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110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     110-600

======================================================================



 
             PROTECTING THE MEDICAID SAFETY NET ACT OF 2008

                                _______
                                

 April 22, 2008.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Dingell, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 5613]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 5613) to extend certain moratoria and impose 
additional moratoria on certain Medicaid regulations through 
April 1, 2009, having considered the same, report favorably 
thereon with amendments and recommend that the bill as amended 
do pass.

                                CONTENTS

                                                                   Page
Amendments.......................................................     1
Purpose and Summary..............................................     6
Background and Need for Legislation..............................     7
Hearings.........................................................    23
Committee Consideration..........................................    24
Committee Votes..................................................    24
Committee Oversight Findings.....................................    27
Statement of General Performance Goals and Objectives............    27
New Budget Authority, Entitlement Authority, and Tax Expenditures    27
Earmarks and Tax and Tariff Benefits.............................    27
Committee Cost Estimate..........................................    27
Congressional Budget Office Estimate.............................    27
Federal Mandates Statement.......................................    33
Advisory Committee Statement.....................................    33
Constitutional Authority Statement...............................    33
Applicability to Legislative Branch..............................    34
Exchange of Committee Letters....................................    35
Section-by-Section Analysis of the Legislation...................    42
Changes in Existing Law Made by the Bill, as Reported............    44

                               Amendments

  The amendments are as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Protecting the Medicaid Safety Net Act 
of 2008''.

SEC. 2. MORATORIA ON CERTAIN MEDICAID REGULATIONS.

  (a) Extension of Certain Moratoria in Public Law 110-28.--Section 
7002(a)(1) of the U.S. Troop Readiness, Veterans' Care, Katrina 
Recovery, and Iraq Accountability Appropriations Act, 2007 (Public Law 
110-28) is amended--
          (1) by striking ``prior to the date that is 1 year after the 
        date of enactment of this Act'' and inserting ``prior to April 
        1, 2009'';
          (2) in subparagraph (A), by inserting after ``Federal 
        Regulations)'' the following: ``or in the final regulation, 
        relating to such parts, published on May 29, 2007 (72 Federal 
        Register 29748)''; and
          (3) in subparagraph (C), by inserting before the period at 
        the end the following: ``, including the proposed regulation 
        published on May 23, 2007 (72 Federal Register 28930)''.
  (b) Extension of Certain Moratoria in Public Law 110-173.--Section 
206 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public 
Law 110-173) is amended--
          (1) by striking ``June 30, 2008'' and inserting ``April 1, 
        2009'';
          (2) by inserting ``, including the proposed regulation 
        published on August 13, 2007 (72 Federal Register 45201),'' 
        after ``rehabilitation services''; and
          (3) by inserting ``, including the final regulation published 
        on December 28, 2007 (72 Federal Register 73635),'' after 
        ``school-based transportation''.
  (c) Additional Moratoria.--
          (1) In general.--Notwithstanding any other provision of law, 
        the Secretary of Health and Human Services shall not, prior to 
        April 1, 2009, take any action (through promulgation of 
        regulation, issuance of regulatory guidance, use of Federal 
        payment audit procedures, or other administrative action, 
        policy, or practice, including a Medical Assistance Manual 
        transmittal or letter to State Medicaid directors) to impose 
        any restrictions relating to a provision described in 
        subparagraph (A), (B), or (C) of paragraph (2) if such 
        restrictions are more restrictive in any aspect than those 
        applied to the respective provision as of the date specified in 
        paragraph (3) for such provision.
          (2) Provisions described.--
                  (A) Portion of interim final regulation relating to 
                medicaid treatment of optional case management 
                services.--
                          (i) In general.--Subject to clause (ii), the 
                        provision described in this subparagraph is the 
                        interim final regulation relating to optional 
                        State plan case management services under the 
                        Medicaid program published on December 4, 2007 
                        (72 Federal Register 68077) in its entirety.
                          (ii) Exception.--The provision described in 
                        this subparagraph does not include the portion 
                        of such regulation as relates directly to 
                        implementing section 1915(g)(2)(A)(ii) of the 
                        Social Security Act, as amended by section 6052 
                        of the Deficit Reduction Act of 2005 (Public 
                        Law 109-171), through the definition of case 
                        management services and targeted case 
                        management services contained in proposed 
                        section 440.169 of title 42, Code of Federal 
                        Regulations, but only to the extent that such 
                        portion is not more restrictive than the 
                        policies set forth in the Dear State Medicaid 
                        Director letter on case management issued on 
                        January 19, 2001 (SMDL #01-013), and with 
                        respect to community transition case 
                        management, the Dear State Medicaid Director 
                        letter issued on July 25, 2000 (Olmstead Update 
                        3).
                  (B) Proposed regulation relating to redefinition of 
                medicaid outpatient hospital services.--The provision 
                described in this subparagraph is the proposed 
                regulation relating to clarification of outpatient 
                clinic and hospital facility services definition and 
                upper payment limit under the Medicaid program 
                published on September 28, 2007 (72 Federal Register 
                55158) in its entirety.
                  (C) Portion of proposed regulation relating to 
                medicaid allowable provider taxes.--
                          (i) In general.--Subject to clause (ii), the 
                        provision described in this subparagraph is the 
                        final regulation relating to health-care-
                        related taxes under the Medicaid program 
                        published on February 22, 2008 (73 Federal 
                        Register 9685) in its entirety.
                          (ii) Exception.--The provision described in 
                        this subparagraph does not include the portions 
                        of such regulation as relate to the following:
                                  (I) Reduction in threshold.--The 
                                reduction from 6 percent to 5.5 percent 
                                in the threshold applied under section 
                                433.68(f)(3)(i) of title 42, Code of 
                                Federal Regulations, for determining 
                                whether or not there is an indirect 
                                guarantee to hold a taxpayer harmless, 
                                as required to carry out section 
                                1903(w)(4)(C)(ii) of the Social 
                                Security Act, as added by section 403 
                                of the Medicare Improvement and 
                                Extension Act of 2006 (division B of 
                                Public Law 109-432).
                                  (II) Change in definition of managed 
                                care.--The change in the definition of 
                                managed care as proposed in the 
                                revision of section 433.56(a)(8) of 
                                title 42, Code of Federal Regulations, 
                                as required to carry out section 
                                1903(w)(7)(A)(viii) of the Social 
                                Security Act, as amended by section 
                                6051 of the Deficit Reduction Act of 
                                2005 (Public Law 109-171).
          (3) Date specified.--The date specified in this paragraph for 
        the provision described in--
                  (A) subparagraph (A) of paragraph (2) is December 3, 
                2007;
                  (B) subparagraph (B) of such paragraph is September 
                27, 2007; or
                  (C) subparagraph (C) of such paragraph is February 
                21, 2008.

SEC. 3. FUNDS TO REDUCE MEDICAID FRAUD AND ABUSE.

  (a) In General.--For purposes of reducing fraud and abuse in the 
Medicaid program under title XIX of the Social Security Act, there is 
appropriated to the Secretary of Health and Human Services, out of any 
money in the Treasury not otherwise appropriated, $25,000,000, for each 
fiscal year (beginning with fiscal year 2009). Amounts appropriated 
under this section shall remain available for expenditure until 
expended and shall be in addition to any other amounts appropriated or 
made available to the Secretary for such purposes with respect to the 
Medicaid program.
  (b) Annual Report.--Not later than September 30 of 2009 and of each 
subsequent year, the Secretary of Health and Human Services shall 
submit to the Committee on Energy and Commerce of the House of 
Representatives and the Committee on Finance of the Senate a report on 
the activities (and the results of such activities) funded under 
subsection (a) to reduce waste, fraud, and abuse in the Medicaid 
program under title XIX of the Social Security Act during the previous 
12 month period, including the amount of funds appropriated under such 
subsection (a) for each such activity and an estimate of the savings to 
the Medicaid program resulting from each such activity.

SEC. 4. STUDY AND REPORTS TO CONGRESS.

  (a) Secretarial Report Identifying Problems.--Not later than July 1, 
2008, the Secretary of Health and Human Services shall submit to the 
Committee on Energy and Commerce of the House of Representatives and 
the Committee on Finance of the Senate a report that--
          (1) outlines the specific problems the Medicaid regulations 
        referred to in the amendments made by subsections (a) and (b) 
        of section 2 and in the provisions described in subsection 
        (c)(2) of such section were intended to address;
          (2) detailing how these regulations were designed to address 
        these specific problems; and
          (3) cites the legal authority for such regulations.
  (b) Independent Comprehensive Study and Report.--
          (1) In general.--Not later than July 1, 2008, the Secretary 
        of Health and Human Services shall enter into a contract with 
        an independent organization for the purpose of--
                  (A) producing a comprehensive report on the 
                prevalence of the problems outlined in the report 
                submitted under subsection (a);
                  (B) identifying strategies in existence to address 
                these problems; and
                  (C) assessing the impact of each regulation referred 
                to in such subsection on each State and the District of 
                Columbia.
          (2) Additional matter.--The report under paragraph (1) shall 
        also include--
                  (A) an identification of which claims for items and 
                services (including administrative activities) under 
                title XIX of the Social Security Act are not processed 
                through systems described in section 1903(r) of such 
                Act;
                  (B) an examination of the reasons why these claims 
                for such items and services are not processed through 
                such systems; and
                  (C) recommendations on actions by the Federal 
                government and the States that can make claims for such 
                items and services more accurate and complete 
                consistent with such title.
          (3) Deadline.--The report under paragraph (1) shall be 
        submitted to the Committee on Energy and Commerce of the House 
        of Representatives and the Committee on Finance of the Senate 
        not later than March 1, 2009.
          (4) Cooperation of states.--If the Secretary of Health and 
        Human Services determines that a State or the District of 
        Columbia has not cooperated with the independent organization 
        for purposes of the report under this subsection, the Secretary 
        shall reduce the amount paid to the State or District under 
        section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) 
        by $25,000 for each day on which the Secretary determines such 
        State or District has not so cooperated. Such reduction shall 
        be made through a process that permits the State or District to 
        challenge the Secretary's determination.
  (c) Funding.--
          (1) In general.--Out of any money in the Treasury of the 
        United States not otherwise appropriated, there are 
        appropriated to the Secretary without further appropriation, 
        $5,000,000 to carry out this section.
          (2) Availability; amounts in addition to other amounts 
        appropriated for such activities.--Amounts appropriated 
        pursuant to paragraph (1) shall--
                  (A) remain available until expended; and
                  (B) be in addition to any other amounts appropriated 
                or made available to the Secretary of Health and Human 
                Services with respect to the Medicaid program.

SEC. 5. ASSET VERIFICATION THROUGH ACCESS TO INFORMATION HELD BY 
                    FINANCIAL INSTITUTIONS.

