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114th Congress   }                                   {    Rept. 114-761
                         HOUSE OF REPRESENTATIVES
 2d Session      }                                   {           Part 1
_______________________________________________________________________

                                                                       


     SUSTAINING HEALTHCARE INTEGRITY AND FAIR TREATMENT ACT OF 2016

                               ----------                              

                              R E P O R T

                                 of the

                      COMMITTEE ON WAYS AND MEANS









[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]












 September 20, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

























   
   
   
   
114th Congress   }                                   {    Rept. 114-761
                         HOUSE OF REPRESENTATIVES
 2d Session      }                                   {           Part 1
_______________________________________________________________________

                                     

                                                                       


     SUSTAINING HEALTHCARE INTEGRITY AND FAIR TREATMENT ACT OF 2016

                               __________

                              R E P O R T

                                 of the

                      COMMITTEE ON WAYS AND MEANS






[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]









 September 20, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed



                                  ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

21-582                         WASHINGTON : 2012 
















114th Congress    }                                  {   Rept. 114-761
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                  {          Part 1

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



 
     SUSTAINING HEALTHCARE INTEGRITY AND FAIR TREATMENT ACT OF 2016

                                _______
                                

 September 20, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 5713]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 5713) to provide for the extension of certain long-
term care hospital Medicare payment rules, clarify the 
application of rules on the calculation of hospital length of 
stay to certain moratorium-excepted long-term care hospitals, 
and for other purposes, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Sustaining 
Healthcare Integrity and Fair Treatment Act of 2016''.
  (b) Table of Contents.--This table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.

                  TITLE I--MEDICARE PART A PROVISIONS

Sec. 101. Extension of certain LTCH Medicare payment rules.
Sec. 102. Application of rules on the calculation of hospital length of 
stay to all LTCHs.
Sec. 103. Change in Medicare classification for certain hospitals.
Sec. 104. Temporary exception to the application of the Medicare LTCH 
site neutral provisions for certain spinal cord specialty hospitals.
Sec. 105. Temporary extension to the application of the Medicare LTCH 
site neutral provisions for certain discharges with severe wounds.

                       TITLE II--OTHER PROVISIONS

Sec. 201. No payment for items and services furnished by newly enrolled 
providers or suppliers within a temporary moratorium area.

                  TITLE I--MEDICARE PART A PROVISIONS

SEC. 101. EXTENSION OF CERTAIN LTCH MEDICARE PAYMENT RULES.

  (a) 25-Percent Patient Threshold Payment Adjustment.--Section 
114(c)(1)(A) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 
(42 U.S.C. 1395ww note), as amended by section 4302(a) of division B of 
the American Recovery and Reinvestment Act (Public Law 111-5), sections 
3106(a) and 10312(a) of Public Law 111-148, and section 1206(b)(1)(B) 
of the Pathway for SGR Reform Act of 2013 (division B of Public Law 
113-67), is amended by striking ``for a 9-year period'' and inserting 
``through June 30, 2016, and for discharges occurring on or after 
October 1, 2016, and before July 1, 2017''.
  (b) Payment for Hospitals-within-hospitals.--Section 114(c)(2) of the 
Medicare, Medicaid, and SCHIP Extension Act of 2007 (42 U.S.C. 1395ww 
note), as amended by section 4302(a) of division B of the American 
Recovery and Reinvestment Act (Public Law 111-5), sections 3106(a) and 
10312(a) of Public Law 111-148, and section 1206(b)(1)(A) of the 
Pathway for SGR Reform Act of 2013 (division B of Public Law 113-67), 
is amended--
          (1) in subparagraph (A), by inserting ``or any similar 
        provision,'' after ``Regulations,'';
          (2) in subparagraph (B)--
                  (A) in clause (i), by inserting ``or any similar 
                provision,'' after ``Regulations,''; and
                  (B) in clause (ii), by inserting ``, or any similar 
                provision,'' after ``Regulations''; and
          (3) in subparagraph (C), by striking ``for a 9-year period'' 
        and inserting ``through June 30, 2016, and for discharges 
        occurring on or after October 1, 2016, and before July 1, 
        2017''.

SEC. 102. APPLICATION OF RULES ON THE CALCULATION OF HOSPITAL LENGTH OF 
                    STAY TO ALL LTCHS.

  (a) In General.--Section 1206(a)(3) of the Pathway for SGR Reform Act 
of 2013 (division B of Public Law 113-67; 42 U.S.C. 1395ww note) is 
amended--
          (1) by striking subparagraph (B);
          (2) by striking ``site neutral basis.--'' and all that 
        follows through ``For discharges occurring'' and inserting 
        ``site neutral basis.--For discharges occurring'';
          (3) by striking ``subject to subparagraph (B),''; and
          (4) by redesignating clauses (i) and (ii) as subparagraphs 
        (A) and (B), respectively, and moving each of such 
        subparagraphs (as so redesignated) 2 ems to the left.
  (b) Effective Date.--The amendments made by subsection (a) shall be 
effective as if included in the enactment of section 1206(a)(3) of the 
Pathway for SGR Reform Act of 2013 (division B of Public Law 113-67; 42 
U.S.C. 1395ww note).

SEC. 103. CHANGE IN MEDICARE CLASSIFICATION FOR CERTAIN HOSPITALS.

  (a) In General.--Subsection (d)(1)(B) of section 1886 of the Social 
Security Act (42 U.S.C. 1395ww) is amended--
          (1) in clause (iv)--
                  (A) in subclause (I), by striking ``or'' at the end;
                  (B) in subclause (II)--
                          (i) by striking ``, or'' at the end and 
                        inserting a semicolon; and
                          (ii) by redesignating such subclause as 
                        clause (vi) and by moving it to immediately 
                        follow clause (v); and
                          (iii) in clause (v), by striking the 
                        semicolon at the end and inserting ``, or''; 
                        and
                  (C) by striking ``(iv)(I) a hospital'' and inserting 
                ``(iv) a hospital''.
  (b) Conforming Payment References.--The second sentence of subsection 
(d)(1)(B) of such section is amended--
          (1) by inserting ``(as in effect as of such date)'' after 
        ``clause (iv)''; and
          (2) by inserting ``(or, in the case of a hospital described 
        in clause (iv)(II), as so in effect, shall be classified under 
        clause (vi) on and after the effective date of such clause (vi) 
        and for cost reporting periods beginning on or after January 1, 
        2015, shall not be subject to subsection (m) as of the date of 
        such classification)'' after ``so classified''.
  (c) Application.--
          (1) In general.--For cost reporting periods beginning on or 
        after January 1, 2015, in the case of an applicable hospital 
        (as defined in paragraph (3)), the following shall apply:
                  (A) Payment for inpatient operating costs shall be 
                made on a reasonable cost basis in the manner provided 
                in section 412.526(c)(3) of title 42, Code of Federal 
                Regulations (as in effect on January 1, 2015) and in 
                any subsequent modifications.
                  (B) Payment for capital costs shall be made in the 
                manner provided by section 412.526(c)(4) of title 42, 
                Code of Federal Regulations (as in effect on such 
                date).
                  (C) Claims for payment for Medicare beneficiaries who 
                are discharged on or after January 1, 2017, shall be 
                processed as claims which are paid on a reasonable cost 
                basis as described in section 412.526(c) of title 42, 
                Code of Federal Regulations (as in effect on such 
                date).
          (2) Applicable hospital defined.--In this subsection, the 
        term ``applicable hospital'' means a hospital that is 
        classified under clause (iv)(II) of section 1886(d)(1)(B) of 
        the Social Security Act (42 U.S.C. 1395ww(d)(1)(B)) on the day 
        before the date of the enactment of this Act and which is 
        classified under clause (vi) of such section, as redesignated 
        and moved by subsection (a), on or after such date of 
        enactment.
  (d) Conforming Technical Amendments.--
          (1) Section 1899B(a)(2)(A)(iv) of the Social Security Act (42 
        U.S.C. 1395lll(a)(2)(A)(iv)) is amended by striking 
        ``1886(d)(1)(B)(iv)(II)'' and inserting ``1886(d)(1)(B)(vi)''.
          (2) Section 1886(m)(5)(F) of such Act (42 U.S.C. 
        1395ww(m)(5)(F)) is amended in each of clauses (i) and (ii) by 
        striking ``(d)(1)(B)(iv)(II)'' and inserting ``(d)(1)(B)(vi)''.

SEC. 104. TEMPORARY EXCEPTION TO THE APPLICATION OF THE MEDICARE LTCH 
                    SITE NEUTRAL PROVISIONS FOR CERTAIN SPINAL CORD 
                    SPECIALTY HOSPITALS.

  (a) Exception.--Section 1886(m)(6) of the Social Security Act (42 
U.S.C. 1395ww(m)(6)) is amended--
          (1) in subparagraph (A)(i), by striking ``and (E)'' and 
        inserting ``, (E), and (F)''; and
          (2) by adding at the end the following new subparagraph:
                  ``(F) Temporary exception for certain spinal cord 
                specialty hospitals.--For discharges in cost reporting 
                periods beginning during fiscal years 2018 and 2019, 
                subparagraph (A)(i) shall not apply (and payment shall 
                be made to a long-term care hospital without regard to 
                this paragraph) if such discharge is from a long-term 
                care hospital that meets each of the following 
                requirements:
                          ``(i) Not-for-profit.--The long-term care 
                        hospital was a not-for-profit long-term care 
                        hospital on June 1, 2014, as determined by cost 
                        report data.
                          ``(ii) Primarily providing treatment for 
                        catastrophic spinal cord or acquired brain 
                        injuries or other paralyzing neuromuscular 
                        conditions.--Of the discharges in calendar year 
                        2013 from the long-term care hospital for which 
                        payment was made under this section, at least 
                        50 percent were classified under MS-LTCH-DRGs 
                        28, 29, 52, 57, 551, 573, and 963.
                          ``(iii) Significant out-of-state 
                        admissions.--
                                  ``(I) In general.--The long-term care 
                                hospital discharged inpatients 
                                (including both individuals entitled 
                                to, or enrolled for, benefits under 
                                this title and individuals not so 
                                entitled or enrolled) during fiscal 
                                year 2014 who had been admitted from at 
                                least 20 of the 50 States, determined 
                                by the States of residency of such 
                                inpatients and based on such data 
                                submitted by the hospital to the 
                                Secretary as the Secretary may require.
                                  ``(II) Implementation.--
                                Notwithstanding any other provision of 
                                law, the Secretary may implement 
                                subclause (I) by program instruction or 
                                otherwise.
                                  ``(III) Non-application of paperwork 
                                reduction act.--Chapter 35 of title 44, 
                                United States Code, shall not apply to 
                                data collected under this clause.''.
  (b) Study and Report on the Status and Viability of Certain Spinal 
Cord Specialty Long-term Care Hospitals.--
          (1) Study.--The Comptroller General of the United States 
        shall conduct a study on long-term care hospitals described in 
        section 1886(m)(6)(F) of the Social Security Act, as added by 
        subsection (a). Such report shall include an analysis of the 
        following:
                  (A) The impact on such hospitals of the 
                classification and facility licensure by State agencies 
                of such hospitals.
                  (B) The Medicare payment rates for such hospitals.
                  (C) Data on the number and health care needs of 
                Medicare beneficiaries who have been diagnosed with 
                catastrophic spinal cord or acquired brain injuries or 
                other paralyzing neuromuscular conditions (as described 
                within the discharge classifications specified in 
                clause (ii) of such section) who are receiving services 
                from such hospitals.
          (2) Report.--Not later than October 1, 2018, the Comptroller 
        General shall submit to Congress a report on the study 
        conducted under paragraph (1), including recommendations for 
        such legislation and administrative action as the Comptroller 
        General determines appropriate.

SEC. 105. TEMPORARY EXTENSION TO THE APPLICATION OF THE MEDICARE LTCH 
                    SITE NEUTRAL PROVISIONS FOR CERTAIN DISCHARGES WITH 
                    SEVERE WOUNDS.

  (a) In General.--Section 1886(m)(6) of the Social Security Act (42 
U.S.C. 1395ww(m)(6)), as amended by section 104, is further amended--
          (1) in subparagraph (A)(i) by striking ``and (F)'' and 
        inserting ``(F), and (G)'';
          (2) in subparagraph (E)(i)(I)(aa), by striking ``the 
        amendment made'' and all that follows before the semicolon and 
        inserting ``the last sentence of subsection (d)(1)(B)''; and
          (3) by adding at the end the following new subparagraph:
                  ``(G) Additional temporary exception for certain 
                severe wound discharges from certain long-term care 
                hospitals.--
                          ``(i) In general.--For a discharge occurring 
                        in a cost reporting period beginning during 
                        fiscal year 2018, subparagraph (A)(i) shall not 
                        apply (and payment shall be made to a long-term 
                        care hospital without regard to this paragraph) 
                        if such discharge--
                                  ``(I) is from a long-term care 
                                hospital identified by the last 
                                sentence of subsection (d)(1)(B);
                                  ``(II) is classified under MS-LTCH-
                                DRG 602, 603, 539, or 540; and
                                  ``(III) is with respect to an 
                                individual treated by a long-term care 
                                hospital for a severe wound.
                          ``(ii) Severe wound defined.--In this 
                        subparagraph, the term `severe wound' means a 
                        wound which is a stage 3 wound, stage 4 wound, 
                        unstageable wound, non-healing surgical wound, 
                        or fistula as identified in the claim from the 
                        long-term care hospital.
                          ``(iii) Wound defined.--In this subparagraph, 
                        the term `wound' means an injury involving 
                        division of tissue or rupture of the integument 
                        or mucous membrane with exposure to the 
                        external environment.''.
  (c) Study and Report to Congress.--
          (1) Study.--The Comptroller General of the United States 
        shall, in consultation with relevant stakeholders, conduct a 
        study on the treatment needs of individuals entitled to 
        benefits under part A of title XVIII of the Social Security Act 
        or enrolled under part B of such title who require specialized 
        wound care, and the cost, for such individuals and the Medicare 
        program under such title, of treating severe wounds in rural 
        and urban areas. Such study shall include an assessment of--
                  (A) access of such individuals to appropriate levels 
                of care for such cases;
                  (B) the potential impact that section 
                1886(m)(6)(A)(i) of such Act (42 U.S.C. 
                1395ww(m)(6)(A)(i)) will have on the access, quality, 
                and cost of care for such individuals; and
                  (C) how to appropriately pay for such care under the 
                Medicare program under such title.
          (2) Report.--Not later than October 1, 2020, the Comptroller 
        General shall submit to Congress a report on the study 
        conducted under paragraph (1), including recommendations for 
        such legislation and administrative action as the Comptroller 
        General determines appropriate.

                       TITLE II--OTHER PROVISIONS

SEC. 201. NO PAYMENT FOR ITEMS AND SERVICES FURNISHED BY NEWLY ENROLLED 
                    PROVIDERS OR SUPPLIERS WITHIN A TEMPORARY 
                    MORATORIUM AREA.

  (a) Medicare.--Section 1866(j)(7) of the Social Security Act (42 
U.S.C. 1395cc(j)(7)) is amended--
          (1) in the paragraph heading, by inserting ``; nonpayment'' 
        before the period; and
          (2) by adding at the end the following new subparagraph:
                  ``(C) Nonpayment.--
                          ``(i) In general.--No payment may be made 
                        under this title or under a program described 
                        in subparagraph (A) with respect to an item or 
                        service described in clause (ii) furnished on 
                        or after October 1, 2017.
                          ``(ii) Item or service described.--An item or 
                        service described in this clause is an item or 
                        service furnished--
                                  ``(I) within a geographic area with 
                                respect to which a temporary moratorium 
                                imposed under subparagraph (A) is in 
                                effect; and
                                  ``(II) by a provider of services or 
                                supplier that meets the requirements of 
                                clause (iii).
                          ``(iii) Requirements.--For purposes of clause 
                        (ii), the requirements of this clause are that 
                        a provider of services or supplier--
                                  ``(I) enrolls under this title on or 
                                after the effective date of such 
                                temporary moratorium; and
                                  ``(II) is within a category of 
                                providers of services and suppliers (as 
                                described in subparagraph (A)) subject 
                                to such temporary moratorium.
                          ``(iv) Prohibition on charges for specified 
                        items or services.--In no case shall a provider 
                        of services or supplier described in clause 
                        (ii)(II) charge an individual or other person 
                        for an item or service described in clause (ii) 
                        furnished on or after October 1, 2017, to an 
                        individual entitled to benefits under part A or 
                        enrolled under part B or an individual under a 
                        program specified in subparagraph (A).''.
  (b) Conforming Amendments.--
          (1) Medicaid.--
                  (A) In general.--Section 1903(i)(2) of the Social 
                Security Act (42 U.S.C. 1396b(i)(2)) is amended--
                          (i) in subparagraph (A), by striking the 
                        comma at the end and inserting a semicolon;
                          (ii) in subparagraph (B), by striking ``or'' 
                        at the end; and
                          (iii)
                  ``(D) with respect to any amount expended for such an 
                item or service furnished during calendar quarters 
                beginning on or after October 1, 2017, subject to 
                section 1902(kk)(4)(A)(ii)(II), within a geographic 
                area that is subject to a moratorium imposed under 
                section 1866(j)(7) by a provider or supplier that meets 
                the requirements specified in subparagraph (C)(iii) of 
                such section, during the period of such moratorium; 
                or''.
                  (B) Exception with respect to access.--Section 
                1902(kk)(4)(A)(ii) of the Social Security Act (42 
                U.S.C. 1396a(kk)(4)(A)(ii)) is amended to read as 
                follows:
                          ``(ii) Exceptions.--
                                  ``(I) Compliance with moratorium.--A 
                                State shall not be required to comply 
                                with a temporary moratorium described 
                                in clause (i) if the State determines 
                                that the imposition of such temporary 
                                moratorium would adversely impact 
                                beneficiaries' access to medical 
                                assistance.
                                  ``(II) FFP available.--
                                Notwithstanding section 1903(i)(2)(D), 
                                payment may be made to a State under 
                                this title with respect to amounts 
                                expended for items and services 
                                described in such section if the 
                                Secretary, in consultation with the 
                                State agency administering the State 
                                plan under this title (or a waiver of 
                                the plan), determines that denying 
                                payment to the State pursuant to such 
                                section would adversely impact 
                                beneficiaries' access to medical 
                                assistance. ''.
                  (C) State plan requirement with respect to limitation 
                on charges to beneficiaries.--Section 1902(kk)(4)(A) of 
                the Social Security Act (42 U.S.C. 1396a(kk)(4)(A)) is 
                amended by adding at the end the following new clause:
                          ``(iii) Limitation on charges to 
                        beneficiaries.--With respect to any amount 
                        expended for items or services furnished during 
                        calendar quarters beginning on or after October 
                        1, 2017, the State prohibits, during the period 
                        of a temporary moratorium described in clause 
                        (i), a provider meeting the requirements 
                        specified in subparagraph (C)(iii) of section 
                        1866(j)(7) from charging an individual or other 
                        person eligible to receive medical assistance 
                        under the State plan under this title (or a 
                        waiver of the plan) for an item or service 
                        described in section 1903(i)(2)(D) furnished to 
                        such an individual.''.
          (2) Correcting amendments to related provisions.--
                  (A) Section 1866(j).--Section 1866(j) of the Social 
                Security Act (42 U.S.C. 1395cc(j)) is amended--
                          (i) in paragraph (1)(A)--
                                  (I) by striking ``paragraph (4)'' and 
                                inserting ``paragraph (5)'';
                                  (II) by striking ``moratoria in 
                                accordance with paragraph (5)'' and 
                                inserting ``moratoria in accordance 
                                with paragraph (7)''; and
                                  (III) by striking ``paragraph (6)'' 
                                and inserting ``paragraph (9)''; and
                          (ii) by redesignating the second paragraph 
                        (8) (added by section 1304(1) of Public Law 
                        111-152) as paragraph (9).
                  (B) Section 1902(kk).--Section 1902(kk) of such Act 
                (42 U.S.C. 1396a(kk)) is amended--
                          (i) in paragraph (1), by striking ``section 
                        1886(j)(2)'' and inserting ``section 
                        1866(j)(2)'';
                          (ii) in paragraph (2), by striking ``section 
                        1886(j)(3)'' and inserting ``section 
                        1866(j)(3)'';
                          (iii) in paragraph (3), by striking ``section 
                        1886(j)(4)'' and inserting ``section 
                        1866(j)(5)''; and
                          (iv) in paragraph (4)(A), by striking 
                        ``section 1886(j)(6)'' and inserting ``section 
                        1866(j)(7)''.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 5713, the ``Sustaining Healthcare Integrity 
and Fair Treatment (SHIFT) Act of 2016,'' as ordered reported 
by the Committee on Ways and Means on July 13, 2016, provides 
for prospective regulatory relief to all Long-Term Care 
Hospitals (LTCHs) from the ``25 percent rule.'' In the Medicare 
program, LTCHs are not able to receive full reimbursement if 
the plurality (defined as exceeding 25 percent) of their total 
annual Medicare discharges comes from only one inpatient acute 
hospital. The SHIFT Act would reinstate the 50 percent 
threshold that was in place prior to July 1, 2016, providing 
relief for 9 months (October 1, 2016 through June 30, 2017). 
The SHIFT Act also provides targeted relief from the site 
neutral payment policy enacted as part of the Bipartisan Budget 
Act of 2013 (BBA `13) for four specific LTCH groups. Finally, 
the SHIFT Act provides three entitlement programs--Medicare, 
Medicaid, and the Children's Health Insurance Program (CHIP)--
with the ability to pursue action against those newly enrolled 
providers or suppliers that may be engaging in fraud, waste or 
abuse. Specifically, such providers or suppliers will not 
receive reimbursement if they attempt to exploit program 
integrity loopholes.

                 B. Background and Need for Legislation

    On July 11, 2016, Representative Tiberi (R-OH) and 
Representative Pascrell (D-NJ) introduced H.R. 5713, the SHIFT 
Act of 2016. The main focus of the SHIFT Act is to continue 
providing regulatory relief from the Centers for Medicare & 
Medicare Services' (CMS) enactment of the LTCH 25 percent rule. 
In 2013, through the BBA `13, Congress established ``site 
neutral payment'' for LTCHs, where if a LTCH discharge failed 
to meet certain criteria, the discharge would be reimbursed at 
the site neutral inpatient reimbursement rate. In its fiscal 
year (FY) 2017 LTCH proposed regulation, CMS reported that 
approximately 45 percent of LTCH discharges in FY 2017 would be 
reimbursed at the site neutral rate for a per case decrease of 
approximately 21 percent. Given these significant changes to 
overall LTCH reimbursement, Congress believes additional 
temporary relief from CMS' 25 percent rule is warranted.
    The SHIFT Act also provides targeted relief from the site 
neutral and other LTCH payment policies for four specific LTCH 
groups. The first group is any ``new'' LTCH that has come into 
the Medicare program since December 26, 2013. The second group 
is any LTCH that was classified as a ``sub-clause II'' LTCH in 
the Balanced Budget Act of 1997 (BBA '97). The third group is 
any LTCH that primarily treats Medicare patients who have 
severe spinal cord injuries. The fourth group is any LTCH that 
was granted ``grandfather'' status as a ``hospital-within-
hospital'' in the BBA `97.
    Finally, the SHIFT Act provides the Secretary of Health and 
Human Services (Secretary) with the authority to deny 
reimbursement for services by providers and suppliers within an 
area the Secretary has designated as a moratoria area due to 
fraud. The authority would apply across the Medicare, Medicaid, 
and CHIP programs. As reported in the President's FY 2017 
Budget, CMS has found that some providers and suppliers are 
circumventing current program integrity efforts by enrolling in 
localities that are just outside of temporary moratoria areas.

                         C. Legislative History


Background

    H.R. 5713 was introduced on July 11, 2016, and was referred 
to the Committee on Ways and Means and subsequently to the 
Committee on Energy and Commerce.

Committee hearings

    On June 8, 2016, the Committee on Ways and Means 
Subcommittee on Health held a Member day hearing on issues in 
the Medicare program, including LTCH issues.
    On April 30, 2014, the Committee on Ways and Means 
Subcommittee on Health held a hearing on Medicare fraud, waste 
and abuse issues.
    On June 14, 2013, the Committee on Ways and Means 
Subcommittee on Health held a hearing on the post-acute care 
issues in the Medicare program.

Committee action

    The Committee on Ways and Means marked up H.R. 5713 on July 
13, 2016, and ordered the bill favorably reported to the House 
of Representatives as amended by a voice vote (with a quorum 
being present).

                      II. EXPLANATION OF THE BILL


  ``Sustaining Healthcare Integrity and Fair Treatment (SHIFT) Act of 
                                 2016''


                              PRESENT LAW

    Under current law, as finalized by CMS (42 Code of Federal 
Regulations [CFR] 412.534 and 412. 536) in 2007, no more than 
25 percent of a LTCH's admissions are allowed to come from the 
same inpatient acute hospital in order for the LTCH to receive 
full reimbursement. The 25 percent rule has been in affect 
since July 1, 2016. Prior to July 1, 2016, Congress delayed the 
enactment of the 25 percent rule four times, subsequently in 
the Medicare, Medicaid and S-CHIP Extension Act (MMSEA) of 
2007, the American Recovery and Reinvestment Act (ARRA) of 
2009, the Affordable Care Act (ACA) of 2010 and the BBA `13. 
The practical affect of delaying the 25 percent rule is 
defaulting to a 50 percent rule.
    Currently, as passed by BBA `13, LTCHs are receiving site 
neutral payments for any discharges that fail to meet one of 
the two following criteria: 1) prior to the LTCH stay, a 
Medicare beneficiary was hospitalized in an intensive care unit 
for a minimum of three days; or 2) the Medicare beneficiary was 
on a ventilator while being treated in the LTCH. For site 
neutral discharges in FY 2016, LTCHs are receiving a blended 
payment rate, which consists of 50 percent of the inpatient 
acute prospective rate and 50 percent of the LTCH rate. 
Beginning in FY 2018, site neutral LTCH discharges will be 
reimbursed at 100 percent of the inpatient acute prospective 
rate.
    Beginning in 2014, CMS used the authority provided in the 
ACA to apply temporary moratoria on new provider and supplier 
enrollment in areas where there is evidence of consistent 
fraud, waste, and abuse. The authority was permitted for 
application in the Medicare, Medicaid, and CHIP entitlement 
programs. Currently, CMS has a temporary moratorium in place 
for ambulance and home health services in select geographic 
areas within the Medicare program. Further, CMS has indicated 
that it may expand temporary moratoria to skilled nursing 
facilities and independent diagnostic testing facilities.

                           REASONS FOR CHANGE

    As stated above, in its FY 2017 LTCH proposed regulation, 
CMS reported that approximately 45 percent of LTCH discharges 
in FY 2017 would be reimbursed at the site neutral rate for a 
per case decrease of approximately 21 percent. Given these 
significant changes to overall LTCH reimbursement, Congress 
feels additional temporary relief from CMS' 25 percent rule is 
warranted. Further, due to the unique patient populations, such 
as severe spinal cord injuries, which certain LTCHs typically 
treat, additional relief to the site neutral payment policy was 
also included in the SHIFT Act. Finally, additional authority 
was given to the Secretary to apply to temporary moratorium 
areas because CMS has found that some providers and suppliers 
are circumventing its efforts by enrolling in localities that 
are just outside of temporary moratorium areas.

                       EXPLANATION OF PROVISIONS

    Section 101 makes a modification to the BBA `13. The BBA 
`13 prohibited the Secretary from enforcing the LTCH 25 percent 
rule through June 30, 2016. This section extends the 
prohibition for an additional 9-months from October 1, 2016 
through June 30, 2017.
    Section 102 makes a modification to the BBA `13. The BBA 
`13 carved-out Medicare Advantage (MA) and site neutral 
discharges from the calculation of the statutory 25-day average 
length of stay requirement for all LTCHs operating under the 
Medicare program prior to December 26, 2013. This section 
affords the same relief to any LTCH that takes advantage of the 
current law LTCH moratorium exception.
    Section 103 codifies, in statute, changes that the CMS made 
to its regulations for certain applicable LTCHs who were ``sub-
clause II'' LTCHs in the BBA `97. This section also re-
designates sub-clause II LTCHs as a new subsection under 
section 1886 of the ``Social Security Act''.
    Section 104 provides for a temporary exception of the LTCH 
site neutral criteria for FY 2018 and 2019. LTCHs who meet the 
following criteria are eligible for relief: 1) must be 
classified as a non-profit hospital prior to June 1, 2014; 2) 
at least 50 percent of the LTCH's Medicare discharges were 
classified under Medicare Severity Long-Term Care Diagnosis 
Related Groups (MS-LTC-DRGs) 28/29 (spinal procedures), 52 
(spinal disorders and injuries), 57 (degenerative nervous 
system disorders), 551 (medical back problems), 573 (skin graft 
for skin ulcer or cellulitis) and 963 (multiple significant 
trauma) for calendar year 2013; and 3) the LTCH discharged 
patients from at least 20 of the 50 States in FY 2014.
    Section 105 provides for a temporary exception of the LTCH 
site neutral criteria for FY 2018. LTCHs who are 
``grandfathered'' (as defined by the BBA `97 and in 42 CFR 
422.12(f)) are eligible for relief. The exception to the LTCH 
site neutral criteria is limited to the following: 1) only 
those discharges classified under MS-LTC-DRGs 539/540 
(osteomyelitis) and 602/603 (cellulitis); and 2) only those 
discharges with a secondary diagnosis code for severe wounds--
defined as a stage 3 or 4 wound, unstageable wound, non-healing 
surgical wound, or fistula that involves injury with division 
of tissue or rupture of skin to the external environment.
    Section 201 provides the Secretary with the authority to 
deny reimbursement for services by providers and suppliers 
within an area the Secretary has designated as a moratoria 
area. The authority would apply across the Medicare, Medicaid, 
and CHIP programs.

                             EFFECTIVE DATE

    The effective date of section 101 is October 1, 2016.
    The effective date of section 102 is retroactive to 
December 26, 2013.
    The effective date of section 103 is retroactive to January 
1, 2015.
    The effective date of section 104 is October 1, 2017.
    The effective date of section 105 is October 1, 2017.
    The effective date of section 201 is October 1, 2017.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 5713, the ``Sustaining Healthcare 
Integrity and Fair Treatment (SHIFT) Act of 2016,'' on July 13, 
2016.
    The bill, H.R. 5713, was ordered favorably reported as 
amended by voice vote (with a quorum being present).

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 5713, as 
reported. The Committee agrees with the estimate prepared by 
the Congressional Budget Office (CBO), which is included below.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee states further that the bill involves no new or 
increased tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 25, 2016.
Hon. Kevin Brady,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5713, the 
Sustaining Healthcare Integrity and Fair Treatment Act of 2016.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Jamease 
Kowalczyk, Kevin McNellis, and Lara Robillard.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 5713--Sustaining Healthcare Integrity and Fair Treatment Act of 
        2016

    Summary: H.R. 5713 would modify Medicare's payments to 
Long-Term Care Hospitals (LTCHs) and would prohibit Medicare 
from paying for items or services furnished by certain newly 
enrolled providers in select areas of the country. CBO 
estimates that enacting the bill would, on net, increase direct 
spending by $25 million over the 2017-2021 period but would 
have no net effect over the 2017-2026 period.
    Pay-as-you-go procedures apply because enacting the 
legislation would affect direct spending. Enacting the bill 
would not affect revenues. CBO estimates that enacting the 
legislation would not increase net direct spending or on-budget 
deficits in any of the four consecutive 10-year periods 
beginning in 2027.
    H.R. 5713 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 5713 is shown in the following table. 
The costs of this legislation fall within budget functions 550 
(health) and 570 (Medicare).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2017    2018    2019    2020    2021    2022    2023    2024    2025    2026   2017-2021  2017-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      INCREASES OR DECREASES (-) IN DIRECT SPENDING
 
Long-Term Care Hospitals..........................      38       5       2       0       0       0       0       0       0       0        45         45
Moratorium On Certain New Providers...............       0      -5      -5      -5      -5      -5      -5      -5      -5      -5       -20        -45
                                                   -----------------------------------------------------------------------------------------------------
    Total Changes.................................      38       0      -3      -5      -5      -5      -5      -5      -5      -5        25          0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Basis of estimate: CBO estimates that the changes in 
payment rules for LTCHs would increase spending by $45 million 
over the 2017-2026 period, while expanding the moratorium would 
reduce spending by the same amount over that time period.

Long-term care hospitals

    Under current law, certain hospitals that treat patients 
considered to be medically complex with an average length of 
stay that exceeds 25 days are designated as LTCHs. Medicare 
payments for care provided in LTCHs are either made at rates 
determined in the prospective payment system for LTCHs, or at a 
so-called ``site-neutral'' rate. Through 2017, the site-neutral 
rate is a blend of the LTCH rates and the substantially lower 
rates that would be paid under the inpatient prospective 
payment system (IPPS). Beginning in 2018 all payments will be 
at the IPPS payment rate. Generally, discharges that involve 
specific conditions for patients with a stay of at least three 
days in an intensive care unit before being admitted to the 
LTCH are paid based on the LTCH system. Other discharges are 
paid at the site-neutral rate. Beginning on July 1, 2016, if 
more than 25 percent of Medicare patients in an LTCH are 
admitted from a single hospital, the site-neutral payment rate 
will be applied to all cases admitted from that hospital in 
excess of that 25 percent threshold.
    Title I of H.R 5713 would suspend the application of site-
neutral payments for cases that exceed that 25 percent 
threshold between October 1, 2016 and June 30, 2017. It also 
would exempt inpatient services furnished to Medicare 
beneficiaries who are treated during:
           Fiscal years 2018 and 2019 for certain 
        conditions, including spinal and traumatic brain 
        injuries, that are treated at not-for-profit LTCHs that 
        specialize in the treatment of those conditions, and
           Fiscal year 2018 for certain kinds of severe 
        wounds.
    Based on analysis of administrative data, CBO estimates 
that enacting those changes to payment rates for Medicare 
patients treated in LTCHs would increase direct spending by $45 
million over the 2017-2026 period.

Moratorium on certain new providers

    Under current law, the Secretary of Health and Human 
Services (HHS) may temporarily prevent individuals and firms 
from enrolling to furnish services in Medicare, Medicaid, and 
the Children's Health Insurance Program (CHIP) if the 
prohibition would reduce the occurrence of fraud, waste, and 
abuse. The authority is specific to certain geographic areas 
and, since it became available, the Secretary has imposed 
temporary moratoria for home health providers in six 
metropolitan areas and for ambulance providers in two 
metropolitan areas.
    Title II would prohibit newly enrolled providers and 
suppliers located outside an area with such a moratorium from 
billing for services provided within a region covered by a 
moratorium. CBO expects that the legislation would prevent 
providers and suppliers from evading the intent of the 
moratorium in certain areas. New providers and suppliers could 
still furnish and bill for services provided outside the 
moratorium zone.
    Because enacting that provision would slightly reduce the 
number of services for which Medicare, Medicaid, and CHIP would 
pay, CBO estimates that enacting the provision would reduce 
direct spending for those programs by about $45 million over 
the 2017-2026 period. About three-quarters of that effect (or 
$34 million) would come from reduced spending in Medicare and 
the remainder (about $11 million) would be attributable to 
Medicaid and CHIP.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.

            CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 5713, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON JULY 13, 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2016    2017    2018    2019    2020    2021    2022    2023    2024    2025    2026   2016-2021  2016-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       NET INCREASE OR DECREASE (-) IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact............       0      38       0      -3      -5      -5      -5      -5      -5      -5      -5        25          0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term direct spending and deficits: CBO 
estimates that enacting the legislation would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    Intergovernmental and private-sector impact: H.R. 5713 
contains no intergovernmental or private-sector mandates as 
defined in UMRA. The bill's limits on Medicaid and CHIP 
payments to the providers that bill for services within 
moratorium areas would result in reduced spending by states for 
those programs of about $8 million over the 2017-2026 period.
    Estimate prepared by: Federal costs: Jamease Kowalczyk, 
Kevin McNellis and Lara Robillard; Impact on state, local, and 
tribal governments: Zachary Byrum; Impact on the private 
sector: Amy Petz.
    Estimate approved by: Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that the findings and recommendations of 
the Committee, based on oversight activities under clause 
2(b)(1) of rule x of the House of Representatives, are 
incorporated in the descriptive portions of this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

  D. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   E. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program; 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139; or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                 F. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED


  A. Text of Existing Law Amended or Repealed by the Bill, as Reported

    In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

          MEDICARE, MEDICAID, AND SCHIP EXTENSION ACT OF 2007




           *       *       *       *       *       *       *
TITLE I--MEDICARE

           *       *       *       *       *       *       *


SEC. 114. LONG-TERM CARE HOSPITALS.

  (a) (Omitted amendatory text)
  (b) Study and Report on Long-Term Care Hospital Facility and 
Patient Criteria.--
          (1) In general.--The Secretary of Health and Human 
        Services (in this section referred to as the 
        ``Secretary'') shall conduct a study on the 
        establishment of national long-term care hospital 
        facility and patient criteria for purposes of 
        determining medical necessity, appropriateness of 
        admission, and continued stay at, and discharge from, 
        long-term care hospitals.
          (2) Report.--Not later than 18 months after the date 
        of the enactment of this Act, the Secretary shall 
        submit to Congress a report on the study conducted 
        under paragraph (1), together with recommendations for 
        such legislation and administrative actions, including 
        timelines for implementation of patient criteria or 
        other actions, as the Secretary determines appropriate.
          (3) Considerations.--In conducting the study and 
        preparing the report under this subsection, the 
        Secretary shall consider--
                  (A) recommendations contained in a report to 
                Congress by the Medicare Payment Advisory 
                Commission in June 2004 for long-term care 
                hospital-specific facility and patient criteria 
                to ensure that patients admitted to long-term 
                care hospitals are medically complex and 
                appropriate to receive long-term care hospital 
                services; and
                  (B) ongoing work by the Secretary to evaluate 
                and determine the feasibility of such 
                recommendations.
  (c) Payment for Long-Term Care Hospital Services.--
          (1) Delay in application of 25 percent patient 
        threshold payment adjustment.--The Secretary shall not 
        apply, for cost reporting periods beginning on or after 
        July 1, 2007,--
                  (A) for a 9-year period, section 412.536 of 
                title 42, Code of Federal Regulations, or any 
                similar provision, to freestanding long-term 
                care hospitals or to a long-term care hospital, 
                or satellite facility, that as of December29, 
                2007, was co-located with an entity that is a 
                provider-based, off-campus location of a 
                subsection (d) hospital which did not provide 
                services payable under section 1886(d) of the 
                Social Security Act at the off-campus location; 
                and
                  (B) such section or section 412.534 of title 
                42, Code of Federal Regulations, or any similar 
                provisions, to a long-term care hospital 
                identified by the amendment made by section 
                4417(a) of the Balanced Budget Act of 1997 
                (Public Law 105-33).
          (2) Payment for hospitals-within-hospitals.--
                  (A) In general.--Payment to an applicable 
                long-term care hospital or satellite facility 
                which is located in a rural area or which is 
                co-located with an urban single or MSA dominant 
                hospital under paragraphs (d)(1), (e)(1), and 
                (e)(4) of section 412.534 of title 42, Code of 
                Federal Regulations, shall not be subject to 
                any payment adjustment under such section if no 
                more than 75 percent of the hospital's Medicare 
                discharges (other than discharges described in 
                paragraph (d)(2) or (e)(3) of such section) are 
                admitted from a co-located hospital.
                  (B) Co-located long-term care hospitals and 
                satellite facilities.--
                          (i) In general.--Payment to an 
                        applicable long-term care hospital or 
                        satellite facility which is co-located 
                        with another hospital shall not be 
                        subject to any payment adjustment under 
                        section 412.534 of title 42, Code of 
                        Federal Regulations, if no more than 50 
                        percent of the hospital's Medicare 
                        discharges (other than discharges 
                        described in paragraph (c)(3) of such 
                        section) are admitted from a co-located 
                        hospital.
                          (ii) Applicable long-term care 
                        hospital or satellite facility 
                        defined.--In this paragraph, the term 
                        ``applicable long-term care hospital or 
                        satellite facility'' means a hospital 
                        or satellite facility that is subject 
                        to the transition rules under section 
                        412.534(g) of title 42, Code of Federal 
                        Regulations or that is described in 
                        section 412.22(h)(3)(i) of such title.
                  (C) Effective date.--Subparagraphs (A) and 
                (B) shall apply to cost reporting periods 
                beginning on or after October 1, 2007 (or July 
                1, 2007, in the case of a satellite facility 
                described in section 412.22(h)(3)(i) of title 
                42, Code of Federal Regulations) for a 9-year 
                period.
          (3) No application of very short-stay outlier 
        policy.--The Secretary shall not apply, for the 5-year 
        period beginning on the date of the enactment of this 
        Act, the amendments finalized on May 11, 2007 (72 
        Federal Register 26904, 26992) made to the short-stay 
        outlier payment provision for long-term care hospitals 
        contained in section 412.529(c)(3)(i) of title 42, Code 
        of Federal Regulations, or any similar provision.
          (4) No application of one-time adjustment to standard 
        amount.--The Secretary shall not, for the 5-year period 
        beginning on the date of the enactment of this Act, 
        make the one-time prospective adjustment to long-term 
        care hospital prospective payment rates provided for in 
        section 412.523(d)(3) of title 42, Code of Federal 
        Regulations, or any similar provision.
  (d) Moratorium on the Establishment of Long-Term Care 
Hospitals, Long-Term Care Satellite Facilities and on the 
Increase of Long-Term Care Hospital Beds in Existing Long-Term 
Care Hospitals or Satellite Facilities.--
          (1) In general.--During the 5-year period (and for 
        the period beginning on the date of the enactment of 
        paragraph (7) of this subsection and ending September 
        30, 2017) beginning on the date of the enactment of 
        this Act, the Secretary shall impose a moratorium for 
        purposes of the Medicare program under title XVIII of 
        the Social Security Act--
                  (A) subject to paragraph (2), on the 
                establishment and classification of a long-term 
                care hospital or satellite facility, other than 
                an existing long-term care hospital or 
                facility; and
                  (B) subject to paragraph (3), on an increase 
                of long-term care hospital beds in existing 
                long-term care hospitals or satellite 
                facilities.
          (2) Exception for certain long-term care hospitals.--
        The moratorium under paragraph (1)(A) shall not apply 
        to a long-term care hospital that as of the date of the 
        enactment of this Act--
                  (A) began its qualifying period for payment 
                as a long-term care hospital under section 
                412.23(e) of title 42, Code of Federal 
                Regulations, on or before the date of the 
                enactment of this Act;
                  (B) has a binding written agreement with an 
                outside, unrelated party for the actual 
                construction, renovation, lease, or demolition 
                for a long-term care hospital, and has 
                expended, before the date of the enactment of 
                this Act, at least 10 percent of the estimated 
                cost of the project (or, if less, $2,500,000); 
                or
                  (C) has obtained an approved certificate of 
                need in a State where one is required on or 
                before the date of the enactment of this Act.
          (3) Exception for bed increases during moratorium.--
                  (A) In general.--Subject to subparagraph (B), 
                the moratorium under paragraph (1)(B) shall not 
                apply to an increase in beds in an existing 
                hospital or satellite facility if the hospital 
                or facility obtained a certificate of need for 
                an increase in beds that is in a State for 
                which such certificate of need is required and 
                that was issued on or after April 1, 2005, and 
                before December 29, 2007, or if the hospital or 
                facility--
                          (i) is located in a State where there 
                        is only one other long-term care 
                        hospital; and
                          (ii) requests an increase in beds 
                        following the closure or the decrease 
                        in the number of beds of another long-
                        term care hospital in the State.
                  (B) No effect on certain limitation.--The 
                exception under subparagraph (A) shall not 
                effect the limitation on increasing beds under 
                sections 412.22(h)(3) and 412.22(f) of title 
                42, Code of Federal Regulations.
          (4) Existing hospital or satellite facility 
        defined.--For purposes of this subsection, the term 
        ``existing'' means, with respect to a hospital or 
        satellite facility, a hospital or satellite facility 
        that received payment under the provisions of subpart O 
        of part 412 of title 42, Code of Federal Regulations, 
        as of the date of the enactment of this Act.
          (5) Judicial review.--There shall be no 
        administrative or judicial review under section 1869 of 
        the Social Security Act (42 U.S.C. 1395ff), section 
        1878 of such Act (42 U.S.C. 1395oo), or otherwise, of 
        the application of this subsection by the Secretary.
          (6) Limitation on application of exceptions.--
        Paragraphs (2) and (3) shall not apply during the 
        period beginning on the date of the enactment of 
        paragraph (7) of this subsection and ending September 
        30, 2017.
          (7) Additional exception for certain long-term care 
        hospitals.--The moratorium under paragraph (1)(A) shall 
        not apply to a long-term care hospital that--
                  (A) began its qualifying period for payment 
                as a long-term care hospital under section 
                412.23(e) of title 42, Code of Federal 
                Regulations, on or before the date of enactment 
                of this paragraph;
                  (B) has a binding written agreement as of the 
                date of the enactment of this paragraph with an 
                outside, unrelated party for the actual 
                construction, renovation, lease, or demolition 
                for a long-term care hospital, and has 
                expended, before such date of enactment, at 
                least 10 percent of the estimated cost of the 
                project (or, if less, $2,500,000); or
                  (C) has obtained an approved certificate of 
                need in a State where one is required on or 
                before such date of enactment.
  (e) Long-Term Care Hospital Payment Update.--
          (1) (Omitted amendatory text)
          (2) Delayed effective date.--Subsection (m)(2) of 
        section 1886 of the Social Security Act, as added by 
        paragraph (1), shall not apply to discharges occurring 
        on or after July 1, 2007, and before April 1, 2008.
  (f) Expanded Review of Medical Necessity.--
          (1) In general.--The Secretary of Health and Human 
        Services shall provide, under contracts with one or 
        more appropriate fiscal intermediaries or medicare 
        administrative contractors under section 1874A(a)(4)(G) 
        of the Social Security Act (42 U.S.C. 1395kk-
        1(a)(4)(G)), for reviews of the medical necessity of 
        admissions to long-term care hospitals (described in 
        section 1886(d)(1)(B)(iv) of such Act) and continued 
        stay at such hospitals, of individuals entitled to, or 
        enrolled for, benefits under part A of title XVIII of 
        such Act consistent with this subsection. Such reviews 
        shall be made for discharges occurring on or after 
        October 1, 2007.
          (2) Review methodology.--The medical necessity 
        reviews under paragraph (1) shall be conducted on an 
        annual basis in accordance with rules specified by the 
        Secretary. Such reviews shall--
                  (A) provide for a statistically valid and 
                representative sample of admissions of such 
                individuals sufficient to provide results at a 
                95 percent confidence interval; and
                  (B) guarantee that at least 75 percent of 
                overpayments received by long-term care 
                hospitals for medically unnecessary admissions 
                and continued stays of individuals in long-term 
                care hospitals will be identified and recovered 
                and that related days of care will not be 
                counted toward the length of stay requirement 
                contained in section 1886(d)(1)(B)(iv) of the 
                Social Security Act (42 U.S.C. 
                1395ww(d)(1)(B)(iv)).
          (3) Continuation of reviews.--Under contracts under 
        this subsection, the Secretary shall establish an error 
        rate with respect to such reviews that could require 
        further review of the medical necessity of admissions 
        and continued stay in the hospital involved and other 
        actions as determined by the Secretary.
          (4) Termination of required reviews.--
                  (A) In general.--Subject to subparagraph (B), 
                the previous provisions of this subsection 
                shall cease to apply for discharges occurring 
                on or after October 1, 2010.
                  (B) Continuation.--As of the date specified 
                in subparagraph (A), the Secretary shall 
                determine whether to continue to guarantee, 
                through continued medical review and sampling 
                under this paragraph, recovery of at least 75 
                percent of overpayments received by long-term 
                care hospitals due to medically unnecessary 
                admissions and continued stays.
          (5) Funding.--The costs to fiscal intermediaries or 
        medicare administrative contractors conducting the 
        medical necessity reviews under paragraph (1) shall be 
        funded from the aggregate overpayments recouped by the 
        Secretary of Health and Human Services from long-term 
        care hospitals due to medically unnecessary admissions 
        and continued stays. The Secretary may use an amount 
        not in excess of 40 percent of the overpayments 
        recouped under this paragraph to compensate the fiscal 
        intermediaries or Medicare administrative contractors 
        for the costs of services performed.
  (g) Implementation.--For purposes of carrying out the 
provisions of, and amendments made by, this title, in addition 
to any amounts otherwise provided in this title, there are 
appropriated to the Centers for Medicare & Medicaid Services 
Program Management Account, out of any money in the Treasury 
not otherwise appropriated, $35,000,000 for the period of 
fiscal years 2008 and 2009.

           *       *       *       *       *       *       *

                              ----------                              


                   PATHWAY FOR SGR REFORM ACT OF 2013




           *       *       *       *       *       *       *
DIVISION B--MEDICARE AND OTHER HEALTH PROVISIONS

           *       *       *       *       *       *       *


TITLE II--OTHER HEALTH PROVISIONS

           *       *       *       *       *       *       *


SEC. 1206. PAYMENT FOR INPATIENT SERVICES IN LONG-TERM CARE HOSPITALS 
                    (LTCHS).

