugs and payment reforms to reduce inappropriate hospital expenditures for health-care acquired conditions. The bill would give states and other stakeholders new program integrity enforcement and monitoring tools as well as impose new data reporting and oversight requirements on states and providers. Additional Medicaid and CHIP program integrity provisions would include requirements for states to implement initiatives used by the Medicare program, such as a national correct coding initiative and a recovery audit contract program. The bill also proposes a broad nursing home accountability initiative that would add a number of requirements to improve the transparency of information on facilities and chains as well as provide LTC consumers with information on the quality and performance of nursing homes. The bill includes a number of demonstrations, pilot programs, and grants. These proposals would provide 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 payment for services. Finally, the Senate bill would include a number of miscellaneous Medicaid and CHIP reforms. These proposals would add several offices within the Centers for Medicare and Medicaid Services (CMS) to work to better coordinate care across the Medicare and Medicaid/CHIP programs. One of these offices would be dedicated to improve coordination for beneficiaries eligible for both Medicare and Medicaid (dual eligibles) and another would add a Medicare and Medicaid innovation center, which may permit states to have more control over both Medicare and Medicaid expenditures for dual eligibles. Unless otherwise indicated, the Secretary of the Department of Health and Human Services is referred to as "the Secretary" throughout this report. 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. Medicaid's financial requirements place limits on the maximum amount of assets and income individuals may possess to participate in Medicaid. Additional guidelines specify how states should calculate these amounts. The specific asset and income limitations that apply to each eligibility group are set through a combination of federal parameters and state definitions. Consequently, these standards vary across states, and different standards apply to different population groups within states. State application of income counting rules result in expanding eligibility to higher-income individuals. Of the approximately 50 different eligibility "pathways" into Medicaid, some are mandatory while others may be covered at state option. Examples of groups that states must provide Medicaid to include pregnant women and children under age six with family income below 133% of the federal poverty level (FPL), and poor individuals with disabilities or poor individuals over age 64 who qualify for cash assistance under the Supplemental Security Income (SSI) program. Three 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. "Childless adults" (nonelderly adults who are not disabled, not pregnant and not parents of dependent children), for example, are generally not eligible for Medicaid, regardless of their income. The measure would make several changes to Medicaid eligibility. Among the provisions that would impact eligibility, the bill would add two new mandatory eligibility groups, and several new optional eligibility groups. In addition, it would make several modifications to existing eligibility groups, and add provisions to facilitate outreach and enrollment in Medicaid, CHIP, and the Health Insurance Exchange. The measure would create a new mandatory Medicaid eligibility category for all non-elderly, non-pregnant individuals (e.g., childless adults, and certain parents) who are not entitled to or enrolled in Medicare Part A or enrolled in Medicare Part B, and are otherwise ineligible for Medicaid. For such individuals (hereafter referred to as "newly eligible" individuals), the proposal would establish 133% of FPL based on modified gross income (or MGI as described below), as the new mandatory minimum Medicaid income eligibility level. As a conforming measure, the bill also would change the mandatory Medicaid income eligibility level for children ages 6 to 19 from 100% FPL to 133% FPL (as applies to children under age 6). Thus, in 2014, most non-elderly citizens up to 133% FPL would be eligible for Medicaid.