  (a) Addition of Authority.--Title XIX of the Social Security Act is 
amended by inserting after section 1939 the following new section:
 ``asset verification through access to information held by financial 
                              institutions
  ``Sec. 1940.  (a) Implementation.--
          ``(1) In general.--Subject to the provisions of this section, 
        each State shall implement an asset verification program 
        described in subsection (b), for purposes of determining or 
        redetermining the eligibility of an individual for medical 
        assistance under the State plan under this title.
          ``(2) Plan submittal.--In order to meet the requirement of 
        paragraph (1), each State shall--
                  ``(A) submit not later than a deadline specified by 
                the Secretary consistent with paragraph (3), a State 
                plan amendment under this title that describes how the 
                State intends to implement the asset verification 
                program; and
                  ``(B) provide for implementation of such program for 
                eligibility determinations and redeterminations made on 
                or after 6 months after the deadline established for 
                submittal of such plan amendment.
          ``(3) Phase-in.--
                  ``(A) In general.--
                          ``(i) Implementation in current asset 
                        verification demo states.--The Secretary shall 
                        require those States specified in subparagraph 
                        (C) (to which an asset verification program has 
                        been applied before the date of the enactment 
                        of this section) to implement an asset 
                        verification program under this subsection by 
                        the end of fiscal year 2009.
                          ``(ii) Implementation in other states.--The 
                        Secretary shall require other States to submit 
                        and implement an asset verification program 
                        under this subsection in such manner as is 
                        designed to result in the application of such 
                        programs, in the aggregate for all such other 
                        States, to enrollment of approximately, but not 
                        less than, the following percentage of 
                        enrollees, in the aggregate for all such other 
                        States, by the end of the fiscal year involved:
                                  ``(I) 12.5 percent by the end of 
                                fiscal year 2009.
                                  ``(II) 25 percent by the end of 
                                fiscal year 2010.
                                  ``(III) 50 percent by the end of 
                                fiscal year 2011.
                                  ``(IV) 75 percent by the end of 
                                fiscal year 2012.
                                  ``(V) 100 percent by the end of 
                                fiscal year 2013.
                  ``(B) Consideration.--In selecting States under 
                subparagraph (A)(ii), the Secretary shall consult with 
                the States involved and take into account the 
                feasibility of implementing asset verification programs 
                in each such State.
                  ``(C) States specified.--The States specified in this 
                subparagraph are California, New York, and New Jersey.
                  ``(D) Construction.--Nothing in subparagraph (A)(ii) 
                shall be construed as preventing a State from 
                requesting, and the Secretary approving, the 
                implementation of an asset verification program in 
                advance of the deadline otherwise established under 
                such subparagraph.
          ``(4) Exemption of territories.--This section shall only 
        apply to the 50 States and the District of Columbia.
  ``(b) Asset Verification Program.--
          ``(1) In general.--For purposes of this section, an asset 
        verification program means a program described in paragraph (2) 
        under which a State--
                  ``(A) requires each applicant for, or recipient of, 
                medical assistance under the State plan under this 
                title on the basis of being aged, blind, or disabled to 
                provide authorization by such applicant or recipient 
                (and any other person whose resources are material to 
                the determination of the eligibility of the applicant 
                or recipient for such assistance) for the State to 
                obtain (subject to the cost reimbursement requirements 
                of section 1115(a) of the Right to Financial Privacy 
                Act but at no cost to the applicant or recipient) from 
                any financial institution (within the meaning of 
                section 1101(1) of such Act) any financial record 
                (within the meaning of section 1101(2) of such Act) 
                held by the institution with respect to the applicant 
                or recipient (and such other person, as applicable), 
                whenever the State determines the record is needed in 
                connection with a determination with respect to such 
                eligibility for (or the amount or extent of) such 
                medical assistance; and
                  ``(B) uses the authorization provided under 
                subparagraph (A) to verify the financial resources of 
                such applicant or recipient (and such other person, as 
                applicable), in order to determine or redetermine the 
                eligibility of such applicant or recipient for medical 
                assistance under the State plan.
          ``(2) Program described.--A program described in this 
        paragraph is a program for verifying individual assets in a 
        manner consistent with the approach used by the Commissioner of 
        Social Security under section 1631(e)(1)(B)(ii).
  ``(c) Duration of Authorization.--Notwithstanding section 1104(a)(1) 
of the Right to Financial Privacy Act, an authorization provided to a 
State under subsection (b)(1) shall remain effective until the earliest 
of--
          ``(1) the rendering of a final adverse decision on the 
        applicant's application for medical assistance under the 
        State's plan under this title;
          ``(2) the cessation of the recipient's eligibility for such 
        medical assistance; or
          ``(3) the express revocation by the applicant or recipient 
        (or such other person described in subsection (b)(1), as 
        applicable) of the authorization, in a written notification to 
        the State.
  ``(d) Treatment of Right to Financial Privacy Act Requirements.--
          ``(1) An authorization obtained by the State under subsection 
        (b)(1) shall be considered to meet the requirements of the 
        Right to Financial Privacy Act for purposes of section 1103(a) 
        of such Act, and need not be furnished to the financial 
        institution, notwithstanding section 1104(a) of such Act.
          ``(2) The certification requirements of section 1103(b) of 
        the Right to Financial Privacy Act shall not apply to requests 
        by the State pursuant to an authorization provided under 
        subsection (b)(1).
          ``(3) A request by the State pursuant to an authorization 
        provided under subsection (b)(1) is deemed to meet the 
        requirements of section 1104(a)(3) of the Right to Financial 
        Privacy Act and of section 1102 of such Act, relating to a 
        reasonable description of financial records.
  ``(e) Required Disclosure.--The State shall inform any person who 
provides authorization pursuant to subsection (b)(1)(A) of the duration 
and scope of the authorization.
  ``(f) Refusal or Revocation of Authorization.--If an applicant for, 
or recipient of, medical assistance under the State plan under this 
title (or such other person described in subsection (b)(1), as 
applicable) refuses to provide, or revokes, any authorization made by 
the applicant or recipient (or such other person, as applicable) under 
subsection (b)(1)(A) for the State to obtain from any financial 
institution any financial record, the State may, on that basis, 
determine that the applicant or recipient is ineligible for medical 
assistance.
  ``(g) Use of Contractor.--For purposes of implementing an asset 
verification program under this section, a State may select and enter 
into a contract with a public or private entity meeting such criteria 
and qualifications as the State determines appropriate, consistent with 
requirements in regulations relating to general contracting provisions 
and with section 1903(i)(2). In carrying out activities under such 
contract, such an entity shall be subject to the same requirements and 
limitations on use and disclosure of information as would apply if the 
State were to carry out such activities directly.
  ``(h) Technical Assistance.--The Secretary shall provide States with 
technical assistance to aid in implementation of an asset verification 
program under this section.
  ``(i) Reports.--A State implementing an asset verification program 
under this section shall furnish to the Secretary such reports 
concerning the program, at such times, in such format, and containing 
such information as the Secretary determines appropriate.
  ``(j) Treatment of Program Expenses.--Notwithstanding any other 
provision of law, reasonable expenses of States in carrying out the 
program under this section shall be treated, for purposes of section 
1903(a), in the same manner as State expenditures specified in 
paragraph (7) of such section.''.
  (b) State Plan Requirements.--Section 1902(a) of such Act (42 U.S.C. 
1396a(a)) is amended--
          (1) in paragraph (69) by striking ``and'' at the end;
          (2) in paragraph (70) by striking the period at the end and 
        inserting ``; and''; and
          (3) by inserting after paragraph (70), as so amended, the 
        following new paragraph:
          ``(71) provide that the State will implement an asset 
        verification program as required under section 1940.''.
  (c) Withholding of Federal Matching Payments for Noncompliant 
States.--Section 1903(i) of such Act (42 U.S.C. 1396b(i)) is amended--
          (1) in paragraph (22) by striking ``or'' at the end;
          (2) in paragraph (23) by striking the period at the end and 
        inserting ``; or''; and
          (3) by adding after paragraph (23) the following new 
        paragraph:
          ``(24) if a State is required to implement an asset 
        verification program under section 1940 and fails to implement 
        such program in accordance with such section, with respect to 
        amounts expended by such State for medical assistance for 
        individuals subject to asset verification under such section, 
        unless--
                  ``(A) the State demonstrates to the Secretary's 
                satisfaction that the State made a good faith effort to 
                comply;
                  ``(B) not later than 60 days after the date of a 
                finding that the State is in noncompliance, the State 
                submits to the Secretary (and the Secretary approves) a 
                corrective action plan to remedy such noncompliance; 
                and
                  ``(C) not later than 12 months after the date of such 
                submission (and approval), the State fulfills the terms 
                of such corrective action plan.''.
  (d) Repeal.--Section 4 of Public Law 110-90 is repealed.

SEC. 6. ADJUSTMENT TO PAQI FUND.

  Section 1848(l)(2) of the Social Security Act (42 U.S.C. 1395w-
4(l)(2)), as amended by section 101(a)(2) of the Medicare, Medicaid, 
and SCHIP Extension Act of 2007 (Public Law 110-173), is amended--
          (1) in subparagraph (A)(i)--
                  (A) in subclause (III), by striking 
                ``$4,960,000,000'' and inserting ``$3,790,000,000''; 
                and
                  (B) by adding at the end the following new subclause:
                                  ``(IV) For expenditures during 2014, 
                                an amount equal to $3,690,000,000.'';
          (2) in subparagraph (A)(ii), by adding at the end the 
        following new subclause:
                                  ``(IV) 2014.--The amount available 
                                for expenditures during 2014 shall only 
                                be available for an adjustment to the 
                                update of the conversion factor under 
                                subsection (d) for that year.''; and
          (3) in subparagraph (B)--
                  (A) in clause (ii), by striking ``and'' at the end;
                  (B) in clause (iii), by striking the period at the 
                end and inserting ``; and''; and
                  (C) by adding at the end the following new clause:
                          ``(iv) 2014 for payment with respect to 
                        physicians' services furnished during 2014.''.

  Amend the title so as to read:

    A bill to extend certain moratoria and impose additional 
moratoria on certain Medicaid regulations through April 1, 
2009, and for other purposes.

                          Purpose and Summary

    The purpose of H.R. 5613, the ``Protecting the Medicaid 
Safety Net Act of 2008'', is to place a one-year moratorium on 
the U.S. Department of Health and Human Services (HHS) 
implementation of seven Medicaid regulations recently issued 
by, and for other purposes. These proposed regulations have the 
potential to adversely affect the Medicaid program, title XIX 
of the Social Security Act. The regulations would eliminate 
Medicaid payment for certain outpatient hospital services; 
redefine the rules for how States may use provider taxes to 
fund Medicaid; restrict Medicaid payments to governmental 
healthcare providers such as critical safety net hospitals and 
nursing homes; restrict Medicaid coverage of rehabilitative 
services which are essential for people with disabilities; 
eliminate Medicaid payment for Medicaid administrative 
activities in schools, such as outreach and enrollment, and 
specialized medical transportation for school-age children who 
receive a medical service in school; restrict the coverage of 
case management services under the Medicaid program; and 
eliminate Medicaid payment for graduate medical education 
costs, used to train medical residents who care for Medicaid 
beneficiaries and others with special needs. The legislation 
ensures that Secretary will take no action, regulatory or 
otherwise, to advance the specified policies of these proposed 
regulations before April 2009.
    The purpose of H.R. 5613, the ``Protecting the Medicaid 
Safety Net Act of 2008,'' is to place a 1-year moratorium on 
the Department of Health and Human Services implementation of 7 
Medicaid regulations issued by the Department over the past 14 
months, and for other purposes. These proposed regulations have 
the potential to adversely affect the Medicaid program. The 
regulations affected by this legislation would restrict the use 
of intergovernmental transfers, limit Medicaid payments to 
governmental providers, clarify and narrow payment policy for 
certain provisions in target case management final regulation, 
prohibit Federal Medicaid payments for certain school-based 
administration and transportation services, narrow the 
definition of rehabilitative services, prohibit Federal 
Medicaid payment for graduate medical education, clarify the 
definition of outpatient clinic and hospital services, and 
prohibit elements of regulation related to permissible taxes on 
healthcare providers. The legislation ensures that Secretary 
will take no action, regulatory or otherwise, to advance the 
specified policies of these proposed regulations before April 
2009.

                  Background and Need for Legislation

    Beginning in 2007, the Centers for Medicare and Medicaid 
Services (CMS) began issuing rules that made significant 
programmatic changes to the Medicaid program. Only two of the 
regulations were issued in response to recent Congressional 
legislation, the provider tax rule, and the case management 
rule. This reshaping of the Medicaid program by Administrative 
action raised significant concern in Congress, as well as with 
the Nation's governors, Medicaid directors, State legislators, 
beneficiary advocates, providers, schools, and others affected 
by the proposed changes.
    Throughout 2007, Congress acted to place moratoria on a 
number of the regulations targeted by H.R. 5613. In the U.S. 
Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq 
Accountability Appropriations Act, 2007 (P.L. 110-28) Congress 
placed a one-year ban on the regulation restricting payments to 
public providers (intergovernmental transfers) and the rule 
eliminating Medicaid payment for graduate medical education 
(GME). This moratorium expires on May 25, 2008.
    In the Children's Health Insurance Program Reauthorization 
Act (CHIPRA), Congress placed a moratorium on the rule 
restricting rehabilitation care and school-based administration 
and transportation services. This legislation, however, was 
vetoed twice by the President.
    In the Medicare, Medicaid, and SCHIP Extension Act of 2007 
(P.L. 110-173), Congress placed a six-month moratorium on the 
implementation of the rule restricting rehabilitation care 
under Medicaid and the rule eliminating Medicaid payment for 
specialized medical transportation for school children with 
disabilities and Medicaid outreach and enrollment conducted by 
schools. This moratorium expires on June 30, 2008.
    In addition, Senators Mikulski (D-MD) and Coleman (R-MN) 
offered an amendment to S. 1200, the Indian Health Care 
Improvement Act (ICHIA), which placed a one-year moratorium on 
the targeted case management rule, which was adopted by voice 
vote. The House, however, has not yet completed action on 
ICHIA.
    Both the House and Senate-passed budget resolutions include 
a reserve fund that would allow for deficit-neutral action to 
place a moratorium on the regulations. These funds would allow 
Committee allocations to be appropriately adjusted in the event 
such legislation was enacted. Differences between the two bills 
are currently being negotiated by the House and Senate Budget 
Committees.
    In response to the concerns raised by Medicaid stakeholders 
about the looming expiration of the existing moratoria and the 
need for a moratorium on the remaining regulations, Rep. John 
D. Dingell (D-MI), Chairman of the Committee on Energy and 
Commerce, along with Representative Tim Murphy (R-PA), 
introduced H.R. 5613. This legislation would place a one-year 
moratorium, but not a permanent ban, on all seven regulations. 
This will allow Congress time to better understand the nature 
and extent of the problems that the regulations propose to 
address, whether the solution identified in the regulation is 
appropriate and within the authority of CMS, and how each 
regulation would affect States, beneficiaries, and providers.
    This legislation received broad bipartisan support by the 
Nation's 50 governors and Medicaid directors. More than 2,000 
organizations, including national organizations such as the 
American Hospital Association, the American Health Care 
Association, and the American Association of School 
Administrators, and the American Association of People with 
Disabilities, as well as local organizations such as the Wayne 
County Public Schools in Michigan, have come forward in support 
of H.R. 5613.