  (a) Establishment of Criteria for Application of Site Neutral 
Payment.--
          (1) In general.--Section 1886(m) of the Social 
        Security Act (42 U.S.C. 1395ww(m)) is amended by adding 
        at the end the following:
          ``(6) Application of site neutral ipps payment rate 
        in certain cases.--
                  ``(A) General application of site neutral 
                ipps payment amount for discharges failing to 
                meet applicable criteria.--
                          ``(i) In general.--For a discharge in 
                        cost reporting periods beginning on or 
                        after October 1, 2015, except as 
                        provided in clause (ii) and 
                        subparagraph (C), payment under this 
                        title to a long-term care hospital for 
                        inpatient hospital services shall be 
                        made at the applicable site neutral 
                        payment rate (as defined in 
                        subparagraph (B)).
                          ``(ii) Exception for certain 
                        discharges meeting criteria.--Clause 
                        (i) shall not apply (and payment shall 
                        be made to a long-term care hospital 
                        without regard to this paragraph) for a 
                        discharge if--
                                  ``(I) the discharge meets the 
                                ICU criterion under clause 
                                (iii) or the ventilator 
                                criterion under clause (iv); 
                                and
                                  ``(II) the discharge does not 
                                have a principal diagnosis 
                                relating to a psychiatric 
                                diagnosis or to rehabilitation.
                          ``(iii) Intensive care unit (icu) 
                        criterion.--
                                  ``(I) In general.--The 
                                criterion specified in this 
                                clause (in this paragraph 
                                referred to as the `ICU 
                                criterion'), for a discharge 
                                from a long-term care hospital, 
                                is that the stay in the long-
                                term care hospital ending with 
                                such discharge was immediately 
                                preceded by a discharge from a 
                                stay in a subsection (d) 
                                hospital that included at least 
                                3 days in an intensive care 
                                unit (ICU), as determined by 
                                the Secretary.
                                  ``(II) Determining icu 
                                days.--In determining intensive 
                                care unit days under subclause 
                                (I), the Secretary shall use 
                                data from revenue center codes 
                                020x or 021x (or such successor 
                                codes as the Secretary may 
                                establish).
                          ``(iv) Ventilator criterion.--The 
                        criterion specified in this clause (in 
                        this paragraph referred to as the 
                        `ventilator criterion'), for a 
                        discharge from a long-term care 
                        hospital, is that--
                                  ``(I) the stay in the long-
                                term care hospital ending with 
                                such discharge was immediately 
                                preceded by a discharge from a 
                                stay in a subsection (d) 
                                hospital; and
                                  ``(II) the individual 
                                discharged was assigned to a 
                                Medicare-Severity-Long-Term-
                                Care-Diagnosis-Related-Group 
                                (MS-LTC-DRG) based on the 
                                receipt of ventilator services 
                                of at least 96 hours.
                  ``(B) Applicable site neutral payment rate 
                defined.--
                          ``(i) In general.--In this paragraph, 
                        the term `applicable site neutral 
                        payment rate' means--
                                  ``(I) for discharges in cost 
                                reporting periods beginning 
                                during fiscal year 2016 or 
                                fiscal year 2017, the blended 
                                payment rate specified in 
                                clause (iii); and
                                  ``(II) for discharges in cost 
                                reporting periods beginning 
                                during fiscal year 2018 or a 
                                subsequent fiscal year, the 
                                site neutral payment rate (as 
                                defined in clause (ii)).
                          ``(ii) Site neutral payment rate 
                        defined.--In this paragraph, the term 
                        `site neutral payment rate' means the 
                        lower of--
                                  ``(I) the IPPS comparable per 
                                diem amount determined under 
                                paragraph (d)(4) of section 
                                412.529 of title 42, Code of 
                                Federal Regulations, including 
                                any applicable outlier payments 
                                under section 412.525 of such 
                                title; or
                                  ``(II) 100 percent of the 
                                estimated cost for the services 
                                involved.
                          ``(iii) Blended payment rate.--The 
                        blended payment rate specified in this 
                        clause, for a long-term care hospital 
                        for inpatient hospital services for a 
                        discharge, is comprised of--
                                  ``(I) half of the site 
                                neutral payment rate (as 
                                defined in clause (ii)) for the 
                                discharge; and
                                  ``(II) half of the payment 
                                rate that would otherwise be 
                                applicable to such discharge 
                                without regard to this 
                                paragraph, as determined by the 
                                Secretary.
                  ``(C) Limiting payment for all hospital 
                discharges to site neutral payment rate for 
                hospitals failing to meet applicable ltch 
                discharge thresholds.--
                          ``(i) Notice of ltch discharge 
                        payment percentage.--For cost reporting 
                        periods beginning during or after 
                        fiscal year 2016, the Secretary shall 
                        inform each long-term care hospital of 
                        its LTCH discharge payment percentage 
                        (as defined in clause (iv)) for such 
                        period.
                          ``(ii) Limitation.--For cost 
                        reporting periods beginning during or 
                        after fiscal year 2020, if the 
                        Secretary determines for a long-term 
                        care hospital that its LTCH discharge 
                        payment percentage for the period is 
                        not at least 50 percent--
                                  ``(I) the Secretary shall 
                                inform the hospital of such 
                                fact; and
                                  ``(II) subject to clause 
                                (iii), for all discharges in 
                                the hospital in each succeeding 
                                cost reporting period, the 
                                payment amount under this 
                                subsection shall be the payment 
                                amount that would apply under 
                                subsection (d) for the 
                                discharge if the hospital were 
                                a subsection (d) hospital.
                          ``(iii) Process for reinstatement.--
                        The Secretary shall establish a process 
                        whereby a long-term care hospital may 
                        seek to and have the provisions of 
                        subclause (II) of clause (ii) 
                        discontinued with respect to that 
                        hospital.
                          ``(iv) LTCH discharge payment 
                        percentage.--In this subparagraph, the 
                        term `LTCH discharge payment 
                        percentage' means, with respect to a 
                        long-term care hospital for a cost 
                        reporting period beginning during or 
                        after fiscal year 2020, the ratio 
                        (expressed as a percentage) of--
                                  ``(I) the number of 
                                discharges for such hospital 
                                and period for which payment is 
                                not made at the site neutral 
                                payment rate, to
                                  ``(II) the total number of 
                                discharges for such hospital 
                                and period.
                  ``(D) Inclusion of subsection (d) puerto rico 
                hospitals.--In this paragraph, any reference in 
                this paragraph to a subsection (d) hospital 
                shall be deemed to include a reference to a 
                subsection (d) Puerto Rico hospital.''.
          (2) Medpac study and report on impact of changes.--
                  (A) Study.--The Medicare Payment Advisory 
                Commission shall examine the effect of applying 
                section 1886(m)(6) of the Social Security Act, 
                as added by the amendment made by paragraph 
                (1), on--
                          (i) the quality of patient care in 
                        long-term care hospitals;
                          (ii) the use of hospice care and 
                        post-acute care settings;
                          (iii) different types of long-term 
                        care hospitals; and
                          (iv) the growth in Medicare spending 
                        for services in such hospitals.
                  (B) Report.--Not later than June 30, 2019, 
                the Commission shall submit to Congress a 
                report on such study. The Commission shall 
                include in such report such recommendations for 
                changes in the application of such section as 
                the Commission deems appropriate as well as the 
                impact of the application of such section on 
                the need to continue applying the 25 percent 
                rule described under sections 412.534 and 
                412.536 of title 42, Code of Federal 
                Regulations.
          (3) Calculation of length of stay excluding cases 
        paid on a site neutral basis.--
                  (A) In general.--For discharges occurring in 
                cost reporting periods beginning on or after 
                October 1, 2015, subject to subparagraph (B), 
                in calculating the length of stay requirement 
                applicable to a long-term care hospital or 
                satellite facility under section 
                1886(d)(1)(B)(iv)(I) of the Social Security Act 
                (42 U.S.C. 1395ww(d)(1)(B)(iv)(I)) and section 
                1861(ccc)(2) of such Act (42 U.S.C. 
                1395x(ccc)(2)), the Secretary of Health and 
                Human Services shall exclude the following:
                  (i) Site neutral payment.--Any patient for 
                whom payment is made at the site neutral 
                payment rate (as defined in section 
                1886(m)(6)(B)(ii)) of such Act, as added by 
                paragraph (1)).
                  (ii) Medicare advantage.--Any patient for 
                whom payment is made under a Medicare Advantage 
                plan under part C of title XVIII of such Act.
                  (B) Limitation on converting subsection (d) 
                hospitals.--Subparagraph (A) shall only apply 
                to a hospital that is classified as of December 
                10, 2013, as a long-term care hospital (as 
                defined in section 1861(ccc) of the Social 
                Security Act, 42 U.S.C. 1395x(ccc)) for 
                purposes of determining whether the 
                requirements of section 1886(d)(1)(B)(iv)(I) or 
                1861(ccc)(2) of such Act (42 U.S.C. 
                1395ww(d)(1)(B)(iv)(I), 1395x(ccc)(2)) are met.
  (b) Extension of Certain LTCH Payment Rules and Moratorium on 
the Establishment of Certain Hospitals and Facilities.--
          (1) Extension of certain payment rules.--
                  (A) Payment for hospitals-within-hospitals.--
                Paragraph (2)(C) of section 114(c) of the 
                Medicare, Medicaid, and SCHIP Extension Act of 
                2007 (42 U.S.C. 1395ww note), as amended by 
                sections 3106(a) and 10312(a) of Public Law 
                111-148, is amended by striking ``5-year 
                period'' and inserting ``9-year period''.
                  (B) 25 PERCENT PATIENT THRESHOLD PAYMENT 
                ADJUSTMENT; MAKING THE GRANDFATHERED EXEMPTION 
                FOR LONG-TERM CARE HOSPITALS PERMANENT.--
                Section 114(c)(1) of the Medicare, Medicaid, 
                and SCHIP Extension Act of 2007 (42 U.S.C. 
                1395ww note), as amended by sections 3106(a) 
                and 10312(a) of Public Law 111-148, is 
                amended--
                          (i) in the matter preceding 
                        subparagraph (A), by striking ``for a 
                        5-year period''; and
                          (ii) in subparagraph (A), by 
                        inserting ``for a 9-year period,'' 
                        before ``section 412.536''.
                  (C) Report assessing continued suspension of 
                25 percent rule.--Not later than 1 year before 
                the end of the 9-year period referred to in 
                section 114(c)(1) of the Medicare, Medicaid, 
                and SCHIP Extension Act of 2007 (42 U.S.C. 
                1395ww note), as amended by subparagraph (B), 
                the Secretary of Health and Human Services 
                shall submit to Congress a report on the need 
                for any further extensions (or modifications of 
                the extensions) of the 25 percent rule 
                described in sections 412.534 and 412.536 of 
                title 42, Code of Federal Regulations, 
                particularly taking into account the 
                application of section 1886(m)(6) of the Social 
                Security Act, as added by subsection (a)(1).
          (2) Extension of moratorium on establishment of and 
        increase in beds for ltchs.--Section 114(d) of the 
        Medicare, Medicaid, and SCHIP Extension Act of 2007 (42 
        U.S.C. 1395ww note), as amended by sections 3106(b) and 
        10312(b) of Public Law 111-148, is amended--
                  (A) in paragraph (1), in the matter preceding 
                subparagraph (A), by inserting after ``5-year 
                period'' the following: ``(and for the period 
                beginning January 1, 2015, and ending September 
                30, 2017)''; and
                  (B) by adding at the end the following new 
                paragraph:
          ``(6) Limitation on application of exceptions.--
        Paragraphs (2) and (3) shall not apply during the 
        period beginning January 1, 2015, and ending September 
        30, 2017.''.
  (c) Additional Quality Measure.--Section 1886(m)(5)(D) of the 
Social Security Act (42 U.S.C. 1395ww(m)(5)(D)) is amended by 
adding at the end the following new clause:
                          ``(iv) Additional quality measures.--
                        Not later than October 1, 2015, the 
                        Secretary shall establish a functional 
                        status quality measure for change in 
                        mobility among inpatients requiring 
                        ventilator support.''.
  (d) Review of Treatment of Certain LTCHs.--
          (1) Evaluation.--As part of the annual rulemaking for 
        fiscal year 2015 or fiscal year 2016 to carry out the 
        payment rates under subsection (d) of section 1886 of 
        the Social Security Act (42 U.S.C. 1395ww), the 
        Secretary shall evaluate both the payment rates and 
        regulations governing hospitals which are classified 
        under subclause (II) of subsection (d)(1)(B)(iv) of 
        such section.
          (2) Adjustment authority.--Based upon such 
        evaluation, the Secretary may adjust payment rates 
        under subsection (b)(3) of section 1886 of the Social 
        Security Act (42 U.S.C. 1395ww) for a hospital so 
        classified (such as payment based upon the TEFRA-
        payment model) and may adjust the regulations governing 
        such hospitals, including applying the regulations 
        governing hospitals which are classified under clause 
        (I) of subsection (d)(1)(B) of such section.

           *       *       *       *       *       *       *

                              ----------                              


                          SOCIAL SECURITY ACT




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

           *       *       *       *       *       *       *



Part E--Miscellaneous Provisions

           *       *       *       *       *       *       *



      agreements with providers of services; enrollment processes

  Sec. 1866. (a)(1) Any provider of services (except a fund 
designated for purposes of section 1814(g) and section 1835(e)) 
shall be qualified to participate under this title and shall be 
eligible for payments under this title if it files with the 
Secretary an agreement--
          (A)(i) not to charge, except as provided in paragraph 
        (2), any individual or any other person for items or 
        services for which such individual is entitled to have 
        payment made under this title (or for which he would be 
        so entitled if such provider of services had complied 
        with the procedural and other requirements under or 
        pursuant to this title or for which such provider is 
        paid pursuant to the provisions of section 1814(e)), 
        and (ii) not to impose any charge that is prohibited 
        under section 1902(n)(3),
          (B) not to charge any individual or any other person 
        for items or services for which such individual is not 
        entitled to have payment made under this title because 
        payment for expenses incurred for such items or 
        services may not be made by reason of the provisions of 
        paragraph (1) or (9) of section 1862(a), but only if 
        (i) such individual was without fault in incurring such 
        expenses and (ii) the Secretary's determination that 
        such payment may not be made for such items and 
        services was made after the third year following the 
        year in which notice of such payment was sent to such 
        individual; except that the Secretary may reduce such 
        three-year period to not less than one year if he finds 
        such reduction is consistent with the objectives of 
        this title,
          (C) to make adequate provision for return (or other 
        disposition, in accordance with regulations) of any 
        moneys incorrectly collected from such individual or 
        other person,
          (D) to promptly notify the Secretary of its 
        employment of an individual who, at any time during the 
        year preceding such employment, was employed in a 
        managerial, accounting, auditing, or similar capacity 
        (as determined by the Secretary by regulation) by an 
        agency or organization which serves as a fiscal 
        intermediary or carrier (for purposes of part A or part 
        B, or both, of this title) with respect to the 
        provider,
          (E) to release data with respect to patients of such 
        provider upon request to an organization having a 
        contract with the Secretary under part B of title XI as 
        may be necessary (i) to allow such organization to 
        carry out its functions under such contract, or (ii) to 
        allow such organization to carry out similar review 
        functions under any contract the organization may have 
        with a private or public agency paying for health care 
        in the same area with respect to patients who authorize 
        release of such data for such purposes,
          (F)(i) in the case of hospitals which provide 
        inpatient hospital services for which payment may be 
        made under subsection (b), (c), or (d) of section 1886, 
        to maintain an agreement with a professional standards 
        review organization (if there is such an organization 
        in existence in the area in which the hospital is 
        located) or with a quality improvement organization 
        which has a contract with the Secretary under part B of 
        title XI for the area in which the hospital is located, 
        under which the organization will perform functions 
        under that part with respect to the review of the 
        validity of diagnostic information provided by such 
        hospital, the completeness, adequacy, and quality of 
        care provided, the appropriateness of admissions and 
        discharges, and the appropriateness of care provided 
        for which additional payments are sought under section 
        1886(d)(5), with respect to inpatient hospital services 
        for which payment may be made under part A of this 
        title (and for purposes of payment under this title, 
        the cost of such agreement to the hospital shall be 
        considered a cost incurred by such hospital in 
        providing inpatient services under part A, and (I) 
        shall be paid directly by the Secretary to such 
        organization on behalf of such hospital in accordance 
        with a rate per review established by the Secretary, 
        (II) shall be transferred from the Federal Hospital 
        Insurance Trust Fund, without regard to amounts 
        appropriated in advance in appropriation Acts, in the 
        same manner as transfers are made for payment for 
        services provided directly to beneficiaries, and (III) 
        shall not be less in the aggregate for a fiscal year 
        than the aggregate amount expended in fiscal year 1988 
        for direct and administrative costs (adjusted for 
        inflation and for any direct or administrative costs 
        incurred as a result of review functions added with 
        respect to a subsequent fiscal year) of such reviews),
          (ii) in the case of hospitals, critical access 
        hospitals, skilled nursing facilities, and home health 
        agencies, to maintain an agreement with a quality 
        improvement organization (which has a contract with the 
        Secretary under part B of title XI for the area in 
        which the hospital, facility, or agency is located) to 
        perform the functions described in paragraph (3)(A),
          (G) in the case of hospitals which provide inpatient 
        hospital services for which payment may be made under 
        subsection (b) or (d) of section 1886, not to charge 
        any individual or any other person for inpatient 
        hospital services for which such individual would be 
        entitled to have payment made under part A but for a 
        denial or reduction of payments under section 
        1886(f)(2),
          (H)(i) in the case of hospitals which provide 
        services for which payment may be made under this title 
        and in the case of critical access hospitals which 
        provide critical access hospital services, to have all 
        items and services (other than physicians' services as 
        defined in regulations for purposes of section 
        1862(a)(14), and other than services described by 
        section 1861(s)(2)(K), certified nurse-midwife 
        services, qualified psychologist services, and services 
        of a certified registered nurse anesthetist) (I) that 
        are furnished to an individual who is a patient of the 
        hospital, and (II) for which the individual is entitled 
        to have payment made under this title, furnished by the 
        hospital or otherwise under arrangements (as defined in 
        section 1861(w)(1)) made by the hospital,
          (ii) in the case of skilled nursing facilities which 
        provide covered skilled nursing facility services--
                  (I) that are furnished to an individual who 
                is a resident of the skilled nursing facility 
                during a period in which the resident is 
                provided covered post-hospital extended care 
                services (or, for services described in section 
                1861(s)(2)(D), that are furnished to such an 
                individual without regard to such period), and
                  (II) for which the individual is entitled to 
                have payment made under this title,
        to have items and services (other than services 
        described in section 1888(e)(2)(A)(ii)) furnished by 
        the skilled nursing facility or otherwise under 
        arrangements (as defined in section 1861(w)(1)) made by 
        the skilled nursing facility,
          (I) in the case of a hospital or critical access 
        hospital--
                  (i) to adopt and enforce a policy to ensure 
                compliance with the requirements of section 
                1867 and to meet the requirements of such 
                section,
                  (ii) to maintain medical and other records 
                related to individuals transferred to or from 
                the hospital for a period of five years from 
                the date of the transfer, and
                  (iii) to maintain a list of physicians who 
                are on call for duty after the initial 
                examination to provide treatment necessary to 
                stabilize an individual with an emergency 
                medical condition,
          (J) in the case of hospitals which provide inpatient 
        hospital services for which payment may be made under 
        this title, to be a participating provider of medical 
        care under any health plan contracted for under section 
        1079 or 1086 of title 10, or under section 613 of title 
        38, United States Code, in accordance with admission 
        practices, payment methodology, and amounts as 
        prescribed under joint regulations issued by the 
        Secretary and by the Secretaries of Defense and 
        Transportation, in implementation of sections 1079 and 
        1086 of title 10, United States Code,
          (K) not to charge any individual or any other person 
        for items or services for which payment under this 
        title is denied under section 1154(a)(2) by reason of a 
        determination under section 1154(a)(1)(B),
          (L) in the case of hospitals which provide inpatient 
        hospital services for which payment may be made under 
        this title, to be a participating provider of medical 
        care under section 603 of title 38, United States Code, 
        in accordance with such admission practices, and such 
        payment methodology and amounts, as are prescribed 
        under joint regulations issued by the Secretary and by 
        the Secretary of Veterans Affairs in implementation of 
        such section,
          (M) in the case of hospitals, to provide to each 
        individual who is entitled to benefits under part A (or 
        to a person acting on the individual's behalf), at or 
        about the time of the individual's admission as an 
        inpatient to the hospital, a written statement 
        (containing such language as the Secretary prescribes 
        consistent with this paragraph) which explains--
                  (i) the individual's rights to benefits for 
                inpatient hospital services and for post-
                hospital services under this title,
                  (ii) the circumstances under which such an 
                individual will and will not be liable for 
                charges for continued stay in the hospital,
                  (iii) the individual's right to appeal 
                denials of benefits for continued inpatient 
                hospital services, including the practical 
                steps to initiate such an appeal, and
                  (iv) the individual's liability for payment 
                for services if such a denial of benefits is 
                upheld on appeal,--and which provides such 
                additional information as the Secretary may 
                specify,
          (N) in the case of hospitals and critical access 
        hospitals--
                  (i) to make available to its patients the 
                directory or directories of participating 
                physicians (published under section 1842(h)(4)) 
                for the area served by the hospital or critical 
                access hospital,
                  (ii) if hospital personnel (including staff 
                of any emergency or outpatient department) 
                refer a patient to a nonparticipating physician 
                for further medical care on an outpatient 
                basis, the personnel must inform the patient 
                that the physician is a nonparticipating 
                physician and, whenever practicable, must 
                identify at least one qualified participating 
                physician who is listed in such a directory and 
                from whom the patient may receive the necessary 
                services,
                  (iii) to post conspicuously in any emergency 
                department a sign (in a form specified by the 
                Secretary) specifying rights of individuals 
                under section 1867 with respect to examination 
                and treatment for emergency medical conditions 
                and women in labor, and
                  (iv) to post conspicuously (in a form 
                specified by the Secretary) information 
                indicating whether or not the hospital 
                participates in the medicaid program under a 
                State plan approved under title XIX,
          (O) to accept as payment in full for services that 
        are covered under this title and are furnished to any 
        individual enrolled with a Medicare+Choice organization 
        under part C, with a PACE provider under section 1894 
        or 1934, or with an eligible organization with a risk-
        sharing contract under section 1876, under section 
        1876(i)(2)(A) (as in effect before February 1, 1985), 
        under section 402(a) of the Social Security Amendments 
        of 1967, or under section 222(a) of the Social Security 
        Amendments of 1972, which does not have a contract (or, 
        in the case of a PACE provider, contract or other 
        agreement) establishing payment amounts for services 
        furnished to members of the organization or PACE 
        program eligible individuals enrolled with the PACE 
        provider, the amounts that would be made as a payment 
        in full under this title (less any payments under 
        sections 1886(d)(11) and 1886(h)(3)(D)) if the 
        individuals were not so enrolled,
          (P) in the case of home health agencies which provide 
        home health services to individuals entitled to 
        benefits under this title who require catheters, 
        catheter supplies, ostomy bags, and supplies related to 
        ostomy car (described in section 1861(m)(5)), to offer 
        to furnish such supplies to such an individual as part 
        of their furnishing of home health services,
          (Q) in the case of hospitals, skilled nursing 
        facilities, home health agencies, and hospice programs, 
        to comply with the requirement of subsection (f) 
        (relating to maintaining written policies and 
        procedures respecting advance directives),
          (R) to contract only with a health care clearinghouse 
        (as defined in section 1171) that meets each standard 
        and implementation specification adopted or established 
        under part C of title XI on or after the date on which 
        the health care clearinghouse is required to comply 
        with the standard or specification,
          (S) in the case of a hospital that has a financial 
        interest (as specified by the Secretary in regulations) 
        in an entity to which individuals are referred as 
        described in section 1861(ee)(2)(H)(ii), or in which 
        such an entity has such a financial interest, or in 
        which another entity has such a financial interest 
        (directly or indirectly) with such hospital and such an 
        entity, to maintain and disclose to the Secretary (in a 
        form and manner specified by the Secretary) information 
        on--
                  (i) the nature of such financial interest,
                  (ii) the number of individuals who were 
                discharged from the hospital and who were 
                identified as requiring home health services, 
                and
                  (iii) the percentage of such individuals who 
                received such services from such provider (or 
                another such provider),
          (T) in the case of hospitals and critical access 
        hospitals, to furnish to the Secretary such data as the 
        Secretary determines appropriate pursuant to 
        subparagraph (E) of section 1886(d)(12) to carry out 
        such section,
          (U) in the case of hospitals which furnish inpatient 
        hospital services for which payment may be made under 
        this title, to be a participating provider of medical 
        care both--
                  (i) under the contract health services 
                program funded by the Indian Health Service and 
                operated by the Indian Health Service, an 
                Indian tribe, or tribal organization (as those 
                terms are defined in section 4 of the Indian 
                Health Care Improvement Act), with respect to 
                items and services that are covered under such 
                program and furnished to an individual eligible 
                for such items and services under such program; 
                and
                  (ii) under any program funded by the Indian 
                Health Service and operated by an urban Indian 
                organization with respect to the purchase of 
                items and services for an eligible urban Indian 
                (as those terms are defined in such section 4),
        in accordance with regulations promulgated by the 
        Secretary regarding admission practices, payment 
        methodology, and rates of payment (including the 
        acceptance of no more than such payment rate as payment 
        in full for such items and services,
          (V) in the case of hospitals that are not otherwise 
        subject to the Occupational Safety and Health Act of 
        1970 (or a State occupational safety and health plan 
        that is approved under 18(b) of such Act), to comply 
        with the Bloodborne Pathogens standard under section 
        1910.1030 of title 29 of the Code of Federal 
        Regulations (or as subsequently redesignated),
                  (W)\60\ in the case of a hospital described 
                in section 1886(d)(1)(B)(v), to report quality 
                data to the Secretary in accordance with 
                subsection (k),
---------------------------------------------------------------------------
    \60\Margin for subparagraph (W) (as added by section 3005(1)(C) of 
Public Law 111-148) so in law. Also, the placement of subparagraph (W) 
reflects the probable intent of Congress. The amendment insertion 
instruction provides to insert this subparagraph at the end of 
paragraph (1), which includes continuation text at the end following 
these subparagraphs.
---------------------------------------------------------------------------
                  (X)\61\ maintain and, upon request of the 
                Secretary, provide access to documentation 
                relating to written orders or requests for 
                payment for durable medical equipment, 
                certifications for home health services, or 
                referrals for other items or services written 
                or ordered by the provider under this title, as 
                specified by the Secretary, and
---------------------------------------------------------------------------
    \61\Margin for subparagraph (X) (as added as a subparagraph (W) by 
section 6406(b)(3) of Public Law 111-148 and redesignated by section 
2(3)(A) of Public Law 114-42) so in law.
---------------------------------------------------------------------------
          (Y) beginning 12 months after the date of the 
        enactment of this subparagraph, in the case of a 
        hospital or critical access hospital, with respect to 
        each individual who receives observation services as an 
        outpatient at such hospital or critical access hospital 
        for more than 24 hours, to provide to such individual 
        not later than 36 hours after the time such individual 
        begins receiving such services (or, if sooner, upon 
        release)--
                  (i) such oral explanation of the written 
                notification described in clause (ii), and such 
                documentation of the provision of such 
                explanation, as the Secretary determines to be 
                appropriate;
                  (ii) a written notification (as specified by 
                the Secretary pursuant to rulemaking and 
                containing such language as the Secretary 
                prescribes consistent with this paragraph) 
                which--
                          (I) explains the status of the 
                        individual as an outpatient receiving 
                        observation services and not as an 
                        inpatient of the hospital or critical 
                        access hospital and the reasons for 
                        such status of such individual;
                          (II) explains the implications of 
                        such status on services furnished by 
                        the hospital or critical access 
                        hospital (including services furnished 
                        on an inpatient basis), such as 
                        implications for cost-sharing 
                        requirements under this title and for 
                        subsequent eligibility for coverage 
                        under this title for services furnished 
                        by a skilled nursing facility;
                          (III) includes such additional 
                        information as the Secretary determines 
                        appropriate;
                          (IV) either--
                                  (aa) is signed by such 
                                individual or a person acting 
                                on such individual's behalf to 
                                acknowledge receipt of such 
                                notification; or
                                  (bb) if such individual or 
                                person refuses to provide the 
                                signature described in item 
                                (aa), is signed by the staff 
                                member of the hospital or 
                                critical access hospital who 
                                presented the written 
                                notification and includes the 
                                name and title of such staff 
                                member, a certification that 
                                the notification was presented, 
                                and the date and time the 
                                notification was presented; and
                          (V) is written and formatted using 
                        plain language and is made available in 
                        appropriate languages as determined by 
                        the Secretary.
In the case of a hospital which has an agreement in effect with 
an organization described in subparagraph (F), which 
organization's contract with the Secretary under part B of 
title XI is terminated on or after October 1, 1984, the 
hospital shall not be determined to be out of compliance with 
the requirement of such subparagraph during the six month 
period beginning on the date of the termination of that 
contract.
  (2)(A) A provider of services may charge such individual or 
other person (i) the amount of any deduction or coinsurance 
amount imposed pursuant to section 1813(a)(1), (a)(3), or 
(a)(4), section 1833(b), or section 1861(y)(3) with respect to 
such items and services (not in excess of the amount 
customarily charged for such items and services by such 
provider), and (ii) an amount equal to 20 per centum of the 
reasonable charges for such items and services (not in excess 
of 20 per centum of the amount customarily charged for such 
items and services by such provider) for which payment is made 
under part B or which are durable medical equipment furnished 
as home health services (but in the case of items and services 
furnished to individuals with end-stage renal disease, an 
amount equal to 20 percent of the estimated amounts for such 
items and services calculated on the basis established by the 
Secretary). In the case of items and services described in 
section 1833(c), clause (ii) of the preceding sentence shall be 
applied by substituting for 20 percent the proportion which is 
appropriate under such section. A provider of services may not 
impose a charge under clause (ii) of the first sentence of this 
subparagraph with respect to items and services described in 
section 1861(s)(10)(A) and with respect to clinical diagnostic 
laboratory tests for which payment is made under part B. 
Notwithstanding the first sentence of this subparagraph, a home 
health agency may charge such an individual or person, with 
respect to covered items subject to payment under section 
1834(a), the amount of any deduction imposed under section 
1833(b) and 20 percent of the payment basis described in 
section 1834(a)(1)(B). In the case of items and services for 
which payment is made under part B under the prospective 
payment system established under section 1833(t), clause (ii) 
of the first sentence shall be applied by substituting for 20 
percent of the reasonable charge, the applicable copayment 
amount established under section 1833(t)(5). In the case of 
services described in section 1833(a)(8) or section 1833(a)(9) 
for which payment is made under part B under section 1834(k), 
clause (ii) of the first sentence shall be applied by 
substituting for 20 percent of the reasonable charge for such 
services 20 percent of the lesser of the actual charge or the 
applicable fee schedule amount (as defined in such section) for 
such services.
  (B) Where a provider of services has furnished, at the 
request of such individual, items or services which are in 
excess of or more expensive than the items or services with 
respect to which payment may be made under this title, such 
provider of services may also charge such individual or other 
person for such more expensive items or services to the extent 
that the amount customarily charged by it for the items or 
services furnished at such request exceeds the amount 
customarily charged by it for the items or services with 
respect to which payment may be made under this title.
  (C) A provider of services may in accordance with its 
customary practice also appropriately charge any such 
individual for any whole blood (or equivalent quantities of 
packed red blood cells, as defined under regulations) furnished 
him with respect to which a deductible is imposed under section 
1813(a)(2), except that (i) any excess of such charge over the 
cost to such provider for the blood (or equivalent quantities 
of packed red blood cells, as so defined) shall be deducted 
from any payment to such provider under this title, (ii) no 
such charge may be imposed for the cost of administration of 
such blood (or equivalent quantities of packed red blood cells, 
as so defined), and (iii) such charge may not be made to the 
extent such blood (or equivalent quantities of packed red blood 
cells, as so defined) has been replaced on behalf of such 
individual or arrangements have been made for its replacement 
on his behalf. For purposes of subparagraph (C), whole blood 
(or equivalent quantities of packed red blood cells, as so 
defined) furnished an individual shall be deemed replaced when 
the provider of services is given one pint of blood for each 
pint of blood (or equivalent quantities of packed red blood 
cells, as so defined) furnished such individual with respect to 
which a deduction is imposed under section 1813(a)(2).
  (D) Where a provider of services customarily furnishes items 
or services which are in excess of or more expensive than the 
items or services with respect to which payment may be made 
under this title, such provider, notwithstanding the preceding 
provisions of this paragraph, may not, under the authority of 
section 1866(a)(2)(B)(ii), charge any individual or other 
person any amount for such items or services in excess of the 
amount of the payment which may otherwise be made for such 
items or services under this title if the admitting physician 
has a direct or indirect financial interest in such provider.
  (3)(A) Under the agreement required under paragraph 
(1)(F)(ii), the quality improvement organization must perform 
functions (other than those covered under an agreement under 
paragraph (1)(F)(i)) under the third sentence of section 
1154(a)(4)(A) and under section 1154(a)(14) with respect to 
services, furnished by the hospital, critical access hospital, 
facility, or agency involved, for which payment may be made 
under this title.
  (B) For purposes of payment under this title, the cost of 
such an agreement to the hospital, critical access hospital, 
facility, or agency shall be considered a cost incurred by such 
hospital, critical access hospital, facility, or agency in 
providing covered services under this title and shall be paid 
directly by the Secretary to the quality improvement 
organization on behalf of such hospital, critical access 
hospital, facility, or agency in accordance with a schedule 
established by the Secretary.
  (C) Such payments--
          (i) shall be transferred in appropriate proportions 
        from the Federal Hospital Insurance Trust Fund and from 
        the Federal Supplementary Medical Insurance Trust Fund, 
        without regard to amounts appropriated in advance in 
        appropriation Acts, in the same manner as transfers are 
        made for payment for services provided directly to 
        beneficiaries, and
          (ii) shall not be less in the aggregate for a fiscal 
        year--
                  (I) in the case of hospitals, than the amount 
                specified in paragraph (1)(F)(i)(III), and
                  (II) in the case of facilities, critical 
                access hospitals, and agencies, than the 
                amounts the Secretary determines to be 
                sufficient to cover the costs of such 
                organizations' conducting the activities 
                described in subparagraph (A) with respect to 
                such facilities, critical access hospitals, or 
                agencies under part B of title XI.
  (b)(1) A provider of services may terminate an agreement with 
the Secretary under this section at such time and upon such 
notice to the Secretary and the public as may be provided in 
regulations, except that notice of more than six months shall 
not be required.
  (2) The Secretary may refuse to enter into an agreement under 
this section or, upon such reasonable notice to the provider 
and the public as may be specified in regulations, may refuse 
to renew or may terminate such an agreement after the 
Secretary--
          (A) has determined that the provider fails to comply 
        substantially with the provisions of the agreement, 
        with the provisions of this title and regulations 
        thereunder, or with a corrective action required under 
        section 1886(f)(2)(B),
          (B) has determined that the provider fails 
        substantially to meet the applicable provisions of 
        section 1861,
          (C) has excluded the provider from participation in a 
        program under this title pursuant to section 1128 or 
        section 1128A, or
          (D) has ascertained that the provider has been 
        convicted of a felony under Federal or State law for an 
        offense which the Secretary determines is detrimental 
        to the best interests of the program or program 
        beneficiaries.
  (3) A termination of an agreement or a refusal to renew an 
agreement under this subsection shall become effective on the 
same date and in the same manner as an exclusion from 
participation under the programs under this title becomes 
effective under section 1128(c).
  (4)(A) A hospital that fails to comply with the requirement 
of subsection (a)(1)(V) (relating to the Bloodborne Pathogens 
standard) is subject to a civil money penalty in an amount 
described in subparagraph (B), but is not subject to 
termination of an agreement under this section.
  (B) The amount referred to in subparagraph (A) is an amount 
that is similar to the amount of civil penalties that may be 
imposed under section 17 of the Occupational Safety and Health 
Act of 1970 for a violation of the Bloodborne Pathogens 
standard referred to in subsection (a)(1)(U) by a hospital that 
is subject to the provisions of such Act.
  (C) A civil money penalty under this paragraph shall be 
imposed and collected in the same manner as civil money 
penalties under subsection (a) of section 1128A are imposed and 
collected under that section.
  (c)(1) Where the Secretary has terminated or has refused to 
renew an agreement under this title with a provider of 
services, such provider may not file another agreement under 
this title unless the Secretary finds that the reason for the 
termination or nonrenewal has been removed and that there is 
reasonable assurance that it will not recur.
  (2) Where the Secretary has terminated or has refused to 
renew an agreement under this title with a provider of 
services, the Secretary shall promptly notify each State agency 
which administers or supervises the administration of a State 
plan approved under title XIX of such termination or 
nonrenewal.
  (d) If the Secretary finds that there is a substantial 
failure to make timely review in accordance with section 
1861(k) of long-stay cases in a hospital, he may, in lieu of 
terminating his agreement with such hospital, decide that, with 
respect to any individual admitted to such hospital after a 
subsequent date specified by him, no payment shall be made 
under this title for inpatient hospital services (including 
inpatient psychiatric hospital services) after the 20th day of 
a continuous period of such services. Such decision may be made 
effective only after such notice to the hospital and to the 
public, as may be prescribed by regulations, and its 
effectiveness shall terminate when the Secretary finds that the 
reason therefor has been removed and that there is reasonable 
assurance that it will not recur. The Secretary shall not make 
any such decision except after reasonable notice and 
opportunity for hearing to the institution or agency affected 
thereby.
  (e) For purposes of this section, the term ``provider of 
services'' shall include--
          (1) a clinic, rehabilitation agency, or public health 
        agency if, in the case of a clinic or rehabilitation 
        agency, such clinic or agency meets the requirements of 
        section 1861(p)(4)(A) (or meets the requirements of 
        such section through the operation of subsection (g) or 
        (ll)(2) of section 1861), or if, in the case of a 
        public health agency, such agency meets the 
        requirements of section 1861(p)(4)(B) (or meets the 
        requirements of such section through the operation of 
        subsection (g) or (ll)(2) of section 1861), but only 
        with respect to the furnishing of outpatient physical 
        therapy services (as therein defined), (through the 
        operation of section 1861(g)) with respect to the 
        furnishing of outpatient occupational therapy services, 
        or (through the operation of section 1861(ll)(2)) with 
        respect to the furnishing of outpatient speech-language 
        pathology; and
          (2) a community mental health center (as defined in 
        section 1861(ff)(3)(B)), but only with respect to the 
        furnishing of partial hospitalization services (as 
        described in section 1861(ff)(1)).
  (f)(1) For purposes of subsection (a)(1)(Q) and sections 
1819(c)(2)(E), 1833(s), 1855(i), 1876(c)(8), and 1891(a)(6), 
the requirement of this subsection is that a provider of 
services, Medicare+Choice organization, or prepaid or eligible 
organization (as the case may be) maintain written policies and 
procedures with respect to all adult individuals receiving 
medical care by or through the provider or organization--
          (A) to provide written information to each such 
        individual concerning--
                  (i) an individual's rights under State law 
                (whether statutory or as recognized by the 
                courts of the State) to make decisions 
                concerning such medical care, including the 
                right to accept or refuse medical or surgical 
                treatment and the right to formulate advance 
                directives (as defined in paragraph (3)), and
                  (ii) the written policies of the provider or 
                organization respecting the implementation of 
                such rights;
          (B) to document in a prominent part of the 
        individual's current medical record whether or not the 
        individual has executed an advance directive;
          (C) not to condition the provision of care or 
        otherwise discriminate against an individual based on 
        whether or not the individual has executed an advance 
        directive;
          (D) to ensure compliance with requirements of State 
        law (whether statutory or as recognized by the courts 
        of the State) respecting advance directives at 
        facilities of the provider or organization; and
          (E) to provide (individually or with others) for 
        education for staff and the community on issues 
        concerning advance directives.
Subparagraph (C) shall not be construed as requiring the 
provision of care which conflicts with an advance directive.
  (2) The written information described in paragraph (1)(A) 
shall be provided to an adult individual--
          (A) in the case of a hospital, at the time of the 
        individual's admission as an inpatient,
          (B) in the case of a skilled nursing facility, at the 
        time of the individual's admission as a resident,
          (C) in the case of a home health agency, in advance 
        of the individual coming under the care of the agency,
          (D) in the case of a hospice program, at the time of 
        initial receipt of hospice care by the individual from 
        the program, and
          (E) in the case of an eligible organization (as 
        defined in section 1876(b)) or an organization provided 
        payments under section 1833(a)(1)(A) or a 
        Medicare+Choice organization, at the time of enrollment 
        of the individual with the organization.
  (3) In this subsection, the term ``advance directive'' means 
a written instruction, such as a living will or durable power 
of attorney for health care, recognized under State law 
(whether statutory or as recognized by the courts of the State) 
and relating to the provision of such care when the individual 
is incapacitated.
  (4) For construction relating to this subsection, see section 
7 of the Assisted Suicide Funding Restriction Act of 1997 
(relating to clarification respecting assisted suicide, 
euthanasia, and mercy killing).
  (g) Except as permitted under subsection (a)(2), any person 
who knowingly and willfully presents, or causes to be 
presented, a bill or request for payment inconsistent with an 
arrangement under subsection (a)(1)(H) or in violation of the 
requirement for such an arrangement, is subject to a civil 
money penalty of not to exceed $2,000. The provisions of 
section 1128A (other than subsections (a) and (b)) shall apply 
to a civil money penalty under the previous sentence in the 
same manner as such provisions apply to a penalty or proceeding 
under section 1128A(a).
  (h)(1)(A) Except as provided in paragraph (2), an institution 
or agency dissatisfied with a determination by the Secretary 
that it is not a provider of services or with a determination 
described in subsection (b)(2) shall be entitled to a hearing 
thereon by the Secretary (after reasonable notice) to the same 
extent as is provided in section 205(b), and to judicial review 
of the Secretary's final decision after such hearing as is 
provided in section 205(g), except that, in so applying such 
sections and in applying section 205(l) thereto, any reference 
therein to the Commissioner of Social Security or the Social 
Security Administration shall be considered a reference to the 
Secretary or the Department of Health and Human Services, 
respectively.
  (B) An institution or agency described in subparagraph (A) 
that has filed for a hearing under subparagraph (A) shall have 
expedited access to judicial review under this subparagraph in 
the same manner as providers of services, suppliers, and 
individuals entitled to benefits under part A or enrolled under 
part B, or both, may obtain expedited access to judicial review 
under the process established under section 1869(b)(2). Nothing 
in this subparagraph shall be construed to affect the 
application of any remedy imposed under section 1819 during the 
pendency of an appeal under this subparagraph.
  (C)(i) The Secretary shall develop and implement a process to 
expedite proceedings under this subsection in which--
          (I) the remedy of termination of participation has 
        been imposed;
          (II) a remedy described in clause (i) or (iii) of 
        section 1819(h)(2)(B) has been imposed, but only if 
        such remedy has been imposed on an immediate basis; or
          (III) a determination has been made as to a finding 
        of substandard quality of care that results in the loss 
        of approval of a skilled nursing facility's nurse aide 
        training program.
  (ii) Under such process under clause (i), priority shall be 
provided in cases of termination described in clause (i)(I).
  (iii) Nothing in this subparagraph shall be construed to 
affect the application of any remedy imposed under section 1819 
during the pendency of an appeal under this subparagraph.
  (2) An institution or agency is not entitled to separate 
notice and opportunity for a hearing under both section 1128 
and this section with respect to a determination or 
determinations based on the same underlying facts and issues.
  (i)(1) If the Secretary determines that a psychiatric 
hospital which has an agreement in effect under this section no 
longer meets the requirements for a psychiatric hospital under 
this title and further finds that the hospital's deficiencies--
          (A) immediately jeopardize the health and safety of 
        its patients, the Secretary shall terminate such 
        agreement; or
          (B) do not immediately jeopardize the health and 
        safety of its patients, the Secretary may terminate 
        such agreement, or provide that no payment will be made 
        under this title with respect to any individual 
        admitted to such hospital after the effective date of 
        the finding, or both.
  (2) If a psychiatric hospital, found to have deficiencies 
described in paragraph (1)(B), has not complied with the 
requirements of this title--
          (A) within 3 months after the date the hospital is 
        found to be out of compliance with such requirements, 
        the Secretary shall provide that no payment will be 
        made under this title with respect to any individual 
        admitted to such hospital after the end of such 3-month 
        period, or
          (B) within 6 months after the date the hospital is 
        found to be out of compliance with such requirements, 
        no payment may be made under this title with respect to 
        any individual in the hospital until the Secretary 
        finds that the hospital is in compliance with the 
        requirements of this title.
  (j) Enrollment Process for Providers of Services and 
Suppliers.--
          (1) Enrollment process.--
                  (A) In general.--The Secretary shall 
                establish by regulation a process for the 
                enrollment of providers of services and 
                suppliers under this title. Such process shall 
                include screening of providers and suppliers in 
                accordance with paragraph (2), a provisional 
                period of enhanced oversight in accordance with 
                paragraph (3), disclosure requirements in 
                accordance with paragraph (4), the imposition 
                of temporary enrollment moratoria in accordance 
                with paragraph (5), and the establishment of 
                compliance programs in accordance with 
                paragraph (6).
                  (B) Deadlines.--The Secretary shall establish 
                by regulation procedures under which there are 
                deadlines for actions on applications for 
                enrollment (and, if applicable, renewal of 
                enrollment). The Secretary shall monitor the 
                performance of medicare administrative 
                contractors in meeting the deadlines 
                established under this subparagraph.
                  (C) Consultation before changing provider 
                enrollment forms.--The Secretary shall consult 
                with providers of services and suppliers before 
                making changes in the provider enrollment forms 
                required of such providers and suppliers to be 
                eligible to submit claims for which payment may 
                be made under this title.
          (2) Provider screening.--
                  (A) Procedures.--Not later than 180 days 
                after the date of enactment of this paragraph, 
                the Secretary, in consultation with the 
                Inspector General of the Department of Health 
                and Human Services, shall establish procedures 
                under which screening is conducted with respect 
                to providers of medical or other items or 
                services and suppliers under the program under 
                this title, the Medicaid program under title 
                XIX, and the CHIP program under title XXI.
                  (B) Level of screening.--The Secretary shall 
                determine the level of screening conducted 
                under this paragraph according to the risk of 
                fraud, waste, and abuse, as determined by the 
                Secretary, with respect to the category of 
                provider of medical or other items or services 
                or supplier. Such screening--
                          (i) shall include a licensure check, 
                        which may include such checks across 
                        States; and
                          (ii) may, as the Secretary determines 
                        appropriate based on the risk of fraud, 
                        waste, and abuse described in the 
                        preceding sentence, include--
                                  (I) a criminal background 
                                check;
                                  (II) fingerprinting;
                                  (III) unscheduled and 
                                unannounced site visits, 
                                including preenrollment site 
                                visits;
                                  (IV) database checks 
                                (including such checks across 
                                States); and
                                  (V) such other screening as 
                                the Secretary determines 
                                appropriate.
                  (C) Application fees.--
                          (i) Institutional providers.--Except 
                        as provided in clause (ii), the 
                        Secretary shall impose a fee on each 
                        institutional provider of medical or 
                        other items or services or supplier 
                        (such as a hospital or skilled nursing 
                        facility) with respect to which 
                        screening is conducted under this 
                        paragraph in an amount equal to--
                                  (I) for 2010, $500; and
                                  (II) for 2011 and each 
                                subsequent year, the amount 
                                determined under this clause 
                                for the preceding year, 
                                adjusted by the percentage 
                                change in the consumer price 
                                index for all urban consumers 
                                (all items; United States city 
                                average) for the 12-month 
                                period ending with June of the 
                                previous year.
                          (ii) Hardship exception; waiver for 
                        certain medicaid providers.--The 
                        Secretary may, on a case-by-case basis, 
                        exempt a provider of medical or other 
                        items or services or supplier from the 
                        imposition of an application fee under 
                        this subparagraph if the Secretary 
                        determines that the imposition of the 
                        application fee would result in a 
                        hardship. The Secretary may waive the 
                        application fee under this subparagraph 
                        for providers enrolled in a State 
                        Medicaid program for whom the State 
                        demonstrates that imposition of the fee 
                        would impede beneficiary access to 
                        care.
                          (iii) Use of funds.--Amounts 
                        collected as a result of the imposition 
                        of a fee under this subparagraph shall 
                        be used by the Secretary for program 
                        integrity efforts, including to cover 
                        the costs of conducting screening under 
                        this paragraph and to carry out this 
                        subsection and section 1128J.
                  (D) Application and enforcement.--
                          (i) New providers of services and 
                        suppliers.--The screening under this 
                        paragraph shall apply, in the case of a 
                        provider of medical or other items or 
                        services or supplier who is not 
                        enrolled in the program under this 
                        title, title XIX, or title XXI as of 
                        the date of enactment of this 
                        paragraph, on or after the date that is 
                        1 year after such date of enactment.
                          (ii) Current providers of services 
                        and suppliers.--The screening under 
                        this paragraph shall apply, in the case 
                        of a provider of medical or other items 
                        or services or supplier who is enrolled 
                        in the program under this title, title 
                        XIX, or title XXI as of such date of 
                        enactment, on or after the date that is 
                        2 years after such date of enactment.
                          (iii) Revalidation of enrollment.--
                        Effective beginning on the date that is 
                        180 days after such date of enactment, 
                        the screening under this paragraph 
                        shall apply with respect to the 
                        revalidation of enrollment of a 
                        provider of medical or other items or 
                        services or supplier in the program 
                        under this title, title XIX, or title 
                        XXI.
                          (iv) Limitation on enrollment and 
                        revalidation of enrollment.--In no case 
                        may a provider of medical or other 
                        items or services or supplier who has 
                        not been screened under this paragraph 
                        be initially enrolled or reenrolled in 
                        the program under this title, title 
                        XIX, or title XXI on or after the date 
                        that is 3 years after such date of 
                        enactment.
                  (E) Use of information from the department of 
                treasury concerning tax debts.--In reviewing 
                the application of a provider of services or 
                supplier to enroll or reenroll under the 
                program under this title, the Secretary shall 
                take into account the information supplied by 
                the Secretary of the Treasury pursuant to 
                section 6103(l)(22) of the Internal Revenue 
                Code of 1986, in determining whether to deny 
                such application or to apply enhanced oversight 
                to such provider of services or supplier 
                pursuant to paragraph (3) if the Secretary 
                determines such provider of services or 
                supplier owes such a debt.
                  (F) Expedited rulemaking.--The Secretary may 
                promulgate an interim final rule to carry out 
                this paragraph.
          (3) Provisional period of enhanced oversight for new 
        providers of services and suppliers.--
                  (A) In general.--The Secretary shall 
                establish procedures to provide for a 
                provisional period of not less than 30 days and 
                not more than 1 year during which new providers 
                of medical or other items or services and 
                suppliers, as the Secretary determines 
                appropriate, including categories of providers 
                or suppliers, would be subject to enhanced 
                oversight, such as prepayment review and 
                payment caps, under the program under this 
                title, the Medicaid program under title XIX. 
                and the CHIP program under title XXI.
                  (B) Implementation.--The Secretary may 
                establish by program instruction or otherwise 
                the procedures under this paragraph.
          (4) 90-day period of enhanced oversight for initial 
        claims of dme suppliers.--For periods beginning after 
        January 1, 2011, if the Secretary determines that there 
        is a significant risk of fraudulent activity among 
        suppliers of durable medical equipment, in the case of 
        a supplier of durable medical equipment who is within a 
        category or geographic area under title XVIII 
        identified pursuant to such determination and who is 
        initially enrolling under such title, the Secretary 
        shall, notwithstanding sections 1816(c), 1842(c), and 
        1869(a)(2), withhold payment under such title with 
        respect to durable medical equipment furnished by such 
        supplier during the 90-day period beginning on the date 
        of the first submission of a claim under such title for 
        durable medical equipment furnished by such supplier.
          (5) Increased disclosure requirements.--
                  (A) Disclosure.--A provider of medical or 
                other items or services or supplier who submits 
                an application for enrollment or revalidation 
                of enrollment in the program under this title, 
                title XIX, or title XXI on or after the date 
                that is 1 year after the date of enactment of 
                this paragraph shall disclose (in a form and 
                manner and at such time as determined by the 
                Secretary) any current or previous affiliation 
                (directly or indirectly) with a provider of 
                medical or other items or services or supplier 
                that has uncollected debt, has been or is 
                subject to a payment suspension under a Federal 
                health care program (as defined in section 
                1128B(f)), has been excluded from participation 
                under the program under this title, the 
                Medicaid program under title XIX, or the CHIP 
                program under title XXI, or has had its billing 
                privileges denied or revoked.
                  (B) Authority to deny enrollment.--If the 
                Secretary determines that such previous 
                affiliation poses an undue risk of fraud, 
                waste, or abuse, the Secretary may deny such 
                application. Such a denial shall be subject to 
                appeal in accordance with paragraph (7).
          (6) Authority to adjust payments of providers of 
        services and suppliers with the same tax identification 
        number for medicare obligations.--
                  (A) In general.--Notwithstanding any other 
                provision of this title, in the case of an 
                applicable provider of services or supplier, 
                the Secretary may make any necessary 
                adjustments to payments to the applicable 
                provider of services or supplier under the 
                program under this title in order to satisfy 
                any amount described in subparagraph (B)(ii) 
                due from such obligated provider of services or 
                supplier.
                  (B) Definitions.--In this paragraph:
                          (i) In general.--The term 
                        ``applicable provider of services or 
                        supplier'' means a provider of services 
                        or supplier that has the same taxpayer 
                        identification number assigned under 
                        section 6109 of the Internal Revenue 
                        Code of 1986 as is assigned to the 
                        obligated provider of services or 
                        supplier under such section, regardless 
                        of whether the applicable provider of 
                        services or supplier is assigned a 
                        different billing number or national 
                        provider identification number under 
                        the program under this title than is 
                        assigned to the obligated provider of 
                        services or supplier.
                          (ii) Obligated provider of services 
                        or supplier.--The term ``obligated 
                        provider of services or supplier'' 
                        means a provider of services or 
                        supplier that owes an amount that is 
                        more than the amount required to be 
                        paid under the program under this title 
                        (as determined by the Secretary).
          (7) Temporary moratorium on enrollment of new 
        providers.--
                  (A) In general.--The Secretary may impose a 
                temporary moratorium on the enrollment of new 
                providers of services and suppliers, including 
                categories of providers of services and 
                suppliers, in the program under this title, 
                under the Medicaid program under title XIX, or 
                under the CHIP program under title XXI if the 
                Secretary determines such moratorium is 
                necessary to prevent or combat fraud, waste, or 
                abuse under either such program.
                  (B) Limitation on review.--There shall be no 
                judicial review under section 1869, section 
                1878, or otherwise, of a temporary moratorium 
                imposed under subparagraph (A).
          (8) Compliance programs.--
                  (A) In general.--On or after the date of 
                implementation determined by the Secretary 
                under subparagraph (C), a provider of medical 
                or other items or services or supplier within a 
                particular industry sector or category shall, 
                as a condition of enrollment in the program 
                under this title, title XIX, or title XXI, 
                establish a compliance program that contains 
                the core elements established under 
                subparagraph (B) with respect to that provider 
                or supplier and industry or category.
                  (B) Establishment of core elements.--The 
                Secretary, in consultation with the Inspector 
                General of the Department of Health and Human 
                Services, shall establish core elements for a 
                compliance program under subparagraph (A) for 
                providers or suppliers within a particular 
                industry or category.
                  (C) Timeline for implementation.--The 
                Secretary shall determine the timeline for the 
                establishment of the core elements under 
                subparagraph (B) and the date of the 
                implementation of subparagraph (A) for 
                providers or suppliers within a particular 
                industry or category. The Secretary shall, in 
                determining such date of implementation, 
                consider the extent to which the adoption of 
                compliance programs by a provider of medical or 
                other items or services or supplier is 
                widespread in a particular industry sector or 
                with respect to a particular provider or 
                supplier category.
          (8)\62\ Hearing rights in cases of denial or non-
        renewal.--A provider of services or supplier whose 
        application to enroll (or, if applicable, to renew 
        enrollment) under this title is denied may have a 
        hearing and judicial review of such denial under the 
        procedures that apply under subsection (h)(1)(A) to a 
        provider of services that is dissatisfied with a 
        determination by the Secretary.
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    \62\Two paragraph (8)s' so in law. See amendments made by section 
6401 of Public Law 111-148 and section 1304 of Public Law 111-152.
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  (k) Quality Reporting by Cancer Hospitals.--
          (1) In general.--For purposes of fiscal year 2014 and 
        each subsequent fiscal year, a hospital described in 
        section 1886(d)(1)(B)(v) shall submit data to the 
        Secretary in accordance with paragraph (2) with respect 
        to such a fiscal year.
          (2) Submission of quality data.--For fiscal year 2014 
        and each subsequent fiscal year, each hospital 
        described in such section shall submit to the Secretary 
        data on quality measures specified under paragraph (3). 
        Such data shall be submitted in a form and manner, and 
        at a time, specified by the Secretary for purposes of 
        this subparagraph.
          (3) Quality measures.--
                  (A) In general.--Subject to subparagraph (B), 
                any measure specified by the Secretary under 
                this paragraph must have been endorsed by the 
                entity with a contract under section 1890(a).
                  (B) Exception.--In the case of a specified 
                area or medical topic determined appropriate by 
                the Secretary for which a feasible and 
                practical measure has not been endorsed by the 
                entity with a contract under section 1890(a), 
                the Secretary may specify a measure that is not 
                so endorsed as long as due consideration is 
                given to measures that have been endorsed or 
                adopted by a consensus organization identified 
                by the Secretary.
                  (C) Time frame.--Not later than October 1, 
                2012, the Secretary shall publish the measures 
                selected under this paragraph that will be 
                applicable with respect to fiscal year 2014.
          (4) Public availability of data submitted.--The 
        Secretary shall establish procedures for making data 
        submitted under paragraph (4) available to the public. 
        Such procedures shall ensure that a hospital described 
        in section 1886(d)(1)(B)(v) has the opportunity to 
        review the data that is to be made public with respect 
        to the hospital prior to such data being made public. 
        The Secretary shall report quality measures of process, 
        structure, outcome, patients' perspective on care, 
        efficiency, and costs of care that relate to services 
        furnished in such hospitals on the Internet website of 
        the Centers for Medicare & Medicaid Services.