                    REGULATIONS DELAYED BY H.R. 5613
------------------------------------------------------------------------
                                   Date issued/
          Regulation                  Status              Summary
------------------------------------------------------------------------
Optional Case Management        Interim final      Medicaid's case
 Services.                       rule issued        management benefit
                                 December 4,        is intended to help
                                 2007; no current   people with
                                 moratorium,        disabilities,
                                 regulation         chronic illnesses,
                                 effective March    or special needs to
                                 3, 2008.           gain access to the
                                                    full spectrum of
                                                    health care and
                                                    support services by
                                                    arranging for and
                                                    coordinating care.
                                                    The rule would
                                                    eliminate Federal
                                                    reimbursement to
                                                    States for all
                                                    payments for certain
                                                    case management
                                                    activities (such as
                                                    those done by child
                                                    welfare workers);
                                                    limit Federal
                                                    reimbursement for
                                                    other case
                                                    management
                                                    activities (such as
                                                    assistance with
                                                    transitioning out of
                                                    a nursing home); and
                                                    eliminate Federal
                                                    reimbursement for
                                                    case management as
                                                    an administrative
                                                    activity.
Rehabilitation services 72      Proposed rule      Medicaid's
 Fed. Reg. 45201.                issued August      rehabilitation
                                 13, 2007;          benefit provides an
                                 current            array of care and
                                 moratorium (sec.   services to allow
                                 206 of the         individuals with
                                 Medicare,          disabilities to
                                 Medicaid, and      attain, maintain, or
                                 SCHIP Extension    regain maximum
                                 Act of 2007,       function. The rule
                                 P.L. 110-173)      would prohibit
                                 through June 30,   Federal Medicaid
                                 2008.              reimbursement to
                                                    States for services
                                                    that allow a
                                                    beneficiary to
                                                    maintain current
                                                    functional status
                                                    and rehabilitative
                                                    services furnished
                                                    through a non-
                                                    medical program
                                                    (e.g., foster care,
                                                    adoption services,
                                                    education, juvenile
                                                    justice)
School-based administration     Final rule issued  Under current law,
 and transportation services     December 28,       States may receive
 72 Fed. Reg. 73635.             2007; current      Federal Medicaid
                                 moratorium (sec.   reimbursements for
                                 206 of the         payments to schools
                                 Medicare,          for both
                                 Medicaid, and      administrative
                                 SCHIP Extension    activities
                                 Act of 2007,       associated with the
                                 P.L. 110-173)      Medicaid program
                                 through June 30,   (such as outreach
                                 2008.              and enrollment) and
                                                    specialized medical
                                                    transportation
                                                    services of a child
                                                    to and from school.
                                                    The rule prohibits
                                                    Federal Medicaid
                                                    reimbursements for
                                                    (1) administrative
                                                    activities by school
                                                    employees or
                                                    contractors and (2)
                                                    specialized medical
                                                    transportation of
                                                    school-aged children
                                                    from home to school
                                                    and back when
                                                    receiving a medical
                                                    service at the
                                                    school.
Payments to public providers    Final rule issued  This rule changes
 72 Fed. Reg. 29748.             May 29, 2007;      existing policy to
                                 current            eliminate a major
                                 moratorium (sec.   source of
                                 7002 of P.L. 110-  supplemental
                                 28) through May    payments to
                                 25, 2008.          healthcare providers
                                                    such as public
                                                    hospitals and
                                                    nursing homes. Since
                                                    1991 the Federal law
                                                    has explicitly
                                                    allowed States to
                                                    use certain
                                                    intergovernmental
                                                    transfers and
                                                    certified public
                                                    expenditures to help
                                                    States pay their
                                                    share of Medicaid
                                                    costs. This rule
                                                    would limit the
                                                    amount States can
                                                    pay to
                                                    governmentally-
                                                    operated healthcare
                                                    providers. It would
                                                    also restrict the
                                                    types of entities
                                                    authorized to
                                                    provide non-Federal
                                                    share funding and
                                                    the rule determines
                                                    which healthcare
                                                    providers would be
                                                    subject to the new
                                                    cost limit.
Provider taxes 72 Fed. Reg.     Final rule issued  Under current law,
 13726.                          February 22,       States are allowed
                                 2008; no current   to use certain types
                                 moratorium.        of taxes on
                                                    healthcare providers
                                                    as a way to help pay
                                                    for Medicaid
                                                    expenses. These
                                                    taxes are typically
                                                    supported by
                                                    providers because
                                                    the taxes are used
                                                    to improve provider
                                                    payment rates and
                                                    improve quality.
                                                    This rule redefines
                                                    what CMS would
                                                    consider an
                                                    ``allowable''
                                                    provider tax beyond
                                                    what is in the law,
                                                    replacing the
                                                    current objective
                                                    and quantitative
                                                    test for determining
                                                    whether a provider
                                                    tax, or quality fee,
                                                    is permissible with
                                                    a new test that is
                                                    completely
                                                    subjective.
Graduate medical education 72   Proposed rule      This rule would
 Fed. Reg. 28930.                issued May 23,     prohibit Federal
                                 2007; current      Medicaid
                                 moratorium (sec.   reimbursement
                                 7002 of P.L. 110-  payments for
                                 28) through May    graduate medical
                                 25, 2008.          education programs
                                                    that train providers
                                                    so they have the
                                                    experience and
                                                    skills necessary to
                                                    meet the unique
                                                    needs of Medicaid
                                                    beneficiaries,
                                                    particularly
                                                    individuals with
                                                    disabilities. Forty-
                                                    seven States and the
                                                    District of Columbia
                                                    currently provide
                                                    these payments under
                                                    the Medicaid
                                                    program.
------------------------------------------------------------------------

    During the comment periods for these regulations, CMS 
received virtually no comments in support of the seven 
regulations. CMS indicated that of approximately 1,000 comments 
on the public provider payment rule, one piece of 
correspondence contained a positive comment, the rest indicated 
opposition. Of the 333 comments received on the hospital 
outpatient rule, only 1 was positive. Of the 1,240 pieces of 
correspondence received on the school-based administration and 
transportation rule, 1,225 were in opposition. There were no 
positive comments among the 1,845 pieces of correspondence 
received on the rehabilitation rule.
    In spite of the significant opposition expressed by the 
public comments on these seven regulations, CMS issued a number 
of the regulations in final form, even after Congress 
specifically directed the agency to cease such activities. The 
public provider payment rule was issued in final form after 
Congress enacted the moratorium on the rule, but before the 
President signed the legislation making that law effective. 
Likewise, the rule on school-based administration and 
transportation was issued in final form after Congress passed a 
bill placing a moratorium on it, but before the President 
signed the bill into law.
    H.R. 5613 will allow for Congressional review of both the 
agency's apparent disregard for the public comments received 
and the agency's apparent disregard of Congressional intent. In 
fact, only minor provisions of two of the seven regulations 
were in response to statutory changes. The moratoria in H.R. 
5613 would allow those two portions of the rules, which were 
specifically enacted by Congress, to proceed.
    These regulations were not published as a result of 
Congressional action. Congress has not acted to change these 
sections of the statute for years. For example, Congress last 
took legislative action on the hospital outpatient department 
benefit in 1977, and there has been no change in the statute 
regarding school services since 1987. And in a number of 
instances, Congress specifically rejected the changes the 
Administration made through regulations. In 2006, a majority of 
the House of Representatives wrote to HHS Secretary Michael 
Leavitt expressing opposition to the regulatory proposals 
included in the President's Budget for fiscal year 2007, 
including changes to school-based administration and 
transportation services, public provider payments, provider 
taxes, and rehabilitation services. These views were conveyed 
in two separate letters: a letter dated July 26, 2006, signed 
by all 201 House Democratic Members, 1 Independent Member, and 
4 Congressional Delegates; and a May 8, 2006, letter signed by 
80 House Republican Members.

                PAYMENTS TO PUBLIC PROVIDERS CMS 2258-FC

    Federal Medicaid law has long allowed States to use funds 
transferred from other units of government, such as counties or 
localities, to meet Medicaid's State share requirement. These 
intergovernmental transfers (IGTs) are also allowed when the 
counties or localities operate hospitals or nursing facilities 
that participate in Medicaid. In 1991, Congress enacted 
legislation prohibiting the use of donations from non-
governmental organizations but codifying the authority for 
States to use IGT funds transferred from units of government, 
including those that operate providers, to State Medicaid 
agencies for use as the non-Federal share.
    In 1997, Congress enacted legislation giving States broad 
flexibility in setting payment rates for inpatient hospital and 
nursing facility services, whether furnished by public or by 
private providers. As a result, States have for more than a 
decade had broad flexibility in setting payment rates to 
reimburse hospitals and nursing homes for covered Medicaid 
services, whether those facilities are public or private. This 
flexibility allows each State to decide whether its Medicaid 
program should contribute toward the cost of treating the 
uninsured.
    The CMS proposed rule would restrict Federal Medicaid 
reimbursements for services offered in hospitals, nursing 
homes, and other providers operated by units of government to 
their ``direct costs'' of furnishing services to Medicaid 
patients. Under this regulation, Medicaid would no longer 
contribute toward the costs incurred by public providers in 
treating the uninsured and for specific things such as the 
losses that the hospital might incur for emergency room visits, 
burn units, or trauma care. In contrast, Medicare includes 
coverage for direct and indirect costs. Indirect costs include 
Medicare's fair share of the overall costs of running the 
hospital.
    This rule was not published as a result of any recent 
Congressional action. Congress has not acted to change payments 
for public providers under Medicaid since 1997. The Government 
Accountability Office (GAO) testified at the April 3, 2008, 
hearing before the Subcommittee on Health of the Committee on 
Energy and Commerce on H.R. 5613 that additional transparency 
is necessary in public provider payments and transfers of funds 
from the local to the State levels. The Committee believes, 
however, that ``transparency'' can be accomplished without this 
regulation.
    In a 1994 report GAO suggested that Congress consider 
enacting legislation to prohibit Medicaid payments that exceed 
costs to any government facility, to minimize the likelihood 
that States can develop illusory financing mechanisms whereby 
providers return Medicaid payments to the States, thus reducing 
the States' share of Medicaid funding. In several reports 
subsequent to 1994 reviewing various aspects of inappropriate 
payment arrangements, GAO has reiterated this matter for the 
Congress to consider. (See HEHS-94-133, GAO/T-HEHS-00-193, GAO-
04-228, GAO-04-574T, See GAO-05-748, GAO-05-836T, and GAO-08-
255T.) And, Congress passed legislation on this matter in 2000 
(P.L. 106-554), and CMS rules implementing these changes became 
final in 2001.
    In a 2007 GAO report that reviewed CMS oversight of State 
Medicaid arrangements, it noted that the CMS initiative 
undertaken within the agency's existing regulations had not 
been implemented in a transparent manner, contributing to 
concerns about the consistency of the agency's actions. GAO 
recommended that the Administrator of CMS issue guidance to 
clarify allowable arrangements for financing the non-Federal 
share of Medicaid payments. GAO noted that such guidance could 
include finalizing the January 18, 2007, draft regulation that 
limited payments to government providers to costs. (See GAO-07-
214, GAO-08-255T.)
    The Committee believes, however, that CMS, through its 
successful oversight initiative launched in 2003, has already 
largely addressed all of the issues cited in the GAO and OIG 
testimony, without the provisions in the public provider rule. 
According to a CMS chart dated November 2006, only 3 States 
remained that CMS had identified potentially questionable IGT 
practices, down from 15 in 2005. The most recent GAO report on 
the topic verified this and found that CMS had successfully 
terminated inappropriate financing arrangements in 29 States. 
The GAO testified at the April 3, 2008, hearing before the 
Subcommittee on Health that they have no recent reports 
demonstrating a continuing problem.
    The National Association of Public Hospitals and Health 
Systems (NAPH), American Hospital Association (AHA), and the 
Association of American Medical Colleges (AAMC) have filed suit 
against in the United States District Court for the District of 
Columbia asking for a preliminary injunction prohibiting CMS 
from implementing these regulations restricting payments to 
public providers.

                  HOSPITAL OUTPATIENT RULE CMS 2213-P

    In September of 2007, CMS issued a proposed rule making 
significant changes to the Medicaid hospital outpatient 
department benefit. This regulation was not published as a 
result of Congressional action. In addition, GAO testified at 
the hearing before the Subcommittee on Health of the Committee 
on Energy and Commerce on April 3, 2008, that it has not done 
any work in this area. At this same hearing, the Director of 
the CMS Center for Medicaid and State Operations noted that 
``CMS does not anticipate a major impact on providers or 
beneficiaries under this regulation as [they] do not believe 
attempts to inflate UPLs [upper payment limits] through this 
manner are widely used currently, but [they] do believe it is 
important to clarify this policy.'' The Committee requested the 
agency provide State-by-State information on the effect of this 
rule, but CMS has yet to respond.
    The proposed rule would restrict the types of outpatient 
services that can be reimbursed by the Federal Government. The 
rule would, for example, limit coverage of dental services and 
screening services as an outpatient department service.
    The Committee believes that such a restriction could have a 
negative effect on State efforts to reduce unnecessary 
emergency room use. Hospitals have used the outpatient clinics 
as a way to keep beneficiaries out of the emergency room. This 
is a more cost-effective alternative. And further, these 
clinics can provide a medical home for the patient.
    In the proposed rule, CMS states the rule is necessary to 
prevent Medicaid from raising payment limits for Medicaid 
services. GAO and other entities have reported on Medicaid's 
historically low payment rates. In fact, one of the witnesses 
at the April 3, 2008, Subcommittee on Health hearing on H.R. 
5613 noted that Medicaid's payment rates are low. Ms. Grace-
MarieTurner, President of the Galen Institute, said that 
``[t]he great majority of providers serving Medicaid patients 
are working to provide the best care possible, often at 
considerable sacrifice, such as physicians who treat Medicaid 
patients even if the Medicaid payment means they are taking a 
financial loss.'' Since low payments can impair access to 
providers, the rule raises concerns regarding access for 
beneficiaries.
    This proposed rule would eliminate the practice used by 
many States to control costs of paying ``all-inclusive'' for 
outpatient hospital services. These rates, like Medicare's 
rate, are paid to the hospital and include a professional 
component, for the services of the physician. Unlike Medicare, 
the physician cannot bill the Medicaid program separately. In 
order to receive Federal Medicaid reimbursements, the proposed 
rule would require States to break apart their payments, paying 
the facility and professional components separately. This would 
require States to amend their long standing payment policies.

                      PROVIDER TAX RULE CMS 2275-P

    Federal law allows States to generate the State's share of 
Medicaid funding from other governmental sources. Many States 
use provider taxes as a way to raise funds to support Medicaid. 
These taxes are allowed as long as they meet a multi-prong test 
to ensure the tax is ``broad-based and uniform'' and do not 
hold the provider harmless for the amount of the tax. One part 
of this multi-prong test determines whether the tax is 
`positively correlated' with provider payments. This is to 
prevent States from simply using the tax to generate Federal 
Medicaid dollars, and holding the provider harmless for the 
amount of the tax.
    Currently, States rely on a mathematical test to determine 
whether or not their provider tax was allowable. The State 
mathematical formula determines if the tax has a `positive 
correlation' with provider payments. If so, the tax is not 
allowed. This test is simple and transparent.
    CMS issued a final rule making significant changes to the 
Medicaid provider tax requirements in February 2008. States 
were given two months to comply with the significant changes 
made in the rule, which takes effect on April 22, 2008. The 
final rule eliminated the mathematical test as the standard. 
States will have no clear, transparent guidance to follow to 
determine whether their program was operating in accordance 
with the law.
    Moreover, because many State provider tax programs are 
outlined in State statute, States would be unable to conform 
their programs to the new requirements in the two months 
provided by the rule. States would not only have to negotiate 
new allowable arrangements with CMS, but also have such 
arrangements approved by their State legislature. This cannot 
likely be accomplished in two months.
    The rule was not published as a result of work carried out 
by the Government Accountability Office. GAO testified at the 
April 3, 2008, hearing before the Subcommittee on Health, that 
there was no basis in GAO work done for the provisions in the 
provider tax regulation, particularly those sections where 
there is no basis in law.
    The Deficit Reduction Act of 2005 (P.L. 109-171) (DRA) 
directed CMS to ensure taxes on managed care organizations were 
within the scope of the provider tax requirements. The Tax 
Relief and Health Care Act of 2006 lowered the allowable tax 
rate from 6 percent to 5.5 percent from January of 2008 through 
September of 2011.
    H.R. 5613 does not place a moratorium on these two 
Congressionally-mandated changes. It only places a moratorium 
on the parts of the rule that go beyond the two statutory 
changes.

                 GRADUATE MEDICAL EDUCATION CMS 2279-P

    CMS published a proposed rule in May 2007 eliminating 
Medicaid payment for graduate medical education programs that 
train providers so they have the experience and skills 
necessary to meet the unique needs of Medicaid beneficiaries. 
Currently 47 States and the District of Columbia provide 
payment for graduate medical education costs under Medicaid. 
Only Illinois, Texas, and North Dakota do not provide such 
payments.
    In his testimony before the Committee, the Director of the 
CMS Center for Medicaid and State Operations noted that ``GME 
is not included as a service, or a component of a service, that 
is eligible for FFP.'' CMS has, however, historically and 
consistently recognized, approved, and funded its share of 
Medicaid GME payments. According to the Congressional Research 
Service (CRS), ``Historically, Medicare and Medicaid have 
recognized * * * graduate medical education (GME) costs. * * 
*'' States have the authority to cover GME payments as a cost 
of delivering hospital services, which comes under the broad 
requirements of 1902(a)(13)(A) which informs States of the 
process by which to establish their rates.
    In addition, GME is noted in both statute and regulation. 
Congress expressly identified GME as an allowable expense in 
the Deficit Reduction Act of 2005 (P.L. 109-171), in noting 
that default rates paid to certain Medicaid providers in 
Section 1932(b)(2) should be ``less any payments for indirect 
costs of medical education and graduate medical education''. In 
2002, CMS modified Medicaid managed care regulations. In those 
regulations (42 CFR 438.60), CMS required States to adjust 
Medicaid managed care payments ``to account for the aggregate 
amount of GME payments to be made directly to hospitals'' to 
ensure that States were not paying twice for GME.
    GAO testified at the April 3, 2008, hearing on H.R. 5613 
that it had not worked to identify fraud and abuse in this 
area. CMS, however, believes that it does not have sufficient 
information on what Medicaid GME supports. Currently Medicaid 
State plans must include a description of how States will 
administer GME payments under Medicaid. CMS approves all these 
plans.
    Teaching hospitals, which receive these payments, represent 
only 6 percent of all hospitals yet are the sites for 
approximately 25 percent of all Medicaid hospitalizations. They 
also supply nearly half of all pediatric intensive care beds 
and one-third of all intensive care beds for premature or 
seriously ill newborns. With the increase in the number of 
uninsured, and the increase in enrollment in Medicaid due to a 
decline in employer-coverage, Medicaid assistance to ensure 
physicians have training to deal with the unique needs of these 
beneficiaries is even more critical. Eliminating GME payments 
in Medicaid will harm physician-training programs at a time 
when the Nation faces a physician shortage and primary care 
physicians are becoming so important for this type of care.
    On a bipartisan basis, Governors have indicated the 
negative effect this regulation would have on patient care. 
Governor Haley Barbour of Mississippi noted ``If the GME 
program is eliminated, the University of Mississippi Medical 
Center's ability to provide care for our Medicaid beneficiaries 
will be threatened.'' Ohio Governor Ted Strickland noted, 
``Ohio's teaching hospitals will lose millions of dollars if 
these regulations and or proposals are allowed to proceed and 
it will undercut their ability to train the next generation of 
physicians.''

      SCHOOL ADMINISTRATION AND TRANSPORTATION SERVICES CMS 2287-F

    CMS proposed a final rule restricting payments for school 
administrative and transportation services in December 2007, 
after Congress enacted a moratorium on implementation of the 
rule but before the President signed that bill into law. This 
rule eliminates Medicaid funding for any Medicaid 
administrative services conducted by schools, including 
outreach, enrollment, and care coordination. The rule also 
eliminates Medicaid payment for specialized medical 
transportation for children with disabilities to and from 
school on a day the child receives a Medicaid service in the 
school.
    This rule was not published as a result of recent 
Congressional action or as a result of work done by the 
Government Accountability Office. GAO testified at the April 3, 
2008, hearing before the Subcommittee on Health that it had not 
recommended changes, such as elimination of payments for 
administration and transportation services in any of its work.
    According to a GAO 2005 report addressing the use of 
contingency fee contractors in Medicaid, GAO noted that the 
Department of Health and Human Services Office of the Inspector 
General had reviewed school-based claims in 18 States. These 
reviews largely cover claims made prior to issuance by CMS of 
the Medicaid Administrative Claiming guide (MAC), which 
provided schools and Medicaid agencies with clear guidance on 
billing for such services.
    In a 2000 GAO report, it recognized the importance of 
school-based administrative activities for Medicaid. GAO wrote, 
``Close to one-third of Medicaid-eligible individuals are 
children, making schools an important arena for Medicaid 
services * * * Outreach and identification activities--in many 
varied settings--help ensure that the nation's most vulnerable 
children receive routine preventive health care or ongoing 
primary care and treatment.''
    Current law allows for schools to be reimbursed when they 
perform legitimate Medicaid activities. Federal Medicaid law 
calls for the provision of Federal funding for administrative 
activities that the Secretary finds ``necessary * * * for the 
proper and efficient administration of the State [Medicaid] 
plan.''
    Until now, many States have entered into interagency 
agreements with schools whereby school nurses and other school 
staff identify children eligible for Medicaid and help their 
families through the enrollment process. School nurses also 
coordinate healthcare services for children with special needs, 
inform families of services that are available to the children, 
and help families access those services. States are required to 
provide these latter activities as part of the Federal Medicaid 
Early Periodic Screening Diagnostic and Treatment (EPSDT) 
benefit.
    The regulation would eliminate Medicaid payment for all of 
these services. Many school-based outreach efforts that 
successfully enroll uninsured low-income children in Medicaid 
would end, resulting in an increase in the number of children 
who are eligible for the program, but who remain uninsured. The 
regulation would also make it much more difficult for States to 
carry out their EPSDT responsibilities, which include arranging 
for and helping children access needed health care.
    The regulation would also eliminate all payments for 
Medicaid-covered transportation services to and from school. 
Under Medicaid, States must ensure children have transportation 
to and from providers. Many children who are in special 
education programs actually receive health services covered by 
Medicaid in schools.
    The Medicare Catastrophic Coverage Act of 1988 required 
Medicaid payment for Medicaid-covered services provided to 
Medicaid-eligible children pursuant to an Individualized 
Education Program (IEP) under the Individuals with Disabilities 
Education Act (IDEA). Section 1903(c) of the Social Security 
Act states, ``Nothing in this title shall be construed to 
prohibit or restrict, payment under subsection (a) for medical 
assistance for covered services furnished to a child with a 
disability because such services are included in the child's 
individualized education program established pursuant to part B 
of the Individuals with Disabilities Education Act [IDEA] * * 
*''. Thus, because transportation is a Medicaid-covered service 
for children, when specialized medical transportation is listed 
in an IEP as a required service, it is supposed to be 
reimbursed by Medicaid.
    As CMS has acknowledged in the preamble to its interim 
final rule, Medicaid coverage of school-based transportation 
services is already highly restricted. Under current law, 
Medicaid only pays for specialized medical transportation to 
and from school if the child is receiving special education and 
transportation is listed in the child's Individualized 
Education Plan (IEP). Even then, Medicaid payment is only 
available on days when a child receives a Medicaid-covered 
service in school. The rule on schools, however, would 
eliminate all payments for Medicaid-related transportation 
under the current construct.
    ``Regular'' transportation to and from school is clearly 
not a covered Medicaid service. Since at least 1999, CMS has 
made clear that such transportation is not covered by Medicaid. 
A May 21, 1999, letter to State Medicaid directors stated, 
``HCFA would like to clarify that a child with special 
education needs under IDEA who rides the regular school bus to 
school with other non-disabled children in his/her neighborhood 
should not have transportation listed in his IEP and the cost 
of that bus ride should not be billed to Medicaid.''

                   CASE MANAGEMENT RULE CMS 2237-IFC

    CMS published an interim final rule restricting payments 
for Medicaid case management services in December 2007. This 
rule became effective on March 3, 2008. This rule restricts 
Medicaid funding for case management provided as an 
administrative activity. The rule also restricts Medicaid 
payment for targeted case management services needed for people 
with disabilities to remain in or transition to community 
living settings.
    Forty-nine States and the District of Columbia provide 
targeted case management services to various groups of adults 
with disabilities. All States, in compliance with the EPDST 
benefit must provide medically-necessary case management 
services to children. Case management is a critical Medicaid 
benefit, helping millions of low-income children and adults 
with disabilities gain access to needed medical services. The 
term ``targeted'' case management is used when the case 
management is provided to one specific group of beneficiaries.
    A January 2005 report by the Department of Health and Human 
Services notes the importance of case management, ``[b]ecause 
successfully supporting working age adults with serious mental 
illness in the community often involves not only addressing 
their treatment needs, but also assisting them in other areas * 
* * the coverage of targeted case management services is a 
means to support linkages to other services, as well as to 
monitor the well-being of individuals and assist them to 
address problems they might encounter in community living.''
    In spite of this relatively recent support for case 
management by the HHS, the recent rule proposes to restrict 
this important benefit. In addition, GAO testified at the April 
3, 2008, hearing before the Subcommittee on Health that many of 
the components of the case management regulation, such as 
requiring States to submit payment in 15-minute increments or 
reducing the amount of time beneficiaries can receive case 
management services when they are trying to move from an 
institution to the community, were not recommended by GAO. In a 
2005 report dealing with the use of contingency fee consultants 
in two States, however, GAO noted that some claims for case 
management services were inconsistent with current CMS policy 
and that, to ensure compliance with existing policies, CMS 
establish or clarify certain policies and then communicate 
them, including policies for targeted case management services. 
GAO reiterated these recommendations in Congressional testimony 
(GAO-08-255T and GAO-05-836T.)
    In the Deficit Reduction Act of 2005, Congress directed CMS 
to issue a rule relating to certain aspects of case management 
clarifying that (1) case management can include contacts with 
individuals who are not eligible for Medicaid when necessary to 
manage the care of the Medicaid beneficiary, but does not 
include management of the ineligible individual's own needs; 
and (2) case management does not include direct delivery of 
services to which the individual has been referred. DRA also 
clarified which specific foster care services are not 
considered part of Medicaid's case management benefit. Congress 
did not direct CMS to change the Medicaid coverage of other 
case management services.
    H.R. 5613 would not impose a moratorium on the components 
of the rule that were published in accordance with 
Congressional direction. The bill would impose a moratorium on 
the components of the rule that seem to go beyond the DRA 
provisions. For example, the bill would put a moratorium on the 
provisions of the rule that restrict the ability of States to 
get reimbursement for case management that are provided as an 
administrative activity. It would also put a moratorium on the 
portion of the regulation that requires States to bill for case 
management services in separate 15-minute increments, rather 
than paying all-inclusive rates.
    It would also place a moratorium on the provision of the 
rule that shortens the time that people moving out of an 
institution into the community can receive case management 
services. The case management rule restricts the amount of time 
a case manager can spend helping a person with disabilities 
plan and execute a transition to the community. Some 
individuals would only have 14 days of case management to 
accomplish all these goals. Case management services for 
others, who have been in an institution for more than 180 days, 
would be limited to 60 days.
    The moratorium in the legislation also would apply to that 
the portion of the case management rule that prohibits payment 
for the case management services until the individual actually 
transitions to the community. Case managers would bear greater 
financial risk, and in some cases could receive no payment at 
all. For example, if a person with a mental illness suffered a 
complicating setback that postponed his or her ability to 
transition out of the nursing home, the case manager, who had 
arranged for the community services needed by the beneficiary, 
would receive no payment because the beneficiary was unable to 
transition at that particular time.
    The moratorium would also apply to the portion of the case 
management rule that imposes a hard limit of one case manager 
per person. While in most cases this is appropriate, for a 
beneficiary with multiple conditions, such as HIV/AIDS, mental 
illness, or an intellectual disability, no single case manager 
may be able to coordinate housing, health care, and social 
needs across multiple systems. DRA did not place any such 
limits on case management services.
    The rule would impose an integral component test to 
prohibit Medicaid coverage of services that CMS deems are 
integral to other Federal or State non-medical programs. This 
test has no basis in the Medicaid statute. Further, it mirrors 
a policy that CMS sought to include in the rehabilitation 
services option under DRA, but which was specifically rejected 
by the Congress. The moratorium would also apply to this 
portion of the rule.
    The rule would require case management services for 
Medicaid-covered children in foster care by a Medicaid provider 
operating outside of the foster care system. Today States can 
reimburse providers in the foster care system when they provide 
Medicaid-covered services. States allocate payment to the 
foster care worker based on the time the foster care worker 
spends on Medicaid case management activities or having a 
qualified contractor of the foster care agency provide case 
management.
    The States of Maine, Maryland, New Jersey, and Oklahoma 
have filed a suit against the U.S. Department of Health and 
Human Services in the District of Columbia U.S. District Court, 
seeking injunctive and declaratory relief against the case 
management rule, which they argue is an ``arbitrary and 
capricious exercise, taken without regard to procedure required 
by law and in excess of Defendants' statutory jurisdiction, 
authority, or limitations, in violation of the Administrative 
Procedure Act * * *'' New York also joined the suit in April 
2008.