           *       *       *       *       *       *       *


          payment to hospitals for inpatient hospital services

  Sec. 1886. (a)(1)(A)(i) The Secretary, in determining the 
amount of the payments that may be made under this title with 
respect to operating costs of inpatient hospital services (as 
defined in paragraph (4)) shall not recognize as reasonable (in 
the efficient delivery of health services) costs for the 
provision of such services by a hospital for a cost reporting 
period to the extent such costs exceed the applicable 
percentage (as determined under clause (ii)) of the average of 
such costs for all hospitals in the same grouping as such 
hospital for comparable time periods.
  (ii) For purposes of clause (i), the applicable percentage 
for hospital cost reporting periods beginning--
          (I) on or after October 1, 1982, and before October 
        1, 1983, is 120 percent;
          (II) on or after October 1, 1983, and before October 
        1, 1984, is 115 percent; and
          (III) on or after October 1, 1984, is 110 percent.
  (B)(i) For purposes of subparagraph (A) the Secretary shall 
establish case mix indexes for all short- term hospitals, and 
shall set limits for each hospital based upon the general mix 
of types of medical cases with respect to which such hospital 
provides services for which payment may be made under this 
title.
  (ii) The Secretary shall set such limits for a cost reporting 
period of a hospital--
          (I) by updating available data for a previous period 
        to the immediate preceding cost reporting period by the 
        estimated average rate of change of hospital costs 
        industry-wide, and
          (II) by projecting for the cost reporting period by 
        the applicable percentage increase (as defined in 
        subsection (b)(3)(B)).
  (C) The limitation established under subparagraph (A) for any 
hospital shall in no event be lower than the allowable 
operating costs of inpatient hospital services (as defined in 
paragraph (4)) recognized under this title for such hospital 
for such hospital's last cost reporting period prior to the 
hospital's first cost reporting period for which this section 
is in effect.
  (D) Subparagraph (A) shall not apply to cost reporting 
periods beginning on or after October 1, 1983.
  (2) The Secretary shall provide for such exemptions from, and 
exceptions and adjustments to, the limitation established under 
paragraph (1)(A) as he deems appropriate, including those which 
he deems necessary to take into account--
          (A) the special needs of sole community hospitals, of 
        new hospitals, of risk based health maintenance 
        organizations, and of hospitals which provide atypical 
        services or essential community services, and to take 
        into account extraordinary circumstances beyond the 
        hospital's control, medical and paramedical education 
        costs, significantly fluctuating population in the 
        service area of the hospital, and unusual labor costs,
          (B) the special needs of psychiatric hospitals and of 
        public or other hospitals that serve a significantly 
        disproportionate number of patients who have low income 
        or are entitled to benefits under part A of this title, 
        and
          (C) a decrease in the inpatient hospital services 
        that a hospital provides and that are customarily 
        provided directly by similar hospitals which results in 
        a significant distortion in the operating costs of 
        inpatient hospital services.
  (3) The limitation established under paragraph (1)(A) shall 
not apply with respect to any hospital which--
          (A) is located outside of a standard metropolitan 
        statistical area, and
          (B)(i) has less than 50 beds, and
          (ii) was in operation and had less than 50 beds on 
        the date of the enactment of this section.
  (4) For purposes of this section, the term ``operating costs 
of inpatient hospital services'' includes all routine operating 
costs, ancillary service operating costs, and special care unit 
operating costs with respect to inpatient hospital services as 
such costs are determined on an average per admission or per 
discharge basis (as determined by the Secretary), and includes 
the costs of all services for which payment may be made under 
this title that are provided by the hospital (or by an entity 
wholly owned or operated by the hospital) to the patient during 
the 3 days (or, in the case of a hospital that is not a 
subsection (d) hospital, during the 1 day) immediately 
preceding the date of the patient's admission if such services 
are diagnostic services (including clinical diagnostic 
laboratory tests) or are other services related to the 
admission (as defined by the Secretary). Such term does not 
include costs of approved educational activities, a return on 
equity capital, or, other capital-related costs (as defined by 
the Secretary for periods before October 1, 1987). In applying 
the first sentence of this paragraph, the term ``other services 
related to the admission'' includes all services that are not 
diagnostic services (other than ambulance and maintenance renal 
dialysis services) for which payment may be made under this 
title that are provided by a hospital (or an entity wholly 
owned or operated by the hospital) to a patient--
          (A)\71\ on the date of the patient's inpatient 
        admission; or
---------------------------------------------------------------------------
    \71\Margins so in law.
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          (B) during the 3 days (or, in the case of a hospital 
        that is not a subsection (d) hospital, during the 1 
        day) immediately preceding the date of such admission 
        unless the hospital demonstrates (in a form and manner, 
        and at a time, specified by the Secretary) that such 
        services are not related (as determined by the 
        Secretary) to such admission.
  (b)(1) Notwithstanding section 1814(b) but subject to the 
provisions of section 1813, if the operating costs of inpatient 
hospital services (as defined in subsection (a)(4)) of a 
hospital (other than a subsection (d) hospital, as defined in 
subsection (d)(1)(B) and other than a rehabilitation facility 
described in subsection (j)(1)) for a cost reporting period 
subject to this paragraph--
          (A) are less than or equal to the target amount (as 
        defined in paragraph (3)) for that hospital for that 
        period, the amount of the payment with respect to such 
        operating costs payable under part A on a per discharge 
        or per admission basis (as the case may be) shall be 
        equal to the amount of such operating costs, plus--
                  (i) 15 percent of the amount by which the 
                target amount exceeds the amount of the 
                operating costs, or
                  (ii) 2 percent of the target amount,
        whichever is less;
          (B) are greater than the target amount but do not 
        exceed 110 percent of the target amount, the amount of 
        the payment with respect to those operating costs 
        payable under part A on a per discharge basis shall 
        equal the target amount; or
          (C) are greater than 110 percent of the target 
        amount, the amount of the payment with respect to such 
        operating costs payable under part A on a per discharge 
        or per admission basis (as the case may be) shall be 
        equal to (i) the target amount, plus (ii) in the case 
        of cost reporting periods beginning on or after October 
        1, 1991, an additional amount equal to 50 percent of 
        the amount by which the operating costs exceed 110 
        percent of the target amount (except that such 
        additional amount may not exceed 10 percent of the 
        target amount) after any exceptions or adjustments are 
        made to such target amount for the cost reporting 
        period;
plus the amount, if any, provided under paragraph (2), except 
that in no case may the amount payable under this title (other 
than on the basis of a DRG prospective payment rate determined 
under subsection (d)) with respect to operating costs of 
inpatient hospital services exceed the maximum amount payable 
with respect to such costs pursuant to subsection (a).
  (2)(A) Except as provided in subparagraph (E), in addition to 
the payment computed under paragraph (1), in the case of an 
eligible hospital (described in subparagraph (B)) for a cost 
reporting period beginning on or after October 1, 1997, the 
amount of payment on a per discharge basis under paragraph (1) 
shall be increased by the lesser of--
          (i) 50 percent of the amount by which the operating 
        costs are less than the expected costs (as defined in 
        subparagraph (D)) for the period; or
          (ii) 1 percent of the target amount for the period.
  (B) For purposes of this paragraph, an ``eligible hospital'' 
means with respect to a cost reporting period, a hospital--
          (i) that has received payments under this subsection 
        for at least 3 full cost reporting periods before that 
        cost reporting period, and
          (ii) whose operating costs for the period are less 
        than the least of its target amount, its trended costs 
        (as defined in subparagraph (C)), or its expected costs 
        (as defined in subparagraph (D)) for the period.
  (C) For purposes of subparagraph (B)(ii), the term ``trended 
costs'' means for a hospital cost reporting period ending in a 
fiscal year--
          (i) in the case of a hospital for which its cost 
        reporting period ending in fiscal year 1996 was its 
        third or subsequent full cost reporting period for 
        which it receives payments under this subsection, the 
        lesser of the operating costs or target amount for that 
        hospital for its cost reporting period ending in fiscal 
        year 1996, or
          (ii) in the case of any other hospital, the operating 
        costs for that hospital for its third full cost 
        reporting period for which it receives payments under 
        this subsection,
increased (in a compounded manner) for each succeeding fiscal 
year (through the fiscal year involved) by the market basket 
percentage increase for the fiscal year.
  (D) For purposes of this paragraph, the term ``expected 
costs'', with respect to the cost reporting period ending in a 
fiscal year, means the lesser of the operating costs of 
inpatient hospital services or target amount per discharge for 
the previous cost reporting period updated by the market basket 
percentage increase (as defined in paragraph (3)(B)(iii)) for 
the fiscal year.
  (E)(i) In the case of an eligible hospital that is a hospital 
or unit that is within a class of hospital described in clause 
(ii) with a 12-month cost reporting period beginning before the 
enactment of this subparagraph, in determining the amount of 
the increase under subparagraph (A), the Secretary shall 
substitute for the percentage of the target amount applicable 
under subparagraph (A)(ii)--
          (I) for a cost reporting period beginning on or after 
        October 1, 2000, and before September 30, 2001, 1.5 
        percent; and
          (II) for a cost reporting period beginning on or 
        after October 1, 2001, and before September 30, 2002, 2 
        percent.
  (ii) For purposes of clause (i), each of the following shall 
be treated as a separate class of hospital:
          (I) Hospitals described in clause (i) of subsection 
        (d)(1)(B) and psychiatric units described in the matter 
        following clause (v) of such subsection.
          (II) Hospitals described in clause (iv) of such 
        subsection.
  (3)(A) Except as provided in subparagraph (C) and succeeding 
subparagraphs and in paragraph (7)(A)(ii), for purposes of this 
subsection, the term ``target amount'' means, with respect to a 
hospital for a particular 12-month cost reporting period--
          (i) in the case of the first such reporting period 
        for which this subsection is in effect, the allowable 
        operating costs of inpatient hospital services (as 
        defined in subsection (a)(4)) recognized under this 
        title for such hospital for the preceding 12-month cost 
        reporting period, and
          (ii) in the case of a later reporting period, the 
        target amount for the preceding 12-month cost reporting 
        period,
increased by the applicable percentage increase under 
subparagraph (B) for that particular cost reporting period.
  (B)(i) For purposes of subsection (d) and subsection (j) for 
discharges occurring during a fiscal year, the ``applicable 
percentage increase'' shall be--
          (I) for fiscal year 1986, \1/2\ percent,
          (II) for fiscal year 1987, 1.15 percent,
          (III) for fiscal year 1988, 3.0 percent for hospitals 
        located in a rural area, 1.5 percent for hospitals 
        located in a large urban area (as defined in subsection 
        (d)(2)(D)), and 1.0 percent for hospitals located in 
        other urban areas,
          (IV) for fiscal year 1989, the market basket 
        percentage increase minus 1.5 percentage points for 
        hospitals located in a rural area, the market basket 
        percentage increase minus 2.0 percentage points for 
        hospitals located in a large urban area, and the market 
        basket percentage increase minus 2.5 percentage points 
        for hospitals located in other urban areas,
          (V) for fiscal year 1990, the market basket 
        percentage increase plus 4.22 percentage points for 
        hospitals located in a rural area, the market basket 
        percentage increase plus 0.12 percentage points for 
        hospitals located in a large urban area, and the market 
        basket percentage increase minus 0.53 percentage points 
        for hospitals located in other urban areas,
          (VI) for fiscal year 1991, the market basket 
        percentage increase minus 2.0 percentage points for 
        hospitals in a large urban or other urban area, and the 
        market basket percentage increase minus 0.7 percentage 
        point for hospitals located in a rural area,
          (VII) for fiscal year 1992, the market basket 
        percentage increase minus 1.6 percentage points for 
        hospitals in a large urban or other urban area, and the 
        market basket percentage increase minus 0.6 percentage 
        point for hospitals located in a rural area,
          (VIII) for fiscal year 1993, the market basket 
        percentage increase minus 1.55 percentage point for 
        hospitals in a large urban or other urban area, and the 
        market basket percentage increase minus 0.55 for 
        hospitals located in a rural area,
          (IX) for fiscal year 1994, the market basket 
        percentage increase minus 2.5 percentage points for 
        hospitals located in a large urban or other urban area, 
        and the market basket percentage increase minus 1.0 
        percentage point for hospitals located in a rural area,
          (X) for fiscal year 1995, the market basket 
        percentage increase minus 2.5 percentage points for 
        hospitals located in a large urban or other urban area, 
        and such percentage increase for hospitals located in a 
        rural area as will provide for the average standardized 
        amount determined under subsection (d)(3)(A) for 
        hospitals located in a rural area being equal to such 
        average standardized amount for hospitals located in an 
        urban area (other than a large urban area),
          (XI) for fiscal year 1996, the market basket 
        percentage increase minus 2.0 percentage points for 
        hospitals in all areas,
          (XII) for fiscal year 1997, the market basket 
        percentage increase minus 0.5 percentage point for 
        hospitals in all areas,
          (XIII) for fiscal year 1998, 0 percent,
          (XIV) for fiscal year 1999, the market basket 
        percentage increase minus 1.9 percentage points for 
        hospitals in all areas,
          (XV) for fiscal year 2000, the market basket 
        percentage increase minus 1.8 percentage points for 
        hospitals in all areas,
          (XVI) for fiscal year 2001, the market basket 
        percentage increase for hospitals in all areas,
          (XVII) for fiscal year 2002, the market basket 
        percentage increase minus 0.55 percentage points for 
        hospitals in all areas,
          (XVIII) for fiscal year 2003, the market basket 
        percentage increase minus 0.55 percentage points for 
        hospitals in all areas,
          (XIX) for each of fiscal years 2004 through 2006, 
        subject to clause (vii), the market basket percentage 
        increase for hospitals in all areas; and
          (XX) for each subsequent fiscal year, subject to 
        clauses (viii), (ix), (xi), and (xii), the market 
        basket percentage increase for hospitals in all areas.
  (ii) For purposes of subparagraphs (A) and (E), the 
``applicable percentage increase'' for 12-month cost reporting 
periods beginning during--
          (I) fiscal year 1986, is 0.5 percent,
          (II) fiscal year 1987, is 1.15 percent,
          (III) fiscal year 1988, is the market basket 
        percentage increase minus 2.0 percentage points,
          (IV) a subsequent fiscal year ending on or before 
        September 30, 1993, is the market basket percentage 
        increase,
          (V) fiscal years 1994 through 1997, is the market 
        basket percentage increase minus the applicable 
        reduction (as defined in clause (v)(II)), or in the 
        case of a hospital for a fiscal year for which the 
        hospital's update adjustment percentage (as defined in 
        clause (v)(I)) is at least 10 percent, the market 
        basket percentage increase,
          (VI) for fiscal year 1998, is 0 percent,
          (VII) for fiscal years 1999 through 2002, is the 
        applicable update factor specified under clause (vi) 
        for the fiscal year, and
          (VIII) subsequent fiscal years is the market basket 
        percentage increase.
  (iii) For purposes of this subparagraph, the term ``market 
basket percentage increase'' means, with respect to cost 
reporting periods and discharges occurring in a fiscal year, 
the percentage, estimated by the Secretary before the beginning 
of the period or fiscal year, by which the cost of the mix of 
goods and services (including personnel costs but excluding 
nonoperating costs) comprising routine, ancillary, and special 
care unit inpatient hospital services, based on an index of 
appropriately weighted indicators of changes in wages and 
prices which are representative of the mix of goods and 
services included in such inpatient hospital services, for the 
period or fiscal year will exceed the cost of such mix of goods 
and services for the preceding 12-month cost reporting period 
or fiscal year.
  (iv) For purposes of subparagraphs (C) and (D), the 
``applicable percentage increase'' is--
          (I) for 12-month cost reporting periods beginning 
        during fiscal years 1986 through 1993, the applicable 
        percentage increase specified in clause (ii),
          (II) for fiscal year 1994, the market basket 
        percentage increase minus 2.3 percentage points 
        (adjusted to exclude any portion of a cost reporting 
        period beginning during fiscal year 1993 for which the 
        applicable percentage increase is determined under 
        subparagraph (I)),
          (III) for fiscal year 1995, the market basket 
        percentage increase minus 2.2 percentage points, and
          (IV) for fiscal year 1996 and each subsequent fiscal 
        year, the applicable percentage increase under clause 
        (i).
  (v) For purposes of clause (ii)(V)--
          (I) a hospital's ``update adjustment percentage'' for 
        a fiscal year is the percentage by which the hospital's 
        allowable operating costs of inpatient hospital 
        services recognized under this title for the cost 
        reporting period beginning in fiscal year 1990 exceeds 
        the hospital's target amount (as determined under 
        subparagraph (A)) for such cost reporting period, 
        increased for each fiscal year (beginning with fiscal 
        year 1994) by the sum of any of the hospital's 
        applicable reductions under subclause (V) for previous 
        fiscal years; and
          (II) the ``applicable reduction'' with respect to a 
        hospital for a fiscal year is the lesser of 1 
        percentage point or the percentage point difference 
        between 10 percent and the hospital's update adjustment 
        percentage for the fiscal year.
  (vi) For purposes of clause (ii)(VII) for a fiscal year, if a 
hospital's allowable operating costs of inpatient hospital 
services recognized under this title for the most recent cost 
reporting period for which information is available--
          (I) is equal to, or exceeds, 110 percent of the 
        hospital's target amount (as determined under 
        subparagraph (A)) for such cost reporting period, the 
        applicable update factor specified under this clause is 
        the market basket percentage;
          (II) exceeds 100 percent, but is less than 110 
        percent, of such target amount for the hospital, the 
        applicable update factor specified under this clause is 
        0 percent or, if greater, the market basket percentage 
        minus 0.25 percentage points for each percentage point 
        by which such allowable operating costs (expressed as a 
        percentage of such target amount) is less than 110 
        percent of such target amount;
          (III) is equal to, or less than 100 percent, but 
        exceeds \2/3\ of such target amount for the hospital, 
        the applicable update factor specified under this 
        clause is 0 percent or, if greater, the market basket 
        percentage minus 2.5 percentage points; or
          (IV) does not exceed \2/3\ of such target amount for 
        the hospital, the applicable update factor specified 
        under this clause is 0 percent.
  (vii)(I) For purposes of clause (i)(XIX) for fiscal years 
2005 and 2006, in a case of a subsection (d) hospital that does 
not submit data to the Secretary in accordance with subclause 
(II) with respect to such a fiscal year, the applicable 
percentage increase under such clause for such fiscal year 
shall be reduced by 0.4 percentage points. Such reduction shall 
apply only with respect to the fiscal year involved, and the 
Secretary shall not take into account such reduction in 
computing the applicable percentage increase under clause 
(i)(XIX) for a subsequent fiscal year.
  (II) For fiscal years 2005 and 2006, each subsection (d) 
hospital shall submit to the Secretary quality data (for a set 
of 10 indicators established by the Secretary as of November 1, 
2003) that relate to the quality of care furnished by the 
hospital in inpatient settings in a form and manner, and at a 
time, specified by the Secretary for purposes of this clause, 
but with respect to fiscal year 2005, the Secretary shall 
provide for a 30-day grace period for the submission of data by 
a hospital.
  (viii)(I) For purposes of clause (i) for fiscal year 2007 and 
each subsequent fiscal year, in the case of a subsection (d) 
hospital that does not submit, to the Secretary in accordance 
with this clause, data required to be submitted on measures 
selected under this clause with respect to such a fiscal year, 
the applicable percentage increase under clause (i) for such 
fiscal year shall be reduced by 2.0 percentage points (or, 
beginning with fiscal year 2015, by one-quarter of such 
applicable percentage increase (determined without regard to 
clause (ix), (xi), or (xii))). Such reduction shall apply only 
with respect to the fiscal year involved and the Secretary 
shall not take into account such reduction in computing the 
applicable percentage increase under clause (i) for a 
subsequent fiscal year, and the Secretary and the Medicare 
Payment Advisory Commission shall carry out the requirements 
under section 5001(b) of the Deficit Reduction Act of 2005.
  (II) Each subsection (d) hospital shall submit data on 
measures selected under this clause to the Secretary in a form 
and manner, and at a time, specified by the Secretary for 
purposes of this clause. The Secretary may require hospitals to 
submit data on measures that are not used for the determination 
of value-based incentive payments under subsection (o).
  (III) The Secretary shall expand, beyond the measures 
specified under clause (vii)(II) and consistent with the 
succeeding subclauses, the set of measures that the Secretary 
determines to be appropriate for the measurement of the quality 
of care (including medication errors) furnished by hospitals in 
inpatient settings.
  (IV) Effective for payments beginning with fiscal year 2007, 
in expanding the number of measures under subclause (III), the 
Secretary shall begin to adopt the baseline set of performance 
measures as set forth in the November 2005 report by the 
Institute of Medicine of the National Academy of Sciences under 
section 238(b) of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003.
  (V) Effective for payments for fiscal years 2008 through 
2012, the Secretary shall add other measures that reflect 
consensus among affected parties and, to the extent feasible 
and practicable, shall include measures set forth by one or 
more national consensus building entities.
  (VI) For purposes of this clause and clause (vii), the 
Secretary may replace any measures or indicators in appropriate 
cases, such as where all hospitals are effectively in 
compliance or the measures or indicators have been subsequently 
shown not to represent the best clinical practice.
  (VII) The Secretary shall establish procedures for making 
information regarding measures submitted under this clause 
available to the public. Such procedures shall ensure that a 
hospital has the opportunity to review the data that are to be 
made public with respect to the hospital prior to such data 
being made public. The Secretary shall report quality measures 
of process, structure, outcome, patients' perspectives on care, 
efficiency, and costs of care that relate to services furnished 
in inpatient settings in hospitals on the Internet website of 
the Centers for Medicare & Medicaid Services.
  (VIII) Effective for payments beginning with fiscal year 
2013, with respect to quality measures for outcomes of care, 
the Secretary shall provide for such risk adjustment as the 
Secretary determines to be appropriate to maintain incentives 
for hospitals to treat patients with severe illnesses or 
conditions.
  (IX)(aa) Subject to item (bb), effective for payments 
beginning with fiscal year 2013, each measure specified by the 
Secretary under this clause shall be endorsed by the entity 
with a contract under section 1890(a).
  (bb) In the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible 
and practical measure has not been endorsed by the entity with 
a contract under section 1890(a), the Secretary may specify a 
measure that is not so endorsed as long as due consideration is 
given to measures that have been endorsed or adopted by a 
consensus organization identified by the Secretary.
  (X) To the extent practicable, the Secretary shall, with 
input from consensus organizations and other stakeholders, take 
steps to ensure that the measures specified by the Secretary 
under this clause are coordinated and aligned with quality 
measures applicable to--
          (aa) physicians under section 1848(k); and
          (bb) other providers of services and suppliers under 
        this title.
  (XI) The Secretary shall establish a process to validate 
measures specified under this clause as appropriate. Such 
process shall include the auditing of a number of randomly 
selected hospitals sufficient to ensure validity of the 
reporting program under this clause as a whole and shall 
provide a hospital with an opportunity to appeal the validation 
of measures reported by such hospital.
  (ix)(I) For purposes of clause (i) for fiscal year 2015 and 
each subsequent fiscal year, in the case of an eligible 
hospital (as defined in subsection (n)(6)(B)\72\) that is not a 
meaningful EHR user (as defined in subsection (n)(3)) for an 
EHR reporting period for such fiscal year, three-quarters of 
the applicable percentage increase otherwise applicable under 
clause (i) (determined without regard to clause (viii), (xi), 
or (xii)) for such fiscal year shall be reduced by 33\1/3\ 
percent for fiscal year 2015, 66\2/3\ percent for fiscal year 
2016, and 100 percent for fiscal year 2017 and each subsequent 
fiscal year. Such reduction shall apply only with respect to 
the fiscal year involved and the Secretary shall not take into 
account such reduction in computing the applicable percentage 
increase under clause (i) for a subsequent fiscal year.
---------------------------------------------------------------------------
    \72\Section 4(b)(1) of the Patient Access and Medicare Protection 
Act (P.L. 114-115) attempts to amend the first sentence of clause 
(ix)(I) by striking ``(n)(6)(A)'' and inserting ``(n)(6)''. Such 
amendment could not be executed because the matter proposed to be 
struck does not appear as a result of an earlier amendment made by 
section 602(b)(1)(A) of division O of Public Law 114-113, which struck 
``(n)(6)(A)'' and inserted ``(n)(6)(B)''.
---------------------------------------------------------------------------
  (II) The Secretary may, on a case-by-case basis (and, with 
respect to the application of subclause (I) for fiscal year 
2017, for categories of subsection (d) hospitals, as 
established by the Secretary and posted on the Internet website 
of the Centers for Medicare & Medicaid Services prior to 
December 15, 2015, an application for which must be submitted 
to the Secretary by not later than April 1, 2016), exempt an 
eligible hospital from the application of subclause (I) with 
respect to a fiscal year if the Secretary determines, subject 
to annual renewal, that requiring such hospital to be a 
meaningful EHR user during such fiscal year would result in a 
significant hardship, such as in the case of a hospital in a 
rural area without sufficient Internet access. In no case may a 
hospital be granted an exemption under this subclause for more 
than 5 years.
  (III) For fiscal year 2015 and each subsequent fiscal year, a 
State in which hospitals are paid for services under section 
1814(b)(3) shall adjust the payments to each subsection (d) 
hospital in the State that is not a meaningful EHR user (as 
defined in subsection (n)(3)) in a manner that is designed to 
result in an aggregate reduction in payments to hospitals in 
the State that is equivalent to the aggregate reduction that 
would have occurred if payments had been reduced to each 
subsection (d) hospital in the State in a manner comparable to 
the reduction under the previous provisions of this clause. The 
State shall report to the Secretary the methodology it will use 
to make the payment adjustment under the previous sentence.
  (IV) For purposes of this clause, the term ``EHR reporting 
period'' means, with respect to a fiscal year, any period (or 
periods) as specified by the Secretary.
  (x)(I) The Secretary shall develop standard Internet website 
reports tailored to meet the needs of various stakeholders such 
as hospitals, patients, researchers, and policymakers. The 
Secretary shall seek input from such stakeholders in 
determining the type of information that is useful and the 
formats that best facilitate the use of the information.
  (II) The Secretary shall modify the Hospital Compare Internet 
website to make the use and navigation of that website readily 
available to individuals accessing it.
  (xi)(I) For 2012 and each subsequent fiscal year, after 
determining the applicable percentage increase described in 
clause (i) and after application of clauses (viii) and (ix), 
such percentage increase shall be reduced by the productivity 
adjustment described in subclause (II).
  (II) The productivity adjustment described in this subclause, 
with respect to a percentage, factor, or update for a fiscal 
year, year, cost reporting period, or other annual period, is a 
productivity adjustment equal to the 10-year moving average of 
changes in annual economy-wide private nonfarm business multi-
factor productivity (as projected by the Secretary for the 10-
year period ending with the applicable fiscal year, year, cost 
reporting period, or other annual period).
  (III) The application of subclause (I) may result in the 
applicable percentage increase described in clause (i) being 
less than 0.0 for a fiscal year, and may result in payment 
rates under this section for a fiscal year being less than such 
payment rates for the preceding fiscal year.
  (xii) After determining the applicable percentage increase 
described in clause (i), and after application of clauses 
(viii), (ix), and (xi), the Secretary shall reduce such 
applicable percentage increase--
          (I) for each of fiscal years 2010 and 2011, by 0.25 
        percentage point;
          (II) for each of fiscal years 2012 and 2013, by 0.1 
        percentage point;
          (III) for fiscal year 2014, by 0.3 percentage point;
          (IV) for each of fiscal years 2015 and 2016, by 0.2 
        percentage point; and
          (V) for each of fiscal years 2017, 2018, and 2019, by 
        0.75 percentage point.
The application of this clause may result in the applicable 
percentage increase described in clause (i) being less than 0.0 
for a fiscal year, and may result in payment rates under this 
section for a fiscal year being less than such payment rates 
for the preceding fiscal year.
  (C) In the case of a hospital that is a sole community 
hospital (as defined in subsection (d)(5)(D)(iii)), subject to 
subparagraphs (I) and (L), the term ``target amount'' means--
          (i) with respect to the first 12-month cost reporting 
        period in which this subparagraph is applied to the 
        hospital--
                  (I) the allowable operating costs of 
                inpatient hospital services (as defined in 
                subsection (a)(4)) recognized under this title 
                for the hospital for the 12-month cost 
                reporting period (in this subparagraph referred 
                to as the ``base cost reporting period'') 
                preceding the first cost reporting period for 
                which this subsection was in effect with 
                respect to such hospital, increased (in a 
                compounded manner) by--
                  (II) the applicable percentage increases 
                applied to such hospital under this paragraph 
                for cost reporting periods after the base cost 
                reporting period and up to and including such 
                first 12-month cost reporting period,
          (ii) with respect to a later cost reporting period 
        beginning before fiscal year 1994, the target amount 
        for the preceding 12-month cost reporting period, 
        increased by the applicable percentage increase under 
        subparagraph (B)(iv) for discharges occurring in the 
        fiscal year in which that later cost reporting period 
        begins,
          (iii) with respect to discharges occurring in fiscal 
        year 1994, the target amount for the cost reporting 
        period beginning in fiscal year 1993 increased by the 
        applicable percentage increase under subparagraph 
        (B)(iv), or
          (iv) with respect to discharges occurring in fiscal 
        year 1995 and each subsequent fiscal year, the target 
        amount for the preceding year increased by the 
        applicable percentage increase under subparagraph 
        (B)(iv).
There shall be substituted for the base cost reporting period 
described in clause (i) a hospital's cost reporting period (if 
any) beginning during fiscal year 1987 if such substitution 
results in an increase in the target amount for the hospital.
  (D) For cost reporting periods ending on or before September 
30, 1994, and for cost reporting periods occurring on or after 
October 1, 1997, and before October 1, 2017, in the case of a 
hospital that is a medicare-dependent, small rural hospital (as 
defined in subsection (d)(5)(G)), subject to subparagraph (K), 
the term ``target amount'' means--
          (i) with respect to the first 12-month cost reporting 
        period in which this subparagraph is applied to the 
        hospital--
                  (I) the allowable operating costs of 
                inpatient hospital services (as defined in 
                subsection (a)(4)) recognized under this title 
                for the hospital for the 12-month cost 
                reporting period (in this subparagraph referred 
                to as the ``base cost reporting period'') 
                preceding the first cost reporting period for 
                which this subsection was in effect with 
                respect to such hospital, increased (in a 
                compounded manner) by--
                  (II) the applicable percentage increases 
                applied to such hospital under this paragraph 
                for cost reporting periods after the base cost 
                reporting period and up to and including such 
                first 12-month cost reporting period, or
          (ii) with respect to a later cost reporting period 
        beginning before fiscal year 1994, the target amount 
        for the preceding 12-month cost reporting period, 
        increased by the applicable percentage increase under 
        subparagraph (B)(iv) for discharges occurring in the 
        fiscal year in which that later cost reporting period 
        begins,
          (iii) with respect to discharges occurring in fiscal 
        year 1994, the target amount for the cost reporting 
        period beginning in fiscal year 1993 increased by the 
        applicable percentage increase under subparagraph 
        (B)(iv), and
          (iv) with respect to discharges occurring during 
        fiscal year 1998 through fiscal year 2017, the target 
        amount for the preceding year increased by the 
        applicable percentage increase under subparagraph 
        (B)(iv).
There shall be substituted for the base cost reporting period 
described in clause (i) a hospital's cost reporting period (if 
any) beginning during fiscal year 1987 if such substitution 
results in an increase in the target amount for the hospital.
  (E) In the case of a hospital described in clause (v) of 
subsection (d)(1)(B), the term ``target amount'' means--
          (i) with respect to the first 12-month cost reporting 
        period in which this subparagraph is applied to the 
        hospital--
                  (I) the allowable operating costs of 
                inpatient hospital services (as defined in 
                subsection (a)(4)) recognized under this title 
                for the hospital for the 12-month cost 
                reporting period (in this subparagraph referred 
                to as the ``base cost reporting period'') 
                preceding the first cost reporting period for 
                which this subsection was in effect with 
                respect to such hospital, increased (in a 
                compounded manner) by--
                  (II) the sum of the applicable percentage 
                increases applied to such hospital under this 
                paragraph for cost reporting periods after the 
                base cost reporting period and up to and 
                including such first 12-month cost reporting 
                period, or
          (ii) with respect to a later cost reporting period, 
        the target amount for the preceding 12-month cost 
        reporting period, increased by the applicable 
        percentage increase under subparagraph (B)(ii) for that 
        later cost reporting period.
There shall be substituted for the base cost reporting period 
described in clause (i) a hospital's cost reporting period (if 
any) beginning during fiscal year 1987 if such substitution 
results in an increase in the target amount for the hospital.
  (F)(i) In the case of a hospital (or unit described in the 
matter following clause (v) of subsection (d)(1)(B)) that 
received payment under this subsection for inpatient hospital 
services furnished during cost reporting periods beginning 
before October 1, 1990, that is within a class of hospital 
described in clause (iii), and that elects (in a form and 
manner determined by the Secretary) this subparagraph to apply 
to the hospital, the target amount for the hospital's 12-month 
cost reporting period beginning during fiscal year 1998 is 
equal to the average described in clause (ii).
  (ii) The average described in this clause for a hospital or 
unit shall be determined by the Secretary as follows:
          (I) The Secretary shall determine the allowable 
        operating costs for inpatient hospital services for the 
        hospital or unit for each of the 5 cost reporting 
        periods for which the Secretary has the most recent 
        settled cost reports as of the date of the enactment of 
        this subparagraph.
          (II) The Secretary shall increase the amount 
        determined under subclause (I) for each cost reporting 
        period by the applicable percentage increase under 
        subparagraph (B)(ii) for each subsequent cost reporting 
        period up to the cost reporting period described in 
        clause (i).
          (III) The Secretary shall identify among such 5 cost 
        reporting periods the cost reporting periods for which 
        the amount determined under subclause (II) is the 
        highest, and the lowest.
          (IV) The Secretary shall compute the averages of the 
        amounts determined under subclause (II) for the 3 cost 
        reporting periods not identified under subclause (III).
  (iii) For purposes of this subparagraph, each of the 
following shall be treated as a separate class of hospital:
          (I) Hospitals described in clause (i) of subsection 
        (d)(1)(B) and psychiatric units described in the matter 
        following clause (v) of such subsection.
          (II) Hospitals described in clause (ii) of such 
        subsection and rehabilitation units described in the 
        matter following clause (v) of such subsection.
          (III) Hospitals described in clause (iii) of such 
        subsection.
          (IV) Hospitals described in clause (iv) of such 
        subsection.
          (V) Hospitals described in clause (v) of such 
        subsection.
  (G)(i) In the case of a qualified long-term care hospital (as 
defined in clause (ii)) that elects (in a form and manner 
determined by the Secretary) this subparagraph to apply to the 
hospital, the target amount for the hospital's 12-month cost 
reporting period beginning during fiscal year 1998 is equal to 
the allowable operating costs of inpatient hospital services 
(as defined in subsection (a)(4)) recognized under this title 
for the hospital for the 12-month cost reporting period 
beginning during fiscal year 1996, increased by the applicable 
percentage increase for the cost reporting period beginning 
during fiscal year 1997.
  (ii) In clause (i), a ``qualified long-term care hospital'' 
means, with respect to a cost reporting period, a hospital 
described in clause (iv) of subsection (d)(1)(B) during each of 
the 2 cost reporting periods for which the Secretary has the 
most recent settled cost reports as of the date of the 
enactment of this subparagraph for each of which--
          (I) the hospital's allowable operating costs of 
        inpatient hospital services recognized under this title 
        exceeded 115 percent of the hospital's target amount, 
        and
          (II) the hospital would have a disproportionate 
        patient percentage of at least 70 percent (as 
        determined by the Secretary under subsection 
        (d)(5)(F)(vi)) if the hospital were a subsection (d) 
        hospital.
  (H)(i) In the case of a hospital or unit that is within a 
class of hospital described in clause (iv), for a cost 
reporting period beginning during fiscal years 1998 through 
2002, the target amount for such a hospital or unit may not 
exceed the amount as updated up to or for such cost reporting 
period under clause (ii).
  (ii)(I) In the case of a hospital or unit that is within a 
class of hospital described in clause (iv), the Secretary shall 
estimate the 75th percentile of the target amounts for such 
hospitals within such class for cost reporting periods ending 
during fiscal year 1996, as adjusted under clause (iii).
  (II) The Secretary shall update the amount determined under 
subclause (I), for each cost reporting period after the cost 
reporting period described in such subclause and up to the 
first cost reporting period beginning on or after October 1, 
1997, by a factor equal to the market basket percentage 
increase.
  (III) For cost reporting periods beginning during each of 
fiscal years 1999 through 2002, subject to subparagraph (J), 
the Secretary shall update such amount by a factor equal to the 
market basket percentage increase.
  (iii) In applying clause (ii)(I) in the case of a hospital or 
unit, the Secretary shall provide for an appropriate adjustment 
to the labor-related portion of the amount determined under 
such subparagraph to take into account differences between 
average wage-related costs in the area of the hospital and the 
national average of such costs within the same class of 
hospital.
  (iv) For purposes of this subparagraph, each of the following 
shall be treated as a separate class of hospital:
          (I) Hospitals described in clause (i) of subsection 
        (d)(1)(B) and psychiatric units described in the matter 
        following clause (v) of such subsection.
          (II) Hospitals described in clause (ii) of such 
        subsection and rehabilitation units described in the 
        matter following clause (v) of such subsection.
          (III) Hospitals described in clause (iv) of such 
        subsection.
  (I)(i) Subject to subparagraph (L), for cost reporting 
periods beginning on or after October 1, 2000, in the case of a 
sole community hospital there shall be substituted for the 
amount otherwise determined under subsection (d)(5)(D)(i), if 
such substitution results in a greater amount of payment under 
this section for the hospital--
          (I) with respect to discharges occurring in fiscal 
        year 2001, 75 percent of the amount otherwise 
        applicable to the hospital under subsection 
        (d)(5)(D)(i) (referred to in this clause as the 
        ``subsection (d)(5)(D)(i) amount'') and 25 percent of 
        the rebased target amount (as defined in clause (ii));
          (II) with respect to discharges occurring in fiscal 
        year 2002, 50 percent of the subsection (d)(5)(D)(i) 
        amount and 50 percent of the rebased target amount;
          (III) with respect to discharges occurring in fiscal 
        year 2003, 25 percent of the subsection (d)(5)(D)(i) 
        amount and 75 percent of the rebased target amount; and
          (IV) with respect to discharges occurring after 
        fiscal year 2003, 100 percent of the rebased target 
        amount.
  (ii) For purposes of this subparagraph, the ``rebased target 
amount'' has the meaning given the term ``target amount'' in 
subparagraph (C) except that--
          (I) there shall be substituted for the base cost 
        reporting period the 12-month cost reporting period 
        beginning during fiscal year 1996;
          (II) any reference in subparagraph (C)(i) to the 
        ``first cost reporting period'' described in such 
        subparagraph is deemed a reference to the first cost 
        reporting period beginning on or after October 1, 2000; 
        and
          (III) applicable increase percentage shall only be 
        applied under subparagraph (C)(iv) for discharges 
        occurring in fiscal years beginning with fiscal year 
        2002.
  (iii) In no case shall a hospital be denied treatment as a 
sole community hospital or payment (on the basis of a target 
rate as such as a hospital) because data are unavailable for 
any cost reporting period due to changes in ownership, changes 
in fiscal intermediaries, or other extraordinary circumstances, 
so long as data for at least one applicable base cost reporting 
period is available.
  (J) For cost reporting periods beginning during fiscal year 
2001, for a hospital described in subsection (d)(1)(B)(iv)--
          (i) the limiting or cap amount otherwise determined 
        under subparagraph (H) shall be increased by 2 percent; 
        and
          (ii) the target amount otherwise determined under 
        subparagraph (A) shall be increased by 25 percent 
        (subject to the limiting or cap amount determined under 
        subparagraph (H), as increased by clause (i)).
  (K)(i) With respect to discharges occurring on or after 
October 1, 2006, in the case of a medicare-dependent, small 
rural hospital, for purposes of applying subparagraph (D)--
          (I) there shall be substituted for the base cost 
        reporting period described in subparagraph (D)(i) the 
        12-month cost reporting period beginning during fiscal 
        year 2002; and
          (II) any reference in such subparagraph to the 
        ``first cost reporting period'' described in such 
        subparagraph is deemed a reference to the first cost 
        reporting period beginning on or after October 1, 2006.
  (ii) This subparagraph shall only apply to a hospital if the 
substitution described in clause (i)(I) results in an increase 
in the target amount under subparagraph (D) for the hospital.
  (L)(i) For cost reporting periods beginning on or after 
January 1, 2009, in the case of a sole community hospital there 
shall be substituted for the amount otherwise determined under 
subsection (d)(5)(D)(i) of this section, if such substitution 
results in a greater amount of payment under this section for 
the hospital, the subparagraph (L) rebased target amount.
  (ii) For purposes of this subparagraph, the term 
``subparagraph (L) rebased target amount'' has the meaning 
given the term ``target amount'' in subparagraph (C), except 
that--
          (I) there shall be substituted for the base cost 
        reporting period the 12-month cost reporting period 
        beginning during fiscal year 2006;
          (II) any reference in subparagraph (C)(i) to the 
        ``first cost reporting period'' described in such 
        subparagraph is deemed a reference to the first cost 
        reporting period beginning on or after January 1, 2009; 
        and
          (III) the applicable percentage increase shall only 
        be applied under subparagraph (C)(iv) for discharges 
        occurring on or after January 1, 2009.
  (4)(A)(i) The Secretary shall provide for an exception and 
adjustment to (and in the case of a hospital described in 
subsection (d)(1)(B)(iii), may provide an exemption from) the 
method under this subsection for determining the amount of 
payment to a hospital where events beyond the hospital's 
control or extraordinary circumstances, including changes in 
the case mix of such hospital, create a distortion in the 
increase in costs for a cost reporting period (including any 
distortion in the costs for the base period against which such 
increase is measured). The Secretary may provide for such other 
exemptions from, and exceptions and adjustments to, such method 
as the Secretary deems appropriate, including the assignment of 
a new base period which is more representative, as determined 
by the Secretary, of the reasonable and necessary cost of 
inpatient services and including those which he deems necessary 
to take into account a decrease in the inpatient hospital 
services that a hospital provides and that are customarily 
provided directly by similar hospitals which results in a 
significant distortion in the operating costs of inpatient 
hospital services. The Secretary shall announce a decision on 
any request for an exemption, exception, or adjustment under 
this paragraph not later than 180 days after receiving a 
completed application from the intermediary for such exemption, 
exception, or adjustment, and shall include in such decision a 
detailed explanation of the grounds on which such request was 
approved or denied.
  (ii) The payment reductions under paragraph (3)(B)(ii)(V) 
shall not be considered by the Secretary in making adjustments 
pursuant to clause (i). In making such reductions, the 
Secretary shall treat the applicable update factor described in 
paragraph (3)(B)(vi) for a fiscal year as being equal to the 
market basket percentage for that year.
  (B) In determining under subparagraph (A) whether to assign a 
new base period which is more representative of the reasonable 
and necessary cost to a hospital of providing inpatient 
services, the Secretary shall take into consideration--
          (i) changes in applicable technologies and medical 
        practices, or differences in the severity of illness 
        among patients, that increase the hospital's costs;
          (ii) whether increases in wages and wage-related 
        costs for hospitals located in the geographic area in 
        which the hospital is located exceed the average of the 
        increases in such costs paid by hospitals in the United 
        States; and
          (iii) such other factors as the Secretary considers 
        appropriate in determining increases in the hospital's 
        costs of providing inpatient services.
  (C) Paragraph (1) shall not apply to payment of hospitals 
which is otherwise determined under paragraph (3) of section 
1814(b).
  (5) In the case of any hospital having any cost reporting 
period of other than a 12-month period, the Secretary shall 
determine the 12-month period which shall be used for purposes 
of this section.
  (6) In the case of any hospital which becomes subject to the 
taxes under section 3111 of the Internal Revenue Code of 1954, 
with respect to any or all of its employees, for part or all of 
a cost reporting period, and was not subject to such taxes with 
respect to any or all of its employees for all or part of the 
12-month base cost reporting period referred to in subsection 
(b)(3)(A)(i), the Secretary shall provide for an adjustment by 
increasing the base period amount described in such subsection 
for such hospital by an amount equal to the amount of such 
taxes which would have been paid or accrued by such hospital 
for such base period if such hospital had been subject to such 
taxes for all of such base period with respect to all its 
employees, minus the amount of any such taxes actually paid or 
accrued for such base period.
  (7)(A) Notwithstanding paragraph (1), in the case of a 
hospital or unit that is within a class of hospital described 
in subparagraph (B) which first receives payments under this 
section on or after October 1, 1997--
          (i) for each of the first 2 cost reporting periods 
        for which the hospital has a settled cost report, the 
        amount of the payment with respect to operating costs 
        described in paragraph (1) under part A on a per 
        discharge or per admission basis (as the case may be) 
        is equal to the lesser of--
                  (I) the amount of operating costs for such 
                respective period, or
                  (II) 110 percent of the national median (as 
                estimated by the Secretary) of the target 
                amount for hospitals in the same class as the 
                hospital for cost reporting periods ending 
                during fiscal year 1996, updated by the 
                hospital market basket increase percentage to 
                the fiscal year in which the hospital first 
                received payments under this section, as 
                adjusted under subparagraph (C); and
          (ii) for purposes of computing the target amount for 
        the subsequent cost reporting period, the target amount 
        for the preceding cost reporting period is equal to the 
        amount determined under clause (i) for such preceding 
        period.
  (B) For purposes of this paragraph, each of the following 
shall be treated as a separate class of hospital:
          (i) Hospitals described in clause (i) of subsection 
        (d)(1)(B) and psychiatric units described in the matter 
        following clause (v) of such subsection.
          (ii) Hospitals described in clause (ii) of such 
        subsection and rehabilitation units described in the 
        matter following clause (v) of such subsection.
          (iii) Hospitals described in clause (iv) of such 
        subsection.
  (C) In applying subparagraph (A)(i)(II) in the case of a 
hospital or unit, the Secretary shall provide for an 
appropriate adjustment to the labor-related portion of the 
amount determined under such subparagraph to take into account 
differences between average wage-related costs in the area of 
the hospital and the national average of such costs within the 
same class of hospital.
  (c)(1) The Secretary may provide, in his discretion, that 
payment with respect to services provided by a hospital in a 
State may be made in accordance with a hospital reimbursement 
control system in a State, rather than in accordance with the 
other provisions of this title, if the chief executive officer 
of the State requests such treatment and if--
          (A) the Secretary determines that the system, if 
        approved under this subsection, will apply (i) to 
        substantially all non- Federal acute care hospitals (as 
        defined by the Secretary) in the State and (ii) to the 
        review of at least 75 percent of all revenues or 
        expenses in the State for inpatient hospital services 
        and of revenues or expenses for inpatient hospital 
        services provided under the State's plan approved under 
        title XIX;
          (B) the Secretary has been provided satisfactory 
        assurances as to the equitable treatment under the 
        system of all entities (including Federal and State 
        programs) that pay hospitals for inpatient hospital 
        services, of hospital employees, and of hospital 
        patients;
          (C) the Secretary has been provided satisfactory 
        assurances that under the system, over 36-month periods 
        (the first such period beginning with the first month 
        in which this subsection applies to that system in the 
        State), the amount of payments made under this title 
        under such system will not exceed the amount of 
        payments which would otherwise have been made under 
        this title not using such system;
          (D) the Secretary determines that the system will not 
        preclude an eligible organization (as defined in 
        section 1876(b)) from negotiating directly with 
        hospitals with respect to the organization's rate of 
        payment for inpatient hospital services; and
          (E) the Secretary determines that the system requires 
        hospitals to meet the requirement of section 
        1866(a)(1)(G) and the system provides for the exclusion 
        of certain costs in accordance with section 1862(a)(14) 
        (except for such waivers thereof as the Secretary 
        provides by regulation).
The Secretary cannot deny the application of a State under this 
subsection on the ground that the State's hospital 
reimbursement control system is based on a payment methodology 
other than on the basis of a diagnosis-related group or on the 
ground that the amount of payments made under this title under 
such system must be less than the amount of payments which 
would otherwise have been made under this title not using such 
system. If the Secretary determines that the conditions 
described in subparagraph (C) are based on maintaining payment 
amounts at no more than a specified percentage increase above 
the payment amounts in a base period, the State has the option 
of applying such test (for inpatient hospital services under 
part A) on an aggregate payment basis or on the basis of the 
amount of payment per inpatient discharge or admission. If the 
Secretary determines that the conditions described in 
subparagraph (C) are based on maintaining aggregate payment 
amounts below a national average percentage increase in total 
payments under part A for inpatient hospital services, the 
Secretary cannot deny the application of a State under this 
subsection on the ground that the State's rate of increase in 
such payments for such services must be less than such national 
average rate of increase.
  (2) In determining under paragraph (1)(C) the amount of 
payment which would otherwise have been made under this title 
for a State, the Secretary may provide for appropriate 
adjustment of such amount to take into account previous 
reductions effected in the amount of payments made under this 
title in the State due to the operation of the hospital 
reimbursement control system in the State if the system has 
resulted in an aggregate rate of increase in operating costs of 
inpatient hospital services (as defined in subsection (a)(4)) 
under this title for hospitals in the State which is less than 
the aggregate rate of increase in such costs under this title 
for hospitals in the United States.
  (3) The Secretary shall discontinue payments under a system 
described in paragraph (1) if the Secretary--
          (A) determines that the system no longer meets the 
        requirements of subparagraphs (A), (D), and (E) of 
        paragraph (1) and, if applicable, the requirements of 
        paragraph (5), or
          (B) has reason to believe that the assurances 
        described in subparagraph (B) or (C) of paragraph (1) 
        (or, if applicable, in paragraph (5)) are not being (or 
        will not be) met.
  (4) The Secretary shall approve the request of a State under 
paragraph (1) with respect to a hospital reimbursement control 
system if--
          (A) the requirements of subparagraphs (A), (B), (C), 
        (D), and (E) of paragraph (1) have been met with 
        respect to the system, and
          (B) with respect to that system a waiver of certain 
        requirements of title XVIII of the Social Security Act 
        has been approved on or before (and which is in effect 
        as of) the date of the enactment of the Social Security 
        Amendments of 1983, pursuant to section 402(a) of the 
        Social Security Amendments of 1967 or section 222(a) of 
        the Social Security Amendments of 1972.
With respect to a State system described in this paragraph, the 
Secretary shall judge the effectiveness of such system on the 
basis of its rate of increase or inflation in inpatient 
hospital payments for individuals under this title, as compared 
to the national rate of increase or inflation for such 
payments, with the State retaining the option to have the test 
applied on the basis of the aggregate payments under the State 
system as compared to aggregate payments which would have been 
made under the national system since October 1, 1984, to the 
most recent date for which annual data are available.
  (5) The Secretary shall approve the request of a State under 
paragraph (1) with respect to a hospital reimbursement control 
system if--
          (A) the requirements of subparagraphs (A), (B), (C), 
        (D), and (E) of paragraph (1) have been met with 
        respect to the system;
          (B) the Secretary determines that the system--
                  (i) is operated directly by the State or by 
                an entity designated pursuant to State law,
                  (ii) provides for payment of hospitals 
                covered under the system under a methodology 
                (which sets forth exceptions and adjustments, 
                as well as any method for changes in the 
                methodology) by which rates or amounts to be 
                paid for hospital services during a specified 
                period are established under the system prior 
                to the defined rate period, and
                  (iii) hospitals covered under the system will 
                make such reports (in lieu of cost and other 
                reports, identified by the Secretary, otherwise 
                required under this title) as the Secretary may 
                require in order to properly monitor assurances 
                provided under this subsection;
          (C) the State has provided the Secretary with 
        satisfactory assurances that operation of the system 
        will not result in any change in hospital admission 
        practices which result in--
                  (i) a significant reduction in the proportion 
                of patients (receiving hospital services 
                covered under the system) who have no third-
                party coverage and who are unable to pay for 
                hospital services,
                  (ii) a significant reduction in the 
                proportion of individuals admitted to hospitals 
                for inpatient hospital services for which 
                payment is (or is likely to be) less than the 
                anticipated charges for or costs of such 
                services,
                  (iii) the refusal to admit patients who would 
                be expected to require unusually costly or 
                prolonged treatment for reasons other than 
                those related to the appropriateness of the 
                care available at the hospital, or
                  (iv) the refusal to provide emergency 
                services to any person who is in need of 
                emergency services if the hospital provides 
                such services;
          (D) any change by the State in the system which has 
        the effect of materially reducing payments to hospitals 
        can only take effect upon 60 days notice to the 
        Secretary and to the hospitals the payment to which is 
        likely to be materially affected by the change; and
          (E) the State has provided the Secretary with 
        satisfactory assurances that in the development of the 
        system the State has consulted with local governmental 
        officials concerning the impact of the system on public 
        hospitals.
The Secretary shall respond to requests of States under this 
paragraph within 60 days of the date the request is submitted 
to the Secretary.
  (6) If the Secretary determines that the assurances described 
in paragraph (1)(C) have not been met with respect to any 36-
month period, the Secretary may reduce payments under this 
title to hospitals under the system in an amount equal to the 
amount by which the payment under this title under such system 
for such period exceeded the amount of payments which would 
otherwise have been made under this title not using such 
system.
  (7) In the case of a State which made a request under 
paragraph (5) before December 31, 1984, for the approval of a 
State hospital reimbursement control system and which request 
was approved--
          (A) in applying paragraphs (1)(C) and (6), a 
        reference to a ``36-month period'' is deemed a 
        reference to a ``48-month period'', and
          (B) in order to allow the State the opportunity to 
        provide the assurances described in paragraph (1)(C) 
        for a 48-month period, the Secretary may not 
        discontinue payments under the system, under the 
        authority of paragraph (3)(A) because the Secretary has 
        reason to believe that such assurances are not being 
        (or will not be) met, before July 1, 1986.
  (d)(1)(A) Notwithstanding section 1814(b) but subject to the 
provisions of section 1813, the amount of the payment with 
respect to the operating costs of inpatient hospital services 
(as defined in subsection (a)(4)) of a subsection (d) hospital 
(as defined in subparagraph (B)) for inpatient hospital 