                     REHABILITATION RULE CMS-2261-P

    CMS proposed a rule restricting payments for rehabilitation 
services in August 2007. This rule restricted Medicaid's 
rehabilitation benefit, including eliminating Medicaid payment 
for a number of services that have been covered for years.
    The Social Security Act (Section 1905(a)(13)) defines 
rehabilitation as ``diagnostic, screening, preventive, and 
rehabilitative services, including any medical or remedial 
services (provided in a facility, home, or other setting) 
recommended by a physician or other practitioner of the healing 
arts within the scope of their practice under state law, for 
the maximum reduction of physical or mental disability and 
restoration of an individual to the best possible functional 
level.''
    Rehabilitation option services are broader than simple 
clinical treatment and assist individuals with disabilities in 
acquiring the skills essential for every day functioning. For 
example, one type of program offered through Medicaid's 
Rehabilitation Option is Mental Health Skills Training. Both 
adults and children with serious mental illnesses can benefit 
from this type of program, which allows for skills trainers to 
work with recipients on specific, individualized treatment 
goals that focus on their unique mental and behavioral needs. 
These services are typically offered at a location in the 
community or in the beneficiary's home. Examples of goals in 
the individualized treatment plan may include: promoting 
various anger management skills and coping skills, working with 
a beneficiary who is suicidal on ways to keep him/her safe, and 
assisting a child suffering from depression in working to 
overcome self esteem issues.
    The rehabilitation option allows States to provide services 
in community settings, including a home or work environment, 
whereas other service categories specify the setting in which 
the services can be provided. The rehabilitation option also 
allows services to be provided by a broader range of 
professionals than other service categories. Community 
paraprofessionals and peer specialists can provide needed 
services, whereas they could not under other service 
categories. A 2006 report from the Department of Health and 
Human Services notes, ``This flexibility is very useful to 
states because it allows them to cover a number of intensive 
home and community services that are particularly important for 
youth with SED [serious emotional disturbance] and their 
families.''
    But States cannot cover anything under the rehabilitation 
option. Current guidance specifies what services cannot be 
covered under this option, including vocational training, 
personal care services, case management services directed 
toward gaining access to and monitoring of non-Medicaid 
services. Furthermore, in order for States to provide 
rehabilitation services, their plan must clearly define the 
scope of the benefits the State is providing through the option 
and be approved by CMS.
    This rule was not published as a result of work done by 
GAO. A 2005 GAO report dealing with the use of contingency fee 
contractors in Medicaid recommended that CMS establish or 
clarify certain policies, and then communicate them, including 
policies for rehabilitation services. (See GAO-05-748.) GAO 
reiterated these recommendations in two subsequent testimonies. 
(See GAO-05-836T and GAO-08-255T.) GAO, however, testified at 
the April 3, 2008, Subcommittee on Health hearing that it had 
not recommended the changes made by the rule such as 
eliminating coverage of certain rehabilitation services.
    One issue in the rehabilitation rule is the imposition of 
an ``intrinsic element'' test to prohibit Medicaid coverage for 
services that are otherwise coverable under the rehabilitation 
services option, on the basis that these services are intrinsic 
to another Federal or State non-medical program. The Congress 
has established in the Medicaid statute a third party liability 
system to delineate when Medicaid's payment obligations are 
superseded by another program. Under the proposed rule, CMS 
would deem a service ineligible for FFP, whether or not a third 
party was available to pay for a service. It should be noted 
that the concept of an intrinsic element test has no basis in 
the Medicaid statute and the Congress specifically rejected 
such a test in its deliberations leading up to the enactment of 
the Deficit Reduction Act of 2005.
    Another issue is the elimination of coverage for day 
habilitation services for persons with mental retardation and 
related conditions. The proposed rule would eliminate coverage 
of day habilitation services under the rehab and clinic options 
for persons with developmental disabilities in contravention of 
Section 6411(g) of the Omnibus Budget and Reconciliation Act of 
1989 (OBRA '89, P.L. 101-239). This provision of law states 
that the Secretary may not deny Medicaid funding for 
habilitation services unless the Secretary promulgates a final 
regulation that ``specifies the types of day habilitation and 
related services that a State may cover * * * on behalf of 
persons with mental retardation or with related conditions.'' 
In contravention to the language of Section 6411(g) of OBRA 
'89, the proposed rule does not specify the types of day 
habilitation services that a State may cover. Instead, the 
proposed rule would prohibit the provisioning of habilitation 
services under the clinic and rehab options.
    In enacting OBRA '89, the Congress clearly intended to 
protect access to day habilitation programs for people with 
mental retardation and related conditions. A Committee on the 
Budget House Report accompanying this legislation stated, ``In 
the view of the Committee, HCFA should be encouraging states to 
offer community-based services to this vulnerable population, 
not restricting their efforts to do so.''\1\ The moratorium 
imposed by H.R. 5613 would allow these programs to continue.
---------------------------------------------------------------------------
    \1\Report of the House Committee on the Budget, ``Explanation of 
the Commerce and Ways and Means Committees Affecting Medicare-Medicaid 
Programs,'' September 20, 1989.
---------------------------------------------------------------------------
    Adult day health care programs provide a related set of 
services, similar in many respects to habilitation services for 
persons with developmental disabilities, but generally targeted 
to seniors, including persons with Alzheimer's disease and 
other forms of dementia and/or cognitive impairments. These 
programs provide a cost-effective alternative to institutional 
placement by providing States the opportunity to offer 
community-based treatment programs that support individuals in 
retaining their capability for independence and self-care. 
Currently, there are eight States that operate such adult day 
health care programs. By placing a one-year moratorium on the 
rehabilitation rule, Congress ensures that these habilitation 
programs and adult day health care services programs can 
continue to operate.
    In addition to eliminating coverage of day habilitation 
programs, under the proposed rehabilitation rule those with 
mental retardation and related conditions (including epilepsy, 
autism, and cerebral palsy) will be ineligible for most 
rehabilitation option services, based on the presumption that, 
because these individuals have cognitive impairments, they have 
never achieved a level of functioning that could require 
rehabilitation services to restore or maintain. These illnesses 
can cause loss of function that needs to be restored, but they 
would no longer qualify for rehabilitation services to restore 
that functioning.
    In the rehabilitation rule, services must be not only for 
the maximum reduction of disability but also must restore 
previous functioning or skills. For example, this is 
problematic for a child, born with a defect, who may walk with 
therapy, but wasn't born walking, or for a person with 
developmental disabilities who may not have had a particular 
skill but can learn it through therapy.
    These two changes would make it likely that many people who 
are today living successfully in the community would no longer 
receive the services that enable them to do so. People with 
disabilities could need to go back into institutions to receive 
these necessary services. Institutional care is more expensive 
than community care and for some populations can cost upwards 
of $100,000 a year. In 2006, the national average for one-year 
of care in a large (16+ persons) private ICF-MR was nearly 
$70,000. Depending on the setting, these costs rise to more 
than $171,000 per year for care in a large, State-operated ICF-
MR.
    Finally, the rehabilitation rule would place constraints on 
State flexibility in billing. The rehabilitation rule would 
require States to bill for services individually in 15-minute 
increments, eliminating State the flexibility to select its own 
payment methodology such as case rate payments, daily payments, 
or various other forms of capitated or bundled payments. 
Moreover, billing in 15-minute increments, instead of on a case 
rate basis that is tied to the average time the provider spends 
working with a patient, would make it difficult to provide 
services that require a provider to be on call at all times.
    Together, these seven rules would affect the ability of 
States to provide critical Medicaid services. A March 2008 
House Committee on Oversight and Government Reform report on 
the Medicaid regulations provides additional insights as to the 
effect of these regulations on States. This report summarized 
the results of a 50 State survey of Medicaid directors. That 
Committee received responses from 43 States, representing 
nearly 95 percent of total Medicaid spending.
    State responses to the Committee on Oversight and 
Government Reform indicated that the regulations will reduce 
spending by shifting costs, not through greater efficiencies. 
These regulations will impose administrative burdens and costs 
on State Medicaid programs.
    The National Governors Association (NGA) sent a letter on 
February 26, 2008, urging Congress to block the implementation 
of these regulations. NGA sent a subsequent letter on April 2, 
2008, indicating the Dingell-Murphy legislation is a high 
priority for the Nation's governors. In addition, the National 
Association of State Medicaid Directors (NASMD) and the 
American Public Human Services Administrators (APHSA) issued a 
joint letter urging Congress to stop the implementation of 
these regulations noting, ``* * * these regulations will impose 
billions of dollars of cuts over the next five years, an amount 
that will be difficult for states to absorb and would restrict 
the reach and effectiveness of the Medicaid program in many 
States.'' More than 2,000 organizations have written in support 
of H.R. 5613. A complete list can be found at http://
energycommerce.house.gov/MedicaidProtection_110/index.shtml
    In addition to the effect on State budgets and 
beneficiaries, many elements of these regulations are of 
questionable legality. A March 2008 report by Professor Sara 
Rosenbaum, Chair of the Department of Health Policy, the George 
Washington University School of Public Health and Health Care 
Services, entitled, ``CMS' Medicaid Regulations: Implications 
for Children with Special Health Care Needs'' on the effect 
these regulations have on children found that many provisions 
in the Medicaid regulations were in violation of the Medicaid 
statute, which guarantees health care for children with special 
needs. The rules would restrict or eliminate critical coverage 
for the Early Periodic Screening Detection and Treatment 
benefit that is essential for children to attain maximum growth 
and development. The EPSDT benefit was added by Congress at the 
request of President Johnson. It was done in response to 
extensive evidence showing a high level of preventable 
physical, dental, and mental health conditions among low income 
children and adolescents. This included both preschool children 
in early Head Start programs, young children served in the 
Nation's first community health centers, and young military 
draftees. The intent of the EPSDT amendments was to both assure 
access to health care and establish comprehensive coverage for 
all categorically needy children under age 21 (that is, 
children whose family incomes and assets make them eligible for 
Medicaid).
    Three examples of where the regulations are inconsistent 
with Medicaid law, EPSDT benefits, for children with special 
needs are outlined below:
     With regard to targeted case management services, 
the report notes, ``[t]he Deficit Reduction Act (DRA) made no 
changes whatsoever in states' administrative obligations to 
manage the care of children receiving care financed through 
EPSDT. Access to care is an administrative obligation of all 
Medicaid programs under the statutory EPSDT access 
requirements. Payment for EPSDT medical assistance and 
administrative services is required regardless of whether the 
child is also receiving child welfare or special education 
services.'' Yet the new targeted case management regulation 
would eliminate payment for important administrative activities 
needed to manage care for children with special needs and 
ensure access to that care.
     With respect to the hospital outpatient rule, the 
report notes, ``[t]o the extent that states have defined 
outpatient hospital services to include the special services 
offered by hospital outpatient departments to children (such as 
developmental therapies and interventions for children with 
physical or mental health conditions), the regulation directly 
contravenes the EPSDT statute in excluding federal financial 
participation in hospital outpatient care programs that furnish 
EPSDT diagnostic and treatment services that may have no 
counterpart in federal Medicare law.''
     With respect to the rule eliminating payment for 
school-based administrative and transportation services the 
report notes, ``[t]o the extent that schools contract with 
health agencies, including agencies and programs receiving 
Title V funding, to provide administration services in schools, 
the regulation directly contravenes federal laws requiring the 
use of health agencies and title V agencies and grantees as 
well as state agency payment for all services furnished by such 
agencies, whether medical assistance or administrative in 
nature.'' Title V of the Public Health Service Act is a block 
grant that provides funding for Maternal and Child Health 
Services.

                                Hearings

    On Thursday April 3, 2008, the Subcommittee on Health of 
the Committee on Energy and Commerce held a hearing entitled 
``H.R. 5613, the Protecting the Medicaid Safety Net Act of 
2008.'' The hearing examined the effect of the regulations on 
States, beneficiaries, and providers. The witnesses included: 
Barbara Coulter Edwards, Interim Director of the National 
Association of State Medicaid Directors (NASMD); Randy 
Mohundro, Superintendent of the DeLeon Independent School 
District and Executive Committee Member of American Association 
of School Administrators; James Cosgrove, Ph.D., Acting 
Director of Health Care Issues for the Government 
Accountability Office; James E. Buckner, Jr., CHE, 
Administrator of Uvalde Memorial Hospital; Joseph R. Antos, 
Ph.D., Wilson H. Taylor Scholar in Health Care and Retirement 
Policy of the American Enterprise Institute; Stuart H. Shapiro, 
M.D., President and Chief Executive Officer of the Pennsylvania 
Health Care Association, Marsha Raulerson, MD, FAAP of the 
American Academy of Pediatrics; Ms. Grace-Marie Turner, 
President of the Galen Institute; Dennis G. Smith, Director of 
the Center for Medicaid and State Operations of the Centers for 
Medicare and Medicaid Services; the Honorable Herb Conaway, 
Jr., M.D., State Assemblyman representing Legislative District 
7 of the State of New Jersey; and John G. Folkemer, Deputy 
Secretary of Health Care Financing of the Department of Health 
and Mental Hygiene.
    Prior to this legislative hearing, the Subcommittee on 
Health held four hearings during January-February of 2008, 
which focused, in part, on these regulations. At the January 
16, 2008, hearing entitled, ``Helping Families with Needed 
Care: Medicaid's Critical Role For Americans With 
Disabilities,'' witnesses described the difficulties posed for 
beneficiaries as a result of the targeted case management, 
rehabilitation, and school-based outreach and transportation 
regulations. At the January 29, 2008, hearing entitled, 
``Covering Uninsured Kids: Missed Opportunities for Moving 
Forward,'' the Committee heard testimony from Dennis Smith, 
Director of the Center for Medicaid and State Operations, 
Centers for Medicaid and Medicare Services; Tricia Brooks, 
President and CEO of New Hampshire's Healthy Kids Corporation, 
which administers the State's Medicaid and SCHIP program; and 
Ann Kohler, Deputy Secretary of the New Jersey Department of 
Health and Human Services regarding these regulations.
    At the February 26, 2008, hearing entitled ``Covering 
Uninsured Kids: Reversing Progress Already Made'' the 
Subcommittee heard testimony from five Governors opposed to the 
implementation of the seven CMS regulations. Finally, at the 
February 28, 2008, ``A Review of the Department of Health and 
Human Services Fiscal Year 2009 Budget'' the Committee on 
Energy and Commerce had the opportunity to question HHS 
Secretary Michael Leavitt about the regulations.