discharges in a cost reporting period or in a fiscal year--
          (i) beginning on or after October 1, 1983, and before 
        October 1, 1984, is equal to the sum of--
                  (I) the target percentage (as defined in 
                subparagraph (C)) of the hospital's target 
                amount for the cost reporting period (as 
                defined in subsection (b)(3)(A), but determined 
                without the application of subsection (a)), and
                  (II) the DRG percentage (as defined in 
                subparagraph (C)) of the regional adjusted DRG 
                prospective payment rate determined under 
                paragraph (2) for such discharges;
          (ii) beginning on or after October 1, 1984, and 
        before October 1, 1987, is equal to the sum of--
                  (I) the target percentage (as defined in 
                subparagraph (C)) of the hospital's target 
                amount for the cost reporting period (as 
                defined in subsection (b)(3)(A), but determined 
                without the application of subsection (a)), and
                  (II) the DRG percentage (as defined in 
                subparagraph (C)) of the applicable combined 
                adjusted DRG prospective payment rate 
                determined under subparagraph (D) for such 
                discharges; or
          (iii) beginning on or after April 1, 1988, is equal 
        to
                  (I) the national adjusted DRG prospective 
                payment rate determined under paragraph (3) for 
                such discharges, or
                  (II) for discharges occurring during a fiscal 
                year ending on or before September 30, 1996, 
                the sum of 85 percent of the national adjusted 
                DRG prospective payment rate determined under 
                paragraph (3) for such discharges and 15 
                percent of the regional adjusted DRG 
                prospective payment rate determined under such 
                paragraph, but only if the average standardized 
                amount (described in clause (i)(I) or clause 
                (ii)(I) of paragraph (3)(D)) for hospitals 
                within the region of, and in the same large 
                urban or other area (or, for discharges 
                occurring during a fiscal year ending on or 
                before September 30, 1994, the same rural, 
                large urban, or other urban area) as, the 
                hospital is greater than the average 
                standardized amount (described in the 
                respective clause) for hospitals within the 
                United States in that type of area for 
                discharges occurring during such fiscal year.
  (B) As used in this section, the term ``subsection (d) 
hospital'' means a hospital located in one of the fifty States 
or the District of Columbia other than--
          (i) a psychiatric hospital (as defined in section 
        1861(f)),
          (ii) a rehabilitation hospital (as defined by the 
        Secretary),
          (iii) a hospital whose inpatients are predominantly 
        individuals under 18 years of age,
          (iv)(I) a hospital which has an average inpatient 
        length of stay (as determined by the Secretary) of 
        greater than 25 days, or
          (II) a hospital that first received payment under 
        this subsection in 1986 which has an average inpatient 
        length of stay (as determined by the Secretary) of 
        greater than 20 days and that has 80 percent or more of 
        its annual medicare inpatient discharges with a 
        principal diagnosis that reflects a finding of 
        neoplastic disease in the 12-month cost reporting 
        period ending in fiscal year 1997, or
          (v)(I) a hospital that the Secretary has classified, 
        at any time on or before December 31, 1990, (or, in the 
        case of a hospital that, as of the date of the 
        enactment of this clause, is located in a State 
        operating a demonstration project under section 
        1814(b), on or before December 31, 1991) for purposes 
        of applying exceptions and adjustments to payment 
        amounts under this subsection, as a hospital involved 
        extensively in treatment for or research on cancer,
          (II) a hospital that was recognized as a 
        comprehensive cancer center or clinical cancer research 
        center by the National Cancer Institute of the National 
        Institutes of Health as of April 20, 1983, that is 
        located in a State which, as of December 19, 1989, was 
        not operating a demonstration project under section 
        1814(b), that applied and was denied, on or before 
        December 31, 1990, for classification as a hospital 
        involved extensively in treatment for or research on 
        cancer under this clause (as in effect on the day 
        before the date of the enactment of this subclause), 
        that as of the date of the enactment of this subclause, 
        is licensed for less than 50 acute care beds, and that 
        demonstrates for the 4-year period ending on December 
        31, 1996, that at least 50 percent of its total 
        discharges have a principal finding of neoplastic 
        disease, as defined in subparagraph (E), or
          (III) a hospital that was recognized as a clinical 
        cancer research center by the National Cancer Institute 
        of the National Institutes of Health as of February 18, 
        1998, that has never been reimbursed for inpatient 
        hospital services pursuant to a reimbursement system 
        under a demonstration project under section 1814(b), 
        that is a freestanding facility organized primarily for 
        treatment of and research on cancer and is not a unit 
        of another hospital, that as of the date of the 
        enactment of this subclause, is licensed for 162 acute 
        care beds, and that demonstrates for the 4-year period 
        ending on June 30, 1999, that at least 50 percent of 
        its total discharges have a principal finding of 
        neoplastic disease, as defined in subparagraph (E);
and, in accordance with regulations of the Secretary, does not 
include a psychiatric or rehabilitation unit of the hospital 
which is a distinct part of the hospital (as defined by the 
Secretary). A hospital that was classified by the Secretary on 
or before September 30, 1995, as a hospital described in clause 
(iv) shall continue to be so classified notwithstanding that it 
is located in the same building as, or on the same campus as, 
another hospital.
  (C) For purposes of this subsection, for cost reporting 
periods beginning--
          (i) on or after October 1, 1983, and before October 
        1, 1984, the ``target percentage'' is 75 percent and 
        the ``DRG percentage'' is 25 percent;
          (ii) on or after October 1, 1984, and before October 
        1, 1985, the ``target percentage'' is 50 percent and 
        the ``DRG percentage'' is 50 percent;
          (iii) on or after October 1, 1985, and before October 
        1, 1986, the ``target percentage'' is 45 percent and 
        the ``DRG percentage'' is 55 percent; and
          (iv) on or after October 1, 1986, and before October 
        1, 1987, the ``target percentage'' is 25 percent and 
        the ``DRG percentage'' is 75 percent.
  (D) For purposes of subparagraph (A)(ii)(II), the 
``applicable combined adjusted DRG prospective payment rate'' 
for discharges occurring--
          (i) on or after October 1, 1984, and before October 
        1, 1986, is a combined rate consisting of 25 percent of 
        the national adjusted DRG prospective payment rate, and 
        75 percent of the regional adjusted DRG prospective 
        payment rate, determined under paragraph (3) for such 
        discharges; and
          (ii) on or after October 1, 1986, and before October 
        1, 1987, is a combined rate consisting of 50 percent of 
        the national adjusted DRG prospective payment rate, and 
        50 percent of the regional adjusted DRG prospective 
        payment rate, determined under paragraph (3) for such 
        discharges.
  (E) For purposes of subclauses (II) and (III) of subparagraph 
(B)(v) only, the term ``principal finding of neoplastic 
disease'' means the condition established after study to be 
chiefly responsible for occasioning the admission of a patient 
to a hospital, except that only discharges with ICD-9-CM 
principal diagnosis codes of 140 through 239, V58.0, V58.1, 
V66.1, V66.2, or 990 will be considered to reflect such a 
principal diagnosis.
  (2) The Secretary shall determine a national adjusted DRG 
prospective payment rate, for each inpatient hospital discharge 
in fiscal year 1984 involving inpatient hospital services of a 
subsection (d) hospital in the United States, and shall 
determine a regional adjusted DRG prospective payment rate for 
such discharges in each region, for which payment may be made 
under part A of this title. Each such rate shall be determined 
for hospitals located in urban or rural areas within the United 
States or within each such region, respectively, as follows:
          (A) Determining allowable individual hospital costs 
        for base period.--The Secretary shall determine the 
        allowable operating costs per discharge of inpatient 
        hospital services for the hospital for the most recent 
        cost reporting period for which data are available.
          (B) Updating for fiscal year 1984.--The Secretary 
        shall update each amount determined under subparagraph 
        (A) for fiscal year 1984 by--
                  (i) updating for fiscal year 1983 by the 
                estimated average rate of change of hospital 
                costs industry-wide between the cost reporting 
                period used under such subparagraph and fiscal 
                year 1983 and the most recent case-mix data 
                available, and
                  (ii) projecting for fiscal year 1984 by the 
                applicable percentage increase (as defined in 
                subsection (b)(3)(B)) for fiscal year 1984.
          (C) Standardizing amounts.--The Secretary shall 
        standardize the amount updated under subparagraph (B) 
        for each hospital by--
                  (i) excluding an estimate of indirect medical 
                education costs (taking into account, for 
                discharges occurring after September 30, 1986, 
                the amendments made by section 9104(a) of the 
                Medicare and Medicaid Budget Reconciliation 
                Amendments of 1985), except that the Secretary 
                shall not take into account any reduction in 
                the amount of additional payments under 
                paragraph (5)(B)(ii) resulting from the 
                amendment made by section 4621(a)(1) of the 
                Balanced Budget Act of 1997 or any additional 
                payments under such paragraph resulting from 
                the application of section 111 of the Medicare, 
                Medicaid, and SCHIP Balanced Budget Refinement 
                Act of 1999, of section 302 of the Medicare, 
                Medicaid, and SCHIP Benefits Improvement and 
                Protection Act of 2000, or the Medicare 
                Prescription Drug, Improvement, and 
                Modernization Act of 2003,
                  (ii) adjusting for variations among hospitals 
                by area in the average hospital wage level,
                  (iii) adjusting for variations in case mix 
                among hospitals, and
                  (iv) for discharges occurring on or after 
                October 1, 1986, excluding an estimate of the 
                additional payments to certain hospitals to be 
                made under paragraph (5)(F), except that the 
                Secretary shall not exclude additional payments 
                under such paragraph made as a result of the 
                enactment of section 6003(c) of the Omnibus 
                Budget Reconciliation Act of 1989, the 
                enactment of section 4002(b) of the Omnibus 
                Budget Reconciliation Act of 1990, the 
                enactment of section 303 of the Medicare, 
                Medicaid, and SCHIP Benefits Improvement and 
                Protection Act of 2000, or the enactment of 
                section 402(a)(1) of the Medicare Prescription 
                Drug, Improvement, and Modernization Act of 
                2003.
          (D) Computing urban and rural averages.--The 
        Secretary shall compute an average of the standardized 
        amounts determined under subparagraph (C) for the 
        United States and for each region--
                  (i) for all subsection (d) hospitals located 
                in an urban area within the United States or 
                that region, respectively, and
                  (ii) for all subsection (d) hospitals located 
                in a rural area within the United States or 
                that region, respectively.
        For purposes of this subsection, the term ``region'' 
        means one of the nine census divisions, comprising the 
        fifty States and the District of Columbia, established 
        by the Bureau of the Census for statistical and 
        reporting purposes; the term ``urban area'' means an 
        area within a Metropolitan Statistical Area (as defined 
        by the Office of Management and Budget) or within such 
        similar area as the Secretary has recognized under 
        subsection (a) by regulation; the term ``large urban 
        area'' means, with respect to a fiscal year, such an 
        urban area which the Secretary determines (in the 
        publications described in subsection (e)(5) before the 
        fiscal year) has a population of more than 1,000,000 
        (as determined by the Secretary based on the most 
        recent available population data published by the 
        Bureau of the Census); and the term ``rural area'' 
        means any area outside such an area or similar area. A 
        hospital located in a Metropolitan Statistical Area 
        shall be deemed to be located in the region in which 
        the largest number of the hospitals in the same 
        Metropolitan Statistical Area are located, or, at the 
        option of the Secretary, the region in which the 
        majority of the inpatient discharges (with respect to 
        which payments are made under this title) from 
        hospitals in the same Metropolitan Statistical Area are 
        made.
          (E) Reducing for value of outlier payments.--The 
        Secretary shall reduce each of the average standardized 
        amounts determined under subparagraph (D) by a 
        proportion equal to the proportion (estimated by the 
        Secretary) of the amount of payments under this 
        subsection based on DRG prospective payment rates which 
        are additional payments described in paragraph (5)(A) 
        (relating to outlier payments).
          (F) Maintaining budget neutrality.--The Secretary 
        shall adjust each of such average standardized amounts 
        as may be required under subsection (e)(1)(B) for that 
        fiscal year.
          (G) Computing drg-specific rates for urban and rural 
        hospitals in the united states and in each region.--For 
        each discharge classified within a diagnosis-related 
        group, the Secretary shall establish a national DRG 
        prospective payment rate and shall establish a regional 
        DRG prospective payment rate for each region, each of 
        which is equal--
                  (i) for hospitals located in an urban area in 
                the United States or that region 
                (respectively), to the product of--
                          (I) the average standardized amount 
                        (computed under subparagraph (D), 
                        reduced under subparagraph (E), and 
                        adjusted under subparagraph (F)) for 
                        hospitals located in an urban area in 
                        the United States or that region, and
                          (II) the weighting factor (determined 
                        under paragraph (4)(B)) for that 
                        diagnosis-related group; and
                  (ii) for hospitals located in a rural area in 
                the United States or that region 
                (respectively), to the product of--
                          (I) the average standardized amount 
                        (computed under subparagraph (D), 
                        reduced under subparagraph (E), and 
                        adjusted under subparagraph (F)) for 
                        hospitals located in a rural area in 
                        the United States or that region, and
                          (II) the weighting factor (determined 
                        under paragraph (4)(B)) for that 
                        diagnosis-related group.
          (H) Adjusting for different area wage levels.--The 
        Secretary shall adjust the proportion, (as estimated by 
        the Secretary from time to time) of hospitals' costs 
        which are attributable to wages and wage-related costs, 
        of the national and regional DRG prospective payment 
        rates computed under subparagraph (G) for area 
        differences in hospital wage levels by a factor 
        (established by the Secretary) reflecting the relative 
        hospital wage level in the geographic area of the 
        hospital compared to the national average hospital wage 
        level.
  (3) The Secretary shall determine a national adjusted DRG 
prospective payment rate, for each inpatient hospital discharge 
in a fiscal year after fiscal year 1984 involving inpatient 
hospital services of a subsection (d) hospital in the United 
States, and shall determine, for fiscal years before fiscal 
year 1997, a regional adjusted DRG prospective payment rate for 
such discharges in each region for which payment may be made 
under part A of this title. Each such rate shall be determined 
for hospitals located in large urban, other urban, or rural 
areas within the United States and within each such region, 
respectively, as follows:
          (A) Updating previous standardized amounts.--(i) For 
        discharges occurring in a fiscal year beginning before 
        October 1, 1987, the Secretary shall compute an average 
        standardized amount for hospitals located in an urban 
        area and for hospitals located in a rural area within 
        the United States and for hospitals located in an urban 
        area and for hospitals located in a rural area within 
        each region, equal to the respective average 
        standardized amount computed for the previous fiscal 
        year under paragraph (2)(D) or under this subparagraph, 
        increased for the fiscal year involved by the 
        applicable percentage increase under subsection 
        (b)(3)(B). With respect to discharges occurring on or 
        after October 1, 1987, the Secretary shall compute 
        urban and rural averages on the basis of discharge 
        weighting rather than hospital weighting, making 
        appropriate adjustments to ensure that computation on 
        such basis does not result in total payments under this 
        section that are greater or less than the total 
        payments that would have been made under this section 
        but for this sentence, and making appropriate changes 
        in the manner of determining the reductions under 
        subparagraph (C)(ii).
          (ii) For discharges occurring in a fiscal year 
        beginning on or after October 1, 1987, and ending on or 
        before September 30, 1994, the Secretary shall compute 
        an average standardized amount for hospitals located in 
        a large urban area, for hospitals located in a rural 
        area, and for hospitals located in other urban areas, 
        within the United States and within each region, equal 
        to the respective average standardized amount computed 
        for the previous fiscal year under this subparagraph 
        increased by the applicable percentage increase under 
        subsection (b)(3)(B)(i) with respect to hospitals 
        located in the respective areas for the fiscal year 
        involved.
          (iii) For discharges occurring in the fiscal year 
        beginning on October 1, 1994, the average standardized 
        amount for hospitals located in a rural area shall be 
        equal to the average standardized amount for hospitals 
        located in an urban area. For discharges occurring on 
        or after October 1, 1994, the Secretary shall adjust 
        the ratio of the labor portion to non-labor portion of 
        each average standardized amount to equal such ratio 
        for the national average of all standardized amounts.
          (iv)(I) Subject to subclause (II), for discharges 
        occurring in a fiscal year beginning on or after 
        October 1, 1995, the Secretary shall compute an average 
        standardized amount for hospitals located in a large 
        urban area and for hospitals located in other areas 
        within the United States and within each region equal 
        to the respective average standardized amount computed 
        for the previous fiscal year under this subparagraph 
        increased by the applicable percentage increase under 
        subsection (b)(3)(B)(i) with respect to hospitals 
        located in the respective areas for the fiscal year 
        involved.
          (II) For discharges occurring in a fiscal year 
        (beginning with fiscal year 2004), the Secretary shall 
        compute a standardized amount for hospitals located in 
        any area within the United States and within each 
        region equal to the standardized amount computed for 
        the previous fiscal year under this subparagraph for 
        hospitals located in a large urban area (or, beginning 
        with fiscal year 2005, for all hospitals in the 
        previous fiscal year) increased by the applicable 
        percentage increase under subsection (b)(3)(B)(i) for 
        the fiscal year involved.
          (v) Average standardized amounts computed under this 
        paragraph shall be adjusted to reflect the most recent 
        case-mix data available.
          (vi) Insofar as the Secretary determines that the 
        adjustments under paragraph (4)(C)(i) for a previous 
        fiscal year (or estimates that such adjustments for a 
        future fiscal year) did (or are likely to) result in a 
        change in aggregate payments under this subsection 
        during the fiscal year that are a result of changes in 
        the coding or classification of discharges that do not 
        reflect real changes in case mix, the Secretary may 
        adjust the average standardized amounts computed under 
        this paragraph for subsequent fiscal years so as to 
        eliminate the effect of such coding or classification 
        changes.
          (B) Reducing for value of outlier payments.--The 
        Secretary shall reduce each of the average standardized 
        amounts determined under subparagraph (A) by a factor 
        equal to the proportion of payments under this 
        subsection (as estimated by the Secretary) based on DRG 
        prospective payment amounts which are additional 
        payments described in paragraph (5)(A) (relating to 
        outlier payments).
          (C)(i) Maintaining budget neutrality for fiscal year 
        1985.--For discharges occurring in fiscal year 1985, 
        the Secretary shall adjust each of such average 
        standardized amounts as may be required under 
        subsection (e)(1)(B) for that fiscal year.
          (ii) Reducing for savings from amendment to indirect 
        teaching adjustment for discharges after September 30, 
        1986.--For discharges occurring after September 30, 
        1986, the Secretary shall further reduce each of the 
        average standardized amounts (in a proportion which 
        takes into account the differing effects of the 
        standardization effected under paragraph (2)(C)(i)) so 
        as to provide for a reduction in the total of the 
        payments (attributable to this paragraph) made for 
        discharges occurring on or after October 1, 1986, of an 
        amount equal to the estimated reduction in the payment 
        amounts under paragraph (5)(B) that would have resulted 
        from the enactment of the amendments made by section 
        9104 of the Medicare and Medicaid Budget Reconciliation 
        Amendments of 1985 and by section 4003(a)(1) of the 
        Omnibus Budget Reconciliation Act of 1987 if the factor 
        described in clause (ii)(II) of paragraph (5)(B) 
        (determined without regard to amendments made by the 
        Omnibus Budget Reconciliation Act of 1990) were applied 
        for discharges occurring on or after such date instead 
        of the factor described in clause (ii) of that 
        paragraph.
          (D) Computing drg-specific rates for hospitals.--For 
        each discharge classified within a diagnosis-related 
        group, the Secretary shall establish for the fiscal 
        year a national DRG prospective payment rate and shall 
        establish, for fiscal years before fiscal year 1997, a 
        regional DRG prospective payment rate for each region 
        which is equal--
                  (i) for fiscal years before fiscal year 2004, 
                for hospitals located in a large urban area in 
                the United States or that region 
                (respectively), to the product of--
                          (I) the average standardized amount 
                        (computed under subparagraph (A), 
                        reduced under subparagraph (B), and 
                        adjusted or reduced under subparagraph 
                        (C)) for the fiscal year for hospitals 
                        located in such a large urban area in 
                        the United States or that region, and
                          (II) the weighting factor (determined 
                        under paragraph (4)(B)) for that 
                        diagnosis-related group;
                  (ii) for fiscal years before fiscal year 
                2004, for hospitals located in other areas in 
                the United States or that region 
                (respectively), to the product of--
                          (I) the average standardized amount 
                        (computed under subparagraph (A), 
                        reduced under subparagraph (B), and 
                        adjusted or reduced under subparagraph 
                        (C)) for the fiscal year for hospitals 
                        located in other areas in the United 
                        States or that region, and
                          (II) the weighting factor (determined 
                        under paragraph (4)(B)) for that 
                        diagnosis-related group; and
                  (iii) for a fiscal year beginning after 
                fiscal year 2003, for hospitals located in all 
                areas, to the product of--
                          (I) the applicable standardized 
                        amount (computed under subparagraph 
                        (A)), reduced under subparagraph (B), 
                        and adjusted or reduced under 
                        subparagraph (C) for the fiscal year; 
                        and
                          (II) the weighting factor (determined 
                        under paragraph (4)(B)) for that 
                        diagnosis-related group.
          (E) Adjusting for different area wage levels.--
                  (i) In general.--Except as provided in clause 
                (ii) or (iii), the Secretary shall adjust the 
                proportion, (as estimated by the Secretary from 
                time to time) of hospitals' costs which are 
                attributable to wages and wage-related costs, 
                of the DRG prospective payment rates computed 
                under subparagraph (D) for area differences in 
                hospital wage levels by a factor (established 
                by the Secretary) reflecting the relative 
                hospital wage level in the geographic area of 
                the hospital compared to the national average 
                hospital wage level. Not later than October 1, 
                1990, and October 1, 1993 (and at least every 
                12 months thereafter), the Secretary shall 
                update the factor under the preceding sentence 
                on the basis of a survey conducted by the 
                Secretary (and updated as appropriate) of the 
                wages and wage-related costs of subsection (d) 
                hospitals in the United States. Not less often 
                than once every 3 years the Secretary (through 
                such survey or otherwise) shall measure the 
                earnings and paid hours of employment by 
                occupational category and shall exclude data 
                with respect to the wages and wage-related 
                costs incurred in furnishing skilled nursing 
                facility services. Any adjustments or updates 
                made under this subparagraph for a fiscal year 
                (beginning with fiscal year 1991) shall be made 
                in a manner that assures that the aggregate 
                payments under this subsection in the fiscal 
                year are not greater or less than those that 
                would have been made in the year without such 
                adjustment. The Secretary shall apply the 
                previous sentence for any period as if the 
                amendments made by section 403(a)(1) of the 
                Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 and the amendments 
                made by section 10324(a)(1) of the Patient 
                Protection and Affordable Care Act\73\ had not 
                been enacted.
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    \73\Section 10324(a)(2) of Public Law 111-148 (124 Stat. 959) 
provides for an amendment to the third sentence of section 
1886(d)(3)(E) by inserting ``and the amendments made by section 
10324(a)(1) of the Patient Protection and Affordable Care Act'' after 
``2003''. Such amendment was carried out by inserting such language 
after ``2003'' in the fifth sentence to reflect the probable intent of 
Congress.
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                  (ii) Alternative proportion to be adjusted 
                beginning in fiscal year 2005.--For discharges 
                occurring on or after October 1, 2004, the 
                Secretary shall substitute ``62 percent'' for 
                the proportion described in the first sentence 
                of clause (i), unless the application of this 
                clause would result in lower payments to a 
                hospital than would otherwise be made.
                  (iii) Floor on area wage index for hospitals 
                in frontier states.--
                          (I) In general.--Subject to subclause 
                        (IV), for discharges occurring on or 
                        after October 1, 2010, the area wage 
                        index applicable under this 
                        subparagraph to any hospital which is 
                        located in a frontier State (as defined 
                        in subclause (II)) may not be less than 
                        1.00.
                          (II) Frontier state defined.--In this 
                        clause, the term ``frontier State'' 
                        means a State in which at least 50 
                        percent of the counties in the State 
                        are frontier counties.
                          (III) Frontier county defined.--In 
                        this clause, the term ``frontier 
                        county'' means a county in which the 
                        population per square mile is less than 
                        6.
                          (IV) Limitation.--This clause shall 
                        not apply to any hospital located in a 
                        State that receives a non-labor related 
                        share adjustment under paragraph 
                        (5)(H).
  (4)(A) The Secretary shall establish a classification of 
inpatient hospital discharges by diagnosis-related groups and a 
methodology for classifying specific hospital discharges within 
these groups.
  (B) For each such diagnosis-related group the Secretary shall 
assign an appropriate weighting factor which reflects the 
relative hospital resources used with respect to discharges 
classified within that group compared to discharges classified 
within other groups.
  (C)(i) The Secretary shall adjust the classifications and 
weighting factors established under subparagraphs (A) and (B), 
for discharges in fiscal year 1988 and at least annually 
thereafter, to reflect changes in treatment patterns, 
technology (including a new medical service or technology under 
paragraph (5)(K)), and other factors which may change the 
relative use of hospital resources.
  (ii) For discharges in fiscal year 1990, the Secretary shall 
reduce the weighting factor for each diagnosis-related group by 
1.22 percent.
  (iii) Any such adjustment under clause (i) for discharges in 
a fiscal year (beginning with fiscal year 1991) shall be made 
in a manner that assures that the aggregate payments under this 
subsection for discharges in the fiscal year are not greater or 
less than those that would have been made for discharges in the 
year without such adjustment.
  (D)(i) For discharges occurring on or after October 1, 2008, 
the diagnosis-related group to be assigned under this paragraph 
for a discharge described in clause (ii) shall be a diagnosis-
related group that does not result in higher payment based on 
the presence of a secondary diagnosis code described in clause 
(iv).
  (ii) A discharge described in this clause is a discharge 
which meets the following requirements:
          (I) The discharge includes a condition identified by 
        a diagnosis code selected under clause (iv) as a 
        secondary diagnosis.
          (II) But for clause (i), the discharge would have 
        been classified to a diagnosis-related group that 
        results in a higher payment based on the presence of a 
        secondary diagnosis code selected under clause (iv).
          (III) At the time of admission, no code selected 
        under clause (iv) was present.
  (iii) As part of the information required to be reported by a 
hospital with respect to a discharge of an individual in order 
for payment to be made under this subsection, for discharges 
occurring on or after October 1, 2007, the information shall 
include the secondary diagnosis of the individual at admission.
  (iv) By not later than October 1, 2007, the Secretary shall 
select diagnosis codes associated with at least two conditions, 
each of which codes meets all of the following requirements (as 
determined by the Secretary):
          (I) Cases described by such code have a high cost or 
        high volume, or both, under this title.
          (II) The code results in the assignment of a case to 
        a diagnosis-related group that has a higher payment 
        when the code is present as a secondary diagnosis.
          (III) The code describes such conditions that could 
        reasonably have been prevented through the application 
        of evidence-based guidelines.
The Secretary may from time to time revise (through addition or 
deletion of codes) the diagnosis codes selected under this 
clause so long as there are diagnosis codes associated with at 
least two conditions selected for discharges occurring during 
any fiscal year.
  (v) In selecting and revising diagnosis codes under clause 
(iv), the Secretary shall consult with the Centers for Disease 
Control and Prevention and other appropriate entities.
  (vi) Any change resulting from the application of this 
subparagraph shall not be taken into account in adjusting the 
weighting factors under subparagraph (C)(i) or in applying 
budget neutrality under subparagraph (C)(iii).
  (5)(A)(i) For discharges occurring during fiscal years ending 
on or before September 30, 1997, the Secretary shall provide 
for an additional payment for a subsection (d) hospital for any 
discharge in a diagnosis-related group, the length of stay of 
which exceeds the mean length of stay for discharges within 
that group by a fixed number of days, or exceeds such mean 
length of stay by some fixed number of standard deviations, 
whichever is the fewer number of days.
  (ii) For cases which are not included in clause (i), a 
subsection (d) hospital may request additional payments in any 
case where charges, adjusted to cost, exceed a fixed multiple 
of the applicable DRG prospective payment rate, or exceed such 
other fixed dollar amount, whichever is greater, or for 
discharges in fiscal years beginning on or after October 1, 
1994, exceed the sum of the applicable DRG prospective payment 
rate plus any amounts payable under subparagraphs (B) and (F) 
plus a fixed dollar amount determined by the Secretary.
  (iii) The amount of such additional payment under clauses (i) 
and (ii) shall be determined by the Secretary and shall (except 
as payments under clause (i) are required to be reduced to take 
into account the requirements of clause (v)) approximate the 
marginal cost of care beyond the cutoff point applicable under 
clause (i) or (ii).
  (iv) The total amount of the additional payments made under 
this subparagraph for discharges in a fiscal year may not be 
less than 5 percent nor more than 6 percent of the total 
payments projected or estimated to be made based on DRG 
prospective payment rates for discharges in that year.
  (v) The Secretary shall provide that--
          (I) the day outlier percentage for fiscal year 1995 
        shall be 75 percent of the day outlier percentage for 
        fiscal year 1994;
          (II) the day outlier percentage for fiscal year 1996 
        shall be 50 percent of the day outlier percentage for 
        fiscal year 1994; and
          (III) the day outlier percentage for fiscal year 1997 
        shall be 25 percent of the day outlier percentage for 
        fiscal year 1994.
  (vi) For purposes of this subparagraph the term ``day outlier 
percentage'' means, for a fiscal year, the percentage of the 
total additional payments made by the Secretary under this 
subparagraph for discharges in that fiscal year which are 
additional payments under clause (i).
  (B) The Secretary shall provide for an additional payment 
amount for subsection (d) hospitals with indirect costs of 
medical education, in an amount computed in the same manner as 
the adjustment for such costs under regulations (in effect as 
of January 1, 1983) under subsection (a)(2), except as follows:
          (i) The amount of such additional payment shall be 
        determined by multiplying (I) the sum of the amount 
        determined under paragraph (1)(A)(ii)(II) (or, if 
        applicable, the amount determined under paragraph 
        (1)(A)(iii)) and, for cases qualifying for additional 
        payment under subparagraph (A)(i), the amount paid to 
        the hospital under subparagraph (A), by (II) the 
        indirect teaching adjustment factor described in clause 
        (ii).
          (ii) For purposes of clause (i)(II), the indirect 
        teaching adjustment factor is equal to c  
        (((1+r) to the nth power) - 1), where ``r'' is the 
        ratio of the hospital's full-time equivalent interns 
        and residents to beds and ``n'' equals .405. Subject to 
        clause (ix), for discharges occurring--
                  (I) on or after October 1, 1988, and before 
                October 1, 1997, ``c'' is equal to 1.89;
                  (II) during fiscal year 1998, ``c'' is equal 
                to 1.72;
                  (III) during fiscal year 1999, ``c'' is equal 
                to 1.6;
                  (IV) during fiscal year 2000, ``c'' is equal 
                to 1.47;
                  (V) during fiscal year 2001, ``c'' is equal 
                to 1.54;
                  (VI) during fiscal year 2002, ``c'' is equal 
                to 1.6;
                  (VII) on or after October 1, 2002, and before 
                April 1, 2004, ``c'' is equal to 1.35;
                  (VIII) on or after April 1, 2004, and before 
                October 1, 2004, ``c'' is equal to 1.47;
                  (IX) during fiscal year 2005, ``c'' is equal 
                to 1.42;
                  (X) during fiscal year 2006, ``c'' is equal 
                to 1.37;
                  (XI) during fiscal year 2007, ``c'' is equal 
                to 1.32; and
                  (XII) on or after October 1, 2007, ``c'' is 
                equal to 1.35.
          (iii) In determining such adjustment the Secretary 
        shall not distinguish between those interns and 
        residents who are employees of a hospital and those 
        interns and residents who furnish services to a 
        hospital but are not employees of such hospital.
          (iv)(I) Effective for discharges occurring on or 
        after October 1, 1997, and before July 1, 2010, all the 
        time spent by an intern or resident in patient care 
        activities under an approved medical residency training 
        program at an entity in a nonhospital setting shall be 
        counted towards the determination of full-time 
        equivalency if the hospital incurs all, or 
        substantially all, of the costs for the training 
        program in that setting.
          (II) Effective for discharges occurring on or after 
        July 1, 2010, all the time spent by an intern or 
        resident in patient care activities in a nonprovider 
        setting shall be counted towards the determination of 
        full-time equivalency if a hospital incurs the costs of 
        the stipends and fringe benefits of the intern or 
        resident during the time the intern or resident spends 
        in that setting. If more than one hospital incurs these 
        costs, either directly or through a third party, such 
        hospitals shall count a proportional share of the time, 
        as determined by written agreement between the 
        hospitals, that a resident spends training in that 
        setting.
          (v) In determining the adjustment with respect to a 
        hospital for discharges occurring on or after October 
        1, 1997, the total number of full-time equivalent 
        interns and residents in the fields of allopathic and 
        osteopathic medicine in either a hospital or 
        nonhospital setting may not exceed the number (or, 130 
        percent of such number in the case of a hospital 
        located in a rural area) of such full-time equivalent 
        interns and residents in the hospital with respect to 
        the hospital's most recent cost reporting period ending 
        on or before December 31, 1996. Rules similar to the 
        rules of subsection (h)(4)(F)(ii) shall apply for 
        purposes of this clause. The provisions of subsections 
        (h)(4)(H)(vi), (h)(7), and (h)(8) shall apply with 
        respect to the first sentence of this clause in the 
        same manner as they apply with respect to subsection 
        (h)(4)(F)(i).\74\
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    \74\The amendments to the second sentence of section 
1886(d)(5)(B)(v) by sections 5503(b)(1) and 5506(b) of Public Law 111-
148 were carried out to the third sentence to reflect the probable 
intent of Congress.
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          (vi) For purposes of clause (ii)--
                  (I) ``r'' may not exceed the ratio of the 
                number of interns and residents, subject to the 
                limit under clause (v), with respect to the 
                hospital for its most recent cost reporting 
                period to the hospital's available beds (as 
                defined by the Secretary) during that cost 
                reporting period, and
                  (II) for the hospital's cost reporting 
                periods beginning on or after October 1, 1997, 
                subject to the limits described in clauses (iv) 
                and (v), the total number of full-time 
                equivalent residents for payment purposes shall 
                equal the average of the actual full-time 
                equivalent resident count for the cost 
                reporting period and the preceding two cost 
                reporting periods.
        In the case of the first cost reporting period 
        beginning on or after October 1, 1997, subclause (II) 
        shall be applied by using the average for such period 
        and the preceding cost reporting period.
          (vii) If any cost reporting period beginning on or 
        after October 1, 1997, is not equal to twelve months, 
        the Secretary shall make appropriate modifications to 
        ensure that the average full-time equivalent residency 
        count pursuant to subclause (II) of clause (vi) is 
        based on the equivalent of full twelve-month cost 
        reporting periods.
          (viii) Rules similar to the rules of subsection 
        (h)(4)(H) shall apply for purposes of clauses (v) and 
        (vi).
          (ix) For discharges occurring on or after July 1, 
        2005, insofar as an additional payment amount under 
        this subparagraph is attributable to resident positions 
        redistributed to a hospital under subsection (h)(7)(B), 
        in computing the indirect teaching adjustment factor 
        under clause (ii) the adjustment shall be computed in a 
        manner as if ``c'' were equal to 0.66 with respect to 
        such resident positions.
          (x) For discharges occurring on or after July 1, 
        2011, insofar as an additional payment amount under 
        this subparagraph is attributable to resident positions 
        distributed to a hospital under subsection (h)(8)(B), 
        the indirect teaching adjustment factor shall be 
        computed in the same manner as provided under clause 
        (ii) with respect to such resident positions.
          (x)(I)\75\ The provisions of subparagraph (K) of 
        subsection (h)(4) shall apply under this subparagraph 
        in the same manner as they apply under such subsection.
---------------------------------------------------------------------------
    \75\Two clauses designated as (x) so in law. See amendments made by 
sections 5503(b)(2) and 5505(b) of Public Law 111-148.
---------------------------------------------------------------------------
                          (II) In determining the hospital's 
                        number of full-time equivalent 
                        residents for purposes of this 
                        subparagraph, all the time spent by an 
                        intern or resident in an approved 
                        medical residency training program in 
                        non-patient care activities, such as 
                        didactic conferences and seminars, as 
                        such time and activities are defined by 
                        the Secretary, that occurs in the 
                        hospital shall be counted toward the 
                        determination of full-time equivalency 
                        if the hospital--
                                  (aa) is recognized as a 
                                subsection (d) hospital;
                                  (bb) is recognized as a 
                                subsection (d) Puerto Rico 
                                hospital;
                                  (cc) is reimbursed under a 
                                reimbursement system authorized 
                                under section 1814(b)(3); or
                                  (dd) is a provider-based 
                                hospital outpatient department.
                          (III) In determining the hospital's 
                        number of full-time equivalent 
                        residents for purposes of this 
                        subparagraph, all the time spent by an 
                        intern or resident in an approved 
                        medical residency training program in 
                        research activities that are not 
                        associated with the treatment or 
                        diagnosis of a particular patient, as 
                        such time and activities are defined by 
                        the Secretary, shall not be counted 
                        toward the determination of full-time 
                        equivalency.
  (C)(i) The Secretary shall provide for such exceptions and 
adjustments to the payment amounts established under this 
subsection (other than under paragraph (9)) as the Secretary 
deems appropriate to take into account the special needs of 
regional and national referral centers (including those 
hospitals of 275 or more beds located in rural areas). A 
hospital which is classified as a rural hospital may appeal to 
the Secretary to be classified as a rural referral center under 
this clause on the basis of criteria (established by the 
Secretary) which shall allow the hospital to demonstrate that 
it should be so reclassified by reason of certain of its 
operating characteristics being similar to those of a typical 
urban hospital located in the same census region and which 
shall not require a rural osteopathic hospital to have more 
than 3,000 discharges in a year in order to be classified as a 
rural referral center. Such characteristics may include wages, 
scope of services, service area, and the mix of medical 
specialties. The Secretary shall publish the criteria not later 
than August 17, 1984, for implementation by October 1, 1984. An 
appeal allowed under this clause must be submitted to the 
Secretary (in such form and manner as the Secretary may 
prescribe) during the quarter before the first quarter of the 
hospital's cost reporting period (or, in the case of a cost 
reporting period beginning during October 1984, during the 
first quarter of that period), and the Secretary must make a 
final determination with respect to such appeal within 60 days 
after the date the appeal was submitted. Any payment 
adjustments necessitated by a reclassification based upon the 
appeal shall be effective at the beginning of such cost 
reporting period.
  (ii) The Secretary shall provide, under clause (i), for the 
classification of a rural hospital as a regional referral 
center if the hospital has a case mix index equal to or greater 
than the median case mix index for hospitals (other than 
hospitals with approved teaching programs) located in an urban 
area in the same region (as defined in paragraph (2)(D)), has 
at least 5,000 discharges a year or, if less, the median number 
of discharges in urban hospitals in the region in which the 
hospital is located (or, in the case of a rural osteopathic 
hospital, meets the criterion established by the Secretary 
under clause (i) with respect to the annual number of 
discharges for such hospitals), and meets any other criteria 
established by the Secretary under clause (i).
  (D)(i) For any cost reporting period beginning on or after 
April 1, 1990, with respect to a subsection (d) hospital which 
is a sole community hospital, payment under paragraph (1)(A) 
shall be--
          (I) an amount based on 100 percent of the hospital's 
        target amount for the cost reporting period, as defined 
        in subsection (b)(3)(C), or
          (II) the amount determined under paragraph 
        (1)(A)(iii),
whichever results in greater payment to the hospital.
  (ii) In the case of a sole community hospital that 
experiences, in a cost reporting period compared to the 
previous cost reporting period, a decrease of more than 5 
percent in its total number of inpatient cases due to 
circumstances beyond its control, the Secretary shall provide 
for such adjustment to the payment amounts under this 
subsection (other than under paragraph (9)) as may be necessary 
to fully compensate the hospital for the fixed costs it incurs 
in the period in providing inpatient hospital services, 
including the reasonable cost of maintaining necessary core 
staff and services.
  (iii) For purposes of this title, the term ``sole community 
hospital'' means any hospital--
          (I) that the Secretary determines is located more 
        than 35 road miles from another hospital,
          (II) that, by reason of factors such as the time 
        required for an individual to travel to the nearest 
        alternative source of appropriate inpatient care (in 
        accordance with standards promulgated by the 
        Secretary), location, weather conditions, travel 
        conditions, or absence of other like hospitals (as 
        determined by the Secretary), is the sole source of 
        inpatient hospital services reasonably available to 
        individuals in a geographic area who are entitled to 
        benefits under part A, or
          (III) that is located in a rural area and designated 
        by the Secretary as an essential access community 
        hospital under section 1820(i)(1) as in effect on 
        September 30, 1997.
  (iv) The Secretary shall promulgate a standard for 
determining whether a hospital meets the criteria for 
classification as a sole community hospital under clause 
(iii)(II) because of the time required for an individual to 
travel to the nearest alternative source of appropriate 
inpatient care.
  (v) If the Secretary determines that, in the case of a 
hospital located in a rural area and designated by the 
Secretary as an essential access community hospital under 
section 1820(i)(1) as in effect on September 30, 1997, the 
hospital has incurred increases in reasonable costs during a 
cost reporting period as a result of becoming a member of a 
rural health network (as defined in section 1820(d)) in the 
State in which it is located, and in incurring such increases, 
the hospital will increase its costs for subsequent cost 
reporting periods, the Secretary shall increase the hospital's 
target amount under subsection (b)(3)(C) to account for such 
incurred increases.
  (E)(i) The Secretary shall estimate the amount of 
reimbursement made for services described in section 
1862(a)(14) with respect to which payment was made under part B 
in the base reporting periods referred to in paragraph (2)(A) 
and with respect to which payment is no longer being made.
  (ii) The Secretary shall provide for an adjustment to the 
payment for subsection (d) hospitals in each fiscal year so as 
appropriately to reflect the net amount described in clause 
(i).
  (F)(i) Subject to subsection (r), for discharges occurring on 
or after May 1, 1986, the Secretary shall provide, in 
accordance with this subparagraph, for an additional payment 
amount for each subsection (d) hospital which--
          (I) serves a significantly disproportionate number of 
        low-income patients (as defined in clause (v)), or
          (II) is located in an urban area, has 100 or more 
        beds, and can demonstrate that its net inpatient care 
        revenues (excluding any of such revenues attributable 
        to this title or State plans approved under title XIX), 
        during the cost reporting period in which the 
        discharges occur, for indigent care from State and 
        local government sources exceed 30 percent of its total 
        of such net inpatient care revenues during the period.
  (ii) Subject to clause (ix), the amount of such payment for 
each discharge shall be determined by multiplying (I) the sum 
of the amount determined under paragraph (1)(A)(ii)(II) (or, if 
applicable, the amount determined under paragraph (1)(A)(iii)) 
and, for cases qualifying for additional payment under 
subparagraph (A)(i), the amount paid to the hospital under 
subparagraph (A) for that discharge, by (II) the 
disproportionate share adjustment percentage established under 
clause (iii) or (iv) for the cost reporting period in which the 
discharge occurs.
  (iii) The disproportionate share adjustment percentage for a 
cost reporting period for a hospital described in clause 
(i)(II) is equal to 35 percent.
  (iv) The disproportionate share adjustment percentage for a 
cost reporting period for a hospital that is not described in 
clause (i)(II) and that--
          (I) is located in an urban area and has 100 or more 
        beds or is described in the second sentence of clause 
        (v), is equal to the percent determined in accordance 
        with the applicable formula described in clause (vii);
          (II) is located in an urban area and has less than 
        100 beds, is equal to 5 percent or, subject to clause 
        (xiv) and for discharges occurring on or after April 1, 
        2001, is equal to the percent determined in accordance 
        with clause (xiii);
          (III) is located in a rural area and is not described 
        in subclause (IV) or (V) or in the second sentence of 
        clause (v), is equal to 4 percent or, subject to clause 
        (xiv) and for discharges occurring on or after April 1, 
        2001, is equal to the percent determined in accordance 
        with clause (xii);
          (IV) is located in a rural area, is classified as a 
        rural referral center under subparagraph (C), and is 
        classified as a sole community hospital under 
        subparagraph (D), is equal to 10 percent or, if 
        greater, the percent determined in accordance with the 
        applicable formula described in clause (viii) or, 
        subject to clause (xiv) and for discharges occurring on 
        or after April 1, 2001, the greater of the percentages 
        determined under clause (x) or (xi);
          (V) is located in a rural area, is classified as a 
        rural referral center under subparagraph (C), and is 
        not classified as a sole community hospital under 
        subparagraph (D), is equal to the percent determined in 
        accordance with the applicable formula described in 
        clause (viii) or, subject to clause (xiv) and for 
        discharges occurring on or after April 1, 2001, is 
        equal to the percent determined in accordance with 
        clause (xi); or
          (VI) is located in a rural area, is classified as a 
        sole community hospital under subparagraph (D), and is 
        not classified as a rural referral center under 
        subparagraph (C), is 10 percent or, subject to clause 
        (xiv) and for discharges occurring on or after April 1, 
        2001, is equal to the percent determined in accordance 
        with clause (x).
  (v) In this subparagraph, a hospital ``serves a significantly 
disproportionate number of low income patients'' for a cost 
reporting period if the hospital has a disproportionate patient 
percentage (as defined in clause (vi)) for that period which 
equals, or exceeds--
          (I) 15 percent, if the hospital is located in an 
        urban area and has 100 or more beds,
          (II) 30 percent (or 15 percent, for discharges 
        occurring on or after April 1, 2001), if the hospital 
        is located in a rural area and has more than 100 beds, 
        or is located in a rural area and is classified as a 
        sole community hospital under subparagraph (D),
          (III) 40 percent (or 15 percent, for discharges 
        occurring on or after April 1, 2001), if the hospital 
        is located in an urban area and has less than 100 beds, 
        or
          (IV) 45 percent (or 15 percent, for discharges 
        occurring on or after April 1, 2001), if the hospital 
        is located in a rural area and is not described in 
        subclause (II).
A hospital located in a rural area and with 500 or more beds 
also ``serves a significantly disproportionate number of low 
income patients'' for a cost reporting period if the hospital 
has a disproportionate patient percentage (as defined in clause 
(vi)) for that period which equals or exceeds a percentage 
specified by the Secretary.
  (vi) In this subparagraph, the term ``disproportionate 
patient percentage'' means, with respect to a cost reporting 
period of a hospital, the sum of--
          (I) the fraction (expressed as a percentage), the 
        numerator of which is the number of such hospital's 
        patient days for such period which were made up of 
        patients who (for such days) were entitled to benefits 
        under part A of this title and were entitled to 
        supplementary security income benefits (excluding any 
        State supplementation) under title XVI of this Act, and 
        the denominator of which is the number of such 
        hospital's patient days for such fiscal year which were 
        made up of patients who (for such days) were entitled 
        to benefits under part A of this title, and
          (II) the fraction (expressed as a percentage), the 
        numerator of which is the number of the hospital's 
        patient days for such period which consist of patients 
        who (for such days) were eligible for medical 
        assistance under a State plan approved under title XIX, 
        but who were not entitled to benefits under part A of 
        this title, and the denominator of which is the total 
        number of the hospital's patient days for such period.
In determining under subclause (II) the number of the 
hospital's patient days for such period which consist of 
patients who (for such days) were eligible for medical 
assistance under a State plan approved under title XIX, the 
Secretary may, to the extent and for the period the Secretary 
determines appropriate, include patient days of patients not so 
eligible but who are regarded as such because they receive 
benefits under a demonstration project approved under title XI.
  (vii) The formula used to determine the disproportionate 
share adjustment percentage for a cost reporting period for a 
hospital described in clause (iv)(I) is--
          (I) in the case of such a hospital with a 
        disproportionate patient percentage (as defined in 
        clause (vi)) greater than 20.2--
                  (a) for discharges occurring on or after 
                April 1, 1990, and on or before December 31, 
                1990, (P-20.2)(.65) + 5.62,
                  (b) for discharges occurring on or after 
                January 1, 1991, and on or before September 30, 
                1993, (P-20.2)(.7) + 5.62,
                  (c) for discharges occurring on or after 
                October 1, 1993, and on or before September 30, 
                1994, (P-20.2)(.8) + 5.88, and
                  (d) for discharges occurring on or after 
                October 1, 1994, (P-20.2)(.825) + 5.88; or
          (II) in the case of any other such hospital--
                  (a) for discharges occurring on or after 
                April 1, 1990, and on or before December 31, 
                1990, (P-15)(.6) + 2.5,
                  (b) for discharges occurring on or after 
                January 1, 1991, and on or before September 30, 
                1993, (P-15)(.6) + 2.5,
                  (c) for discharges occurring on or after 
                October 1, 1993, (P-15)(.65) + 2.5,
where ``P'' is the hospital's disproportionate patient 
percentage (as defined in clause (vi)).
  (viii) Subject to clause (xiv), the formula used to determine 
the disproportionate share adjustment percentage for a cost 
reporting period for a hospital described in clause (iv)(IV) or 
(iv)(V) is the percentage determined in accordance with the 
following formula:(P-30)(.6) + 4.0, where ``P'' is the 
hospital's disproportionate patient percentage (as defined in 
clause (vi)).
  (ix) In the case of discharges occurring--
          (I) during fiscal year 1998, the additional payment 
        amount otherwise determined under clause (ii) shall be 
        reduced by 1 percent;
          (II) during fiscal year 1999, such additional payment 
        amount shall be reduced by 2 percent;
          (III) during fiscal years 2000 and 2001, such 
        additional payment amount shall be reduced by 3 percent 
        and 2 percent, respectively;
          (IV) during fiscal year 2002, such additional payment 
        amount shall be reduced by 3 percent; and
          (V) during fiscal year 2003 and each subsequent 
        fiscal year, such additional payment amount shall be 
        reduced by 0 percent.
  (x) Subject to clause (xiv), for purposes of clause (iv)(VI) 
(relating to sole community hospitals), in the case of a 
hospital for a cost reporting period with a disproportionate 
patient percentage (as defined in clause (vi)) that--
          (I) is less than 19.3, the disproportionate share 
        adjustment percentage is determined in accordance with 
        the following formula: (P-15)(.65) + 2.5;
          (II) is equal to or exceeds 19.3, but is less than 
        30.0, such adjustment percentage is equal to 5.25 
        percent; or
          (III) is equal to or exceeds 30, such adjustment 
        percentage is equal to 10 percent,
where ``P'' is the hospital's disproportionate patient 
percentage (as defined in clause (vi)).
  (xi) Subject to clause (xiv), for purposes of clause (iv)(V) 
(relating to rural referral centers), in the case of a hospital 
for a cost reporting period with a disproportionate patient 
percentage (as defined in clause (vi)) that--
          (I) is less than 19.3, the disproportionate share 
        adjustment percentage is determined in accordance with 
        the following formula: (P-15)(.65) + 2.5;
          (II) is equal to or exceeds 19.3, but is less than 
        30.0, such adjustment percentage is equal to 5.25 
        percent; or
          (III) is equal to or exceeds 30, such adjustment 
        percentage is determined in accordance with the 
        following formula: (P-30)(.6) + 5.25,
where ``P'' is the hospital's disproportionate patient 
percentage (as defined in clause (vi)).
  (xii) Subject to clause (xiv), for purposes of clause 
(iv)(III) (relating to small rural hospitals generally), in the 
case of a hospital for a cost reporting period with a 
disproportionate patient percentage (as defined in clause (vi)) 
that--
          (I) is less than 19.3, the disproportionate share 
        adjustment percentage is determined in accordance with 
        the following formula: (P-15)(.65) + 2.5; or
          (II) is equal to or exceeds 19.3, such adjustment 
        percentage is equal to 5.25 percent,
where ``P'' is the hospital's disproportionate patient 
percentage (as defined in clause (vi)).
  (xiii) Subject to clause (xiv), for purposes of clause 
(iv)(II) (relating to urban hospitals with less than 100 beds), 
in the case of a hospital for a cost reporting period with a 
disproportionate patient percentage (as defined in clause (vi)) 
that--
          (I) is less than 19.3, the disproportionate share 
        adjustment percentage is determined in accordance with 
        the following formula: (P-15)(.65) + 2.5; or
          (II) is equal to or exceeds 19.3, such adjustment 
        percentage is equal to 5.25 percent,
where ``P'' is the hospital's disproportionate patient 
percentage (as defined in clause (vi)).
  (xiv)(I) In the case of discharges occurring on or after 
April 1, 2004, subject to subclause (II), there shall be 
substituted for the disproportionate share adjustment 
percentage otherwise determined under clause (iv) (other than 
subclause (I)) or under clause (viii), (x), (xi), (xii), or 
(xiii), the disproportionate share adjustment percentage 
determined under clause (vii) (relating to large, urban 
hospitals).
  (II) Under subclause (I), the disproportionate share 
adjustment percentage shall not exceed 12 percent for a 
hospital that is not classified as a rural referral center 
under subparagraph (C) or, in the case of discharges occurring 
on or after October 1, 2006, as a medicare-dependent, small 
rural hospital under subparagraph (G)(iv).
  (G)(i) For any cost reporting period beginning on or after 
April 1, 1990, and before October 1, 1994, or discharges 
occurring on or after October 1, 1997, and before October 1, 
2017, in the case of a subsection (d) hospital which is a 
medicare-dependent, small rural hospital, payment under 
paragraph (1)(A) shall be equal to the sum of the amount 
determined under clause (ii) and the amount determined under 
paragraph (1)(A)(iii).
  (ii) The amount determined under this clause is--
          (I) for discharges occurring during the 36-month 
        period beginning with the first day of the cost 
        reporting period that begins on or after April 1, 1990, 
        the amount by which the hospital's target amount for 
        the cost reporting period (as defined in subsection 
        (b)(3)(D)) exceeds the amount determined under 
        paragraph (1)(A)(iii); and
          (II) for discharges occurring during any subsequent 
        cost reporting period (or portion thereof) and before 
        October 1, 1994, or discharges occurring on or after 
        October 1, 1997, and before October 1, 2017, 50 percent 
        (or 75 percent in the case of discharges occurring on 
        or after October 1, 2006) of the amount by which the 
        hospital's target amount for the cost reporting period 
        or for discharges in the fiscal year (as defined in 
        subsection (b)(3)(D)) exceeds the amount determined 
        under paragraph (1)(A)(iii).
  (iii) In the case of a medicare dependent, small rural 
hospital that experiences, in a cost reporting period compared 
to the previous cost reporting period, a decrease of more than 
5 percent in its total number of inpatient cases due to 
circumstances beyond its control, the Secretary shall provide 
for such adjustment to the payment amounts under this 
subsection (other than under paragraph (9)) as may be necessary 
to fully compensate the hospital for the fixed costs it incurs 
in the period in providing inpatient hospital services, 
including the reasonable cost of maintaining necessary core 
staff and services.
  (iv) The term ``medicare-dependent, small rural hospital'' 
means, with respect to any cost reporting period to which 
clause (i) applies, any hospital--
          (I) located in a rural area,
          (II) that has not more than 100 beds,
          (III) that is not classified as a sole community 
        hospital under subparagraph (D), and
          (IV) for which not less than 60 percent of its 
        inpatient days or discharges during the cost reporting 
        period beginning in fiscal year 1987, or two of the 
        three most recently audited cost reporting periods for 
        which the Secretary has a settled cost report, were 
        attributable to inpatients entitled to benefits under 
        part A.
  (H) The Secretary may provide for such adjustments to the 
payment amounts under this subsection as the Secretary deems 
appropriate to take into account the unique circumstances of 
hospitals located in Alaska and Hawaii.
  (I)(i) The Secretary shall provide by regulation for such 
other exceptions and adjustments to such payment amounts under 
this subsection as the Secretary deems appropriate.
  (ii) In making adjustments under clause (i) for transfer 
cases (as defined by the Secretary) in a fiscal year, not 
taking in account the effect of subparagraph (J), the Secretary 
may make adjustments to each of the average standardized 
amounts determined under paragraph (3) to assure that the 
aggregate payments made under this subsection for such fiscal 
year are not greater or lesser than those that would have 
otherwise been made in such fiscal year.
  (J)(i) The Secretary shall treat the term ``transfer case'' 
(as defined in subparagraph (I)(ii)) as including the case of a 
qualified discharge (as defined in clause (ii)), which is 
classified within a diagnosis-related group described in clause 
(iii), and which occurs on or after October 1, 1998. In the 
case of a qualified discharge for which a substantial portion 
of the costs of care are incurred in the early days of the 
inpatient stay (as defined by the Secretary), in no case may 
the payment amount otherwise provided under this subsection 
exceed an amount equal to the sum of--
          (I) 50 percent of the amount of payment under this 
        subsection for transfer cases (as established under 
        subparagraph (I)(i)), and
          (II) 50 percent of the amount of payment which would 
        have been made under this subsection with respect to 
        the qualified discharge if no transfer were involved.
  (ii) For purposes of clause (i), subject to clause (iii), the 
term ``qualified discharge'' means a discharge classified with 
a diagnosis-related group (described in clause (iii)) of an 
individual from a subsection (d) hospital, if upon such 
discharge the individual--
          (I) is admitted as an inpatient to a hospital or 
        hospital unit that is not a subsection (d) hospital for 
        the provision of inpatient hospital services;
          (II) is admitted to a skilled nursing facility;
          (III) is provided home health services from a home 
        health agency, if such services relate to the condition 
        or diagnosis for which such individual received 
        inpatient hospital services from the subsection (d) 
        hospital, and if such services are provided within an 
        appropriate period (as determined by the Secretary); or
          (IV) for discharges occurring on or after October 1, 
        2000, the individual receives post discharge services 
        described in clause (iv)(I).
  (iii) Subject to clause (iv), a diagnosis-related group 
described in this clause is--
          (I) 1 of 10 diagnosis-related groups selected by the 
        Secretary based upon a high volume of discharges 
        classified within such groups and a disproportionate 
        use of post discharge services described in clause 
        (ii); and
          (II) a diagnosis-related group specified by the 
        Secretary under clause (iv)(II).
  (iv) The Secretary shall include in the proposed rule 
published under subsection (e)(5)(A) for fiscal year 2001, a 
description of the effect of this subparagraph. The Secretary 
may include in the proposed rule (and in the final rule 
published under paragraph (6)) for fiscal year 2001 or a 
subsequent fiscal year, a description of--
          (I) post-discharge services not described in 
        subclauses (I), (II), and (III) of clause (ii), the 
        receipt of which results in a qualified discharge; and
          (II) diagnosis-related groups described in clause 
        (iii)(I) in addition to the 10 selected under such 
        clause.
  (K)(i) Effective for discharges beginning on or after October 
1, 2001, the Secretary shall establish a mechanism to recognize 
the costs of new medical services and technologies under the 
payment system established under this subsection. Such 
mechanism shall be established after notice and opportunity for 
public comment (in the publications required by subsection 
(e)(5) for a fiscal year or otherwise). Such mechanism shall be 
modified to meet the requirements of clause (viii).
  (ii) The mechanism established pursuant to clause (i) shall--
          (I) apply to a new medical service or technology if, 
        based on the estimated costs incurred with respect to 
        discharges involving such service or technology, the 
        DRG prospective payment rate otherwise applicable to 
        such discharges under this subsection is inadequate 
        (applying a threshold specified by the Secretary that 
        is the lesser of 75 percent of the standardized amount 
        (increased to reflect the difference between cost and 
        charges) or 75 percent of one standard deviation for 
        the diagnosis-related group involved);
          (II) provide for the collection of data with respect 
        to the costs of a new medical service or technology 
        described in subclause (I) for a period of not less 
        than two years and not more than three years beginning 
        on the date on which an inpatient hospital code is 
        issued with respect to the service or technology;
          (III) provide for additional payment to be made under 
        this subsection with respect to discharges involving a 
        new medical service or technology described in 
        subclause (I) that occur during the period described in 
        subclause (II) in an amount that adequately reflects 
        the estimated average cost of such service or 
        technology; and
          (IV) provide that discharges involving such a service 
        or technology that occur after the close of the period 
        described in subclause (II) will be classified within a 
        new or existing diagnosis-related group with a 
        weighting factor under paragraph (4)(B) that is derived 
        from cost data collected with respect to discharges 
        occurring during such period.
  (iii) For purposes of clause (ii)(II), the term ``inpatient 
hospital code'' means any code that is used with respect to 
inpatient hospital services for which payment may be made under 
this subsection and includes an alphanumeric code issued under 
the International Classification of Diseases, 9th Revision, 
Clinical Modification (``ICD-9-CM'') and its subsequent 
revisions.
  (iv) For purposes of clause (ii)(III), the term ``additional 
payment'' means, with respect to a discharge for a new medical 
service or technology described in clause (ii)(I), an amount 
that exceeds the prospective payment rate otherwise applicable 
under this subsection to discharges involving such service or 
technology that would be made but for this subparagraph.
  (v) The requirement under clause (ii)(III) for an additional 
payment may be satisfied by means of a new-technology group 
(described in subparagraph (L)), an add-on payment, a payment 
adjustment, or any other similar mechanism for increasing the 
amount otherwise payable with respect to a discharge under this 
subsection. The Secretary may not establish a separate fee 
schedule for such additional payment for such services and 
technologies, by utilizing a methodology established under 
subsection (a) or (h) of section 1834 to determine the amount 
of such additional payment, or by other similar mechanisms or 
methodologies.
  (vi) For purposes of this subparagraph and subparagraph (L), 
a medical service or technology will be considered a ``new 
medical service or technology'' if the service or technology 
meets criteria established by the Secretary after notice and an 
opportunity for public comment.
  (vii) Under the mechanism under this subparagraph, the 
Secretary shall provide for the addition of new diagnosis and 
procedure codes in April 1 of each year, but the addition of 
such codes shall not require the Secretary to adjust the 
payment (or diagnosis-related group classification) under this 
subsection until the fiscal year that begins after such date.
  (viii) The mechanism established pursuant to clause (i) shall 
be adjusted to provide, before publication of a proposed rule, 
for public input regarding whether a new service or technology 
represents an advance in medical technology that substantially 
improves the diagnosis or treatment of individuals entitled to 
benefits under part A as follows:
          (I) The Secretary shall make public and periodically 
        update a list of all the services and technologies for 
        which an application for additional payment under this 
        subparagraph is pending.
          (II) The Secretary shall accept comments, 
        recommendations, and data from the public regarding 
        whether the service or technology represents a 
        substantial improvement.
          (III) The Secretary shall provide for a meeting at 
        which organizations representing hospitals, physicians, 
        such individuals, manufacturers, and any other 
        interested party may present comments, recommendations, 
        and data to the clinical staff of the Centers for 
        Medicare & Medicaid Services before publication of a 
        notice of proposed rulemaking regarding whether service 
        or technology represents a substantial improvement.
  (ix) Before establishing any add-on payment under this 
subparagraph with respect to a new technology, the Secretary 
shall seek to identify one or more diagnosis-related groups 
associated with such technology, based on similar clinical or 
anatomical characteristics and the cost of the technology. 
Within such groups the Secretary shall assign an eligible new 
technology into a diagnosis-related group where the average 
costs of care most closely approximate the costs of care of 
using the new technology. No add-on payment under this 
subparagraph shall be made with respect to such new technology 
and this clause shall not affect the application of paragraph 
(4)(C)(iii).
  (L)(i) In establishing the mechanism under subparagraph (K), 
the Secretary may establish new-technology groups into which a 
new medical service or technology will be classified if, based 
on the estimated average costs incurred with respect to 
discharges involving such service or technology, the DRG 
prospective payment rate otherwise applicable to such 
discharges under this subsection is inadequate.
  (ii) Such groups--
          (I) shall not be based on the costs associated with a 
        specific new medical service or technology; but
          (II) shall, in combination with the applicable 
        standardized amounts and the weighting factors assigned 
        to such groups under paragraph (4)(B), reflect such 
        cost cohorts as the Secretary determines are 
        appropriate for all new medical services and 
        technologies that are likely to be provided as 
        inpatient hospital services in a fiscal year.
  (iii) The methodology for classifying specific hospital 
discharges within a diagnosis-related group under paragraph 
(4)(A) or a new-technology group shall provide that a specific 
hospital discharge may not be classified within both a 
diagnosis-related group and a new-technology group.
  (6) The Secretary shall provide for publication in the 
Federal Register, on or before the August 1 before each fiscal 
year (beginning with fiscal year 1984), of a description of the 
methodology and data used in computing the adjusted DRG 
prospective payment rates under this subsection, including any 
adjustments required under subsection (e)(1)(B).
  (7) There shall be no administrative or judicial review under 
section 1878 or otherwise of--
          (A) the determination of the requirement, or the 
        proportional amount, of any adjustment effected 
        pursuant to subsection (e)(1) or the determination of 
        the applicable percentage increase under paragraph 
        (12)(A)(ii),
          (B) the establishment of diagnosis-related groups, of 
        the methodology for the classification of discharges 
        within such groups, and of the appropriate weighting 
        factors thereof under paragraph (4), including the 
        selection and revision of codes under paragraph (4)(D), 
        and
          (C)\76\ the determination of whether services 
        provided prior to a patient's inpatient admission are 
        related to the admission (as described in subsection 
        (a)(4)).
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    \76\Margin so in law.
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  (8)(A) In the case of any hospital which is located in an 
area which is, at any time after April 20, 1983, reclassified 
from an urban to a rural area, payments to such hospital for 
the first two cost reporting periods for which such 
reclassification is effective shall be made as follows:
          (i) For the first such cost reporting period, payment 
        shall be equal to the amount payable to such hospital 
        for such reporting period on the basis of the rural 
        classification, plus an amount equal to two-thirds of 
        the amount (if any) by which--
                  (I) the amount which would have been payable 
                to such hospital for such reporting period on 
                the basis of an urban classification, exceeds
                  (II) the amount payable to such hospital for 
                such reporting period on the basis of the rural 
                classification.
          (ii) For the second such cost reporting period, 
        payment shall be equal to the amount payable to such 
        hospital for such reporting period on the basis of the 
        rural classification, plus an amount equal to one-third 
        of the amount (if any) by which--
                  (I) the amount which would have been payable 
                to such hospital for such reporting period on 
                the basis of an urban classification, exceeds
                  (II) the amount payable to such hospital for 
                such reporting period on the basis of the rural 
                classification.
  (B)(i) For purposes of this subsection, the Secretary shall 
treat a hospital located in a rural county adjacent to one or 
more urban areas as being located in the urban metropolitan 
statistical area to which the greatest number of workers in the 
county commute, if the rural county would otherwise be 
considered part of an urban area, under the standards for 
designating Metropolitan Statistical Areas (and for designating 
New England County Metropolitan Areas) described in clause 
(ii), if the commuting rates used in determining outlying 
counties (or, for New England, similar recognized areas) were 
determined on the basis of the aggregate number of resident 
workers who commute to (and, if applicable under the standards, 
from) the central county or counties of all contiguous 
Metropolitan Statistical Areas (or New England County 
Metropolitan Areas).
  (ii) The standards described in this clause for cost 
reporting periods beginning in a fiscal year--
          (I) before fiscal year 2003, are the standards 
        published in the Federal Register on January 3, 1980, 
        or, at the election of the hospital with respect to 
        fiscal years 2001 and 2002, standards so published on 
        March 30, 1990; and
          (II) after fiscal year 2002, are the standards 
        published in the Federal Register by the Director of 
        the Office of Management and Budget based on the most 
        recent available decennial population data.
Subparagraphs (C) and (D) shall not apply with respect to the 
application of subclause (I).
  (C)(i) If the application of subparagraph (B) or a decision 
of the Medicare Geographic Classification Review Board or the 
Secretary under paragraph (10), by treating hospitals located 
in a rural county or counties as being located in an urban 
area, or by treating hospitals located in one urban area as 
being located in another urban area--
          (I) reduces the wage index for that urban area (as 
        applied under this subsection) by 1 percentage point or 
        less, the Secretary, in calculating such wage index 
        under this subsection, shall exclude those hospitals so 
        treated, or
          (II) reduces the wage index for that urban area by 
        more than 1 percentage point (as applied under this 
        subsection), the Secretary shall calculate and apply 
        such wage index under this subsection separately to 
        hospitals located in such urban area (excluding all the 
        hospitals so treated) and to the hospitals so treated 
        (as if such hospitals were located in such urban area).
  (ii) If the application of subparagraph (B) or a decision of 
the Medicare Geographic Classification Review Board or the 
Secretary under paragraph (10), by treating hospitals located 
in a rural county or counties as not being located in the rural 
area in a State, reduces the wage index for that rural area (as 
applied under this subsection), the Secretary shall calculate 
and apply such wage index under this subsection as if the 
hospitals so treated had not been excluded from calculation of 
the wage index for that rural area.
  (iii) The application of subparagraph (B) or a decision of 
the Medicare Geographic Classification Review Board or the 
Secretary under paragraph (10) may not result in the reduction 
of any county's wage index to a level below the wage index for 
rural areas in the State in which the county is located.
  (iv) The application of subparagraph (B) or a decision of the 
Medicare Geographic Classification Review Board or of the 
Secretary under paragraph (10) may not result in a reduction in 
an urban area's wage index if--
          (I) the urban area has a wage index below the wage 
        index for rural areas in the State in which it is 
        located; or
          (II) the urban area is located in a State that is 
        composed of a single urban area.
  (v) This subparagraph shall apply with respect to discharges 
occurring in a fiscal year only if the Secretary uses a method 
for making adjustments to the DRG prospective payment rate for 
area differences in hospital wage levels under paragraph (3)(E) 
for the fiscal year that is based on the use of Metropolitan 
Statistical Area classifications.
  (D) The Secretary shall make a proportional adjustment in the 
standardized amounts determined under paragraph (3) to assure 
that the provisions of subparagraphs (B) and (C) or a decision 
of the Medicare Geographic Classification Review Board or the 
Secretary under paragraph (10) do not result in aggregate 
payments under this section that are greater or less than those 
that would otherwise be made.
  (E)(i) For purposes of this subsection, not later than 60 
days after the receipt of an application (in a form and manner 
determined by the Secretary) from a subsection (d) hospital 
described in clause (ii), the Secretary shall treat the 
hospital as being located in the rural area (as defined in 
paragraph (2)(D)) of the State in which the hospital is 
located.
  (ii) For purposes of clause (i), a subsection (d) hospital 
described in this clause is a subsection (d) hospital that is 
located in an urban area (as defined in paragraph (2)(D)) and 
satisfies any of the following criteria:
          (I) The hospital is located in a rural census tract 
        of a metropolitan statistical area (as determined under 
        the most recent modification of the Goldsmith 
        Modification, originally published in the Federal 
        Register on February 27, 1992 (57 Fed. Reg. 6725)).
          (II) The hospital is located in an area designated by 
        any law or regulation of such State as a rural area (or 
        is designated by such State as a rural hospital).
          (III) The hospital would qualify as a rural, 
        regional, or national referral center under paragraph 
        (5)(C) or as a sole community hospital under paragraph 
        (5)(D) if the hospital were located in a rural area.
          (IV) The hospital meets such other criteria as the 
        Secretary may specify.
  (9)(A) Notwithstanding section 1814(b) but subject to the 
provisions of section 1813, the amount of the payment with 
respect to the operating costs of inpatient hospital services 
of a subsection (d) Puerto Rico hospital for inpatient hospital 
discharges is equal to the sum of--
          (i) the applicable Puerto Rico percentage (specified 
        in subparagraph (E)) of the Puerto Rico adjusted DRG 
        prospective payment rate (determined under subparagraph 
        (B) or (C)) for such discharges,
          (ii) the applicable Federal percentage (specified in 
        subparagraph (E)) of--
                  (I) for discharges beginning in a fiscal year 
                beginning on or after October 1, 1997, and 
                before October 1, 2003, the discharge-weighted 
                average of--
                          (aa) the national adjusted DRG 
                        prospective payment rate (determined 
                        under paragraph (3)(D)) for hospitals 
                        located in a large urban area,
                          (bb) such rate for hospitals located 
                        in other urban areas, and
                          (cc) such rate for hospitals located 
                        in a rural area,
                for such discharges, adjusted in the manner 
                provided in paragraph (3)(E) for different area 
                wage levels; and
                  (II) for discharges in a fiscal year 
                beginning on or after October 1, 2003, the 
                national DRG prospective payment rate 
                determined under paragraph (3)(D)(iii) for 
                hospitals located in any area for such 
                discharges, adjusted in the manner provided in 
                paragraph (3)(E) for different area wage 
                levels.
As used in this section, the term ``subsection (d) Puerto Rico 
hospital'' means a hospital that is located in Puerto Rico and 
that would be a subsection (d) hospital (as defined in 
paragraph (1)(B)) if it were located in one of the 50 States.
  (B) The Secretary shall determine a Puerto Rico adjusted DRG 
prospective payment rate, for each inpatient hospital discharge 
in fiscal year 1988 involving inpatient hospital services of a 
subsection (d) Puerto Rico hospital for which payment may be 
made under part A of this title. Such rate shall be determined 
for such hospitals located in urban or rural areas within 
Puerto Rico, as follows:
          (i) The Secretary shall determine the target amount 
        (as defined in subsection (b)(3)(A)) for the hospital 
        for the cost reporting period beginning in fiscal year 
        1987 and increase such amount by prorating the 
        applicable percentage increase (as defined in 
        subsection (b)(3)(B)) to update the amount to the 
        midpoint in fiscal year 1988.
          (ii) The Secretary shall standardize the amount 
        determined under clause (i) for each hospital by--
                  (I) excluding an estimate of indirect medical 
                education costs,
                  (II) adjusting for variations among hospitals 
                by area in the average hospital wage level,
                  (III) adjusting for variations in case mix 
                among hospitals, and
                  (IV) excluding an estimate of the additional 
                payments to certain subsection (d) Puerto Rico 
                hospitals to be made under subparagraph 
                (D)(iii) (relating to disproportionate share 
                payments).
          (iii) The Secretary shall compute a discharge 
        weighted average of the standardized amounts determined 
        under clause (ii) for all hospitals located in an urban 
        area and for all hospitals located in a rural area (as 
        such terms are defined in paragraph (2)(D)).
          (iv) The Secretary shall reduce the average 
        standardized amount by a proportion equal to the 
        proportion (estimated by the Secretary) of the amount 
        of payments under this paragraph which are additional 
        payments described in subparagraph (D)(i) (relating to 
        outlier payments).
          (v) For each discharge classified within a diagnosis-
        related group for hospitals located in an urban or 
        rural area, respectively, the Secretary shall establish 
        a Puerto Rico DRG prospective payment rate equal to the 
        product of--
                  (I) the average standardized amount (computed 
                under clause (iii) and reduced under clause 
                (iv)) for hospitals located in an urban or 
                rural area, respectively, and
                  (II) the weighting factor (determined under 
                paragraph (4)(B)) for that diagnosis-related 
                group.
          (vi) The Secretary shall adjust the proportion (as 
        estimated by the Secretary from time to time) of 
        hospitals' costs which are attributable to wages and 
        wage-related costs, of the Puerto Rico DRG prospective 
        payment rate computed under clause (v) for area 
        differences in hospital wage levels by a factor 
        (established by the Secretary) reflecting the relative 
        hospital wage level in the geographic area of the 
        hospital compared to the Puerto Rican average hospital 
        wage level.
  (C) The Secretary shall determine a Puerto Rico adjusted DRG 
prospective payment rate, for each inpatient hospital discharge 
after fiscal year 1988 involving inpatient hospital services of 
a subsection (d) Puerto Rico hospital for which payment may be 
made under part A of this title. Such rate shall be determined 
for hospitals located in urban or rural areas within Puerto 
Rico as follows:
          (i)(I) For discharges in a fiscal year after fiscal 
        year 1988 and before fiscal year 2004, the Secretary 
        shall compute an average standardized amount for 
        hospitals located in an urban area and for hospitals 
        located in a rural area equal to the respective average 
        standardized amount computed for the previous fiscal 
        year under subparagraph (B)(iii) or under this clause, 
        increased for fiscal year 1989 by the applicable 
        percentage increase under subsection (b)(3)(B), and 
        adjusted for subsequent fiscal years in accordance with 
        the final determination of the Secretary under 
        subsection (e)(4), and adjusted to reflect the most 
        recent case-mix data available.
          (II) For discharges occurring in a fiscal year 
        (beginning with fiscal year 2004), the Secretary shall 
        compute an average standardized amount for hospitals 
        located in any area of Puerto Rico that is equal to the 
        average standardized amount computed under subclause 
        (I) for fiscal year 2003 for hospitals in a large urban 
        area (or, beginning with fiscal year 2005, for all 
        hospitals in the previous fiscal year) increased by the 
        applicable percentage increase under subsection 
        (b)(3)(B) for the fiscal year involved.
          (ii) The Secretary shall reduce each of the average 
        standardized amounts (or for fiscal year 2004 and 
        thereafter, the average standardized amount) by a 
        proportion equal to the proportion (estimated by the 
        Secretary) of the amount of payments under this 
        paragraph which are additional payments described in 
        subparagraph (D)(i) (relating to outlier payments).
          (iii) For each discharge classified within a 
        diagnosis-related group for hospitals located in an 
        urban or rural area, respectively, the Secretary shall 
        establish a Puerto Rico DRG prospective payment rate 
        equal to the product of--
                  (I) the average standardized amount (computed 
                under clause (i) and reduced under clause 
                (ii)), and
                  (II) the weighting factor (determined under 
                paragraph (4)(B)) for that diagnosis-related 
                group.
          (iv)(I) The Secretary shall adjust the proportion (as 
        estimated by the Secretary from time to time) of 
        hospitals' costs which are attributable to wages and 
        wage-related costs, of the Puerto Rico DRG prospective 
        payment rate computed under clause (iii) for area 
        differences in hospital wage levels by a factor 
        (established by the Secretary) reflecting the relative 
        hospital wage level in the geographic area of the 
        hospital compared to the Puerto Rico average hospital 
        wage level. The second and third sentences of paragraph 
        (3)(E)(i) shall apply to subsection (d) Puerto Rico 
        hospitals under this clause in the same manner as they 
        apply to subsection (d) hospitals under such paragraph 
        and, for purposes of this clause, any reference in such 
        paragraph to a subsection (d) hospital is deemed a 
        reference to a subsection (d) Puerto Rico hospital.
          (II) For discharges occurring on or after October 1, 
        2004, the Secretary shall substitute ``62 percent'' for 
        the proportion described in the first sentence of 
        clause (i), unless the application of this subclause 
        would result in lower payments to a hospital than would 
        otherwise be made.
  (D) The following provisions of paragraph (5) shall apply to 
subsection (d) Puerto Rico hospitals receiving payment under 
this paragraph in the same manner and to the extent as they 
apply to subsection (d) hospitals receiving payment under this 
subsection:
          (i) Subparagraph (A) (relating to outlier payments).
          (ii) Subparagraph (B) (relating to payments for 
        indirect medical education costs), except that for this 
        purpose the sum of the amount determined under 
        subparagraph (A) of this paragraph and the amount paid 
        to the hospital under clause (i) of this subparagraph 
        shall be substituted for the sum referred to in 
        paragraph (5)(B)(i)(I).
          (iii) Subparagraph (F) (relating to disproportionate 
        share payments), except that for this purpose the sum 
        described in clause (ii) of this subparagraph shall be 
        substituted for the sum referred to in paragraph 
        (5)(F)(ii)(I).
          (iv) Subparagraph (H) (relating to exceptions and 
        adjustments).
  (E) For purposes of subparagraph (A), for discharges 
occurring--
          (i) on or after October 1, 1987, and before October 
        1, 1997, the applicable Puerto Rico percentage is 75 
        percent and the applicable Federal percentage is 25 
        percent;
          (ii) on or after October 1, 1997, and before April 1, 
        2004, the applicable Puerto Rico percentage is 50 
        percent and the applicable Federal percentage is 50 
        percent;
          (iii) on or after April 1, 2004, and before October 
        1, 2004, the applicable Puerto Rico percentage is 37.5 
        percent and the applicable Federal percentage is 62.5 
        percent;
          (iv) on or after October 1, 2004, and before January 
        1, 2016, the applicable Puerto Rico percentage is 25 
        percent and the applicable Federal percentage is 75 
        percent; and
          (v) on or after January 1, 2016, the applicable 
        Puerto Rico percentage is 0 percent and the applicable 
        Federal percentage is 100 percent.
  (10)(A) There is hereby established the Medicare Geographic 
Classification Review Board (hereinafter in this paragraph 
referred to as the ``Board'').
  (B)(i) The Board shall be composed of 5 members appointed by 
the Secretary without regard to the provisions of title 5, 
United States Code, governing appointments in the competitive 
service. Two of such members shall be representative of 
subsection (d) hospitals located in a rural area under 
paragraph (2)(D). At least 1 member shall be knowledgeable in 
the field of analyzing costs with respect to the provision of 
inpatient hospital services.
  (ii) The Secretary shall make initial appointments to the 
Board as provided in this paragraph within 180 days after the 
date of the enactment of this paragraph.
  (C)(i) The Board shall consider the application of any 
subsection (d) hospital requesting that the Secretary change 
the hospital's geographic classification for purposes of 
determining for a fiscal year--
          (I) the hospital's average standardized amount under 
        paragraph (2)(D), or
          (II) the factor used to adjust the DRG prospective 
        payment rate for area differences in hospital wage 
        levels that applies to such hospital under paragraph 
        (3)(E).
  (ii) A hospital requesting a change in geographic 
classification under clause (i) for a fiscal year shall submit 
its application to the Board not later than the first day of 
the 13-month period ending on September 30 of the preceding 
fiscal year.
  (iii)(I) The Board shall render a decision on an application 
submitted under clause (i) not later than 180 days after the 
deadline referred to in clause (ii).
  (II) Appeal of decisions of the Board shall be subject to the 
provisions of section 557b of title 5, United States Code. The 
Secretary shall issue a decision on such an appeal not later 
than 90 days after the date on which the appeal is filed. The 
decision of the Secretary shall be final and shall not be 
subject to judicial review.
  (D)(i) The Secretary shall publish guidelines to be utilized 
by the Board in rendering decisions on applications submitted 
under this paragraph, and shall include in such guidelines the 
following:
          (I) Guidelines for comparing wages, taking into 
        account (to the extent the Secretary determines 
        appropriate) occupational mix, in the area in which the 
        hospital is classified and the area in which the 
        hospital is applying to be classified.
          (II) Guidelines for determining whether the county in 
        which the hospital is located should be treated as 
        being a part of a particular Metropolitan Statistical 
        Area.
          (III) Guidelines for considering information provided 
        by an applicant with respect to the effects of the 
        hospital's geographic classification on access to 
        inpatient hospital services by medicare beneficiaries.
          (IV) Guidelines for considering the appropriateness 
        of the criteria used to define New England County 
        Metropolitan Areas.
  (ii) Notwithstanding clause (i), if the Secretary uses a 
method for making adjustments to the DRG prospective payment 
rate for area differences in hospital wage levels under 
paragraph (3)(E) that is not based on the use of Metropolitan 
Statistical Area classifications, the Secretary may revise the 
guidelines published under clause (i) to the extent such 
guidelines are used to determine the appropriateness of the 
geographic area in which the hospital is determined to be 
located for purposes of making such adjustments.
  (iii) Under the guidelines published by the Secretary under 
clause (i), in the case of a hospital which has ever been 
classified by the Secretary as a rural referral center under 
paragraph (5)(C), the Board may not reject the application of 
the hospital under this paragraph on the basis of any 
comparison between the average hourly wage of the hospital and 
the average hourly wage of hospitals in the area in which it is 
located.
  (iv) The Secretary shall publish the guidelines described in 
clause (i) by July 1, 1990.
  (v) Any decision of the Board to reclassify a subsection (d) 
hospital for purposes of the adjustment factor described in 
subparagraph (C)(i)(II) for fiscal year 2001 or any fiscal year 
thereafter shall be effective for a period of 3 fiscal years, 
except that the Secretary shall establish procedures under 
which a subsection (d) hospital may elect to terminate such 
reclassification before the end of such period.
  (vi) Such guidelines shall provide that, in making decisions 
on applications for reclassification for the purposes described 
in clause (v) for fiscal year 2003 and any succeeding fiscal 
year, the Board shall base any comparison of the average hourly 
wage for the hospital with the average hourly wage for 
hospitals in an area on--
          (I) an average of the average hourly wage amount for 
        the hospital from the most recently published hospital 
        wage survey data of the Secretary (as of the date on 
        which the hospital applies for reclassification) and 
        such amount from each of the two immediately preceding 
        surveys; and
          (II) an average of the average hourly wage amount for 
        hospitals in such area from the most recently published 
        hospital wage survey data of the Secretary (as of the 
        date on which the hospital applies for 
        reclassification) and such amount from each of the two 
        immediately preceding surveys.
  (E)(i) The Board shall have full power and authority to make 
rules and establish procedures, not inconsistent with the 
provisions of this title or regulations of the Secretary, which 
are necessary or appropriate to carry out the provisions of 
this paragraph. In the course of any hearing the Board may 
administer oaths and affirmations. The provisions of 
subsections (d) and (e) of section 205 with respect to subpenas 
shall apply to the Board to the same extent as such provisions 
apply to the Secretary with respect to title II.
  (ii) The Board is authorized to engage such technical 
assistance and to receive such information as may be required 
to carry out its functions, and the Secretary shall, in 
addition, make available to the Board such secretarial, 
clerical, and other assistance as the Board may require to 
carry out its functions.
  (F)(i) Each member of the Board who is not an officer or 
employee of the Federal Government shall be compensated at a 
rate equal to the daily equivalent of the annual rate of basic 
pay prescribed for grade GS-18 of the General Schedule under 
section 5332 of title 5, United States Code, for each day 
(including travel time) during which such member is engaged in 
the performance of the duties of the Board. Each member of the 
Board who is an officer or employee of the United States shall 
serve without compensation in addition to that received for 
service as an officer or employee of the United States.
  (ii) Members of the Board shall be allowed travel expenses, 
including per diem in lieu of subsistence, at rates authorized 
for employees of agencies under subchapter I of chapter 57 of 
title 5, United States Code, while away from their homes or 
regular places of business in the performance of services for 
the Board.
          (11) Additional payments for managed care 
        enrollees.--
                  (A) In general.--For portions of cost 
                reporting periods occurring on or after January 
                1, 1998, the Secretary shall provide for an 
                additional payment amount for each applicable 
                discharge of any subsection (d) hospital that 
                has an approved medical residency training 
                program.
                  (B) Applicable discharge.--For purposes of 
                this paragraph, the term ``applicable 
                discharge'' means the discharge of any 
                individual who is enrolled under a risk-sharing 
                contract with an eligible organization under 
                section 1876 and who is entitled to benefits 
                under part A or any individual who is enrolled 
                with a Medicare+Choice organization under part 
                C.
                  (C) Determination of amount.--The amount of 
                the payment under this paragraph with respect 
                to any applicable discharge shall be equal to 
                the applicable percentage (as defined in 
                subsection (h)(3)(D)(ii)) of the estimated 
                average per discharge amount that would 
                otherwise have been paid under paragraph (5)(B) 
                if the individuals had not been enrolled as 
                described in subparagraph (B).
                  (D) Special rule for hospitals under 
                reimbursement system.--The Secretary shall 
                establish rules for the application of this 
                paragraph to a hospital reimbursed under a 
                reimbursement system authorized under section 
                1814(b)(3) in the same manner as it would apply 
                to the hospital if it were not reimbursed under 
                such section.
          (12) Payment adjustment for low-volume hospitals.--
                  (A) In general.--In addition to any payments 
                calculated under this section for a subsection 
                (d) hospital, for discharges occurring during a 
                fiscal year (beginning with fiscal year 2005), 
                the Secretary shall provide for an additional 
                payment amount to each low-volume hospital (as 
                defined in subparagraph (C)(i)) for discharges 
                occurring during that fiscal year that is equal 
                to the applicable percentage increase 
                (determined under subparagraph (B) or (D) for 
                the hospital involved) in the amount paid to 
                such hospital under this section for such 
                discharges (determined without regard to this 
                paragraph).
                  (B) Applicable percentage increase.--For 
                discharges occurring in fiscal years 2005 
                through 2010 and for discharges occurring in 
                fiscal year 2018 and subsequent fiscal years, 
                the Secretary shall determine an applicable 
                percentage increase for purposes of 
                subparagraph (A) as follows:
                          (i) The Secretary shall determine the 
                        empirical relationship for subsection 
                        (d) hospitals between the standardized 
                        cost-per-case for such hospitals and 
                        the total number of discharges of such 
                        hospitals and the amount of the 
                        additional incremental costs (if any) 
                        that are associated with such number of 
                        discharges.
                          (ii) The applicable percentage 
                        increase shall be determined based upon 
                        such relationship in a manner that 
                        reflects, based upon the number of such 
                        discharges for a subsection (d) 
                        hospital, such additional incremental 
                        costs.
                          (iii) In no case shall the applicable 
                        percentage increase exceed 25 percent.
                  (C) Definitions.--
                          (i) Low-volume hospital.--For 
                        purposes of this paragraph, the term 
                        ``low-volume hospital'' means, for a 
                        fiscal year, a subsection (d) hospital 
                        (as defined in paragraph (1)(B)) that 
                        the Secretary determines is located 
                        more than 25 road miles (or, with 
                        respect to fiscal years 2011 through 
                        2017, 15 road miles) from another 
                        subsection (d) hospital and has less 
                        than 800 discharges (or, with respect 
                        to fiscal years 2011 through 2017, 
                        1,600 discharges of individuals 
                        entitled to, or enrolled for, benefits 
                        under part A) during the fiscal year or 
                        portion of fiscal year.
                          (ii) Discharge.--For purposes of 
                        subparagraph (B) and clause (i), the 
                        term ``discharge'' means an inpatient 
                        acute care discharge of an individual 
                        regardless of whether the individual is 
                        entitled to benefits under part A.
                  (D) Temporary applicable percentage 
                increase.--For discharges occurring in fiscal 
                years 2011 through 2017, the Secretary shall 
                determine an applicable percentage increase for 
                purposes of subparagraph (A) using a continuous 
                linear sliding scale ranging from 25 percent 
                for low-volume hospitals with 200 or fewer 
                discharges of individuals entitled to, or 
                enrolled for, benefits under part A in the 
                fiscal year or the portion of fiscal year to 0 
                percent for low-volume hospitals with greater 
                than 1,600 discharges of such individuals in 
                the fiscal year.
  (13)(A) In order to recognize commuting patterns among 
geographic areas, the Secretary shall establish a process 
through application or otherwise for an increase of the wage 
index applied under paragraph (3)(E) for subsection (d) 
hospitals located in a qualifying county described in 
subparagraph (B) in the amount computed under subparagraph (D) 
based on out-migration of hospital employees who reside in that 
county to any higher wage index area.
  (B) The Secretary shall establish criteria for a qualifying 
county under this subparagraph based on the out-migration 
referred to in subparagraph (A) and differences in the area 
wage indices. Under such criteria the Secretary shall, 
utilizing such data as the Secretary determines to be 
appropriate, establish--
          (i) a threshold percentage, established by the 
        Secretary, of the weighted average of the area wage 
        index or indices for the higher wage index areas 
        involved;
          (ii) a threshold (of not less than 10 percent) for 
        minimum out-migration to a higher wage index area or 
        areas; and
          (iii) a requirement that the average hourly wage of 
        the hospitals in the qualifying county equals or 
        exceeds the average hourly wage of all the hospitals in 
        the area in which the qualifying county is located.
  (C) For purposes of this paragraph, the term ``higher wage 
index area'' means, with respect to a county, an area with a 
wage index that exceeds that of the county.
  (D) The increase in the wage index under subparagraph (A) for 
a qualifying county shall be equal to the percentage of the 
hospital employees residing in the qualifying county who are 
employed in any higher wage index area multiplied by the sum of 
the products, for each higher wage index area of--
          (i) the difference between--
                  (I) the wage index for such higher wage index 
                area, and
                  (II) the wage index of the qualifying county; 
                and
          (ii) the number of hospital employees residing in the 
        qualifying county who are employed in such higher wage 
        index area divided by the total number of hospital 
        employees residing in the qualifying county who are 
        employed in any higher wage index area.
  (E) The process under this paragraph may be based upon the 
process used by the Medicare Geographic Classification Review 
Board under paragraph (10). As the Secretary determines to be 
appropriate to carry out such process, the Secretary may 
require hospitals (including subsection (d) hospitals and other 
hospitals) and critical access hospitals, as required under 
section 1866(a)(1)(T), to submit data regarding the location of 
residence, or the Secretary may use data from other sources.
  (F) A wage index increase under this paragraph shall be 
effective for a period of 3 fiscal years, except that the 
Secretary shall establish procedures under which a subsection 
(d) hospital may elect to waive the application of such wage 
index increase.
  (G) A hospital in a county that has a wage index increase 
under this paragraph for a period and that has not waived the 
application of such an increase under subparagraph (F) is not 
eligible for reclassification under paragraph (8) or (10) 
during that period.
  (H) Any increase in a wage index under this paragraph for a 
county shall not be taken into account for purposes of--
          (i) computing the wage index for portions of the wage 
        index area (not including the county) in which the 
        county is located; or
          (ii) applying any budget neutrality adjustment with 
        respect to such index under paragraph (8)(D).
  (I) The thresholds described in subparagraph (B), data on 
hospital employees used under this paragraph, and any 
determination of the Secretary under the process described in 
subparagraph (E) shall be final and shall not be subject to 
judicial review.
  (e)(1)(A) For cost reporting periods of hospitals beginning 
in fiscal year 1984 or fiscal year 1985, the Secretary shall 
provide for such proportional adjustment in the applicable 
percentage increase (otherwise applicable to the periods under 
subsection (b)(3)(B)) as may be necessary to assure that--
          (i) the aggregate payment amounts otherwise provided 
        under subsection (d)(1)(A)(i)(I) for that fiscal year 
        for operating costs of inpatient hospital services of 
        hospitals (excluding payments made under section 
        1866(a)(1)(F)),
are not greater or less than--
          (ii) the target percentage (as defined in subsection 
        (d)(1)(C)) of the payment amounts which would have been 
        payable for such services for those same hospitals for 
        that fiscal year under this section under the law as in 
        effect before the date of the enactment of the Social 
        Security Amendments of 1983 (excluding payments made 
        under section 1866(a)(1)(F));
except that the adjustment made under this subparagraph shall 
apply only to subsection (d) hospitals and shall not apply for 
purposes of making computations under subsection (d)(2)(B)(ii) 
or subsection (d)(3)(A).
  (B) For discharges occurring in fiscal year 1984 or fiscal 
year 1985, the Secretary shall provide under subsections 
(d)(2)(F) and (d)(3)(C) for such equal proportional adjustment 
in each of the average standardized amounts otherwise computed 
for that fiscal year as may be necessary to assure that--
          (i) the aggregate payment amounts otherwise provided 
        under subsection (d)(1)(A)(i)(II) and (d)(5) for that 
        fiscal year for operating costs of inpatient hospital 
        services of hospitals (excluding payments made under 
        section 1866(a)(1)(F)),
are not greater or less than--
          (ii) the DRG percentage (as defined in subsection 
        (d)(1)(C)) of the payment amounts which would have been 
        payable for such services for those same hospitals for 
        that fiscal year under this section under the law as in 
        effect before the date of the enactment of the Social 
        Security Amendments of 1983 (excluding payments made 
        under section 1866(a)(1)(F)).
  (C) For discharges occurring in fiscal year 1988, the 
Secretary shall provide for such equal proportional adjustment 
in each of the average standardized amounts otherwise computed 
under subsection (d)(3) for that fiscal year as may be 
necessary to assure that--
          (i) the aggregate payment amounts otherwise provided 
        under subsections (d)(1)(A)(iii), (d)(5), and (d)(9) 
        for that fiscal year for operating costs of inpatient 
        hospital services of subsection (d) hospitals and 
        subsection (d) Puerto Rico hospitals,
are not greater or less than--
          (ii) the payment amounts that would have been payable 
        for such services for those same hospitals for that 
        fiscal year but for the enactment of the amendments 
        made by section 9304 of the Omnibus Budget 
        Reconciliation Act of 1986.
  (4)(A) Taking into consideration the recommendations of the 
Commission, the Secretary shall recommend for each fiscal year 
(beginning with fiscal year 1988) an appropriate change factor 
for inpatient hospital services for discharges in that fiscal 
year which will take into account amounts necessary for the 
efficient and effective delivery of medically appropriate and 
necessary care of high quality. The appropriate change factor 
may be different for all large urban subsection (d) hospitals, 
other urban subsection (d) hospitals, urban subsection (d) 
Puerto Rico hospitals, rural subsection (d) hospitals, and 
rural subsection (d) Puerto Rico hospitals, and all other 
hospitals and units not paid under subsection (d), and may vary 
among such other hospitals and units.
  (B) In addition to the recommendation made under subparagraph 
(A), the Secretary shall, taking into consideration the 
recommendations of the Commission under paragraph (2)(B), 
recommend for each fiscal year (beginning with fiscal year 
1992) other appropriate changes in each existing reimbursement 
policy under this title under which payments to an institution 
are based upon prospectively determined rates.
  (5) The Secretary shall cause to have published in the 
Federal Register, not later than--
          (A) the April 1 before each fiscal year (beginning 
        with fiscal year 1986), the Secretary's proposed 
        recommendations under paragraph (4) for that fiscal 
        year for public comment, and
          (B) the August 1 before such fiscal year after such 
        consideration of public comment on the proposal as is 
        feasible in the time available, the Secretary's final 
        recommendations under such paragraph for that year.
The Secretary shall include in the publication referred to in 
subparagraph (A) for a fiscal year the report of the 
Commission's recommendations submitted under paragraph (3) for 
that fiscal year. To the extent that the Secretary's 
recommendations under paragraph (4) differ from the 
Commission's recommendations for that fiscal year, the 
Secretary shall include in the publication referred to in 
subparagraph (A) an explanation of the Secretary's grounds for 
not following the Commission's recommendations.
  (f)(1)(A) The Secretary shall maintain a system for the 
reporting of costs of hospitals receiving payments computed 
under subsection (d).
  (B)(i) Subject to clause (ii), the Secretary shall place into 
effect a standardized electronic cost reporting format for 
hospitals under this title.
  (ii) The Secretary may delay or waive the implementation of 
such format in particular instances where such implementation 
would result in financial hardship (in particular with respect 
to hospitals with a small percentage of inpatients entitled to 
benefits under this title).
  (2) If the Secretary determines, based upon information 
supplied by a quality improvement organization under part B of 
title XI, that a hospital, in order to circumvent the payment 
method established under subsection (b) or (d) of this section, 
has taken an action that results in the admission of 
individuals entitled to benefits under part A unnecessarily, 
unnecessary multiple admissions of the same such individuals, 
or other inappropriate medical or other practices with respect 
to such individuals, the Secretary may--
          (A) deny payment (in whole or in part) under part A 
        with respect to inpatient hospital services provided 
        with respect to such an unnecessary admission (or 
        subsequent admission of the same individual), or
          (B) require the hospital to take other corrective 
        action necessary to prevent or correct the 
        inappropriate practice.
  (3) The provisions of subsections (c) through (g) of section 
1128 shall apply to determinations made under paragraph (2) in 
the same manner as they apply to exclusions effected under 
section 1128(b)(13).
  (g)(1)(A) Notwithstanding section 1861(v), instead of any 
amounts that are otherwise payable under this title with 
respect to the reasonable costs of subsection (d) hospitals and 
subsection (d) Puerto Rico hospitals for capital-related costs 
of inpatient hospital services, the Secretary shall, for 
hospital cost reporting periods beginning on or after October 
1, 1991, provide for payments for such costs in accordance with 
a prospective payment system established by the Secretary. 
Aggregate payments made under subsection (d) and this 
subsection during fiscal years 1992 through 1995 shall be 
reduced in a manner that results in a reduction (as estimated 
by the Secretary) in the amount of such payments equal to a 10 
percent reduction in the amount of payments attributable to 
capital-related costs that would otherwise have been made 
during such fiscal year had the amount of such payments been 
based on reasonable costs (as defined in section 1861(v)). For 
discharges occurring after September 30, 1993, the Secretary 
shall reduce by 7.4 percent the unadjusted standard Federal 
capital payment rate (as described in 42 CFR 412.308(c), as in 
effect on the date of the enactment of the Omnibus Budget 
Reconciliation Act of 1993) and shall (for hospital cost 
reporting periods beginning on or after October 1, 1993) 
redetermine which payment methodology is applied to the 
hospital under such system to take into account such reduction. 
In addition to the reduction described in the preceding 
sentence, for discharges occurring on or after October 1, 1997, 
the Secretary shall apply the budget neutrality adjustment 
factor used to determine the Federal capital payment rate in 
effect on September 30, 1995 (as described in section 412.352 
of title 42 of the Code of Federal Regulations), to (i) the 
unadjusted standard Federal capital payment rate (as described 
in section 412.308(c) of that title, as in effect on September 
30, 1997), and (ii) the unadjusted hospital-specific rate (as 
described in section 412.328(e)(1) of that title, as in effect 
on September 30, 1997), and, for discharges occurring on or 
after October 1, 1997, and before October 1, 2002, reduce the 
rates described in clauses (i) and (ii) by 2.1 percent.
  (B) Such system--
          (i) shall provide for (I) a payment on a per 
        discharge basis, and (II) an appropriate weighting of 
        such payment amount as relates to the classification of 
        the discharge;
          (ii) may provide for an adjustment to take into 
        account variations in the relative costs of capital and 
        construction for the different types of facilities or 
        areas in which they are located;
          (iii) may provide for such exceptions (including 
        appropriate exceptions to reflect capital obligations) 
        as the Secretary determines to be appropriate, and
          (iv) may provide for suitable adjustment to reflect 
        hospital occupancy rate.
  (C) In this paragraph, the term ``capital-related costs'' has 
the meaning given such term by the Secretary under subsection 
(a)(4) as of September 30, 1987, and does not include a return 
on equity capital.
  (2)(A) The Secretary shall provide that the amount which is 
allowable, with respect to reasonable costs of inpatient 
hospital services for which payment may be made under this 
title, for a return on equity capital for hospitals shall, for 
cost reporting periods beginning on or after the date of the 
enactment of this subsection, be equal to amounts otherwise 
allowable under regulations in effect on March 1, 1983, except 
that the rate of return to be recognized shall be equal to the 
applicable percentage (described in subparagraph (B)) of the 
average of the rates of interest, for each of the months any 
part of which is included in the reporting period, on 
obligations issued for purchase by the Federal Hospital 
Insurance Trust Fund.
  (B) In this paragraph, the ``applicable percentage'' is--
          (i) 75 percent, for cost reporting periods beginning 
        during fiscal year 1987,
          (ii) 50 percent, for cost reporting periods beginning 
        during fiscal year 1988,
          (iii) 25 percent, for cost reporting periods 
        beginning during fiscal year 1989, and
          (iv) 0 percent, for cost reporting periods beginning 
        on or after October 1, 1989.
  (3)(A) Except as provided in subparagraph (B), in determining 
the amount of the payments that may be made under this title 
with respect to all the capital-related costs of inpatient 
hospital services of a subsection (d) hospital and a subsection 
(d) Puerto Rico hospital, the Secretary shall reduce the 
amounts of such payments otherwise established under this title 
by--
          (i) 3.5 percent for payments attributable to portions 
        of cost reporting periods occurring during fiscal year 
        1987,
          (ii) 7 percent for payments attributable to portions 
        of cost reporting periods or discharges (as the case 
        may be) occurring during fiscal year 1988 on or after 
        October 1, 1987, and before January 1, 1988,
          (iii) 12 percent for payments attributable to 
        portions of cost reporting periods or discharges (as 
        the case may be) in fiscal year 1988, occurring on or 
        after January 1, 1988,
          (iv) 15 percent for payments attributable to portions 
        of cost reporting periods or discharges (as the case 
        may be) occurring during fiscal year 1989, and
          (v) 15 percent for payments attributable to portions 
        of cost reporting periods or discharges (as the case 
        may be) occurring during the period beginning January 
        1, 1990, and ending September 30, 1991.
  (B) Subparagraph (A) shall not apply to payments with respect 
to the capital-related costs of any hospital that is a sole 
community hospital (as defined in subsection (d)(5)(D)(iii)) or 
a critical access hospital (as defined in section 1861(mm)(1)).
  (4) In determining the amount of the payments that are 
attributable to portions of cost reporting periods occurring 
during fiscal years 1998 through 2002 and that may be made 
under this title with respect to capital-related costs of 
inpatient hospital services of a hospital which is described in 
clause (i), (ii), or (iv) of subsection (d)(1)(B) or a unit 
described in the matter after clause (v) of such subsection, 
the Secretary shall reduce the amounts of such payments 
otherwise determined under this title by 15 percent.
  (h) Payments for Direct Graduate Medical Education Costs.--
          (1) Substitution of special payment rules.--
        Notwithstanding section 1861(v), instead of any amounts 
        that are otherwise payable under this title with 
        respect to the reasonable costs of hospitals for direct 
        graduate medical education costs, the Secretary shall 
        provide for payments for such costs in accordance with 
        paragraph (3) of this subsection. In providing for such 
        payments, the Secretary shall provide for an allocation 
        of such payments between part A and part B (and the 
        trust funds established under the respective parts) as 
        reasonably reflects the proportion of direct graduate 
        medical education costs of hospitals associated with 
        the provision of services under each respective part.
          (2) Determination of hospital-specific approved fte 
        resident amounts.--The Secretary shall determine, for 
        each hospital with an approved medical residency 
        training program, an approved FTE resident amount for 
        each cost reporting period beginning on or after July 
        1, 1985, as follows:
                  (A) Determining allowable average cost per 
                fte resident in a hospital's base period.--The 
                Secretary shall determine, for the hospital's 
                cost reporting period that began during fiscal 
                year 1984, the average amount recognized as 
                reasonable under this title for direct graduate 
                medical education costs of the hospital for 
                each full-time-equivalent resident.
                  (B) Updating to the first cost reporting 
                period.--
                          (i) In general.--The Secretary shall 
                        update each average amount determined 
                        under subparagraph (A) by the 
                        percentage increase in the consumer 
                        price index during the 12-month cost 
                        reporting period described in such 
                        subparagraph.
                          (ii) Exception.--The Secretary shall 
                        not perform an update under clause (i) 