                        Committee Consideration

    On Wednesday, April 9, 2008, the Subcommittee on Health met 
in open markup session and favorably forwarded H.R. 5613, 
amended, to the full Committee for consideration, by a voice 
vote. On Wednesday, April 16, 2008, the full Committee met in 
open markup session and ordered H.R. 5613 favorably reported to 
the House, amended, by a record vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. A 
motion by Mr. Dingell to order H.R. 5613 favorably reported to 
the House, amended, was agreed to by a recorded vote of 46 yeas 
and 0 nays. The following are the recorded votes taken on the 
motion and amendments, including the names of those Members 
voting for and against.


                      Committee Oversight Findings

    Regarding clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Subcommittee on Health held a 
legislative hearing, and the oversight findings of the 
Committee regarding H.R. 5613 are reflected in this report.

         Statement of General Performance Goals and Objectives

    The purpose of H.R. 5613 is to impose a one year moratorium 
on seven rules issued by the Department of Health and Human 
Services which would restrict or eliminate Medicaid payment for 
certain health care services and safety net institutions. The 
purpose is to ensure that Congress is able to consider the 
effect of these rules on States, beneficiary groups, and 
providers to determine whether the changes made by the rules 
are appropriate and in the best interest of the Medicaid 
program or warrant any further action.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    Regarding compliance with clause 3(c)(2) of rule XIII of 
the Rules of the House of Representatives, the Committee adopts 
as its own the estimate of budget authority, entitlement 
authority, tax expenditures, and revenues regarding H.R. 5613 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974.

                  Earmarks and Tax and Tariff Benefits

    Regarding compliance with clause 9 of rule XXI of the Rules 
of the House of Representatives, H.R. 5613 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate on H.R. 
5613 prepared by the Director of the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate on 
H.R. 5613 provided by the Congressional Budget Office pursuant 
to section 402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, April 22, 2008.
Hon. John D. Dingell,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5613, the 
Protecting the Medicaid Safety Net Act of 2008. The bill was 
ordered reported on April 16, 2008.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Jeanne De Sa.
            Sincerely,
                                         Robert A. Sunshine
                                   (For Peter R. Orszag, Director).
    Enclosure.

H.R. 5613--Protecting the Medicaid Safety Net Act of 2008

    Summary: H.R. 5613 would extend existing moratoria on 
certain regulatory actions taken by the Centers for Medicare & 
Medicaid Services (CMS) with regard to the Medicaid program. 
Those actions are related to payments for services furnished by 
public providers, for graduate medical education, for school-
based administration and transportation services, and for 
rehabilitation services. In addition, the bill would impose new 
moratoria on Medicaid regulations involving targeted case-
management services and provider taxes and on a proposed 
regulation involving outpatient hospital services. The bill 
would appropriate $5 million to study the effects of these 
regulations on the Medicaid program.
    The bill would make additional changes to Medicaid by 
requiring more stringent verification of assets in certain 
eligibility determinations. H.R. 5613 also would appropriate 
$25 million a year to the Secretary of Health and Human 
Services to address fraud and abuse in Medicaid and would 
reduce funding for the Medicare physician assistance and 
quality initiative (PAQI) fund in fiscal year 2013, and 
increase such funding in 2014.
    Some of the bill's provisions would increase direct 
spending; others would reduce direct spending. CBO estimates 
that the increases would amount to $1.8 billion over the 2008-
2013 period and $1.9 billion over the 2008-2018 period, largely 
due to the required delays in implementing regulations. Other 
provisions related to asset verification and adjustments to the 
PAQI fund would reduce direct spending by similar amounts. On 
net, H.R. 5613 would reduce direct spending by $3 million over 
the 2008-2013 and 2008-2018 periods.
    H.R. 5613 would not affect federal revenues or 
discretionary spending. This bill contains no intergovernmental 
or private-sector mandates as defined in the Unfunded Mandates 
Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 5613 is shown in the following table. 
The changes in direct spending fall within budget functions 550 
(health) and 570 (Medicare).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         By fiscal year, in millions of dollars--
                                ------------------------------------------------------------------------------------------------------------------------
                                  2008    2009     2010     2011     2012     2013      2014      2015     2016     2017     2018   2008-2013  2008-2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING

Moratoria on Certain Medicaid
 Regulations:
    Estimated Budget Authority.     445   1,205        0        0        0         0         0        0        0        0        0      1,650      1,650
    Estimated Outlays..........     445   1,205        0        0        0         0         0        0        0        0        0      1,650      1,650
Funds to Reduce Fraud and
 Abuse:
    Estimated Budget Authority.       0      25       25       25       25        25        25       25       25       25       25        125        250
    Estimated Outlays..........       0      24       25       25       25        25        25       25       25       25       25        124        249
Study on Impact of Regulations:
    Estimated Budget Authority.       5       0        0        0        0         0         0        0        0        0        0          5          5
    Estimated Outlays..........       0       5        0        0        0         0         0        0        0        0        0          5          5
Medicaid Asset Verification:
    Estimated Budget Authority.       0     -80     -130     -180     -230      -380      -490     -590     -690     -820     -950     -1,000     -4,540
    Estimated Outlays..........       0     -80     -130     -180     -230      -380      -490     -590     -690     -820     -950     -1,000     -4,540
Medicare Physician Assistance
 and Quality Fund:
    Estimated Budget Authority.       0       0        0        0        0    -1,203     3,777       58        0        0        0     -1,203      2,633
    Estimated Outlays..........       0       0        0        0        0      -782     2,027    1,387        0        0        0       -782      2,633
    Total Changes:
        Estimated Budget            450   1,150     -105     -155     -205    -1,558     3,312     -507     -665     -795     -925       -423         -2
         Authority.............
        Estimated Outlays......     445   1,154     -105     -155     -205    -1,137     1,562      822     -665     -795     -925         -3         -3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Components may not sum to totals because of rounding.

    Basis of estimate: The bill contains provisions that would 
both increase and decrease direct spending. CBO estimates that 
the net impact would be savings of $3 million over both the 
2008-2013 period and over the 2008-2018 period. This estimate 
assumes that the bill will be enacted by late May 2008.

Moratoria on certain Medicaid regulations

    CMS has taken regulatory action to limit payments under the 
Medicaid program for certain financing mechanisms and services. 
The Congress previously enacted moratoria on four of those 
regulations. H.R. 5613 would extend the existing moratoria 
through April 1, 2009, and would impose new moratoria through 
April 1, 2009, on certain provisions of regulations involving 
targeted case-management services, provider taxes, and covered 
outpatient services. In total, CBO estimates that the seven 
moratoria would increase Medicaid spending by $1.7 billion over 
the 2008-2009 period.
    All of the regulations addressed by H.R. 5613 are 
incorporated either fully or partially in CBO's baseline 
projections of Medicaid spending. For final regulations, CBO 
fully incorporates the projected effects into the baseline 
(after any moratorium ends), reflecting implementation of 
current law. For proposed rules or other significant 
administrative actions, CBO generally assigns a weight of 50 
percent in its baseline, reflecting the uncertainties of the 
administrative process.
    Payment to Public Providers. CMS issued a final rule on May 
29, 2007, to restrict the use of intergovernmental transfers 
and limit payment to public providers to cost (public providers 
are health care providers owned or operated by a unit of 
government). The final rule:
           Clarifies that the only providers that may 
        participate in providing the nonfederal share of 
        Medicaid funding are those that are part of a unit of 
        government;
           Limits Medicaid payments to cost for 
        providers operated by units of government; and
           Requires that providers retain the full 
        amount of their Medicaid payments.
    The Congress enacted a moratorium on implementation of that 
rule that will remain in effect until May 25, 2008, under 
current law. Using information from CMS on how states use 
intergovernmental transfers, estimates of hospital and nursing 
home spending based on administrative data, and analysis of the 
distribution of spending by facility ownership, CBO estimates 
the bill's extended moratorium on the public provider final 
rule would increase spending by a total of $0.8 billion in 
fiscal years 2008 and 2009.
    Graduate Medical Education. On May 23, 2007, CMS issued a 
proposed rule to prohibit payment for Medicaid graduate medical 
education. The Congress enacted a moratorium on further 
regulatory action in this area, which remains in effect until 
May 25, 2008. The extension of that moratorium on the proposed 
rule for graduate medical education would increase spending by 
$0.1 billion over the 2008-2009 period, CBO estimates, based on 
information from CMS about which states use Medicaid funds for 
graduate medical education. Because the graduate medical 
education regulation is proposed and not final, CBO's estimate 
represents half of the potential costs of this moratorium.
    School-based Administration and Transportation Services. On 
December 20, 2007, CMS issued a final rule prohibiting payments 
for administrative costs for any activities performed by 
employees or contractors of local school districts and for 
transportation of Medicaid recipients from their home to their 
school. The Congress enacted a moratorium on implementing that 
rule, which will remain in effect until May 25, 2008. Relying 
on spending information provided by CMS, CBO estimates that 
extending this moratorium would increase spending by a total of 
$0.5 billion in fiscal years 2008 and 2009.
    Rehabilitation Services. On August 13, 2007, CMS issued a 
proposed rule to narrow the definition of rehabilitation 
services. The proposed rule would:
           Prohibit payments for services that are 
        ``intrinsic parts'' of other programs such as foster 
        care, child welfare, or juvenile justice;
           Ban states from using bundled rates to pay 
        for therapeutic foster care (which is a type of 
        rehabilitation service);
           Prohibit payments, unless otherwise 
        permitted by a Secretarial waiver, for habilitation 
        services (which help individuals to develop new skills 
        instead of restoring previously existing skills); and
           Restrict payments for recreational or social 
        services.
    The Congress enacted a moratorium on further agency action 
in this area, which remains in effect until May 25, 2008. The 
bill's extended moratorium on implementing the rehabilitation 
rule would increase spending by $0.1 billion over the 2008-2009 
period. Because the rehabilitative services regulation is 
proposed and not final, CBO's estimate represents half of the 
potential costs of this moratorium.
    Targeted Case Management. The Deficit Reduction Act of 2005 
clarified and narrowed payment policy for targeted case-
management services, and required CMS to issue a final rule to 
implement the policy. On December 4, 2007, CMS issued a final 
rule, which went into effect on March 3, 2008. The rule defines 
case-management and targeted case-management services and 
clarifies that those services may not include the direct 
delivery of other social services, specifically foster care. It 
also limits transitional assistance services to individuals in 
institutions to 60 days (as opposed to 180 days), restricts 
services to only one case manager per person, requires that 
payments be based on 15-minute increments, and prohibits child 
welfare agencies and contractors from serving as case managers.
    The bill would not prevent CMS from implementing the 
clarification of targeted case management outlined in the 
Deficit Reduction Act of 2005. However it would prohibit 
implementation of portions of the rule that are more stringent 
than the statute, particularly the restriction on days of 
service and the limit of one case manager per person. The 
moratorium on implementing the portion of the targeted case 
management final rule that is more stringent than the 
underlying statute would increase spending by a total of $0.1 
billion in fiscal years 2008 and 2009, CBO estimates. CBO based 
its analysis of this rule on projections of expenditures for 
targeted case management by state, using administrative 
spending and enrollment data, and analysis of the regulation by 
the Kaiser Family Foundation.
    Provider Taxes. On February 22, 2008, CMS issued a final 
rule that revises standards on permissible provider taxes 
through 2011, lowering allowable amounts from 6.0 percent to 
5.5 percent of gross patient revenues. The final rule specifies 
methodologies for determining when states are using an 
impermissible tax. H.R. 5613 would allow the provider tax 
limits to go into effect, but would delay implementation of the 
clarifications outlined in the regulation. CBO estimates this 
delay would have no effect because the regulation codifies 
current practices, which would continue in the absence of that 
regulation.
    Outpatient Clinic and Hospital Services. On September 28, 
2007, CMS issued a proposed rule to clarify the definition of 
outpatient clinic and hospital services eligible for payment 
under the Medicaid program and to require states to use the 
definition of ``outpatient hospital services'' that is used by 
Medicare.
    Based on Medicaid administrative spending data, information 
from CMS, and analysis of the regulation by the Kaiser Family 
Foundation, CBO expects that the moratorium on the proposed 
rule clarifying outpatient clinic and hospital services would 
allow certain services to be performed in higher-cost settings 
and estimates that a delay in implementation would increase 
spending by a total of $0.1 billion in fiscal years 2008 and 
2009. Because the regulation is proposed and not final, CBO's 
estimate represents half of the potential costs.

Funds to reduce fraud and abuse

    H.R. 5613 would appropriate $25 million a year for the 
Secretary of Health and Human Services to address fraud and 
abuse in the Medicaid program. CBO estimates that this 
provision would cost about $125 million and $250 million over 
the 2009-2013 and 2009-2018 periods, respectively.

Study on impact of Medicaid regulations

    The bill would appropriate $5 million for the Secretary of 
Health and Human Services to contract with an independent 
organization to produce a report on the impact of the 
regulations subject to the moratoria and an analysis of the 
problems the regulations were designed to address. CBO 
anticipates those funds would be spent in fiscal year 2009.

Medicaid asset verification demonstration

    Section 5 would require all states to incorporate into 
their Medicaid programs a demonstration program from the 
Supplemental Security Income (SSI) program. The program uses 
Web-based techniques to identify assets that might otherwise 
not be discovered through the eligibility-determination process 
and requires beneficiaries to allow access to their financial 
information. Under current law, New York and New Jersey, which 
both operate the SSI demonstration, are required to implement 
this program for Medicaid through 2013. The bill would allow a 
five-year phase-in period during which CMS would develop a 
staggered schedule for states to adopt the necessary 
administrative and systems requirements. California, which 
recently implemented the SSI demonstration, would be required 
to implement the program for Medicaid by the end of fiscal year 
2009. The bill would permit states to enroll people in the 
demonstration program even if they refuse to allow disclosure 
of their financial information.
    Based on information from CMS, CBO expects that the new 
Medicaid procedures would result in denial of or delay in 
eligibility for some people and reduced enrollment in Medicaid, 
mainly for individuals seeking nursing home coverage or other 
high-cost long-term care services. CBO estimates that this 
provision would reduce federal outlays by $1.0 billion over the 
2009-2013 period and $4.5 billion over the 2009-2018 period.

Medicare physician assistance and quality initiative fund

    Under current law, the Secretary of Health and Human 
Services has $5.0 billion available in 2013 to use for 
initiatives related to physician payments and quality 
improvements in Medicare. Section 6 would reduce the funding 
available in 2013 by $1.2 billion and would increase the 
funding for 2014 by $3.8 billion. CBO estimates that those 
changes in funding would decrease outlays by $0.8 billion in 
2013 and would increase outlays by $2.6 billion over the 2013-
2015 period.
    Intergovernmental and private-sector impact: H.R. 5613 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. The bill would impose a new requirement on 
states to electronically verify the assets of Medicaid 
enrollees. That requirement would increase administrative 
spending by states; however, the provision also would result in 
lower caseloads and an overall decline in state spending. 
Because Medicaid provides states with significant flexibility 
to make programmatic adjustments to accommodate changes, the 
requirement to verify assets would not be an intergovernmental 
mandate as defined by UMRA. State, local, and tribal 
governments would benefit from provisions in the bill that 
would delay the implementation of several Medicaid regulations.
    Estimate prepared by: Federal Costs: Jeanne De Sa; Impact 
on State, Local, and Tribal Governments: Lisa Ramirez-Branum; 
Impact on the Private Sector: Patrick Bernhardt.
    Estimate approved by: Keith J. Fontenot, Deputy Assistant 
Director for Health and Human Resources, Budget Analysis 
Division.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates regarding H.R. 5613 prepared by the Director of the 
Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act would be created by H.R. 
5613.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for H.R. 5613 is provided in Article 
I, section 8, clause 3, which grants Congress the power to 
regulate commerce with foreign nations, among the several 
States, and with the Indian Tribes, and in the provisions of 
Article I, section 8, clause 1, that relate to expending funds 
to provide for the general welfare of the United States.

                  Applicability to Legislative Branch

    The Committee finds that H.R. 5613 does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of section 102(b)(3) of 
the Congressional Accountability Act of 1995.


             Section-by-Section Analysis of the Legislation


Section 1. Short title

    Section 1 establishes the short title of the Act as the 
``Protecting the Medicaid Safety Net Act of 2008''.

Section 2. Moratoria on certain Medicaid regulations

            (a) Extension of certain moratoria in Public Law 110-28
    This subsection extends moratoria Congress previously 
placed on two Medicaid regulations issued by the Department of 
Health and Human Services having to do with restrictions on 
Medicaid payments to public providers and elimination of 
Medicaid payments for graduate medical education (GME). These 
moratoria were enacted through the U.S. Troop Readiness, 
Veterans' Care, Katrina Recovery, and Iraq Accountability 
Appropriations Act, 2007 (P.L. 110-28) and will expire on May 
25, 2008. This section extends the current moratoria through 
March of 2009.
            (b) Extension of certain moratoria in Public Law 110-173
    This subsection extends moratoria Congress previously 
placed on two Medicaid regulations dealing with restrictions on 
Medicaid payments for rehabilitation services and elimination 
of Medicaid payments for school-based transportation and 
administration services. These moratoria were enacted in the 
Medicare, Medicaid, and SCHIP Extension Act of 2007 (P.L. 110-
173) and will expire on June 30, 2008. This subsection extends 
the current moratoria through March of 2009. This moratorium 
would insure that CMS cannot implement an intrinsic element 
test or eliminate State day habilitation programs for persons 
with mental retardation and related conditions, as well as 
coverage under approved State plans of adult day health care 
programs, which are covered by that regulation.
            (c) Additional moratoria
    This subsection would prohibit the Secretary from going 
beyond current law, through regulation, to put limits on what 
States can provide in terms of case management services in 
their Medicaid programs. Case management services are those 
that assist beneficiaries in gaining access to needed medical, 
social, educational, and other services and include assistance 
for transitioning out of a nursing home. This subsection would 
allow the Secretary to provide regulations to implement the 
current law provisions passed in the deficit reduction act 
(DRA) as long as they are not more restrictive than the 
policies set forth in previous guidance from the Centers for 
Medicare and Medicaid Services relating to State 
responsibilities under Medicaid for persons with disabilities. 
The Secretary may exercise such authority so long as 
restrictions are not imposed on case management services that 
are more restrictive than the policies set forth in the Dear 
State Medicaid Director letter issued on January 19, 2001 (SMDL 
#01-013), which clarified the interaction of Medicaid with the 
Title IV-E foster care program and included a listing of some 
of the allowable services under the Medicaid case management 
benefit for children receiving Title IV-E services, and so long 
as restrictions are not imposed on community transition case 
management more restrictive than the policies set forth in the 
Dear State Medicaid Director letter issued on July 25, 2000 
(Olmstead Update 3), including the standard that permits 
Medicaid coverage of transition case management for 180 days, 
and which does not include a prohibition on payment for 
transition case management until an individual has successfully 
completed a community transition.
    This subsection also would place a moratorium on the 
proposed regulations that restrict Medicaid payment for 
preventative care, rehabilitation services, and dental care 
provided in outpatient hospital settings.
    This subsection would prevent the Secretary from 
implementing the portions of the final regulation relating to 
Medicaid allowable provider taxes that does not directly 
implement the changes Congress made in the Tax Relief and 
Health Care Act of 2006 (P.L. 109-432). The Secretary went 
beyond the current law by redefining what is considered an 
``allowable'' provider tax.
    The bill as approved by the Committee modified the language 
of subsection (c) in section 2 of the introduced bill to 
address concerns that the scope of the moratoria was too broad. 
Language was substituted as used in P.L. 110-73, the Medicare, 
Medicaid, and SCHIP Extension Act.

Section 3. Funds to reduce Medicaid fraud and abuse

    Section 3 of the bill included $25 million a year 
appropriation to the Secretary of Health and Human Services 
beginning with fiscal year 2009 for the purposes of reducing 
fraud and abuse in the Medicaid program. In addition, this 
section includes a requirement for the Secretary to report to 
the Committee on Energy and Commerce and the Committee on 
Finance on the activities funded and results of such 
activities.

Section 4. Study and reports to Congress

    Section 4(a) requires the Secretary of Health and Human 
Services to submit a report to the Committee on Energy and 
Commerce and the Committee on Finance by July 1, 2008. This 
report would outline what specific problems the Medicaid 
regulations are intended to address, how the regulations 
address those problems and the legal authority for such 
regulations.
    Section 4(b) directs the Secretary to enter into a contract 
with an independent organization for the purpose of producing a 
report on the prevalence of the problems identified in the 
regulations, identifying existing strategies to address such 
problems, and assessing the impact of each regulation on the 
States and the District of Columbia. The independent report 
produced under section 4(b) shall identify strategies in 
existence to address the problems outlined in the Secretary's 
report to Congress to indicate where current legal authority is 
sufficient to respond to any identified problems, and shall 
assess the impact of the regulations referred to in the report 
conducted under section 4(a) on each State and the District of 
Columbia. This shall include an examination of the effect that 
these regulations would have on State efforts to operate 
evidence-based programs consistent with the current standards 
of best professional practice in the various areas covered by 
the rules. Section 4 provides $5 million for the purposes of 
conducting this report.

Section 5. Asset verification through access to information held by 
        financial institutions

    Section 5 requires all States to phase in a program for 
electronic verification of the assets of aged, blind, and 
disabled individuals applying for Medicaid coverage. States 
would submit and implement an asset verification program so 
that such a program is applied to approximately, but not less 
than 12.5 percent of Medicaid enrollees by the end of fiscal 
year 2009; 25 percent by the end of fiscal year 2010; 50 
percent by the end of fiscal year 2011; 75 percent by the end 
of fiscal year 2012; and 100 percent by the end of fiscal year 
2013. Section 5(a) requires the Secretary to develop this 
schedule taking into account the feasibility of implementing 
asset verification programs in each individual State. States 
are permitted to voluntarily request approval to implement an 
`asset verification program' in advance of being required by 
the Secretary.
    Section 5(a) defines an ``asset verification program,'' 
established under section 5 of this bill, as a program 
requiring that each applicant for, or recipient of, medical 
assistance under a Medicaid State plan, on the basis of being 
aged, blind, or disabled, authorize the State to obtain 
financial records held by any financial institution. States 
that do not apply an asset test in determining eligibility of 
categories of individuals who qualify for Medicaid on the basis 
of being aged, blind, or disabled obviously would not be 
required to apply the electronic asset verification system to 
such individuals. An asset verification program requires an 
individual to authorize the State to obtain financial records 
when the State determines it is needed in connection with 
determining eligibility for medical assistance under the 
Medicaid program. Under current law, States might need to 
verify assets of a spouse in determining eligibility of an 
individual, but the authority to require other individuals to 
provide authorization to obtain financial records is limited, 
and should not extend to parties whose assets are not relevant 
to the determination. The State shall use those financial 
records to verify the financial resources of individuals 
applying for, or receiving medical assistance. An asset 
verification program established under section 5 must verify 
individual assets in a manner consistent with procedures used 
by the Commissioner of Social Security.

Section 6. Adjustment to PAQI fund

    Section 6 amends the Social Security Act, as amended by the 
Medicare, Medicaid, and SCHIP Extension Act of 2007, to reduce 
the amount of money available to the Physician Assistance and 
Quality Initiative Fund for expenditure during 2013 from 
$4,960,000,000 to $3,790,000,000. Section 6, however, makes 
$3,690,000,000 available to the fund for expenditures during 
2014 under the same limitations provided for expenditures made 
with money available during 2013.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

   SECTION 7002 OF THE U.S. TROOP READINESS, VETERANS' CARE, KATRINA 
       RECOVERY, AND IRAQ ACCOUNTABILITY APPROPRIATIONS ACT, 2007


  Sec. 7002. (a) Prohibition.--
          (1) Limitation on secretarial authority.--
        Notwithstanding any other provision of law, the 
        Secretary of Health and Human Services shall not, 
        [prior to the date that is 1 year after the date of 
        enactment of this Act] prior to April 1, 2009, take any 
        action (through promulgation of regulation, issuance of 
        regulatory guidance, or other administrative action) to
                  (A) finalize or otherwise implement 
                provisions contained in the proposed rule 
                published on January 18, 2007, on pages 2236 
                through 2248 of volume 72, Federal Register 
                (relating to parts 433, 447, and 457 of title 
                42, Code of Federal Regulations) or in the 
                final regulation, relating to such parts, 
                published on May 29, 2007 (72 Federal Register 
                29748);

           *       *       *       *       *       *       *

                  (C) promulgate or implement any rule or 
                provisions restricting payments for graduate 
                medical education under the Medicaid program, 
                including the proposed regulation published on 
                May 23, 2007 (72 Federal Register 28930).

           *       *       *       *       *       *       *

                              ----------                              -


 SECTION 206 OF THE MEDICARE, MEDICAID, AND SCHIP EXTENSION ACT OF 2007


SEC. 206. MORATORIUM ON CERTAIN PAYMENT RESTRICTION.

  Notwithstanding any other provision of law, the Secretary of 
Health and Human Services shall not, prior to [June 30, 2008] 
April 1, 2009, take any action (through promulgation of 
regulation, issuance of regulatory guidance, use of Federal 
payment audit procedures, or other administrative action, 
policy, or practice, including a Medical Assistance Manual 
transmittal or letter to State Medicaid directors) to impose 
any restrictions relating to coverage or payment under title 
XIX of the Social Security Act for rehabilitation services, 
including the proposed regulation published on August 13, 2007 
(72 Federal Register 45201), or school-based administration and 
school-based transportation, including the final regulation 
published on December 28, 2007 (72 Federal Register 73635), if 
such restrictions are more restrictive in any aspect than those 
applied to such areas as of July 1, 2007.
                              ----------                              


                          SOCIAL SECURITY ACT




           *       *       *       *       *       *       *
TITLE XVIII--HEALTH INSURANCE FOR THE AGED AND DISABLED

           *       *       *       *       *       *       *



   Part B--Supplementary Medical Insurance Benefits for the Aged and 
Disabled

           *       *       *       *       *       *       *



                    PAYMENT FOR PHYSICIANS' SERVICES

  Sec. 1848. (a) * * *

           *       *       *       *       *       *       *

  (l) Physician Assistance and Quality Initiative Fund.--
          (1) * * *
          (2) Funding.--
                  (A) Amount available.--
                          (i) In general.--Subject to clause 
                        (ii), there shall be available to the 
                        Fund the following amounts:
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (III) For expenditures during 
                                2013, an amount equal to 
                                [$4,960,000,000] 
                                $3,790,000,000.
                                  (IV) For expenditures during 
                                2014, an amount equal to 
                                $3,690,000,000.
                          (ii) Limitations on expenditures.--
                                  (I) * * *

           *       *       *       *       *       *       *

                                  (IV) 2014.--The amount 
                                available for expenditures 
                                during 2014 shall only be 
                                available for an adjustment to 
                                the update of the conversion 
                                factor under subsection (d) for 
                                that year.
                  (B) Timely obligation of all available funds 
                for services.--The Secretary shall provide for 
                expenditures from the Fund in a manner designed 
                to provide (to the maximum extent feasible) for 
                the obligation of the entire amount available 
                for expenditures, after application of 
                subparagraph (A)(ii), during--
                          (i) * * *
                          (ii) 2009 for payment with respect to 
                        physicians' services furnished during 
                        2009; [and]
                          (iii) 2013 for payment with respect 
                        to physicians' services furnished 
                        during 2013[.]; and
                          (iv) 2014 for payment with respect to 
                        physicians' services furnished during 
                        2014.