                        in the case of a hospital if the 
                        hospital's reporting period, described 
                        in subparagraph (A), began on or after 
                        July 1, 1984, and before October 1, 
                        1984.
                  (C) Amount for first cost reporting period.--
                For the first cost reporting period of the 
                hospital beginning on or after July 1, 1985, 
                the approved FTE resident amount for the 
                hospital is equal to the amount determined 
                under subparagraph (B) increased by 1 percent.
                  (D) Amount for subsequent cost reporting 
                periods.--
                          (i) In general.--Except as provided 
                        in a subsequent clause, for each 
                        subsequent cost reporting period, the 
                        approved FTE resident amount for the 
                        hospital is equal to the approved FTE 
                        resident amount determined under this 
                        paragraph for the previous cost 
                        reporting period updated, through the 
                        midpoint of the period, by projecting 
                        the estimated percentage change in the 
                        consumer price index during the 12-
                        month period ending at that midpoint, 
                        with appropriate adjustments to reflect 
                        previous under-or over-estimations 
                        under this subparagraph in the 
                        projected percentage change in the 
                        consumer price index.
                          (ii) Freeze in update for fiscal 
                        years 1994 and 1995.--For cost 
                        reporting periods beginning during 
                        fiscal year 1994 or fiscal year 1995, 
                        the approved FTE resident amount for a 
                        hospital shall not be updated under 
                        clause (i) for a resident who is not a 
                        primary care resident (as defined in 
                        paragraph (5)(H)) or a resident 
                        enrolled in an approved medical 
                        residency training program in 
                        obstetrics and gynecology.
                          (iii) Floor for locality adjusted 
                        national average per resident amount.--
                        The approved FTE resident amount for a 
                        hospital for the cost reporting period 
                        beginning during fiscal year 2001 shall 
                        not be less than 70 percent, and for 
                        the cost reporting period beginning 
                        during fiscal year 2002 shall not be 
                        less than 85 percent, of the locality 
                        adjusted national average per resident 
                        amount computed under subparagraph (E) 
                        for the hospital and period.
                          (iv) Adjustment in rate of increase 
                        for hospitals with fte approved amount 
                        above 140 percent of locality adjusted 
                        national average per resident amount.--
                                  (I) Freeze for fiscal years 
                                2001 and 2002 and 2004 through 
                                2013.--For a cost reporting 
                                period beginning during fiscal 
                                year 2001 or fiscal year 2002 
                                or during the period beginning 
                                with fiscal year 2004 and 
                                ending with fiscal year 2013, 
                                if the approved FTE resident 
                                amount for a hospital for the 
                                preceding cost reporting period 
                                exceeds 140 percent of the 
                                locality adjusted national 
                                average per resident amount 
                                computed under subparagraph (E) 
                                for that hospital and period, 
                                subject to subclause (III), the 
                                approved FTE resident amount 
                                for the period involved shall 
                                be the same as the approved FTE 
                                resident amount for the 
                                hospital for such preceding 
                                cost reporting period.
                                  (II)  2 percent decrease in 
                                update for fiscal years 2003, 
                                2004, and 2005.--For the cost 
                                reporting period beginning 
                                during fiscal year 2003, if the 
                                approved FTE resident amount 
                                for a hospital for the 
                                preceding cost reporting period 
                                exceeds 140 percent of the 
                                locality adjusted national 
                                average per resident amount 
                                computed under subparagraph (E) 
                                for that hospital and preceding 
                                period, the approved FTE 
                                resident amount for the period 
                                involved shall be updated in 
                                the manner described in 
                                subparagraph (D)(i) except 
                                that, subject to subclause 
                                (III), the consumer price index 
                                applied for a 12-month period 
                                shall be reduced (but not below 
                                zero) by 2 percentage points.
                                  (III) No adjustment below 140 
                                percent.--In no case shall 
                                subclause (I) or (II) reduce an 
                                approved FTE resident amount 
                                for a hospital for a cost 
                                reporting period below 140 
                                percent of the locality 
                                adjusted national average per 
                                resident amount computed under 
                                subparagraph (E) for such 
                                hospital and period.
                  (E) Determination of locality adjusted 
                national average per resident amount.--The 
                Secretary shall determine a locality adjusted 
                national average per resident amount with 
                respect to a cost reporting period of a 
                hospital beginning during a fiscal year as 
                follows:
                          (i) Determining hospital single per 
                        resident amount.--The Secretary shall 
                        compute for each hospital operating an 
                        approved graduate medical education 
                        program a single per resident amount 
                        equal to the average (weighted by 
                        number of full-time equivalent 
                        residents, as determined under 
                        paragraph (4)) of the primary care per 
                        resident amount and the non-primary 
                        care per resident amount computed under 
                        paragraph (2) for cost reporting 
                        periods ending during fiscal year 1997.
                          (ii) Standardizing per resident 
                        amounts.--The Secretary shall compute a 
                        standardized per resident amount for 
                        each such hospital by dividing the 
                        single per resident amount computed 
                        under clause (i) by an average of the 3 
                        geographic index values (weighted by 
                        the national average weight for each of 
                        the work, practice expense, and 
                        malpractice components) as applied 
                        under section 1848(e) for 1999 for the 
                        fee schedule area in which the hospital 
                        is located.
                          (iii) Computing of weighted 
                        average.--The Secretary shall compute 
                        the average of the standardized per 
                        resident amounts computed under clause 
                        (ii) for such hospitals, with the 
                        amount for each hospital weighted by 
                        the average number of full-time 
                        equivalent residents at such hospital 
                        (as determined under paragraph (4)).
                          (iv) Computing national average per 
                        resident amount.--The Secretary shall 
                        compute the national average per 
                        resident amount, for a hospital's cost 
                        reporting period that begins during 
                        fiscal year 2001, equal to the weighted 
                        average computed under clause (iii) 
                        increased by the estimated percentage 
                        increase in the consumer price index 
                        for all urban consumers during the 
                        period beginning with the month that 
                        represents the midpoint of the cost 
                        reporting periods described in clause 
                        (i) and ending with the midpoint of the 
                        hospital's cost reporting period that 
                        begins during fiscal year 2001.
                          (v) Adjusting for locality.--The 
                        Secretary shall compute the product 
                        of--
                                  (I) the national average per 
                                resident amount computed under 
                                clause (iv) for the hospital, 
                                and
                                  (II) the geographic index 
                                value average (described and 
                                applied under clause (ii)) for 
                                the fee schedule area in which 
                                the hospital is located.
                          (vi) Computing locality adjusted 
                        amount.--The locality adjusted national 
                        per resident amount for a hospital 
                        for--
                                  (I) the cost reporting period 
                                beginning during fiscal year 
                                2001 is the product computed 
                                under clause (v); or
                                  (II) each subsequent cost 
                                reporting period is equal to 
                                the locality adjusted national 
                                per resident amount for the 
                                hospital for the previous cost 
                                reporting period (as determined 
                                under this clause) updated, 
                                through the midpoint of the 
                                period, by projecting the 
                                estimated percentage change in 
                                the consumer price index for 
                                all urban consumers during the 
                                12-month period ending at that 
                                midpoint.
                  (F) Treatment of certain hospitals.--In the 
                case of a hospital that did not have an 
                approved medical residency training program or 
                was not participating in the program under this 
                title for a cost reporting period beginning 
                during fiscal year 1984, the Secretary shall, 
                for the first such period for which it has such 
                a residency training program and is 
                participating under this title, provide for 
                such approved FTE resident amount as the 
                Secretary determines to be appropriate, based 
                on approved FTE resident amounts for comparable 
                programs.
          (3) Hospital payment amount per resident.--
                  (A) In general.--The payment amount, for a 
                hospital cost reporting period beginning on or 
                after July 1, 1985, is equal to the product 
                of--
                          (i) the aggregate approved amount (as 
                        defined in subparagraph (B)) for that 
                        period, and
                          (ii) the hospital's medicare patient 
                        load (as defined in subparagraph (C)) 
                        for that period.
                  (B) Aggregate approved amount.--As used in 
                subparagraph (A), the term ``aggregate approved 
                amount'' means, for a hospital cost reporting 
                period, the product of--
                          (i) the hospital's approved FTE 
                        resident amount (determined under 
                        paragraph (2)) for that period, and
                          (ii) the weighted average number of 
                        full-time-equivalent residents (as 
                        determined under paragraph (4)) in the 
                        hospital's approved medical residency 
                        training programs in that period.
        The Secretary shall reduce the aggregate approved 
        amount to the extent payment is made under subsection 
        (k) for residents included in the hospital's count of 
        full-time equivalent residents.
                  (C) Medicare patient load.--As used in 
                subparagraph (A), the term ``medicare patient 
                load'' means, with respect to a hospital's cost 
                reporting period, the fraction of the total 
                number of inpatient-bed-days (as established by 
                the Secretary) during the period which are 
                attributable to patients with respect to whom 
                payment may be made under part A.
                  (D) Payment for managed care enrollees.--
                          (i) In general.--For portions of cost 
                        reporting periods occurring on or after 
                        January 1, 1998, the Secretary shall 
                        provide for an additional payment 
                        amount under this subsection for 
                        services furnished to individuals who 
                        are enrolled under a risk-sharing 
                        contract with an eligible organization 
                        under section 1876 and who are entitled 
                        to part A or with a Medicare+Choice 
                        organization under part C. The amount 
                        of such a payment shall equal, subject 
                        to clause (iii), the applicable 
                        percentage of the product of--
                                  (I) the aggregate approved 
                                amount (as defined in 
                                subparagraph (B)) for that 
                                period; and
                                  (II) the fraction of the 
                                total number of inpatient-bed 
                                days (as established by the 
                                Secretary) during the period 
                                which are attributable to such 
                                enrolled individuals.
                          (ii) Applicable percentage.--For 
                        purposes of clause (i), the applicable 
                        percentage is--
                                  (I) 20 percent in 1998,
                                  (II) 40 percent in 1999,
                                  (III) 60 percent in 2000,
                                  (IV) 80 percent in 2001, and
                                  (V) 100 percent in 2002 and 
                                subsequent years.
                          (iii) Proportional reduction for 
                        nursing and allied health education.--
                        The Secretary shall estimate a 
                        proportional adjustment in payments to 
                        all hospitals determined under clauses 
                        (i) and (ii) for portions of cost 
                        reporting periods beginning in a year 
                        (beginning with 2000) such that the 
                        proportional adjustment reduces 
                        payments in an amount for such year 
                        equal to the total additional payment 
                        amounts for nursing and allied health 
                        education determined under subsection 
                        (l) for portions of cost reporting 
                        periods occurring in that year.
                          (iv) Special rule for hospitals under 
                        reimbursement system.--The Secretary 
                        shall establish rules for the 
                        application of this subparagraph to a 
                        hospital reimbursed under a 
                        reimbursement system authorized under 
                        section 1814(b)(3) in the same manner 
                        as it would apply to the hospital if it 
                        were not reimbursed under such section.
          (4) Determination of full-time-equivalent 
        residents.--
                  (A) Rules.--The Secretary shall establish 
                rules consistent with this paragraph for the 
                computation of the number of full-time- 
                equivalent residents in an approved medical 
                residency training program.
                  (B) Adjustment for part-year or part-time 
                residents.--Such rules shall take into account 
                individuals who serve as residents for only a 
                portion of a period with a hospital or 
                simultaneously with more than one hospital.
                  (C) Weighting factors for certain 
                residents.--Subject to subparagraph (D), such 
                rules shall provide, in calculating the number 
                of full-time-equivalent residents in an 
                approved residency program--
                          (i) before July 1, 1986, for each 
                        resident the weighting factor is 1.00,
                          (ii) on or after July 1, 1986, for a 
                        resident who is in the resident's 
                        initial residency period (as defined in 
                        paragraph (5)(F)), the weighting factor 
                        is 1.00,
                          (iii) on or after July 1, 1986, and 
                        before July 1, 1987, for a resident who 
                        is not in the resident's initial 
                        residency period (as defined in 
                        paragraph (5)(F)), the weighting factor 
                        is .75, and
                          (iv) on or after July 1, 1987, for a 
                        resident who is not in the resident's 
                        initial residency period (as defined in 
                        paragraph (5)(F)), the weighting factor 
                        is .50.
                  (D) Foreign medical graduates required to 
                pass fmgems examination.--
                          (i) In general.--Except as provided 
                        in clause (ii), such rules shall 
                        provide that, in the case of an 
                        individual who is a foreign medical 
                        graduate (as defined in paragraph 
                        (5)(D)), the individual shall not be 
                        counted as a resident on or after July 
                        1, 1986, unless--
                                  (I) the individual has passed 
                                the FMGEMS examination (as 
                                defined in paragraph (5)(E)), 
                                or
                                  (II) the individual has 
                                previously received 
                                certification from, or has 
                                previously passed the 
                                examination of, the Educational 
                                Commission for Foreign Medical 
                                Graduates.
                          (ii) Transition for current fmgs.--On 
                        or after July 1, 1986, but before July 
                        1, 1987, in the case of a foreign 
                        medical graduate who--
                                  (I) has served as a resident 
                                before July 1, 1986, and is 
                                serving as a resident after 
                                that date, but
                                  (II) has not passed the 
                                FMGEMS examination or a 
                                previous examination of the 
                                Educational Commission for 
                                Foreign Medical Graduates 
                                before July 1, 1986,
                        the individual shall be counted as a 
                        resident at a rate equal to one-half of 
                        the rate at which the individual would 
                        otherwise be counted.
                  (E) Counting time spent in outpatient 
                settings.--Subject to subparagraphs (J) and 
                (K), such rules shall provide that only time 
                spent in activities relating to patient care 
                shall be counted and that--
                          (i) effective for cost reporting 
                        periods beginning before July 1, 2010, 
                        all the time;\77\
---------------------------------------------------------------------------
    \77\So in law. Probably should read ``; and''. Amendment by section 
5504(a)(2) of Public Law 111-148 attempts to add this word but the 
instructions to strike the period at the end and insert ``; and'' did 
not execute because there was no period at the end of clause (i) (as 
added by such Public Law).
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                          (ii) effective for cost reporting 
                        periods beginning on or after July 1, 
                        2010, all the time so spent by a 
                        resident shall be counted towards the 
                        determination of full-time equivalency, 
                        without regard to the setting in which 
                        the activities are performed, if a 
                        hospital incurs the costs of the 
                        stipends and fringe benefits of the 
                        resident during the time the resident 
                        spends in that setting. If more than 
                        one hospital incurs these costs, either 
                        directly or through a third party, such 
                        hospitals shall count a proportional 
                        share of the time, as determined by 
                        written agreement between the 
                        hospitals, that a resident spends 
                        training in that setting.
                so spent by a resident under an approved 
                medical residency training program shall be 
                counted towards the determination of full-time 
                equivalency, without regard to the setting in 
                which the activities are performed, if the 
                hospital incurs all, or substantially all, of 
                the costs for the training program in that 
                setting.\78\
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    \78\The placement of language beginning with ``so spent by a 
resident under'' through ``training program in that setting.'' that 
appears after clause (ii) and before the continuation text at the end 
(as added by section 5504(a) of Public Law 111-148), is so in law and 
is based on text that existed prior to the enactment of such Public 
Law.
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                Any hospital claiming under this subparagraph 
                for time spent in a nonprovider setting shall 
                maintain and make available to the Secretary 
                records regarding the amount of such time and 
                such amount in comparison with amounts of such 
                time in such base year as the Secretary shall 
                specify.
                  (F) Limitation on number of residents in 
                allopathic and osteopathic medicine.--
                          (i) In general.--Such rules shall 
                        provide that for purposes of a cost 
                        reporting period beginning on or after 
                        October 1, 1997, subject to paragraphs 
                        (7) and (8), the total number of full-
                        time equivalent residents before 
                        application of weighting factors (as 
                        determined under this paragraph) with 
                        respect to a hospital's approved 
                        medical residency training program in 
                        the fields of allopathic medicine and 
                        osteopathic medicine may not exceed the 
                        number (or, 130 percent of such number 
                        in the case of a hospital located in a 
                        rural area) of such full-time 
                        equivalent residents for the hospital's 
                        most recent cost reporting period 
                        ending on or before December 31, 1996.
                          (ii) Counting primary care residents 
                        on certain approved leaves of absence 
                        in base year fte count.--
                                  (I) In general.--In 
                                determining the number of such 
                                full-time equivalent residents 
                                for a hospital's most recent 
                                cost reporting period ending on 
                                or before December 31, 1996, 
                                for purposes of clause (i), the 
                                Secretary shall count an 
                                individual to the extent that 
                                the individual would have been 
                                counted as a primary care 
                                resident for such period but 
                                for the fact that the 
                                individual, as determined by 
                                the Secretary, was on maternity 
                                or disability leave or a 
                                similar approved leave of 
                                absence.
                                  (II) Limitation to 3 fte 
                                residents for any hospital.--
                                The total number of individuals 
                                counted under subclause (I) for 
                                a hospital may not exceed 3 
                                full-time equivalent residents.
                  (G) Counting interns and residents for fy 
                1998 and subsequent years.--
                          (i) In general.--For cost reporting 
                        periods beginning during fiscal years 
                        beginning on or after October 1, 1997, 
                        subject to the limit described in 
                        subparagraph (F), the total number of 
                        full-time equivalent residents for 
                        determining a hospital's graduate 
                        medical education payment shall equal 
                        the average of the actual full-time 
                        equivalent resident counts for the cost 
                        reporting period and the preceding two 
                        cost reporting periods.
                          (ii) Adjustment for short periods.--
                        If any cost reporting period beginning 
                        on or after October 1, 1997, is not 
                        equal to twelve months, the Secretary 
                        shall make appropriate modifications to 
                        ensure that the average full-time 
                        equivalent resident counts pursuant to 
                        clause (i) are based on the equivalent 
                        of full twelve-month cost reporting 
                        periods.
                          (iii) Transition rule for 1998.--In 
                        the case of a hospital's first cost 
                        reporting period beginning on or after 
                        October 1, 1997, clause (i) shall be 
                        applied by using the average for such 
                        period and the preceding cost reporting 
                        period.
                  (H) Special rules for application of 
                subparagraphs (f) and (g).--
                          (i) New facilities.--The Secretary 
                        shall, consistent with the principles 
                        of subparagraphs (F) and (G) and 
                        subject to paragraphs (7) and (8), 
                        prescribe rules for the application of 
                        such subparagraphs in the case of 
                        medical residency training programs 
                        established on or after January 1, 
                        1995. In promulgating such rules for 
                        purposes of subparagraph (F), the 
                        Secretary shall give special 
                        consideration to facilities that meet 
                        the needs of underserved rural areas.
                          (ii) Aggregation.--The Secretary may 
                        prescribe rules which allow 
                        institutions which are members of the 
                        same affiliated group (as defined by 
                        the Secretary) to elect to apply the 
                        limitation of subparagraph (F) on an 
                        aggregate basis.
                          (iii) Data collection.--The Secretary 
                        may require any entity that operates a 
                        medical residency training program and 
                        to which subparagraphs (F) and (G) 
                        apply to submit to the Secretary such 
                        additional information as the Secretary 
                        considers necessary to carry out such 
                        subparagraphs.
                          (iv) Nonrural hospitals operating 
                        training programs in rural areas.--In 
                        the case of a hospital that is not 
                        located in a rural area but establishes 
                        separately accredited approved medical 
                        residency training programs (or rural 
                        tracks) in an\79\ rural area or has an 
                        accredited training program with an 
                        integrated rural track, the Secretary 
                        shall adjust the limitation under 
                        subparagraph (F) in an appropriate 
                        manner insofar as it applies to such 
                        programs in such rural areas in order 
                        to encourage the training of physicians 
                        in rural areas.
---------------------------------------------------------------------------
    \79\So in original. Probably should be ``a''.
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                          (v) Special provider agreement.--If 
                        an entity enters into a provider 
                        agreement pursuant to section 1866(a) 
                        to provide hospital services on the 
                        same physical site previously used by 
                        Medicare Provider No. 05-0578--
                                  (I) the limitation on the 
                                number of total full time 
                                equivalent residents under 
                                subparagraph (F) and clauses 
                                (v) and (vi)(I) of subsection 
                                (d)(5)(B) applicable to such 
                                provider shall be equal to the 
                                limitation applicable under 
                                such provisions to Provider No. 
                                05-0578 for its cost reporting 
                                period ending on June 30, 2006; 
                                and
                                  (II) the provisions of 
                                subparagraph (G) and subsection 
                                (d)(5)(B)(vi)(II) shall not be 
                                applicable to such provider for 
                                the first three cost reporting 
                                years in which such provider 
                                trains residents under any 
                                approved medical residency 
                                training program.
                          (vi) Redistribution of residency 
                        slots after a hospital closes.--
                                  (I) In general.--Subject to 
                                the succeeding provisions of 
                                this clause, the Secretary 
                                shall, by regulation, establish 
                                a process under which, in the 
                                case where a hospital (other 
                                than a hospital described in 
                                clause (v)) with an approved 
                                medical residency program 
                                closes on or after a date that 
                                is 2 years before the date of 
                                enactment of this clause, the 
                                Secretary shall increase the 
                                otherwise applicable resident 
                                limit under this paragraph for 
                                other hospitals in accordance 
                                with this clause.
                                  (II) Priority for hospitals 
                                in certain areas.--Subject to 
                                the succeeding provisions of 
                                this clause, in determining for 
                                which hospitals the increase in 
                                the otherwise applicable 
                                resident limit is provided 
                                under such process, the 
                                Secretary shall distribute the 
                                increase to hospitals in the 
                                following priority order (with 
                                preference given within each 
                                category to hospitals that are 
                                members of the same affiliated 
                                group (as defined by the 
                                Secretary under clause (ii)) as 
                                the closed hospital):
                                          (aa) First, to 
                                        hospitals located in 
                                        the same core-based 
                                        statistical area as, or 
                                        a core-based 
                                        statistical area 
                                        contiguous to, the 
                                        hospital that closed.
                                          (bb) Second, to 
                                        hospitals located in 
                                        the same State as the 
                                        hospital that closed.
                                          (cc) Third, to 
                                        hospitals located in 
                                        the same region of the 
                                        country as the hospital 
                                        that closed.
                                          (dd) Fourth, only if 
                                        the Secretary is not 
                                        able to distribute the 
                                        increase to hospitals 
                                        described in item (cc), 
                                        to qualifying hospitals 
                                        in accordance with the 
                                        provisions of paragraph 
                                        (8).
                                  (III) Requirement hospital 
                                likely to fill position within 
                                certain time period.--The 
                                Secretary may only increase the 
                                otherwise applicable resident 
                                limit of a hospital under such 
                                process if the Secretary 
                                determines the hospital has 
                                demonstrated a likelihood of 
                                filling the positions made 
                                available under this clause 
                                within 3 years.
                                  (IV) Limitation.--The 
                                aggregate number of increases 
                                in the otherwise applicable 
                                resident limits for hospitals 
                                under this clause shall be 
                                equal to the number of resident 
                                positions in the approved 
                                medical residency programs that 
                                closed on or after the date 
                                described in subclause (I).
                                  (V) Administration.--Chapter 
                                35 of title 44, United States 
                                Code, shall not apply to the 
                                implementation of this clause.
                  (J)\80\ Treatment of certain nonprovider and 
                didactic activities.--Such rules shall provide 
                that all time spent by an intern or resident in 
                an approved medical residency training program 
                in a nonprovider setting that is primarily 
                engaged in furnishing patient care (as defined 
                in paragraph (5)(K)) in non-patient care 
                activities, such as didactic conferences and 
                seminars, but not including research not 
                associated with the treatment or diagnosis of a 
                particular patient, as such time and activities 
                are defined by the Secretary, shall be counted 
                toward the determination of full-time 
                equivalency.
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    \80\There is no subparagraph (I) in section 1886(h)(4). 
Subparagraphs (J) and (K) were added by section 5505(a)(1)(B) of Public 
Law 111-148.
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                  (K) Treatment of certain other activities.--
                In determining the hospital's number of full-
                time equivalent residents for purposes of this 
                subsection, all the time that is spent by an 
                intern or resident in an approved medical 
                residency training program on vacation, sick 
                leave, or other approved leave, as such time is 
                defined by the Secretary, and that does not 
                prolong the total time the resident is 
                participating in the approved program beyond 
                the normal duration of the program shall be 
                counted toward the determination of full-time 
                equivalency.
          (5) Definitions and special rules.--As used in this 
        subsection:
                  (A) Approved medical residency training 
                program.--The term ``approved medical residency 
                training program'' means a residency or other 
                postgraduate medical training program 
                participation in which may be counted toward 
                certification in a specialty or subspecialty 
                and includes formal postgraduate training 
                programs in geriatric medicine approved by the 
                Secretary.
                  (B) Consumer price index.--The term 
                ``consumer price index'' refers to the Consumer 
                Price Index for All Urban Consumers (United 
                States city average), as published by the 
                Secretary of Commerce.
                  (C) Direct graduate medical education 
                costs.--The term ``direct graduate medical 
                education costs'' means direct costs of 
                approved educational activities for approved 
                medical residency training programs.
                  (D) Foreign medical graduate.--The term 
                ``foreign medical graduate'' means a resident 
                who is not a graduate of--
                          (i) a school of medicine accredited 
                        by the Liaison Committee on Medical 
                        Education of the American Medical 
                        Association and the Association of 
                        American Medical Colleges (or approved 
                        by such Committee as meeting the 
                        standards necessary for such 
                        accreditation),
                          (ii) a school of osteopathy 
                        accredited by the American Osteopathic 
                        Association, or approved by such 
                        Association as meeting the standards 
                        necessary for such accreditation, or
                          (iii) a school of dentistry or 
                        podiatry which is accredited (or meets 
                        the standards for accreditation) by an 
                        organization recognized by the 
                        Secretary for such purpose.
                  (E) FMGEMS examination.--The term ``FMGEMS 
                examination'' means parts I and II of the 
                Foreign Medical Graduate Examination in the 
                Medical Sciences or any successor examination 
                recognized by the Secretary for this purpose.
                  (F) Initial residency period.--The term 
                ``initial residency period'' means the period 
                of board eligibility, except that--
                          (i) except as provided in clause 
                        (ii), in no case shall the initial 
                        period of residency exceed an aggregate 
                        period of formal training of more than 
                        five years for any individual, and
                          (ii) a period, of not more than two 
                        years, during which an individual is in 
                        a geriatric residency or fellowship 
                        program or a preventive medicine 
                        residency or fellowship program which 
                        meets such criteria as the Secretary 
                        may establish, shall be treated as part 
                        of the initial residency period, but 
                        shall not be counted against any 
                        limitation on the initial residency 
                        period.
                Subject to subparagraph (G)(v), the initial 
                residency period shall be determined, with 
                respect to a resident, as of the time the 
                resident enters the residency training program.
                  (G) Period of board eligibility.--
                          (i) General rule.--Subject to clauses 
                        (ii), (iii), (iv), and (v), the term 
                        ``period of board eligibility'' means, 
                        for a resident, the minimum number of 
                        years of formal training necessary to 
                        satisfy the requirements for initial 
                        board eligibility in the particular 
                        specialty for which the resident is 
                        training.
                          (ii) Application of 1985-1986 
                        directory.--Except as provided in 
                        clause (iii), the period of board 
                        eligibility shall be such period 
                        specified in the 1985-1986 Directory of 
                        Residency Training Programs published 
                        by the Accreditation Council on 
                        Graduate Medical Education.
                          (iii) Changes in period of board 
                        eligibility.--On or after July 1, 1989, 
                        if the Accreditation Council on 
                        Graduate Medical Education, in its 
                        Directory of Residency Training 
                        Programs--
                                  (I) increases the minimum 
                                number of years of formal 
                                training necessary to satisfy 
                                the requirements for a 
                                specialty, above the period 
                                specified in its 1985-1986 
                                Directory, the Secretary may 
                                increase the period of board 
                                eligibility for that specialty, 
                                but not to exceed the period of 
                                board eligibility specified in 
                                that later Directory, or
                                  (II) decreases the minimum 
                                number of years of formal 
                                training necessary to satisfy 
                                the requirements for a 
                                specialty, below the period 
                                specified in its 1985-1986 
                                Directory, the Secretary may 
                                decrease the period of board 
                                eligibility for that specialty, 
                                but not below the period of 
                                board eligibility specified in 
                                that later Directory.
                          (iv) Special rule for certain primary 
                        care combined residency programs.--(I) 
                        In the case of a resident enrolled in a 
                        combined medical residency training 
                        program in which all of the individual 
                        programs (that are combined) are for 
                        training a primary care resident (as 
                        defined in subparagraph (H)), the 
                        period of board eligibility shall be 
                        the minimum number of years of formal 
                        training required to satisfy the 
                        requirements for initial board 
                        eligibility in the longest of the 
                        individual programs plus one additional 
                        year.
                          (II) A resident enrolled in a 
                        combined medical residency training 
                        program that includes an obstetrics and 
                        gynecology program shall qualify for 
                        the period of board eligibility under 
                        subclause (I) if the other programs 
                        such resident combines with such 
                        obstetrics and gynecology program are 
                        for training a primary care resident.
                          (v) Child neurology training 
                        programs.--In the case of a resident 
                        enrolled in a child neurology residency 
                        training program, the period of board 
                        eligibility and the initial residency 
                        period shall be the period of board 
                        eligibility for pediatrics plus 2 
                        years.
                  (H) Primary care resident.--The term 
                ``primary care resident'' means a resident 
                enrolled in an approved medical residency 
                training program in family medicine, general 
                internal medicine, general pediatrics, 
                preventive medicine, geriatric medicine, or 
                osteopathic general practice.
                  (I) Resident.--The term ``resident'' includes 
                an intern or other participant in an approved 
                medical residency training program.
                  (J) Adjustments for certain family practice 
                residency programs.--
                          (i) In general.--In the case of an 
                        approved medical residency training 
                        program (meeting the requirements of 
                        clause (ii)) of a hospital which 
                        received funds from the United States, 
                        a State, or a political subdivision of 
                        a State or an instrumentality of such a 
                        State or political subdivision (other 
                        than payments under this title or a 
                        State plan under title XIX) for the 
                        program during the cost reporting 
                        period that began during fiscal year 
                        1984, the Secretary shall--
                                  (I) provide for an average 
                                amount under paragraph (2)(A) 
                                that takes into account the 
                                Secretary's estimate of the 
                                amount that would have been 
                                recognized as reasonable under 
                                this title if the hospital had 
                                not received such funds, and
                                  (II) reduce the payment 
                                amount otherwise provided under 
                                this subsection in an amount 
                                equal to the proportion of such 
                                program funds received during 
                                the cost reporting period 
                                involved that is allocable to 
                                this title.
                          (ii) Additional requirements.--A 
                        hospital's approved medical residency 
                        program meets the requirements of this 
                        clause if--
                                  (I) the program is limited to 
                                training for family and 
                                community medicine;
                                  (II) the program is the only 
                                approved medical residency 
                                program of the hospital; and
                                  (III) the average amount 
                                determined under paragraph 
                                (2)(A) for the hospital (as 
                                determined without regard to 
                                the increase in such amount 
                                described in clause (i)(I)) 
                                does not exceed $10,000.
                  (K) Nonprovider setting that is primarily 
                engaged in furnishing patient care.--The term 
                ``nonprovider setting that is primarily engaged 
                in furnishing patient care'' means a 
                nonprovider setting in which the primary 
                activity is the care and treatment of patients, 
                as defined by the Secretary.
          (6) Incentive payment under plans for voluntary 
        reduction in number of residents.--
                  (A) In general.--In the case of a voluntary 
                residency reduction plan for which an 
                application is approved under subparagraph (B), 
                subject to subparagraph (F), each hospital 
                which is part of the qualifying entity 
                submitting the plan shall be paid an applicable 
                hold harmless percentage (as specified in 
                subparagraph (E)) of the sum of--
                          (i) the amount (if any) by which--
                                  (I) the amount of payment 
                                which would have been made 
                                under this subsection if there 
                                had been a 5-percent reduction 
                                in the number of full-time 
                                equivalent residents in the 
                                approved medical education 
                                training programs of the 
                                hospital as of June 30, 1997, 
                                exceeds
                                  (II) the amount of payment 
                                which is made under this 
                                subsection, taking into account 
                                the reduction in such number 
                                effected under the reduction 
                                plan; and
                          (ii) the amount of the reduction in 
                        payment under subsection (d)(5)(B) for 
                        the hospital that is attributable to 
                        the reduction in number of residents 
                        effected under the plan below 95 
                        percent of the number of full-time 
                        equivalent residents in such programs 
                        of the hospital as of June 30, 1997.
                The determination of the amounts under clauses 
                (i) and (ii) for any year shall be made on the 
                basis of the provisions of this title in effect 
                on the application deadline date for the first 
                calendar year to which the reduction plan 
                applies.
                  (B) Approval of plan applications.--The 
                Secretary may not approve the application of an 
                qualifying entity unless--
                          (i) the application is submitted in a 
                        form and manner specified by the 
                        Secretary and by not later than 
                        November 1, 1999,
                          (ii) the application provides for the 
                        operation of a plan for the reduction 
                        in the number of full-time equivalent 
                        residents in the approved medical 
                        residency training programs of the 
                        entity consistent with the requirements 
                        of subparagraph (D);
                          (iii) the entity elects in the 
                        application the period of residency 
                        training years (not greater than 5) 
                        over which the reduction will occur;
                          (iv) the entity will not reduce the 
                        proportion of its residents in primary 
                        care (to the total number of residents) 
                        below such proportion as in effect as 
                        of the applicable time described in 
                        subparagraph (D)(v); and
                          (v) the Secretary determines that the 
                        application and the entity and such 
                        plan meet such other requirements as 
                        the Secretary specifies in regulations.
                  (C) Qualifying entity.--For purposes of this 
                paragraph, any of the following may be a 
                qualifying entity:
                          (i) Individual hospitals operating 
                        one or more approved medical residency 
                        training programs.
                          (ii) Two or more hospitals that 
                        operate such programs and apply for 
                        treatment under this paragraph as a 
                        single qualifying entity.
                          (iii) A qualifying consortium (as 
                        described in section 4628 of the 
                        Balanced Budget Act of 1997).
                  (D) Residency reduction requirements.--
                          (i) Individual hospital applicants.--
                        In the case of a qualifying entity 
                        described in subparagraph (C)(i), the 
                        number of full-time equivalent 
                        residents in all the approved medical 
                        residency training programs operated by 
                        or through the entity shall be reduced 
                        as follows:
                                  (I) If the base number of 
                                residents exceeds 750 
                                residents, by a number equal to 
                                at least 20 percent of such 
                                base number.
                                  (II) Subject to subclause 
                                (IV), if the base number of 
                                residents exceeds 600 but is 
                                less than 750 residents, by 150 
                                residents.
                                  (III) Subject to subclause 
                                (IV), if the base number of 
                                residents does not exceed 600 
                                residents, by a number equal to 
                                at least 25 percent of such 
                                base number.
                                  (IV) In the case of a 
                                qualifying entity which is 
                                described in clause (v) and 
                                which elects treatment under 
                                this subclause, by a number 
                                equal to at least 20 percent of 
                                the base number.
                          (ii) Joint applicants.--In the case 
                        of a qualifying entity described in 
                        subparagraph (C)(ii), the number of 
                        full-time equivalent residents in the 
                        aggregate for all the approved medical 
                        residency training programs operated by 
                        or through the entity shall be reduced 
                        as follows:
                                  (I) Subject to subclause 
                                (II), by a number equal to at 
                                least 25 percent of the base 
                                number.
                                  (II) In the case of such a 
                                qualifying entity which is 
                                described in clause (v) and 
                                which elects treatment under 
                                this subclause, by a number 
                                equal to at least 20 percent of 
                                the base number.
                          (iii) Consortia.--In the case of a 
                        qualifying entity described in 
                        subparagraph (C)(iii), the number of 
                        full-time equivalent residents in the 
                        aggregate for all the approved medical 
                        residency training programs operated by 
                        or through the entity shall be reduced 
                        by a number equal to at least 20 
                        percent of the base number.
                          (iv) Manner of reduction.--The 
                        reductions specified under the 
                        preceding provisions of this 
                        subparagraph for a qualifying entity 
                        shall be below the base number of 
                        residents for that entity and shall be 
                        fully effective not later than the 5th 
                        residency training year in which the 
                        application under subparagraph (B) is 
                        effective.
                          (v) Entities providing assurance of 
                        increase in primary care residents.--An 
                        entity is described in this clause if--
                                  (I) the base number of 
                                residents for the entity is 
                                less than 750 or the entity is 
                                described in subparagraph 
                                (C)(ii); and
                                  (II) the entity represents in 
                                its application under 
                                subparagraph (B) that it will 
                                increase the number of full-
                                time equivalent residents in 
                                primary care by at least 20 
                                percent (from such number 
                                included in the base number of 
                                residents) by not later than 
                                the 5th residency training year 
                                in which the application under 
                                subparagraph (B) is effective.
                        If a qualifying entity fails to comply 
                        with the representation described in 
                        subclause (II) by the end of such 5th 
                        residency training year, the entity 
                        shall be subject to repayment of all 
                        amounts paid under this paragraph, in 
                        accordance with procedures established 
                        to carry out subparagraph (F).
                          (vi) Base number of residents 
                        defined.--For purposes of this 
                        paragraph, the term ``base number of 
                        residents'' means, with respect to a 
                        qualifying entity (or its participating 
                        hospitals) operating approved medical 
                        residency training programs, the number 
                        of full-time equivalent residents in 
                        such programs (before application of 
                        weighting factors) of the entity as of 
                        the most recent residency training year 
                        ending before June 30, 1997, or, if 
                        less, for any subsequent residency 
                        training year that ends before the date 
                        the entity makes application under this 
                        paragraph.
                  (E) Applicable hold harmless percentage.--For 
                purposes of subparagraph (A), the ``applicable 
                hold harmless percentage'' for the--
                          (i) first and second residency 
                        training years in which the reduction 
                        plan is in effect, 100 percent,
                          (ii) third such year, 75 percent,
                          (iii) fourth such year, 50 percent, 
                        and
                          (iv) fifth such year, 25 percent.
                  (F) Penalty for noncompliance.--
                          (i) In general.--No payment may be 
                        made under this paragraph to a hospital 
                        for a residency training year if the 
                        hospital has failed to reduce the 
                        number of full-time equivalent 
                        residents (in the manner required under 
                        subparagraph (D)) to the number agreed 
                        to by the Secretary and the qualifying 
                        entity in approving the application 
                        under this paragraph with respect to 
                        such year.
                          (ii) Increase in number of residents 
                        in subsequent years.--If payments are 
                        made under this paragraph to a 
                        hospital, and if the hospital increases 
                        the number of full-time equivalent 
                        residents above the number of such 
                        residents permitted under the reduction 
                        plan as of the completion of the plan, 
                        then, as specified by the Secretary, 
                        the entity is liable for repayment to 
                        the Secretary of the total amounts paid 
                        under this paragraph to the entity.
                  (G) Treatment of rotating residents.--In 
                applying this paragraph, the Secretary shall 
                establish rules regarding the counting of 
                residents who are assigned to institutions the 
                medical residency training programs in which 
                are not covered under approved applications 
                under this paragraph.
          (7) Redistribution of unused resident positions.--