           *       *       *       *       *       *       *


TITLE XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

           *       *       *       *       *       *       *


                   STATE PLANS FOR MEDICAL ASSISTANCE

  Sec. 1902. (a) A State plan for medical assistance must--
          (1) * * *

           *       *       *       *       *       *       *

          (69) provide that the State must comply with any 
        requirements determined by the Secretary to be 
        necessary for carrying out the Medicaid Integrity 
        Program established under section 1936; [and]
          (70) at the option of the State and notwithstanding 
        paragraphs (1), (10)(B), and (23), provide for the 
        establishment of a non-emergency medical transportation 
        brokerage program in order to more cost-effectively 
        provide transportation for individuals eligible for 
        medical assistance under the State plan who need access 
        to medical care or services and have no other means of 
        transportation which--
                  (A) * * *

           *       *       *       *       *       *       *

                  (B) may be conducted under contract with a 
                broker who--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iv) complies with such requirements 
                        related to prohibitions on referrals 
                        and conflict of interest as the 
                        Secretary shall establish (based on the 
                        prohibitions on physician referrals 
                        under section 1877 and such other 
                        prohibitions and requirements as the 
                        Secretary determines to be 
                        appropriate)[.]; and
          (71) provide that the State will implement an asset 
        verification program as required under section 1940.
Notwithstanding paragraph (5), if on January 1, 1965, and on 
the date on which a State submits its plan for approval under 
this title, the State agency which administered or supervised 
the administration of the plan of such State approved under 
title X (or title XVI, insofar as it relates to the blind) was 
different from the State agency which administered or 
supervised the administration of the State plan approved under 
title I (or title XVI, insofar as it relates to the aged), the 
State agency which administered or supervised the 
administration of such plan approved under title X (or title 
XVI, insofar as it relates to the blind) may be designated to 
administer or supervise the administration of the portion of 
the State plan for medical assistance which relates to blind 
individuals and a different State agency may be established or 
designated to administer or supervise the administration of the 
rest of the State plan for medical assistance; and in such case 
the part of the plan which each such agency administers, or the 
administration of which each such agency supervises, shall be 
regarded as a separate plan for purposes of this title (except 
for purposes of paragraph (10)). The provisions of paragraphs 
(9)(A), (31), and (33) and of section 1903(i)(4) shall not 
apply to a religious nonmedical health care institution (as 
defined in section 1861(ss)(1)).

           *       *       *       *       *       *       *


                           PAYMENT TO STATES

  Sec. 1903. (a) * * *

           *       *       *       *       *       *       *

  (i) Payment under the preceding provisions of this section 
shall not be made--
          (1) * * *

           *       *       *       *       *       *       *

          (22) with respect to amounts expended for medical 
        assistance for an individual who declares under section 
        1137(d)(1)(A) to be a citizen or national of the United 
        States for purposes of establishing eligibility for 
        benefits under this title, unless the requirement of 
        subsection (x) is met; [or]
          (23) with respect to amounts expended for medical 
        assistance for covered outpatient drugs (as defined in 
        section 1927(k)(2)) for which the prescription was 
        executed in written (and non-electronic) form unless 
        the prescription was executed on a tamper-resistant 
        pad[.]; or
          (24) if a State is required to implement an asset 
        verification program under section 1940 and fails to 
        implement such program in accordance with such section, 
        with respect to amounts expended by such State for 
        medical assistance for individuals subject to asset 
        verification under such section, unless--
                  (A) the State demonstrates to the Secretary's 
                satisfaction that the State made a good faith 
                effort to comply;
                  (B) not later than 60 days after the date of 
                a finding that the State is in noncompliance, 
                the State submits to the Secretary (and the 
                Secretary approves) a corrective action plan to 
                remedy such noncompliance; and
                  (C) not later than 12 months after the date 
                of such submission (and approval), the State 
                fulfills the terms of such corrective action 
                plan.
Nothing in paragraph (1) shall be construed as permitting a 
State to provide services under its plan under this title that 
are not reasonable in amount, duration, and scope to achieve 
their purpose. Paragraphs (1), (2), (16), (17), and (18) shall 
apply with respect to items or services furnished and amounts 
expended by or through a managed care entity (as defined in 
section 1932(a)(1)(B)) in the same manner as such paragraphs 
apply to items or services furnished and amounts expended 
directly by the State.

           *       *       *       *       *       *       *


  ASSET VERIFICATION THROUGH ACCESS TO INFORMATION HELD BY FINANCIAL 
                              INSTITUTIONS

  Sec. 1940. (a) Implementation.--
          (1) In general.--Subject to the provisions of this 
        section, each State shall implement an asset 
        verification program described in subsection (b), for 
        purposes of determining or redetermining the 
        eligibility of an individual for medical assistance 
        under the State plan under this title.
          (2) Plan submittal.--In order to meet the requirement 
        of paragraph (1), each State shall--
                  (A) submit not later than a deadline 
                specified by the Secretary consistent with 
                paragraph (3), a State plan amendment under 
                this title that describes how the State intends 
                to implement the asset verification program; 
                and
                  (B) provide for implementation of such 
                program for eligibility determinations and 
                redeterminations made on or after 6 months 
                after the deadline established for submittal of 
                such plan amendment.
          (3) Phase-in.--
                  (A) In general.--
                          (i) Implementation in current asset 
                        verification demo states.--The 
                        Secretary shall require those States 
                        specified in subparagraph (C) (to which 
                        an asset verification program has been 
                        applied before the date of the 
                        enactment of this section) to implement 
                        an asset verification program under 
                        this subsection by the end of fiscal 
                        year 2009.
                          (ii) Implementation in other 
                        states.--The Secretary shall require 
                        other States to submit and implement an 
                        asset verification program under this 
                        subsection in such manner as is 
                        designed to result in the application 
                        of such programs, in the aggregate for 
                        all such other States, to enrollment of 
                        approximately, but not less than, the 
                        following percentage of enrollees, in 
                        the aggregate for all such other 
                        States, by the end of the fiscal year 
                        involved:
                                  (I) 12.5 percent by the end 
                                of fiscal year 2009.
                                  (II) 25 percent by the end of 
                                fiscal year 2010.
                                  (III) 50 percent by the end 
                                of fiscal year 2011.
                                  (IV) 75 percent by the end of 
                                fiscal year 2012.
                                  (V) 100 percent by the end of 
                                fiscal year 2013.
                  (B) Consideration.--In selecting States under 
                subparagraph (A)(ii), the Secretary shall 
                consult with the States involved and take into 
                account the feasibility of implementing asset 
                verification programs in each such State.
                  (C) States specified.--The States specified 
                in this subparagraph are California, New York, 
                and New Jersey.
                  (D) Construction.--Nothing in subparagraph 
                (A)(ii) shall be construed as preventing a 
                State from requesting, and the Secretary 
                approving, the implementation of an asset 
                verification program in advance of the deadline 
                otherwise established under such subparagraph.
          (4) Exemption of territories.--This section shall 
        only apply to the 50 States and the District of 
        Columbia.
  (b) Asset Verification Program.--
          (1) In general.--For purposes of this section, an 
        asset verification program means a program described in 
        paragraph (2) under which a State--
                  (A) requires each applicant for, or recipient 
                of, medical assistance under the State plan 
                under this title on the basis of being aged, 
                blind, or disabled to provide authorization by 
                such applicant or recipient (and any other 
                person whose resources are material to the 
                determination of the eligibility of the 
                applicant or recipient for such assistance) for 
                the State to obtain (subject to the cost 
                reimbursement requirements of section 1115(a) 
                of the Right to Financial Privacy Act but at no 
                cost to the applicant or recipient) from any 
                financial institution (within the meaning of 
                section 1101(1) of such Act) any financial 
                record (within the meaning of section 1101(2) 
                of such Act) held by the institution with 
                respect to the applicant or recipient (and such 
                other person, as applicable), whenever the 
                State determines the record is needed in 
                connection with a determination with respect to 
                such eligibility for (or the amount or extent 
                of) such medical assistance; and
                  (B) uses the authorization provided under 
                subparagraph (A) to verify the financial 
                resources of such applicant or recipient (and 
                such other person, as applicable), in order to 
                determine or redetermine the eligibility of 
                such applicant or recipient for medical 
                assistance under the State plan.
          (2) Program described.--A program described in this 
        paragraph is a program for verifying individual assets 
        in a manner consistent with the approach used by the 
        Commissioner of Social Security under section 
        1631(e)(1)(B)(ii).
  (c) Duration of Authorization.--Notwithstanding section 
1104(a)(1) of the Right to Financial Privacy Act, an 
authorization provided to a State under subsection (b)(1) shall 
remain effective until the earliest of--
          (1) the rendering of a final adverse decision on the 
        applicant's application for medical assistance under 
        the State's plan under this title;
          (2) the cessation of the recipient's eligibility for 
        such medical assistance; or
          (3) the express revocation by the applicant or 
        recipient (or such other person described in subsection 
        (b)(1), as applicable) of the authorization, in a 
        written notification to the State.
  (d) Treatment of Right to Financial Privacy Act 
Requirements.--
          (1) An authorization obtained by the State under 
        subsection (b)(1) shall be considered to meet the 
        requirements of the Right to Financial Privacy Act for 
        purposes of section 1103(a) of such Act, and need not 
        be furnished to the financial institution, 
        notwithstanding section 1104(a) of such Act.
          (2) The certification requirements of section 1103(b) 
        of the Right to Financial Privacy Act shall not apply 
        to requests by the State pursuant to an authorization 
        provided under subsection (b)(1).
          (3) A request by the State pursuant to an 
        authorization provided under subsection (b)(1) is 
        deemed to meet the requirements of section 1104(a)(3) 
        of the Right to Financial Privacy Act and of section 
        1102 of such Act, relating to a reasonable description 
        of financial records.
  (e) Required Disclosure.--The State shall inform any person 
who provides authorization pursuant to subsection (b)(1)(A) of 
the duration and scope of the authorization.
  (f) Refusal or Revocation of Authorization.--If an applicant 
for, or recipient of, medical assistance under the State plan 
under this title (or such other person described in subsection 
(b)(1), as applicable) refuses to provide, or revokes, any 
authorization made by the applicant or recipient (or such other 
person, as applicable) under subsection (b)(1)(A) for the State 
to obtain from any financial institution any financial record, 
the State may, on that basis, determine that the applicant or 
recipient is ineligible for medical assistance.
  (g) Use of Contractor.--For purposes of implementing an asset 
verification program under this section, a State may select and 
enter into a contract with a public or private entity meeting 
such criteria and qualifications as the State determines 
appropriate, consistent with requirements in regulations 
relating to general contracting provisions and with section 
1903(i)(2). In carrying out activities under such contract, 
such an entity shall be subject to the same requirements and 
limitations on use and disclosure of information as would apply 
if the State were to carry out such activities directly.
  (h) Technical Assistance.--The Secretary shall provide States 
with technical assistance to aid in implementation of an asset 
verification program under this section.
  (i) Reports.--A State implementing an asset verification 
program under this section shall furnish to the Secretary such 
reports concerning the program, at such times, in such format, 
and containing such information as the Secretary determines 
appropriate.
  (j) Treatment of Program Expenses.--Notwithstanding any other 
provision of law, reasonable expenses of States in carrying out 
the program under this section shall be treated, for purposes 
of section 1903(a), in the same manner as State expenditures 
specified in paragraph (7) of such section.

           *       *       *       *       *       *       *

                              ----------                              


 SECTION 4 OF THE TMA, ABSTINENCE EDUCATION, AND QI PROGRAMS EXTENSION 
                              ACT OF 2007

                          (Public Law 110-90)

AN ACT To provide for the extension of transitional medical assistance 
(TMA), the abstinence education program, and the qualifying individuals 
                 (QI) program, and for other purposes.



           *       *       *       *       *       *       *
[SEC. 4. EXTENSION OF SSI WEB-BASED ASSET DEMONSTRATION PROJECT TO THE 
                    MEDICAID PROGRAM.

  [(a) In General.--Beginning on October 1, 2007, and ending on 
September 30, 2012, the Secretary of Health and Human Services 
shall provide for the application to asset eligibility 
determinations under the Medicaid program under title XIX of 
the Social Security Act of the automated, secure, web-based 
asset verification request and response process being applied 
for determining eligibility for benefits under the Supplemental 
Security Income (SSI) program under title XVI of such Act under 
a demonstration project conducted under the authority of 
section 1631(e)(1)(B)(ii) of such Act (42 U.S.C. 
1383(e)(1)(B)(ii)).
  [(b) Limitation.--Such application shall only extend to those 
States in which such demonstration project is operating and 
only for the period in which such project is otherwise 
provided.
  [(c) Rules of Application.--For purposes of carrying out 
subsection (a), notwithstanding any other provision of law, 
information obtained from a financial institution that is used 
for purposes of eligibility determinations under such 
demonstration project with respect to the Secretary of Health 
and Human Services under the SSI program may also be shared and 
used by States for purposes of eligibility determinations under 
the Medicaid program. In applying section 1631(e)(1)(B)(ii) of 
the Social Security Act under this subsection, references to 
the Commissioner of Social Security and benefits under title 
XVI of such Act shall be treated as including a reference to a 
State described in subsection (b) and medical assistance under 
title XIX of such Act provided by such a State.]

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