                  (A) Reduction in limit based on unused 
                positions.--
                          (i) Programs subject to reduction.--
                                  (I) In general.--Except as 
                                provided in subclause (II), if 
                                a hospital's reference resident 
                                level (specified in clause 
                                (ii)) is less than the 
                                otherwise applicable resident 
                                limit (as defined in 
                                subparagraph (C)(ii)), 
                                effective for portions of cost 
                                reporting periods occurring on 
                                or after July 1, 2005, the 
                                otherwise applicable resident 
                                limit shall be reduced by 75 
                                percent of the difference 
                                between such otherwise 
                                applicable resident limit and 
                                such reference resident level.
                                  (II) Exception for small 
                                rural hospitals.--This 
                                subparagraph shall not apply to 
                                a hospital located in a rural 
                                area (as defined in subsection 
                                (d)(2)(D)(ii)) with fewer than 
                                250 acute care inpatient beds.
                          (ii) Reference resident level.--
                                  (I) In general.--Except as 
                                otherwise provided in 
                                subclauses (II) and (III), the 
                                reference resident level 
                                specified in this clause for a 
                                hospital is the resident level 
                                for the most recent cost 
                                reporting period of the 
                                hospital ending on or before 
                                September 30, 2002, for which a 
                                cost report has been settled 
                                (or, if not, submitted (subject 
                                to audit)), as determined by 
                                the Secretary.
                                  (II) Use of most recent 
                                accounting period to recognize 
                                expansion of existing 
                                programs.--If a hospital 
                                submits a timely request to 
                                increase its resident level due 
                                to an expansion of an existing 
                                residency training program that 
                                is not reflected on the most 
                                recent settled cost report, 
                                after audit and subject to the 
                                discretion of the Secretary, 
                                the reference resident level 
                                for such hospital is the 
                                resident level for the cost 
                                reporting period that includes 
                                July 1, 2003, as determined by 
                                the Secretary.
                                  (III) Expansions under newly 
                                approved programs.--Upon the 
                                timely request of a hospital, 
                                the Secretary shall adjust the 
                                reference resident level 
                                specified under subclause (I) 
                                or (II) to include the number 
                                of medical residents that were 
                                approved in an application for 
                                a medical residency training 
                                program that was approved by an 
                                appropriate accrediting 
                                organization (as determined by 
                                the Secretary) before January 
                                1, 2002, but which was not in 
                                operation during the cost 
                                reporting period used under 
                                subclause (I) or (II), as the 
                                case may be, as determined by 
                                the Secretary.
                          (iii) Affiliation.--The provisions of 
                        clause (i) shall be applied to 
                        hospitals which are members of the same 
                        affiliated group (as defined by the 
                        Secretary under paragraph (4)(H)(ii)) 
                        as of July 1, 2003.
                  (B) Redistribution.--
                          (i) In general.--The Secretary is 
                        authorized to increase the otherwise 
                        applicable resident limit for each 
                        qualifying hospital that submits a 
                        timely application under this 
                        subparagraph by such number as the 
                        Secretary may approve for portions of 
                        cost reporting periods occurring on or 
                        after July 1, 2005. The aggregate 
                        number of increases in the otherwise 
                        applicable resident limits under this 
                        subparagraph may not exceed the 
                        Secretary's estimate of the aggregate 
                        reduction in such limits attributable 
                        to subparagraph (A).
                          (ii) Considerations in 
                        redistribution.--In determining for 
                        which hospitals the increase in the 
                        otherwise applicable resident limit is 
                        provided under clause (i), the 
                        Secretary shall take into account the 
                        demonstrated likelihood of the hospital 
                        filling the positions within the first 
                        3 cost reporting periods beginning on 
                        or after July 1, 2005, made available 
                        under this subparagraph, as determined 
                        by the Secretary.
                          (iii) Priority for rural and small 
                        urban areas.--In determining for which 
                        hospitals and residency training 
                        programs an increase in the otherwise 
                        applicable resident limit is provided 
                        under clause (i), the Secretary shall 
                        distribute the increase to programs of 
                        hospitals located in the following 
                        priority order:
                                  (I) First, to hospitals 
                                located in rural areas (as 
                                defined in subsection 
                                (d)(2)(D)(ii)).
                                  (II) Second, to hospitals 
                                located in urban areas that are 
                                not large urban areas (as 
                                defined for purposes of 
                                subsection (d)).
                                  (III) Third, to other 
                                hospitals in a State if the 
                                residency training program 
                                involved is in a specialty for 
                                which there are not other 
                                residency training programs in 
                                the State.
                        Increases of residency limits within 
                        the same priority category under this 
                        clause shall be determined by the 
                        Secretary.
                          (iv) Limitation.--In no case shall 
                        more than 25 full-time equivalent 
                        additional residency positions be made 
                        available under this subparagraph with 
                        respect to any hospital.
                          (v) Application of locality adjusted 
                        national average per resident amount.--
                        With respect to additional residency 
                        positions in a hospital attributable to 
                        the increase provided under this 
                        subparagraph, notwithstanding any other 
                        provision of this subsection, the 
                        approved FTE resident amount is deemed 
                        to be equal to the locality adjusted 
                        national average per resident amount 
                        computed under paragraph (4)(E) for 
                        that hospital.
                          (vi) Construction.--Nothing in this 
                        subparagraph shall be construed as 
                        permitting the redistribution of 
                        reductions in residency positions 
                        attributable to voluntary reduction 
                        programs under paragraph (6), under a 
                        demonstration project approved as of 
                        October 31, 2003, under the authority 
                        of section 402 of Public Law 90-248, or 
                        as affecting the ability of a hospital 
                        to establish new medical residency 
                        training programs under paragraph 
                        (4)(H).
                  (C) Resident level and limit defined.--In 
                this paragraph:
                          (i) Resident level.--The term 
                        ``resident level'' means, with respect 
                        to a hospital, the total number of 
                        full-time equivalent residents, before 
                        the application of weighting factors 
                        (as determined under paragraph (4)), in 
                        the fields of allopathic and 
                        osteopathic medicine for the hospital.
                          (ii) Otherwise applicable resident 
                        limit.--The term ``otherwise applicable 
                        resident limit'' means, with respect to 
                        a hospital, the limit otherwise 
                        applicable under subparagraphs (F)(i) 
                        and (H) of paragraph (4) on the 
                        resident level for the hospital 
                        determined without regard to this 
                        paragraph.
                  (D) Adjustment based on settled cost 
                report.--In the case of a hospital with a dual 
                accredited osteopathic and allopathic family 
                practice program for which--
                          (i) the otherwise applicable resident 
                        limit was reduced under subparagraph 
                        (A)(i)(I); and
                          (ii) such reduction was based on a 
                        reference resident level that was 
                        determined using a cost report and 
                        where a revised or corrected notice of 
                        program reimbursement was issued for 
                        such cost report between September 1, 
                        2006 and September 15, 2006, whether as 
                        a result of an appeal or otherwise, and 
                        the reference resident level under such 
                        settled cost report is higher than the 
                        level used for the reduction under 
                        subparagraph (A)(i)(I);
                the Secretary shall apply subparagraph 
                (A)(i)(I) using the higher resident reference 
                level and make any necessary adjustments to 
                such reduction. Any such necessary adjustments 
                shall be effective for portions of cost 
                reporting periods occurring on or after July 1, 
                2005.
                  (E) Judicial review.--There shall be no 
                administrative or judicial review under section 
                1869, 1878, or otherwise, with respect to 
                determinations made under this this\81\ 
                paragraph, paragraph (8), or paragraph 
                (4)(H)(vi).
---------------------------------------------------------------------------
    \81\So in law. See amendment made by section 5506(e) of Public Law 
111-148.
---------------------------------------------------------------------------
          (8) Distribution of additional residency positions.--
                  (A) Reductions in limit based on unused 
                positions.--
                          (i) In general.--Except as provided 
                        in clause (ii), if a hospital's 
                        reference resident level (as defined in 
                        subparagraph (H)(i)) is less than the 
                        otherwise applicable resident limit (as 
                        defined in subparagraph (H)(iii)), 
                        effective for portions of cost 
                        reporting periods occurring on or after 
                        July 1, 2011, the otherwise applicable 
                        resident limit shall be reduced by 65 
                        percent of the difference between such 
                        otherwise applicable resident limit and 
                        such reference resident level.
                          (ii) Exceptions.--This subparagraph 
                        shall not apply to--
                                  (I) a hospital located in a 
                                rural area (as defined in 
                                subsection (d)(2)(D)(ii)) with 
                                fewer than 250 acute care 
                                inpatient beds;
                                  (II) a hospital that was part 
                                of a qualifying entity which 
                                had a voluntary residency 
                                reduction plan approved under 
                                paragraph (6)(B) or under the 
                                authority of section 402 of 
                                Public Law 90-248, if the 
                                hospital demonstrates to the 
                                Secretary that it has a 
                                specified plan in place for 
                                filling the unused positions by 
                                not later than 2 years after 
                                the date of enactment of this 
                                paragraph; or
                                  (III) a hospital described in 
                                paragraph (4)(H)(v).
                  (B) Distribution.--
                          (i) In general.--The Secretary shall 
                        increase the otherwise applicable 
                        resident limit for each qualifying 
                        hospital that submits an application 
                        under this subparagraph by such number 
                        as the Secretary may approve for 
                        portions of cost reporting periods 
                        occurring on or after July 1, 2011. The 
                        aggregate number of increases in the 
                        otherwise applicable resident limit 
                        under this subparagraph shall be equal 
                        to the aggregate reduction in such 
                        limits attributable to subparagraph (A) 
                        (as estimated by the Secretary).
                          (ii) Requirements.--Subject to clause 
                        (iii), a hospital that receives an 
                        increase in the otherwise applicable 
                        resident limit under this subparagraph 
                        shall ensure, during the 5-year period 
                        beginning on the date of such increase, 
                        that--
                                  (I) the number of full-time 
                                equivalent primary care 
                                residents, as defined in 
                                paragraph (5)(H) (as determined 
                                by the Secretary), excluding 
                                any additional positions under 
                                subclause (II), is not less 
                                than the average number of 
                                full-time equivalent primary 
                                care residents (as so 
                                determined) during the 3 most 
                                recent cost reporting periods 
                                ending prior to the date of 
                                enactment of this paragraph; 
                                and
                                  (II) not less than 75 percent 
                                of the positions attributable 
                                to such increase are in a 
                                primary care or general surgery 
                                residency (as determined by the 
                                Secretary).
                        The Secretary may determine whether a 
                        hospital has met the requirements under 
                        this clause during such 5-year period 
                        in such manner and at such time as the 
                        Secretary determines appropriate, 
                        including at the end of such 5-year 
                        period.
                          (iii) Redistribution of positions if 
                        hospital no longer meets certain 
                        requirements.--In the case where the 
                        Secretary determines that a hospital 
                        described in clause (ii) does not meet 
                        either of the requirements under 
                        subclause (I) or (II) of such clause, 
                        the Secretary shall--
                                  (I) reduce the otherwise 
                                applicable resident limit of 
                                the hospital by the amount by 
                                which such limit was increased 
                                under this paragraph; and
                                  (II) provide for the 
                                distribution of positions 
                                attributable to such reduction 
                                in accordance with the 
                                requirements of this paragraph.
                  (C) Considerations in redistribution.--In 
                determining for which hospitals the increase in 
                the otherwise applicable resident limit is 
                provided under subparagraph (B), the Secretary 
                shall take into account--
                          (i) the demonstration likelihood of 
                        the hospital filling the positions made 
                        available under this paragraph within 
                        the first 3 cost reporting periods 
                        beginning on or after July 1, 2011, as 
                        determined by the Secretary; and
                          (ii) whether the hospital has an 
                        accredited rural training track (as 
                        described in paragraph (4)(H)(iv)).
                  (D) Priority for certain areas.--In 
                determining for which hospitals the increase in 
                the otherwise applicable resident limit is 
                provided under subparagraph (B), subject to 
                subparagraph (E), the Secretary shall 
                distribute the increase to hospitals based on 
                the following factors:
                          (i) Whether the hospital is located 
                        in a State with a resident-to-
                        population ratio in the lowest quartile 
                        (as determined by the Secretary).
                          (ii) Whether the hospital is located 
                        in a State, a territory of the United 
                        States, or the District of Columbia 
                        that is among the top 10 States, 
                        territories, or Districts in terms of 
                        the ratio of--
                                  (I) the total population of 
                                the State, territory, or 
                                District living in an area 
                                designated (under such section 
                                332(a)(1)(A)) as a health 
                                professional shortage area (as 
                                of the date of enactment of 
                                this paragraph); to
                                  (II) the total population of 
                                the State, territory, or 
                                District (as determined by the 
                                Secretary based on the most 
                                recent available population 
                                data published by the Bureau of 
                                the Census).
                          (iii) Whether the hospital is located 
                        in a rural area (as defined in 
                        subsection (d)(2)(D)(ii)).
                  (E) Reservation of positions for certain 
                hospitals.--
                          (i) In general.--Subject to clause 
                        (ii), the Secretary shall reserve the 
                        positions available for distribution 
                        under this paragraph as follows:
                                  (I) 70 percent of such 
                                positions for distribution to 
                                hospitals described in clause 
                                (i) of subparagraph (D).
                                  (II) 30 percent of such 
                                positions for distribution to 
                                hospitals described in clause 
                                (ii) and (iii) of such 
                                subparagraph.
                          (ii) Exception if positions not 
                        redistributed by july 1, 2011.--In the 
                        case where the Secretary does not 
                        distribute positions to hospitals in 
                        accordance with clause (i) by July 1, 
                        2011, the Secretary shall distribute 
                        such positions to other hospitals in 
                        accordance with the considerations 
                        described in subparagraph (C) and the 
                        priority described in subparagraph (D).
                  (F) Limitation.--A hospital may not receive 
                more than 75 full-time equivalent additional 
                residency positions under this paragraph.
                  (G) Application of per resident amounts for 
                primary care and nonprimary care.--With respect 
                to additional residency positions in a hospital 
                attributable to the increase provided under 
                this paragraph, the approved FTE per resident 
                amounts are deemed to be equal to the hospital 
                per resident amounts for primary care and 
                nonprimary care computed under paragraph (2)(D) 
                for that hospital.
                  (H) Definitions.--In this paragraph:
                          (i) Reference resident level.--The 
                        term ``reference resident level'' 
                        means, with respect to a hospital, the 
                        highest resident level for any of the 3 
                        most recent cost reporting periods 
                        (ending before the date of the 
                        enactment of this paragraph) of the 
                        hospital for which a cost report has 
                        been settled (or, if not, submitted 
                        (subject to audit)), as determined by 
                        the Secretary.
                          (ii) Resident level.--The term 
                        ``resident level'' has the meaning 
                        given such term in paragraph (7)(C)(i).
                          (iii) Otherwise applicable resident 
                        limit.--The term ``otherwise applicable 
                        resident limit'' means, with respect to 
                        a hospital, the limit otherwise 
                        applicable under subparagraphs (F)(i) 
                        and (H) of paragraph (4) on the 
                        resident level for the hospital 
                        determined without regard to this 
                        paragraph but taking into account 
                        paragraph (7)(A).
                  (I) Affiliation.--The provisions of this 
                paragraph shall be applied to hospitals which 
                are members of the same affiliated group (as 
                defined by the Secretary under paragraph 
                (4)(H)(ii)) and the reference resident level 
                for each such hospital shall be the reference 
                resident level with respect to the cost 
                reporting period that results in the smallest 
                difference between the reference resident level 
                and the otherwise applicable resident limit.
  (i) Avoiding Duplicative Payments to Hospitals Participating 
in Rural Demonstration Programs.--The Secretary shall reduce 
any payment amounts otherwise determined under this section to 
the extent necessary to avoid duplication of any payment made 
under section 4005(e) of the Omnibus Budget Reconciliation Act 
of 1987.
  (j) Prospective Payment for Inpatient Rehabilitation 
Services.--
          (1) Payment during transition period.--
                  (A) In general.--Notwithstanding section 
                1814(b), but subject to the provisions of 
                section 1813, the amount of the payment with 
                respect to the operating and capital costs of 
                inpatient hospital services of a rehabilitation 
                hospital or a rehabilitation unit (in this 
                subsection referred to as a ``rehabilitation 
                facility''), other than a facility making an 
                election under subparagraph (F) in a cost 
                reporting period beginning on or after October 
                1, 2000, and before October 1, 2002, is equal 
                to the sum of--
                          (i) the TEFRA percentage (as defined 
                        in subparagraph (C)) of the amount that 
                        would have been paid under part A with 
                        respect to such costs if this 
                        subsection did not apply, and
                          (ii) the prospective payment 
                        percentage (as defined in subparagraph 
                        (C)) of the product of (I) the per unit 
                        payment rate established under this 
                        subsection for the fiscal year in which 
                        the payment unit of service occurs, and 
                        (II) the number of such payment units 
                        occurring in the cost reporting period.
                  (B) Fully implemented system.--
                Notwithstanding section 1814(b), but subject to 
                the provisions of section 1813, the amount of 
                the payment with respect to the operating and 
                capital costs of inpatient hospital services of 
                a rehabilitation facility for a payment unit in 
                a cost reporting period beginning on or after 
                October 1, 2002, or, in the case of a facility 
                making an election under subparagraph (F), for 
                any cost reporting period described in such 
                subparagraph, is equal to the per unit payment 
                rate established under this subsection for the 
                fiscal year in which the payment unit of 
                service occurs.
                  (C) TEFRA and prospective payment percentages 
                specified.--For purposes of subparagraph (A), 
                for a cost reporting period beginning--
                          (i) on or after October 1, 2000, and 
                        before October 1, 2001, the ``TEFRA 
                        percentage'' is 66\2/3\ percent and the 
                        ``prospective payment percentage'' is 
                        33\1/3\ percent; and
                          (ii) on or after October 1, 2001, and 
                        before October 1, 2002, the ``TEFRA 
                        percentage'' is 33\1/3\ percent and the 
                        ``prospective payment percentage'' is 
                        66\2/3\ percent.
                  (D) Payment unit.--For purposes of this 
                subsection, the term ``payment unit'' means a 
                discharge.
                  (E) Construction relating to transfer 
                authority.--Nothing in this subsection shall be 
                construed as preventing the Secretary from 
                providing for an adjustment to payments to take 
                into account the early transfer of a patient 
                from a rehabilitation facility to another site 
                of care.
                  (F) Election to apply full prospective 
                payment system.--A rehabilitation facility may 
                elect, not later than 30 days before its first 
                cost reporting period for which the payment 
                methodology under this subsection applies to 
                the facility, to have payment made to the 
                facility under this subsection under the 
                provisions of subparagraph (B) (rather than 
                subparagraph (A)) for each cost reporting 
                period to which such payment methodology 
                applies.
          (2) Patient case mix groups.--
                  (A) Establishment.--The Secretary shall 
                establish--
                          (i) classes of patient discharges of 
                        rehabilitation facilities by 
                        functional-related groups (each in this 
                        subsection referred to as a ``case mix 
                        group''), based on impairment, age, 
                        comorbidities, and functional 
                        capability of the patient and such 
                        other factors as the Secretary deems 
                        appropriate to improve the explanatory 
                        power of functional independence 
                        measure-function related groups; and
                          (ii) a method of classifying specific 
                        patients in rehabilitation facilities 
                        within these groups.
                  (B) Weighting factors.--For each case mix 
                group the Secretary shall assign an appropriate 
                weighting which reflects the relative facility 
                resources used with respect to patients 
                classified within that group compared to 
                patients classified within other groups.
                  (C) Adjustments for case mix.--
                          (i) In general.--The Secretary shall 
                        from time to time adjust the 
                        classifications and weighting factors 
                        established under this paragraph as 
                        appropriate to reflect changes in 
                        treatment patterns, technology, case 
                        mix, number of payment units for which 
                        payment is made under this title, and 
                        other factors which may affect the 
                        relative use of resources. Such 
                        adjustments shall be made in a manner 
                        so that changes in aggregate payments 
                        under the classification system are a 
                        result of real changes and are not a 
                        result of changes in coding that are 
                        unrelated to real changes in case mix.
                          (ii) Adjustment.--Insofar as the 
                        Secretary determines that such 
                        adjustments for a previous fiscal year 
                        (or estimates that such adjustments for 
                        a future fiscal year) did (or are 
                        likely to) result in a change in 
                        aggregate payments under the 
                        classification system during the fiscal 
                        year that are a result of changes in 
                        the coding or classification of 
                        patients that do not reflect real 
                        changes in case mix, the Secretary 
                        shall adjust the per payment unit 
                        payment rate for subsequent years so as 
                        to eliminate the effect of such coding 
                        or classification changes.
                  (D) Data collection.--The Secretary is 
                authorized to require rehabilitation facilities 
                that provide inpatient hospital services to 
                submit such data as the Secretary deems 
                necessary to establish and administer the 
                prospective payment system under this 
                subsection.
          (3) Payment rate.--
                  (A) In general.--The Secretary shall 
                determine a prospective payment rate for each 
                payment unit for which such rehabilitation 
                facility is entitled to receive payment under 
                this title. Subject to subparagraph (B), such 
                rate for payment units occurring during a 
                fiscal year shall be based on the average 
                payment per payment unit under this title for 
                inpatient operating and capital costs of 
                rehabilitation facilities using the most recent 
                data available (as estimated by the Secretary 
                as of the date of establishment of the system) 
                adjusted--
                          (i) by updating such per-payment-unit 
                        amount to the fiscal year involved by 
                        the weighted average of the applicable 
                        percentage increases provided under 
                        subsection (b)(3)(B)(ii) (for cost 
                        reporting periods beginning during the 
                        fiscal year) covering the period from 
                        the midpoint of the period for such 
                        data through the midpoint of fiscal 
                        year 2000 and by an increase factor 
                        (described in subparagraph (C)) 
                        specified by the Secretary for 
                        subsequent fiscal years up to the 
                        fiscal year involved;
                          (ii) by reducing such rates by a 
                        factor equal to the proportion of 
                        payments under this subsection (as 
                        estimated by the Secretary) based on 
                        prospective payment amounts which are 
                        additional payments described in 
                        paragraph (4) (relating to outlier and 
                        related payments);
                          (iii) for variations among 
                        rehabilitation facilities by area under 
                        paragraph (6);
                          (iv) by the weighting factors 
                        established under paragraph (2)(B); and
                          (v) by such other factors as the 
                        Secretary determines are necessary to 
                        properly reflect variations in 
                        necessary costs of treatment among 
                        rehabilitation facilities.
                  (B) Budget neutral rates.--The Secretary 
                shall establish the prospective payment amounts 
                under this subsection for payment units during 
                fiscal years 2001 and 2002 at levels such that, 
                in the Secretary's estimation, the amount of 
                total payments under this subsection for such 
                fiscal years (including any payment adjustments 
                pursuant to paragraphs (4) and (6) but not 
                taking into account any payment adjustment 
                resulting from an election permitted under 
                paragraph (1)(F)) shall be equal to 98 percent 
                for fiscal year 2001 and 100 percent for fiscal 
                year 2002 of the amount of payments that would 
                have been made under this title during the 
                fiscal years for operating and capital costs of 
                rehabilitation facilities had this subsection 
                not been enacted. In establishing such payment 
                amounts, the Secretary shall consider the 
                effects of the prospective payment system 
                established under this subsection on the total 
                number of payment units from rehabilitation 
                facilities and other factors described in 
                subparagraph (A).
                  (C) Increase factor.--
                          (i) In general.--For purposes of this 
                        subsection for payment units in each 
                        fiscal year (beginning with fiscal year 
                        2001), the Secretary shall establish an 
                        increase factor subject to clauses (ii) 
                        and (iii). Such factor shall be based 
                        on an appropriate percentage increase 
                        in a market basket of goods and 
                        services comprising services for which 
                        payment is made under this subsection, 
                        which may be the market basket 
                        percentage increase described in 
                        subsection (b)(3)(B)(iii). The increase 
                        factor to be applied under this 
                        subparagraph for each of fiscal years 
                        2008 and 2009 shall be 0 percent.
                          (ii) Productivity and other 
                        adjustment.--Subject to clause (iii), 
                        after establishing the increase factor 
                        described in clause (i) for a fiscal 
                        year, the Secretary shall reduce such 
                        increase factor--
                                  (I) for fiscal year 2012 and 
                                each subsequent fiscal year, by 
                                the productivity adjustment 
                                described in section 
                                1886(b)(3)(B)(xi)(II); and
                                  (II) for each of fiscal years 
                                2010 through 2019, by the other 
                                adjustment described in 
                                subparagraph (D).
                        The application of this clause may 
                        result in the increase factor under 
                        this subparagraph being less than 0.0 
                        for a fiscal year, and may result in 
                        payment rates under this subsection for 
                        a fiscal year being less than such 
                        payment rates for the preceding fiscal 
                        year.
                          (iii) Special rule for fiscal year 
                        2018.--The increase factor to be 
                        applied under this subparagraph for 
                        fiscal year 2018, after the application 
                        of clause (ii), shall be 1 percent.
                  (D) Other adjustment.--For purposes of 
                subparagraph (C)(ii)(II), the other adjustment 
                described in this subparagraph is--
                          (i) for each of fiscal years 2010 and 
                        2011, 0.25 percentage point;
                          (ii) for each of fiscal years 2012 
                        and 2013, 0.1 percentage point;
                          (iii) for fiscal year 2014, 0.3 
                        percentage point;
                          (iv) for each of fiscal years 2015 
                        and 2016, 0.2 percentage point; and
                          (v) for each of fiscal years 2017, 
                        2018, and 2019, 0.75 percentage point.
          (4) Outlier and special payments.--
                  (A) Outliers.--
                          (i) In general.--The Secretary may 
                        provide for an additional payment to a 
                        rehabilitation facility for patients in 
                        a case mix group, based upon the 
                        patient being classified as an outlier 
                        based on an unusual length of stay, 
                        costs, or other factors specified by 
                        the Secretary.
                          (ii) Payment based on marginal cost 
                        of care.--The amount of such additional 
                        payment under clause (i) shall be 
                        determined by the Secretary and shall 
                        approximate the marginal cost of care 
                        beyond the cutoff point applicable 
                        under clause (i).
                          (iii) Total payments.--The total 
                        amount of the additional payments made 
                        under this subparagraph for payment 
                        units in a fiscal year may not exceed 5 
                        percent of the total payments projected 
                        or estimated to be made based on 
                        prospective payment rates for payment 
                        units in that year.
                  (B) Adjustment.--The Secretary may provide 
                for such adjustments to the payment amounts 
                under this subsection as the Secretary deems 
                appropriate to take into account the unique 
                circumstances of rehabilitation facilities 
                located in Alaska and Hawaii.
          (5) Publication.--The Secretary shall provide for 
        publication in the Federal Register, on or before 
        August 1 before each fiscal year (beginning with fiscal 
        year 2001), of the classification and weighting factors 
        for case mix groups under paragraph (2) for such fiscal 
        year and a description of the methodology and data used 
        in computing the prospective payment rates under this 
        subsection for that fiscal year.
          (6) Area wage adjustment.--The Secretary shall adjust 
        the proportion (as estimated by the Secretary from time 
        to time) of rehabilitation facilities' costs which are 
        attributable to wages and wage-related costs, of the 
        prospective payment rates computed under paragraph (3) 
        for area differences in wage levels by a factor 
        (established by the Secretary) reflecting the relative 
        hospital wage level in the geographic area of the 
        rehabilitation facility compared to the national 
        average wage level for such facilities. Not later than 
        October 1, 2001 (and at least every 36 months 
        thereafter), the Secretary shall update the factor 
        under the preceding sentence on the basis of 
        information available to the Secretary (and updated as 
        appropriate) of the wages and wage-related costs 
        incurred in furnishing rehabilitation services. Any 
        adjustments or updates made under this paragraph for a 
        fiscal year shall be made in a manner that assures that 
        the aggregated payments under this subsection in the 
        fiscal year are not greater or less than those that 
        would have been made in the year without such 
        adjustment.
          (7) Quality reporting.--
                  (A) Reduction in update for failure to 
                report.--
                          (i) In general.--For purposes of 
                        fiscal year 2014 and each subsequent 
                        fiscal year, in the case of a 
                        rehabilitation facility that does not 
                        submit data to the Secretary in 
                        accordance with subparagraphs (C) and 
                        (F) with respect to such a fiscal year, 
                        after determining the increase factor 
                        described in paragraph (3)(C), and 
                        after application of subparagraphs 
                        (C)(iii) and (D) of paragraph (3), the 
                        Secretary shall reduce such increase 
                        factor for payments for discharges 
                        occurring during such fiscal year by 2 
                        percentage points.
                          (ii) Special rule.--The application 
                        of this subparagraph may result in the 
                        increase factor described in paragraph 
                        (3)(C) being less than 0.0 for a fiscal 
                        year, and may result in payment rates 
                        under this subsection for a fiscal year 
                        being less than such payment rates for 
                        the preceding fiscal year.
                  (B) Noncumulative application.--Any reduction 
                under subparagraph (A) shall apply only with 
                respect to the fiscal year involved and the 
                Secretary shall not take into account such 
                reduction in computing the payment amount under 
                this subsection for a subsequent fiscal year.
                  (C) Submission of quality data.--Subject to 
                subparagraph (G), for fiscal year 2014 and each 
                subsequent fiscal year, each rehabilitation 
                facility shall submit to the Secretary data on 
                quality measures specified under subparagraph 
                (D). Such data shall be submitted in a form and 
                manner, and at a time, specified by the 
                Secretary for purposes of this subparagraph.
                  (D) Quality measures.--
                          (i) In general.--Subject to clause 
                        (ii), any measure specified by the 
                        Secretary under this subparagraph must 
                        have been endorsed by the entity with a 
                        contract under section 1890(a).
                          (ii) Exception.--In the case of a 
                        specified area or medical topic 
                        determined appropriate by the Secretary 
                        for which a feasible and practical 
                        measure has not been endorsed by the 
                        entity with a contract under section 
                        1890(a), the Secretary may specify a 
                        measure that is not so endorsed as long 
                        as due consideration is given to 
                        measures that have been endorsed or 
                        adopted by a consensus organization 
                        identified by the Secretary.
                          (iii) Time frame.--Not later than 
                        October 1, 2012, the Secretary shall 
                        publish the measures selected under 
                        this subparagraph that will be 
                        applicable with respect to fiscal year 
                        2014.
                  (E) Public availability of data submitted.--
                The Secretary shall establish procedures for 
                making data submitted under subparagraph (C) 
                and subparagraph (F)(i) available to the 
                public. Such procedures shall ensure that a 
                rehabilitation facility has the opportunity to 
                review the data that is to be made public with 
                respect to the facility prior to such data 
                being made public. The Secretary shall report 
                quality measures that relate to services 
                furnished in inpatient settings in 
                rehabilitation facilities on the Internet 
                website of the Centers for Medicare & Medicaid 
                Services.
                  (F) Submission of additional data.--
                          (i) In general.--For the fiscal year 
                        beginning on the specified application 
                        date (as defined in subsection 
                        (a)(2)(E) of section 1899B), as 
                        applicable with respect to inpatient 
                        rehabilitation facilities and quality 
                        measures under subsection (c)(1) of 
                        such section and measures under 
                        subsection (d)(1) of such section, and 
                        each subsequent fiscal year, in 
                        addition to such data on the quality 
                        measures described in subparagraph (C), 
                        each rehabilitation facility shall 
                        submit to the Secretary data on the 
                        quality measures under such subsection 
                        (c)(1) and any necessary data specified 
                        by the Secretary under such subsection 
                        (d)(1).
                          (ii) Standardized patient assessment 
                        data.--For fiscal year 2019 and each 
                        subsequent fiscal year, in addition to 
                        such data described in clause (i), each 
                        rehabilitation facility shall submit to 
                        the Secretary standardized patient 
                        assessment data required under 
                        subsection (b)(1) of section 1899B.
                          (iii) Submission.--Such data shall be 
                        submitted in the form and manner, and 
                        at the time, specified by the Secretary 
                        for purposes of this subparagraph.
                  (G) Non-duplication.--To the extent data 
                submitted under subparagraph (F) duplicates 
                other data required to be submitted under 
                subparagraph (C), the submission of such data 
                under subparagraph (F) shall be in lieu of the 
                submission of such data under subparagraph (C). 
                The previous sentence shall not apply insofar 
                as the Secretary determines it is necessary to 
                avoid a delay in the implementation of section 
                1899B, taking into account the different 
                specified application dates under subsection 
                (a)(2)(E) of such section.
          (8) Limitation on review.--There shall be no 
        administrative or judicial review under section 1869, 
        1878, or otherwise of the establishment of--
                  (A) case mix groups, of the methodology for 
                the classification of patients within such 
                groups, and of the appropriate weighting 
                factors thereof under paragraph (2),
                  (B) the prospective payment rates under 
                paragraph (3),
                  (C) outlier and special payments under 
                paragraph (4), and
                  (D) area wage adjustments under paragraph 
                (6).
  (k) Payment to Nonhospital Providers.--
          (1) In general.--For cost reporting periods beginning 
        on or after October 1, 1997, the Secretary may 
        establish rules for payment to qualified nonhospital 
        providers for their direct costs of medical education, 
        if those costs are incurred in the operation of an 
        approved medical residency training program described 
        in subsection (h). Such rules shall specify the 
        amounts, form, and manner in which such payments will 
        be made and the portion of such payments that will be 
        made from each of the trust funds under this title.
          (2) Qualified nonhospital providers.--For purposes of 
        this subsection, the term ``qualified nonhospital 
        providers'' means--
                  (A) a Federally qualified health center, as 
                defined in section 1861(aa)(4);
                  (B) a rural health clinic, as defined in 
                section 1861(aa)(2);
                  (C) Medicare+Choice organizations; and
                  (D) such other providers (other than 
                hospitals) as the Secretary determines to be 
                appropriate.
  (l) Payment for Nursing and Allied Health Education for 
Managed Care Enrollees.--
          (1) In general.--For portions of cost reporting 
        periods occurring in a year (beginning with 2000), the 
        Secretary shall provide for an additional payment 
        amount for any hospital that receives payments for the 
        costs of approved educational activities for nurse and 
        allied health professional training under section 
        1861(v)(1).
          (2) Payment amount.--The additional payment amount 
        under this subsection for each hospital for portions of 
        cost reporting periods occurring in a year shall be an 
        amount specified by the Secretary in a manner 
        consistent with the following:
                  (A) Determination of managed care enrollee 
                payment ratio for graduate medical education 
                payments.--The Secretary shall estimate the 
                ratio of payments for all hospitals for 
                portions of cost reporting periods occurring in 
                the year under subsection (h)(3)(D) to total 
                direct graduate medical education payments 
                estimated for such portions of periods under 
                subsection (h)(3).
                  (B) Application to fee-for-service nursing 
                and allied health education payments.--Such 
                ratio shall be applied to the Secretary's 
                estimate of total payments for nursing and 
                allied health education determined under 
                section 1861(v) for portions of cost reporting 
                periods occurring in the year to determine a 
                total amount of additional payments for nursing 
                and allied health education to be distributed 
                to hospitals under this subsection for portions 
                of cost reporting periods occurring in the 
                year; except that in no case shall such total 
                amount exceed $60,000,000 in any year.
                  (C) Application to hospital.--The amount of 
                payment under this subsection to a hospital for 
                portions of cost reporting periods occurring in 
                a year is equal to the total amount of payments 
                determined under subparagraph (B) for the year 
                multiplied by the ratio of--
                          (i) the product of (I) the 
                        Secretary's estimate of the ratio of 
                        the amount of payments made under 
                        section 1861(v) to the hospital for 
                        nursing and allied health education 
                        activities for the hospital's cost 
                        reporting period ending in the second 
                        preceding fiscal year, to the 
                        hospital's total inpatient days for 
                        such period, and (II) the total number 
                        of inpatient days (as established by 
                        the Secretary) for such period which 
                        are attributable to services furnished 
                        to individuals who are enrolled under a 
                        risk sharing contract with an eligible 
                        organization under section 1876 and who 
                        are entitled to benefits under part A 
                        or who are enrolled with a 
                        Medicare+Choice organization under part 
                        C; to
                          (ii) the sum of the products 
                        determined under clause (i) for such 
                        cost reporting periods.
  (m) Prospective Payment for Long-Term Care Hospitals.--
          (1) Reference to establishment and implementation of 
        system.--For provisions related to the establishment 
        and implementation of a prospective payment system for 
        payments under this title for inpatient hospital 
        services furnished by a long-term care hospital 
        described in subsection (d)(1)(B)(iv), see section 123 
        of the Medicare, Medicaid, and SCHIP Balanced Budget 
        Refinement Act of 1999 and section 307(b) of the 
        Medicare, Medicaid, and SCHIP Benefits Improvement and 
        Protection Act of 2000.
          (2) Update for rate year 2008.--In implementing the 
        system described in paragraph (1) for discharges 
        occurring during the rate year ending in 2008 for a 
        hospital, the base rate for such discharges for the 
        hospital shall be the same as the base rate for 
        discharges for the hospital occurring during the rate 
        year ending in 2007.
          (3) Implementation for rate year 2010 and subsequent 
        years.--
                  (A) In general.--Subject to subparagraph (C), 
                in implementing the system described in 
                paragraph (1) for rate year 2010 and each 
                subsequent rate year, any annual update to a 
                standard Federal rate for discharges for the 
                hospital during the rate year, shall be 
                reduced--
                          (i) for rate year 2012 and each 
                        subsequent rate year, by the 
                        productivity adjustment described in 
                        section 1886(b)(3)(B)(xi)(II); and
                          (ii) for each of rate years 2010 
                        through 2019, by the other adjustment 
                        described in paragraph (4).
                  (B) Special rule.--The application of this 
                paragraph may result in such annual update 
                being less than 0.0 for a rate year, and may 
                result in payment rates under the system 
                described in paragraph (1) for a rate year 
                being less than such payment rates for the 
                preceding rate year.
                  (C) Additional special rule.--For fiscal year 
                2018, the annual update under subparagraph (A) 
                for the fiscal year, after application of 
                clauses (i) and (ii) of subparagraph (A), shall 
                be 1 percent.
          (4) Other adjustment.--For purposes of paragraph 
        (3)(A)(ii), the other adjustment described in this 
        paragraph is--
                  (A) for rate year 2010, 0.25 percentage 
                point;
                  (B) for rate year 2011, 0.50 percentage 
                point;
                  (C) for each of the rate years beginning in 
                2012 and 2013, 0.1 percentage point;
                  (D) for rate year 2014, 0.3 percentage point;
                  (E) for each of rate years 2015 and 2016, 0.2 
                percentage point; and
                  (F) for each of rate years 2017, 2018, and 
                2019, 0.75 percentage point.
          (5) Quality reporting.--
                  (A) Reduction in update for failure to 
                report.--
                          (i) In general.--Under the system 
                        described in paragraph (1), for rate 
                        year 2014 and each subsequent rate 
                        year, in the case of a long-term care 
                        hospital that does not submit data to 
                        the Secretary in accordance with 
                        subparagraphs (C) and (F) with respect 
                        to such a rate year, any annual update 
                        to a standard Federal rate for 
                        discharges for the hospital during the 
                        rate year, and after application of 
                        paragraph (3), shall be reduced by 2 
                        percentage points.
                          (ii) Special rule.--The application 
                        of this subparagraph may result in such 
                        annual update being less than 0.0 for a 
                        rate year, and may result in payment 
                        rates under the system described in 
                        paragraph (1) for a rate year being 
                        less than such payment rates for the 
                        preceding rate year.
                  (B) Noncumulative application.--Any reduction 
                under subparagraph (A) shall apply only with 
                respect to the rate year involved and the 
                Secretary shall not take into account such 
                reduction in computing the payment amount under 
                the system described in paragraph (1) for a 
                subsequent rate year.
                  (C) Submission of quality data.--Subject to 
                subparagraph (G), for rate year 2014 and each 
                subsequent rate year, each long-term care 
                hospital shall submit to the Secretary data on 
                quality measures specified under subparagraph 
                (D). Such data shall be submitted in a form and 
                manner, and at a time, specified by the 
                Secretary for purposes of this subparagraph.
                  (D) Quality measures.--
                          (i) In general.--Subject to clause 
                        (ii), any measure specified by the 
                        Secretary under this subparagraph must 
                        have been endorsed by the entity with a 
                        contract under section 1890(a).
                          (ii) Exception.--In the case of a 
                        specified area or medical topic 
                        determined appropriate by the Secretary 
                        for which a feasible and practical 
                        measure has not been endorsed by the 
                        entity with a contract under section 
                        1890(a), the Secretary may specify a 
                        measure that is not so endorsed as long 
                        as due consideration is given to 
                        measures that have been endorsed or 
                        adopted by a consensus organization 
                        identified by the Secretary.
                          (iii) Time frame.--Not later than 
                        October 1, 2012, the Secretary shall 
                        publish the measures selected under 
                        this subparagraph that will be 
                        applicable with respect to rate year 
                        2014.
                          (iv) Additional quality measures.--
                        Not later than October 1, 2015, the 
                        Secretary shall establish a functional 
                        status quality measure for change in 
                        mobility among inpatients requiring 
                        ventilator support.
                  (E) Public availability of data submitted.--
                The Secretary shall establish procedures for 
                making data submitted under subparagraph (C) 
                and subparagraph (F)(i) available to the 
                public. Such procedures shall ensure that a 
                long-term care hospital has the opportunity to 
                review the data that is to be made public with 
                respect to the hospital prior to such data 
                being made public. The Secretary shall report 
                quality measures that relate to services 
                furnished in inpatient settings in long-term 
                care hospitals on the Internet website of the 
                Centers for Medicare & Medicaid Services.
                  (F) Submission of additional data.--
                          (i) In general.--For the rate year 
                        beginning on the specified application 
                        date (as defined in subsection 
                        (a)(2)(E) of section 1899B), as 
                        applicable with respect to long-term 
                        care hospitals and quality measures 
                        under subsection (c)(1) of such section 
                        and measures under subsection (d)(1) of 
                        such section, and each subsequent rate 
                        year, in addition to the data on the 
                        quality measures described in 
                        subparagraph (C), each long-term care 
                        hospital (other than a hospital 
                        classified under subsection 
                        (d)(1)(B)(iv)(II)) shall submit to the 
                        Secretary data on the quality measures 
                        under such subsection (c)(1) and any 
                        necessary data specified by the 
                        Secretary under such subsection (d)(1).
                          (ii) Standardized patient assessment 
                        data.--For rate year 2019 and each 
                        subsequent rate year, in addition to 
                        such data described in clause (i), each 
                        long-term care hospital (other than a 
                        hospital classified under subsection 
                        (d)(1)(B)(iv)(II)) shall submit to the 
                        Secretary standardized patient 
                        assessment data required under 
                        subsection (b)(1) of section 1899B.
                          (iii) Submission.--Such data shall be 
                        submitted in the form and manner, and 
                        at the time, specified by the Secretary 
                        for purposes of this subparagraph.
                  (G) Non-duplication.--To the extent data 
                submitted under subparagraph (F) duplicates 
                other data required to be submitted under 
                subparagraph (C), the submission of such data 
                under subparagraph (F) shall be in lieu of the 
                submission of such data under subparagraph (C). 
                The previous sentence shall not apply insofar 
                as the Secretary determines it is necessary to 
                avoid a delay in the implementation of section 
                1899B, taking into account the different 
                specified application dates under subsection 
                (a)(2)(E) of such section.
          (6) Application of site neutral ipps payment rate in 
        certain cases.--
                  (A) General application of site neutral ipps 
                payment amount for discharges failing to meet 
                applicable criteria.--
                          (i) In general.--For a discharge in 
                        cost reporting periods beginning on or 
                        after October 1, 2015, except as 
                        provided in clause (ii) and 
                        subparagraphs (C) and (E), payment 
                        under this title to a long-term care 
                        hospital for inpatient hospital 
                        services shall be made at the 
                        applicable site neutral payment rate 
                        (as defined in subparagraph (B)).
                          (ii) Exception for certain discharges 
                        meeting criteria.--Clause (i) shall not 
                        apply (and payment shall be made to a 
                        long-term care hospital without regard 
                        to this paragraph) for a discharge if--
                                  (I) the discharge meets the 
                                ICU criterion under clause 
                                (iii) or the ventilator 
                                criterion under clause (iv); 
                                and
                                  (II) the discharge does not 
                                have a principal diagnosis 
                                relating to a psychiatric 
                                diagnosis or to rehabilitation.
                          (iii) Intensive care unit (icu) 
                        criterion.--
                                  (I) In general.--The 
                                criterion specified in this 
                                clause (in this paragraph 
                                referred to as the ``ICU 
                                criterion''), for a discharge 
                                from a long-term care hospital, 
                                is that the stay in the long-
                                term care hospital ending with 
                                such discharge was immediately 
                                preceded by a discharge from a 
                                stay in a subsection (d) 
                                hospital that included at least 
                                3 days in an intensive care 
                                unit (ICU), as determined by 
                                the Secretary.
                                  (II) Determining icu days.--
                                In determining intensive care 
                                unit days under subclause (I), 
                                the Secretary shall use data 
                                from revenue center codes 020x 
                                or 021x (or such successor 
                                codes as the Secretary may 
                                establish).
                          (iv) Ventilator criterion.--The 
                        criterion specified in this clause (in 
                        this paragraph referred to as the 
                        ``ventilator criterion''), for a 
                        discharge from a long-term care 
                        hospital, is that--
                                  (I) the stay in the long-term 
                                care hospital ending with such 
                                discharge was immediately 
                                preceded by a discharge from a 
                                stay in a subsection (d) 
                                hospital; and
                                  (II) the individual 
                                discharged was assigned to a 
                                Medicare-Severity-Long-Term-
                                Care-Diagnosis-Related-Group 
                                (MS-LTC-DRG) based on the 
                                receipt of ventilator services 
                                of at least 96 hours.
                  (B) Applicable site neutral payment rate 
                defined.--
                          (i) In general.--In this paragraph, 
                        the term ``applicable site neutral 
                        payment rate'' means--
                                  (I) for discharges in cost 
                                reporting periods beginning 
                                during fiscal year 2016 or 
                                fiscal year 2017, the blended 
                                payment rate specified in 
                                clause (iii); and
                                  (II) for discharges in cost 
                                reporting periods beginning 
                                during fiscal year 2018 or a 
                                subsequent fiscal year, the 
                                site neutral payment rate (as 
                                defined in clause (ii)).
                          (ii) Site neutral payment rate 
                        defined.--In this paragraph, the term 
                        ``site neutral payment rate'' means the 
                        lower of--
                                  (I) the IPPS comparable per 
                                diem amount determined under 
                                paragraph (d)(4) of section 
                                412.529 of title 42, Code of 
                                Federal Regulations, including 
                                any applicable outlier payments 
                                under section 412.525 of such 
                                title; or
                                  (II) 100 percent of the 
                                estimated cost for the services 
                                involved.
                          (iii) Blended payment rate.--The 
                        blended payment rate specified in this 
                        clause, for a long-term care hospital 
                        for inpatient hospital services for a 
                        discharge, is comprised of--
                                  (I) half of the site neutral 
                                payment rate (as defined in 
                                clause (ii)) for the discharge; 
                                and
                                  (II) half of the payment rate 
                                that would otherwise be 
                                applicable to such discharge 
                                without regard to this 
                                paragraph, as determined by the 
                                Secretary.
                  (C) Limiting payment for all hospital 
                discharges to site neutral payment rate for 
                hospitals failing to meet applicable ltch 
                discharge thresholds.--
                          (i) Notice of ltch discharge payment 
                        percentage.--For cost reporting periods 
                        beginning during or after fiscal year 
                        2016, the Secretary shall inform each 
                        long-term care hospital of its LTCH 
                        discharge payment percentage (as 
                        defined in clause (iv)) for such 
                        period.
                          (ii) Limitation.--For cost reporting 
                        periods beginning during or after 
                        fiscal year 2020, if the Secretary 
                        determines for a long-term care 
                        hospital that its LTCH discharge 
                        payment percentage for the period is 
                        not at least 50 percent--
                                  (I) the Secretary shall 
                                inform the hospital of such 
                                fact; and
                                  (II) subject to clause (iii), 
                                for all discharges in the 
                                hospital in each succeeding 
                                cost reporting period, the 
                                payment amount under this 
                                subsection shall be the payment 
                                amount that would apply under 
                                subsection (d) for the 
                                discharge if the hospital were 
                                a subsection (d) hospital.
                          (iii) Process for reinstatement.--The 
                        Secretary shall establish a process 
                        whereby a long-term care hospital may 
                        seek to and have the provisions of 
                        subclause (II) of clause (ii) 
                        discontinued with respect to that 
                        hospital.
                          (iv) LTCH discharge payment 
                        percentage.--In this subparagraph, the 
                        term ``LTCH discharge payment 
                        percentage'' means, with respect to a 
                        long-term care hospital for a cost 
                        reporting period beginning during or 
                        after fiscal year 2020, the ratio 
                        (expressed as a percentage) of--
                                  (I) the number of Medicare 
                                fee-for-service discharges for 
                                such hospital and period for 
                                which payment is not made at 
                                the site neutral payment rate, 
                                to
                                  (II) the total number of 
                                Medicare fee-for-service 
                                discharges for such hospital 
                                and period.
                  (D) Inclusion of subsection (d) puerto rico 
                hospitals.--In this paragraph, any reference in 
                this paragraph to a subsection (d) hospital 
                shall be deemed to include a reference to a 
                subsection (d) Puerto Rico hospital.
                  (E) Temporary exception for certain severe 
                wound discharges from certain long-term care 
                hospitals.--
                          (i) In general.--In the case of a 
                        discharge occurring prior to January 1, 
                        2017, subparagraph (A)(i) shall not 
                        apply (and payment shall be made to a 
                        long-term care hospital without regard 
                        to this paragraph) if such discharge--
                                  (I) is from a long-term care 
                                hospital that is--
                                          (aa) identified by 
                                        the amendment made by 
                                        section 4417(a) of the 
                                        Balanced Budget Act of 
                                        1997 (42 U.S.C. 1395ww 
                                        note, Public Law 105-
                                        33); and
                                          (bb) located in a 
                                        rural area (as defined 
                                        in subsection 
                                        (d)(2)(D)) or treated 
                                        as being so located 
                                        pursuant to subsection 
                                        (d)(8)(E); and
                                  (II) the individual 
                                discharged has a severe wound.
                          (ii) Severe wound defined.--In this 
                        subparagraph, the term ``severe wound'' 
                        means a stage 3 wound, stage 4 wound, 
                        unstageable wound, non-healing surgical 
                        wound, infected wound, fistula, 
                        osteomyelitis, or wound with morbid 
                        obesity, as identified in the claim 
                        from the long-term care hospital.
  (n) Incentives for Adoption and Meaningful Use of Certified 
EHR Technology.--
          (1) In general.--Subject to the succeeding provisions 
        of this subsection, with respect to inpatient hospital 
        services furnished by an eligible hospital during a 
        payment year (as defined in paragraph (2)(G)), if the 
        eligible hospital is a meaningful EHR user (as 
        determined under paragraph (3)) for the EHR reporting 
        period with respect to such year, in addition to the 
        amount otherwise paid under this section, there also 
        shall be paid to the eligible hospital, from the 
        Federal Hospital Insurance Trust Fund established under 
        section 1817, an amount equal to the applicable amount 
        specified in paragraph (2)(A) for the hospital for such 
        payment year.
          (2) Payment amount.--
                  (A) In general.--Subject to the succeeding 
                subparagraphs of this paragraph, the applicable 
                amount specified in this subparagraph for an 
                eligible hospital for a payment year is equal 
                to the product of the following:
                          (i) Initial amount.--The sum of--
                                  (I) the base amount specified 
                                in subparagraph (B); plus
                                  (II) the discharge related 
                                amount specified in 
                                subparagraph (C) for a 12-month 
                                period selected by the 
                                Secretary with respect to such 
                                payment year.
                          (ii) Medicare share.--The Medicare 
                        share as specified in subparagraph (D) 
                        for the eligible hospital for a period 
                        selected by the Secretary with respect 
                        to such payment year.
                          (iii) Transition factor.--The 
                        transition factor specified in 
                        subparagraph (E) for the eligible 
                        hospital for the payment year.
                  (B) Base amount.--The base amount specified 
                in this subparagraph is $2,000,000.
                  (C) Discharge related amount.--The discharge 
                related amount specified in this subparagraph 
                for a 12-month period selected by the Secretary 
                shall be determined as the sum of the amount, 
                estimated based upon total discharges for the 
                eligible hospital (regardless of any source of 
                payment) for the period, for each discharge up 
                to the 23,000th discharge as follows:
                          (i) For the first through 1,149th 
                        discharge, $0.
                          (ii) For the 1,150th through the 
                        23,000th discharge, $200.
                          (iii) For any discharge greater than 
                        the 23,000th, $0.
                  (D) Medicare share.--The Medicare share 
                specified under this subparagraph for an 
                eligible hospital for a period selected by the 
                Secretary for a payment year is equal to the 
                fraction--
                          (i) the numerator of which is the sum 
                        (for such period and with respect to 
                        the eligible hospital) of--
                                  (I) the estimated number of 
                                inpatient-bed-days (as 
                                established by the Secretary) 
                                which are attributable to 
                                individuals with respect to 
                                whom payment may be made under 
                                part A; and
                                  (II) the estimated number of 
                                inpatient-bed-days (as so 
                                established) which are 
                                attributable to individuals who 
                                are enrolled with a Medicare 
                                Advantage organization under 
                                part C; and
                          (ii) the denominator of which is the 
                        product of--
                                  (I) the estimated total 
                                number of inpatient-bed-days 
                                with respect to the eligible 
                                hospital during such period; 
                                and
                                  (II) the estimated total 
                                amount of the eligible 
                                hospital's charges during such 
                                period, not including any 
                                charges that are attributable 
                                to charity care (as such term 
                                is used for purposes of 
                                hospital cost reporting under 
                                this title), divided by the 
                                estimated total amount of the 
                                hospital's charges during such 
                                period.
                Insofar as the Secretary determines that data 
                are not available on charity care necessary to 
                calculate the portion of the formula specified 
                in clause (ii)(II), the Secretary shall use 
                data on uncompensated care and may adjust such 
                data so as to be an appropriate proxy for 
                charity care including a downward adjustment to 
                eliminate bad debt data from uncompensated care 
                data. In the absence of the data necessary, 
                with respect to a hospital, for the Secretary 
                to compute the amount described in clause 
                (ii)(II), the amount under such clause shall be 
                deemed to be 1. In the absence of data, with 
                respect to a hospital, necessary to compute the 
                amount described in clause (i)(II), the amount 
                under such clause shall be deemed to be 0.
                  (E) Transition factor specified.--
                          (i) In general.--Subject to clause 
                        (ii), the transition factor specified 
                        in this subparagraph for an eligible 
                        hospital for a payment year is as 
                        follows:
                                  (I) For the first payment 
                                year for such hospital, 1.
                                  (II) For the second payment 
                                year for such hospital, \3/4\.
                                  (III) For the third payment 
                                year for such hospital, \1/2\.
                                  (IV) For the fourth payment 
                                year for such hospital, \1/4\.
                                  (V) For any succeeding 
                                payment year for such hospital, 
                                0.
                          (ii) Phase down for eligible 
                        hospitals first adopting ehr after 
                        2013.--If the first payment year for an 
                        eligible hospital is after 2013, then 
                        the transition factor specified in this 
                        subparagraph for a payment year for 
                        such hospital is the same as the amount 
                        specified in clause (i) for such 
                        payment year for an eligible hospital 
                        for which the first payment year is 
                        2013. If the first payment year for an 
                        eligible hospital is after 2015 then 
                        the transition factor specified in this 
                        subparagraph for such hospital and for 
                        such year and any subsequent year shall 
                        be 0.
                  (F) Form of payment.--The payment under this 
                subsection for a payment year may be in the 
                form of a single consolidated payment or in the 
                form of such periodic installments as the 
                Secretary may specify.
                  (G) Payment year defined.--
                          (i) In general.--For purposes of this 
                        subsection, the term ``payment year'' 
                        means a fiscal year beginning with 
                        fiscal year 2011.
                          (ii) First, second, etc. payment 
                        year.--The term ``first payment year'' 
                        means, with respect to inpatient 
                        hospital services furnished by an 
                        eligible hospital, the first fiscal 
                        year for which an incentive payment is 
                        made for such services under this 
                        subsection. The terms ``second payment 
                        year'', ``third payment year'', and 
                        ``fourth payment year'' mean, with 
                        respect to an eligible hospital, each 
                        successive year immediately following 
                        the first payment year for that 
                        hospital.
          (3) Meaningful ehr user.--
                  (A) In general.--For purposes of paragraph 
                (1), an eligible hospital shall be treated as a 
                meaningful EHR user for an EHR reporting period 
                for a payment year (or, for purposes of 
                subsection (b)(3)(B)(ix), for an EHR reporting 
                period under such subsection for a fiscal year) 
                if each of the following requirements are met:
                          (i) Meaningful use of certified ehr 
                        technology.--The eligible hospital 
                        demonstrates to the satisfaction of the 
                        Secretary, in accordance with 
                        subparagraph (C)(i), that during such 
                        period the hospital is using certified 
                        EHR technology in a meaningful manner.
                          (ii) Information exchange.--The 
                        eligible hospital demonstrates to the 
                        satisfaction of the Secretary, in 
                        accordance with subparagraph (C)(i), 
                        that during such period such certified 
                        EHR technology is connected in a manner 
                        that provides, in accordance with law 
                        and standards applicable to the 
                        exchange of information, for the 
                        electronic exchange of health 
                        information to improve the quality of 
                        health care, such as promoting care 
                        coordination, and the hospital 
                        demonstrates (through a process 
                        specified by the Secretary, such as the 
                        use of an attestation) that the 
                        hospital has not knowingly and 
                        willfully taken action (such as to 
                        disable functionality) to limit or 
                        restrict the compatibility or 
                        interoperability of the certified EHR 
                        technology.
                          (iii) Reporting on measures using 
                        ehr.--Subject to subparagraph (B)(ii) 
                        and using such certified EHR 
                        technology, the eligible hospital 
                        submits information for such period, in 
                        a form and manner specified by the 
                        Secretary, on such clinical quality 
                        measures and such other measures as 
                        selected by the Secretary under 
                        subparagraph (B)(i).
                The Secretary shall seek to improve the use of 
                electronic health records and health care 
                quality over time by requiring more stringent 
                measures of meaningful use selected under this 
                paragraph.
                  (B) Reporting on measures.--
                          (i) Selection.--The Secretary shall 
                        select measures for purposes of 
                        subparagraph (A)(iii) but only 
                        consistent with the following:
                                  (I) The Secretary shall 
                                provide preference to clinical 
                                quality measures that have been 
                                selected for purposes of 
                                applying subsection 
                                (b)(3)(B)(viii) or that have 
                                been endorsed by the entity 
                                with a contract with the 
                                Secretary under section 
                                1890(a).
                                  (II) Prior to any measure 
                                (other than a clinical quality 
                                measure that has been selected 
                                for purposes of applying 
                                subsection (b)(3)(B)(viii)) 
                                being selected under this 
                                subparagraph, the Secretary 
                                shall publish in the Federal 
                                Register such measure and 
                                provide for a period of public 
                                comment on such measure.
                          (ii) Limitations.--The Secretary may 
                        not require the electronic reporting of 
                        information on clinical quality 
                        measures under subparagraph (A)(iii) 
                        unless the Secretary has the capacity 
                        to accept the information 
                        electronically, which may be on a pilot 
                        basis.
                          (iii) Coordination of reporting of 
                        information.--In selecting such 
                        measures, and in establishing the form 
                        and manner for reporting measures under 
                        subparagraph (A)(iii), the Secretary 
                        shall seek to avoid redundant or 
                        duplicative reporting with reporting 
                        otherwise required, including reporting 
                        under subsection (b)(3)(B)(viii).
                  (C) Demonstration of meaningful use of 
                certified ehr technology and information 
                exchange.--
                          (i) In general.--An eligible hospital 
                        may satisfy the demonstration 
                        requirement of clauses (i) and (ii) of 
                        subparagraph (A) through means 
                        specified by the Secretary, which may 
                        include--
                                  (I) an attestation;
                                  (II) the submission of claims 
                                with appropriate coding (such 
                                as a code indicating that 
                                inpatient care was documented 
                                using certified EHR 
                                technology);
                                  (III) a survey response;
                                  (IV) reporting under 
                                subparagraph (A)(iii); and
                                  (V) other means specified by 
                                the Secretary.
                          (ii) Use of part d data.--
                        Notwithstanding sections 1860D-
                        15(d)(2)(B) and 1860D-15(f)(2), the 
                        Secretary may use data regarding drug 
                        claims submitted for purposes of 
                        section 1860D-15 that are necessary for 
                        purposes of subparagraph (A).
          (4) Application.--
                  (A) Limitations on review.--There shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise, of--
                          (i) the methodology and standards for 
                        determining payment amounts under this 
                        subsection and payment adjustments 
                        under subsection (b)(3)(B)(ix), 
                        including selection of periods under 
                        paragraph (2) for determining, and 
                        making estimates or using proxies of, 
                        discharges under paragraph (2)(C) and 
                        inpatient-bed-days, hospital charges, 
                        charity charges, and Medicare share 
                        under paragraph (2)(D);
                          (ii) the methodology and standards 
                        for determining a meaningful EHR user 
                        under paragraph (3), including 
                        selection of measures under paragraph 
                        (3)(B), specification of the means of 
                        demonstrating meaningful EHR use under 
                        paragraph (3)(C), and the hardship 
                        exception under subsection 
                        (b)(3)(B)(ix)(II); and
                          (iii) the specification of EHR 
                        reporting periods under paragraph 
                        (6)(B) and the selection of the form of 
                        payment under paragraph (2)(F).
                  (B) Posting on website.--The Secretary shall 
                post on the Internet website of the Centers for 
                Medicare & Medicaid Services, in an easily 
                understandable format, a list of the names of 
                the eligible hospitals that are meaningful EHR 
                users under this subsection or subsection 
                (b)(3)(B)(ix) (and a list of the names of 
                critical access hospitals to which paragraph 
                (3) or (4) of section 1814(l) applies), and 
                other relevant data as determined appropriate 
                by the Secretary. The Secretary shall ensure 
                that an eligible hospital (or critical access 
                hospital) has the opportunity to review the 
                other relevant data that are to be made public 
                with respect to the hospital (or critical 
                access hospital) prior to such data being made 
                public.
          (5) Certified ehr technology defined.--The term 
        ``certified EHR technology'' has the meaning given such 
        term in section 1848(o)(4).
          (6) Definitions.--For purposes of this subsection:
                  (A) EHR reporting period.--The term ``EHR 
                reporting period'' means, with respect to a 
                payment year, any period (or periods) as 
                specified by the Secretary.
                  (B) Eligible hospital.--The term ``eligible 
                hospital'' means a hospital that is a 
                subsection (d) hospital or a subsection (d) 
                Puerto Rico hospital.
  (o) Hospital Value-Based Purchasing Program.--
          (1) Establishment.--
                  (A) In general.--Subject to the succeeding 
                provisions of this subsection, the Secretary 
                shall establish a hospital value-based 
                purchasing program (in this subsection referred 
                to as the ``Program'') under which value-based 
                incentive payments are made in a fiscal year to 
                hospitals that meet the performance standards 
                under paragraph (3) for the performance period 
                for such fiscal year (as established under 
                paragraph (4)).
                  (B) Program to begin in fiscal year 2013.--
                The Program shall apply to payments for 
                discharges occurring on or after October 1, 
                2012.
                  (C) Applicability of program to hospitals.--
                          (i) In general.--For purposes of this 
                        subsection, subject to clause (ii), the 
                        term ``hospital'' means a subsection 
                        (d) hospital (as defined in subsection 
                        (d)(1)(B)).
                          (ii) Exclusions.--The term 
                        ``hospital'' shall not include, with 
                        respect to a fiscal year, a hospital--
                                  (I) that is subject to the 
                                payment reduction under 
                                subsection (b)(3)(B)(viii)(I) 
                                for such fiscal year;
                                  (II) for which, during the 
                                performance period for such 
                                fiscal year, the Secretary has 
                                cited deficiencies that pose 
                                immediate jeopardy to the 
                                health or safety of patients;
                                  (III) for which there are not 
                                a minimum number (as determined 
                                by the Secretary) of measures 
                                that apply to the hospital for 
                                the performance period for such 
                                fiscal year; or
                                  (IV) for which there are not 
                                a minimum number (as determined 
                                by the Secretary) of cases for 
                                the measures that apply to the 
                                hospital for the performance 
                                period for such fiscal year.
                          (iii) Independent analysis.--For 
                        purposes of determining the minimum 
                        numbers under subclauses (III) and (IV) 
                        of clause (ii), the Secretary shall 
                        have conducted an independent analysis 
                        of what numbers are appropriate.
                          (iv) Exemption.--In the case of a 
                        hospital that is paid under section 
                        1814(b)(3), the Secretary may exempt 
                        such hospital from the application of 
                        this subsection if the State which is 
                        paid under such section submits an 
                        annual report to the Secretary 
                        describing how a similar program in the 
                        State for a participating hospital or 
                        hospitals achieves or surpasses the 
                        measured results in terms of patient 
                        health outcomes and cost savings 
                        established under this subsection.
          (2) Measures.--
                  (A) In general.--The Secretary shall select 
                measures, other than measures of readmissions, 
                for purposes of the Program. Such measures 
                shall be selected from the measures specified 
                under subsection (b)(3)(B)(viii).
                  (B) Requirements.--
                          (i) For fiscal year 2013.--For value-
                        based incentive payments made with 
                        respect to discharges occurring during 
                        fiscal year 2013, the Secretary shall 
                        ensure the following:
                                  (I) Conditions or 
                                procedures.--Measures are 
                                selected under subparagraph (A) 
                                that cover at least the 
                                following 5 specific conditions 
                                or procedures:
                                          (aa) Acute myocardial 
                                        infarction (AMI).
                                          (bb) Heart failure.
                                          (cc) Pneumonia.
                                          (dd) Surgeries, as 
                                        measured by the 
                                        Surgical Care 
                                        Improvement Project 
                                        (formerly referred to 
                                        as ``Surgical Infection 
                                        Prevention'' for 
                                        discharges occurring 
                                        before July 2006).
                                          (ee) Healthcare-
                                        associated infections, 
                                        as measured by the 
                                        prevention metrics and 
                                        targets established in 
                                        the HHS Action Plan to 
                                        Prevent Healthcare-
                                        Associated Infections 
                                        (or any successor plan) 
                                        of the Department of 
                                        Health and Human 
                                        Services.
                                  (II) HCAHPS.--Measures 
                                selected under subparagraph (A) 
                                shall be related to the 
                                Hospital Consumer Assessment of 
                                Healthcare Providers and 
                                Systems survey (HCAHPS).
                          (ii) Inclusion of efficiency 
                        measures.--For value-based incentive 
                        payments made with respect to 
                        discharges occurring during fiscal year 
                        2014 or a subsequent fiscal year, the 
                        Secretary shall ensure that measures 
                        selected under subparagraph (A) include 
                        efficiency measures, including measures 
                        of ``Medicare spending per 
                        beneficiary''. Such measures shall be 
                        adjusted for factors such as age, sex, 
                        race, severity of illness, and other 
                        factors that the Secretary determines 
                        appropriate.
                  (C) Limitations.--
                          (i) Time requirement for prior 
                        reporting and notice.--The Secretary 
                        may not select a measure under 
                        subparagraph (A) for use under the 
                        Program with respect to a performance 
                        period for a fiscal year (as 
                        established under paragraph (4)) unless 
                        such measure has been specified under 
                        subsection (b)(3)(B)(viii) and included 
                        on the Hospital Compare Internet 
                        website for at least 1 year prior to 
                        the beginning of such performance 
                        period.
                          (ii) Measure not applicable unless 
                        hospital furnishes services appropriate 
                        to the measure.--A measure selected 
                        under subparagraph (A) shall not apply 
                        to a hospital if such hospital does not 
                        furnish services appropriate to such 
                        measure.
                  (D) Replacing measures.--Subclause (VI) of 
                subsection (b)(3)(B)(viii) shall apply to 
                measures selected under subparagraph (A) in the 
                same manner as such subclause applies to 
                measures selected under such subsection.
          (3) Performance standards.--
                  (A) Establishment.--The Secretary shall 
                establish performance standards with respect to 
                measures selected under paragraph (2) for a 
                performance period for a fiscal year (as 
                established under paragraph (4)).
                  (B) Achievement and improvement.--The 
                performance standards established under 
                subparagraph (A) shall include levels of 
                achievement and improvement.
                  (C) Timing.--The Secretary shall establish 
                and announce the performance standards under 
                subparagraph (A) not later than 60 days prior 
                to the beginning of the performance period for 
                the fiscal year involved.
                  (D) Considerations in establishing 
                standards.--In establishing performance 
                standards with respect to measures under this 
                paragraph, the Secretary shall take into 
                account appropriate factors, such as--
                          (i) practical experience with the 
                        measures involved, including whether a 
                        significant proportion of hospitals 
                        failed to meet the performance standard 
                        during previous performance periods;
                          (ii) historical performance 
                        standards;
                          (iii) improvement rates; and
                          (iv) the opportunity for continued 
                        improvement.
          (4) Performance period.--For purposes of the Program, 
        the Secretary shall establish the performance period 
        for a fiscal year. Such performance period shall begin 
        and end prior to the beginning of such fiscal year.
          (5) Hospital performance score.--
                  (A) In general.--Subject to subparagraph (B), 
                the Secretary shall develop a methodology for 
                assessing the total performance of each 
                hospital based on performance standards with 
                respect to the measures selected under 
                paragraph (2) for a performance period (as 
                established under paragraph (4)). Using such 
                methodology, the Secretary shall provide for an 
                assessment (in this subsection referred to as 
                the ``hospital performance score'') for each 
                hospital for each performance period.
                  (B) Application.--
                          (i) Appropriate distribution.--The 
                        Secretary shall ensure that the 
                        application of the methodology 
                        developed under subparagraph (A) 
                        results in an appropriate distribution 
                        of value-based incentive payments under 
                        paragraph (6) among hospitals achieving 
                        different levels of hospital 
                        performance scores, with hospitals 
                        achieving the highest hospital 
                        performance scores receiving the 
                        largest value-based incentive payments.
                          (ii) Higher of achievement or 
                        improvement.--The methodology developed 
                        under subparagraph (A) shall provide 
                        that the hospital performance score is 
                        determined using the higher of its 
                        achievement or improvement score for 
                        each measure.
                          (iii) Weights.--The methodology 
                        developed under subparagraph (A) shall 
                        provide for the assignment of weights 
                        for categories of measures as the 
                        Secretary determines appropriate.
                          (iv) No minimum performance 
                        standard.--The Secretary shall not set 
                        a minimum performance standard in 
                        determining the hospital performance 
                        score for any hospital.
                          (v) Reflection of measures applicable 
                        to the hospital.--The hospital 
                        performance score for a hospital shall 
                        reflect the measures that apply to the 
                        hospital.
          (6) Calculation of value-based incentive payments.--
                  (A) In general.--In the case of a hospital 
                that the Secretary determines meets (or 
                exceeds) the performance standards under 
                paragraph (3) for the performance period for a 
                fiscal year (as established under paragraph 
                (4)), the Secretary shall increase the base 
                operating DRG payment amount (as defined in 
                paragraph (7)(D)), as determined after 
                application of paragraph (7)(B)(i), for a 
                hospital for each discharge occurring in such 
                fiscal year by the value-based incentive 
                payment amount.
                  (B) Value-based incentive payment amount.--
                The value-based incentive payment amount for 
                each discharge of a hospital in a fiscal year 
                shall be equal to the product of--
                          (i) the base operating DRG payment 
                        amount (as defined in paragraph (7)(D)) 
                        for the discharge for the hospital for 
                        such fiscal year; and
                          (ii) the value-based incentive 
                        payment percentage specified under 
                        subparagraph (C) for the hospital for 
                        such fiscal year.
                  (C) Value-based incentive payment 
                percentage.--
                          (i) In general.--The Secretary shall 
                        specify a value-based incentive payment 
                        percentage for a hospital for a fiscal 
                        year.
                          (ii) Requirements.--In specifying the 
                        value-based incentive payment 
                        percentage for each hospital for a 
                        fiscal year under clause (i), the 
                        Secretary shall ensure that--
                                  (I) such percentage is based 
                                on the hospital performance 
                                score of the hospital under 
                                paragraph (5); and
                                  (II) the total amount of 
                                value-based incentive payments 
                                under this paragraph to all 
                                hospitals in such fiscal year 
                                is equal to the total amount 
                                available for value-based 
                                incentive payments for such 
                                fiscal year under paragraph 
                                (7)(A), as estimated by the 
                                Secretary.
          (7) Funding for value-based incentive payments.--
                  (A) Amount.--The total amount available for 
                value-based incentive payments under paragraph 
                (6) for all hospitals for a fiscal year shall 
                be equal to the total amount of reduced 
                payments for all hospitals under subparagraph 
                (B) for such fiscal year, as estimated by the 
                Secretary.
                  (B) Adjustment to payments.--
                          (i) In general.--The Secretary shall 
                        reduce the base operating DRG payment 
                        amount (as defined in subparagraph (D)) 
                        for a hospital for each discharge in a 
                        fiscal year (beginning with fiscal year 
                        2013) by an amount equal to the 
                        applicable percent (as defined in 
                        subparagraph (C)) of the base operating 
                        DRG payment amount for the discharge 
                        for the hospital for such fiscal year. 
                        The Secretary shall make such 
                        reductions for all hospitals in the 
                        fiscal year involved, regardless of 
                        whether or not the hospital has been 
                        determined by the Secretary to have 
                        earned a value-based incentive payment 
                        under paragraph (6) for such fiscal 
                        year.
                          (ii) No effect on other payments.--
                        Payments described in items (aa) and 
                        (bb) of subparagraph (D)(i)(II) for a 
                        hospital shall be determined as if this 
                        subsection had not been enacted.
                  (C) Applicable percent defined.--For purposes 
                of subparagraph (B), the term ``applicable 
                percent'' means--
                          (i) with respect to fiscal year 2013, 
                        1.0 percent;
                          (ii) with respect to fiscal year 
                        2014, 1.25 percent;
                          (iii) with respect to fiscal year 
                        2015, 1.5 percent;
                          (iv) with respect to fiscal year 
                        2016, 1.75 percent; and
                          (v) with respect to fiscal year 2017 
                        and succeeding fiscal years, 2 percent.
                  (D) Base operating drg payment amount 
                defined.--
                          (i) In general.--Except as provided 
                        in clause (ii), in this subsection, the 
                        term ``base operating DRG payment 
                        amount'' means, with respect to a 
                        hospital for a fiscal year--
                                  (I) the payment amount that 
                                would otherwise be made under 
                                subsection (d) (determined 
                                without regard to subsection 
                                (q)) for a discharge if this 
                                subsection did not apply; 
                                reduced by
                                  (II) any portion of such 
                                payment amount that is 
                                attributable to--
                                          (aa) payments under 
                                        paragraphs (5)(A), 
                                        (5)(B), (5)(F), and 
                                        (12) of subsection (d); 
                                        and
                                          (bb) such other 
                                        payments under 
                                        subsection (d) 
                                        determined appropriate 
                                        by the Secretary.
                          (ii) Special rules for certain 
                        hospitals.--
                                  (I) Sole community hospitals 
                                and medicare-dependent, small 
                                rural hospitals.--In the case 
                                of a medicare-dependent, small 
                                rural hospital (with respect to 
                                discharges occurring during 
                                fiscal year 2012 and 2013) or a 
                                sole community hospital, in 
                                applying subparagraph (A)(i), 
                                the payment amount that would 
                                otherwise be made under 
                                subsection (d) shall be 
                                determined without regard to 
                                subparagraphs (I) and (L) of 
                                subsection (b)(3) and 
                                subparagraphs (D) and (G) of 
                                subsection (d)(5).
                                  (II) Hospitals paid under 
                                section 1814.--In the case of a 
                                hospital that is paid under 
                                section 1814(b)(3), the term 
                                ``base operating DRG payment 
                                amount'' means the payment 
                                amount under such section.
          (8) Announcement of net result of adjustments.--Under 
        the Program, the Secretary shall, not later than 60 
        days prior to the fiscal year involved, inform each 
        hospital of the adjustments to payments to the hospital 
        for discharges occurring in such fiscal year under 
        paragraphs (6) and (7)(B)(i).
          (9) No effect in subsequent fiscal years.--The value-
        based incentive payment under paragraph (6) and the 
        payment reduction under paragraph (7)(B)(i) shall each 
        apply only with respect to the fiscal year involved, 
        and the Secretary shall not take into account such 
        value-based incentive payment or payment reduction in 
        making payments to a hospital under this section in a 
        subsequent fiscal year.
          (10) Public reporting.--
                  (A) Hospital specific information.--
                          (i) In general.--The Secretary shall 
                        make information available to the 
                        public regarding the performance of 
                        individual hospitals under the Program, 
                        including--
                                  (I) the performance of the 
                                hospital with respect to each 
                                measure that applies to the 
                                hospital;
                                  (II) the performance of the 
                                hospital with respect to each 
                                condition or procedure; and
                                  (III) the hospital 
                                performance score assessing the 
                                total performance of the 
                                hospital.
                          (ii) Opportunity to review and submit 
                        corrections.--The Secretary shall 
                        ensure that a hospital has the 
                        opportunity to review, and submit 
                        corrections for, the information to be 
                        made public with respect to the 
                        hospital under clause (i) prior to such 
                        information being made public.
                          (iii) Website.--Such information 
                        shall be posted on the Hospital Compare 
                        Internet website in an easily 
                        understandable format.
                  (B) Aggregate information.--The Secretary 
                shall periodically post on the Hospital Compare 
                Internet website aggregate information on the 
                Program, including--
                          (i) the number of hospitals receiving 
                        value-based incentive payments under 
                        paragraph (6) and the range and total 
                        amount of such value-based incentive 
                        payments; and
                          (ii) the number of hospitals 
                        receiving less than the maximum value-
                        based incentive payment available to 
                        the hospital for the fiscal year 
                        involved and the range and amount of 
                        such payments.
          (11) Implementation.--
                  (A) Appeals.--The Secretary shall establish a 
                process by which hospitals may appeal the 
                calculation of a hospital's performance 
                assessment with respect to the performance 
                standards established under paragraph (3)(A) 
                and the hospital performance score under 
                paragraph (5). The Secretary shall ensure that 
                such process provides for resolution of such 
                appeals in a timely manner.
                  (B) Limitation on review.--Except as provided 
                in subparagraph (A), there shall be no 
                administrative or judicial review under section 
                1869, section 1878, or otherwise of the 
                following:
                          (i) The methodology used to determine 
                        the amount of the value-based incentive 
                        payment under paragraph (6) and the 
                        determination of such amount.
                          (ii) The determination of the amount 
                        of funding available for such value-
                        based incentive payments under 
                        paragraph (7)(A) and the payment 
                        reduction under paragraph (7)(B)(i).
                          (iii) The establishment of the 
                        performance standards under paragraph 
                        (3) and the performance period under 
                        paragraph (4).
                          (iv) The measures specified under 
                        subsection (b)(3)(B)(viii) and the 
                        measures selected under paragraph (2).
                          (v) The methodology developed under 
                        paragraph (5) that is used to calculate 
                        hospital performance scores and the 
                        calculation of such scores.
                          (vi) The validation methodology 
                        specified in subsection 
                        (b)(3)(B)(viii)(XI).
                  (C) Consultation with small hospitals.--The 
                Secretary shall consult with small rural and 
                urban hospitals on the application of the 
                Program to such hospitals.
          (12) Promulgation of regulations.--The Secretary 
        shall promulgate regulations to carry out the Program, 
        including the selection of measures under paragraph 
        (2), the methodology developed under paragraph (5) that 
        is used to calculate hospital performance scores, and 
        the methodology used to determine the amount of value-
        based incentive payments under paragraph (6).
  (p) Adjustment to Hospital Payments for Hospital Acquired 
Conditions.--
          (1) In general.--In order to provide an incentive for 
        applicable hospitals to reduce hospital acquired 
        conditions under this title, with respect to discharges 
        from an applicable hospital occurring during fiscal 
        year 2015 or a subsequent fiscal year, the amount of 
        payment under this section or section 1814(b)(3), as 
        applicable, for such discharges during the fiscal year 
        shall be equal to 99 percent of the amount of payment 
        that would otherwise apply to such discharges under 
        this section or section 1814(b)(3) (determined after 
        the application of subsections (o) and (q) and section 
        1814(l)(4) but without regard to this subsection).
          (2) Applicable hospitals.--
                  (A) In general.--For purposes of this 
                subsection, the term ``applicable hospital'' 
                means a subsection (d) hospital that meets the 
                criteria described in subparagraph (B).
                  (B) Criteria described.--
                          (i) In general.--The criteria 
                        described in this subparagraph, with 
                        respect to a subsection (d) hospital, 
                        is that the subsection (d) hospital is 
                        in the top quartile of all subsection 
                        (d) hospitals, relative to the national 
                        average, of hospital acquired 
                        conditions during the applicable 
                        period, as determined by the Secretary.
                          (ii) Risk adjustment.--In carrying 
                        out clause (i), the Secretary shall 
                        establish and apply an appropriate risk 
                        adjustment methodology.
                  (C) Exemption.--In the case of a hospital 
                that is paid under section 1814(b)(3), the 
                Secretary may exempt such hospital from the 
                application of this subsection if the State 
                which is paid under such section submits an 
                annual report to the Secretary describing how a 
                similar program in the State for a 
                participating hospital or hospitals achieves or 
                surpasses the measured results in terms of 
                patient health outcomes and cost savings 
                established under this subsection.
          (3) Hospital acquired conditions.--For purposes of 
        this subsection, the term ``hospital acquired 
        condition'' means a condition identified for purposes 
        of subsection (d)(4)(D)(iv) and any other condition 
        determined appropriate by the Secretary that an 
        individual acquires during a stay in an applicable 
        hospital, as determined by the Secretary.
          (4) Applicable period.--In this subsection, the term 
        ``applicable period'' means, with respect to a fiscal 
        year, a period specified by the Secretary.
          (5) Reporting to hospitals.--Prior to fiscal year 
        2015 and each subsequent fiscal year, the Secretary 
        shall provide confidential reports to applicable 
        hospitals with respect to hospital acquired conditions 
        of the applicable hospital during the applicable 
        period.
          (6) Reporting hospital specific information.--
                  (A) In general.--The Secretary shall make 
                information available to the public regarding 
                hospital acquired conditions of each applicable 
                hospital.
                  (B) Opportunity to review and submit 
                corrections.--The Secretary shall ensure that 
                an applicable hospital has the opportunity to 
                review, and submit corrections for, the 
                information to be made public with respect to 
                the hospital under subparagraph (A) prior to 
                such information being made public.
                  (C) Website.--Such information shall be 
                posted on the Hospital Compare Internet website 
                in an easily understandable format.
          (7) Limitations on review.--There shall be no 
        administrative or judicial review under section 1869, 
        section 1878, or otherwise of the following:
                  (A) The criteria described in paragraph 
                (2)(A).
                  (B) The specification of hospital acquired 
                conditions under paragraph (3).
                  (C) The specification of the applicable 
                period under paragraph (4).
                  (D) The provision of reports to applicable 
                hospitals under paragraph (5) and the 
                information made available to the public under 
                paragraph (6).
  (q) Hospital Readmissions Reduction Program.--
          (1) In general.--With respect to payment for 
        discharges from an applicable hospital (as defined in 
        paragraph (5)(C)) occurring during a fiscal year 
        beginning on or after October 1, 2012, in order to 
        account for excess readmissions in the hospital, the 
        Secretary shall make payments (in addition to the 
        payments described in paragraph (2)(A)(ii)) for such a 
        discharge to such hospital under subsection (d) (or 
        section 1814(b)(3), as the case may be) in an amount 
        equal to the product of--
                  (A) the base operating DRG payment amount (as 
                defined in paragraph (2)) for the discharge; 
                and
                  (B) the adjustment factor (described in 
                paragraph (3)(A)) for the hospital for the 
                fiscal year.
          (2) Base operating drg payment amount defined.--
                  (A) In general.--Except as provided in 
                subparagraph (B), in this subsection, the term 
                ``base operating DRG payment amount'' means, 
                with respect to a hospital for a fiscal year--
                          (i) the payment amount that would 
                        otherwise be made under subsection (d) 
                        (determined without regard to 
                        subsection (o)) for a discharge if this 
                        subsection did not apply; reduced by
                          (ii) any portion of such payment 
                        amount that is attributable to payments 
                        under paragraphs (5)(A), (5)(B), 
                        (5)(F), and (12) of subsection (d).
                  (B) Special rules for certain hospitals.--
                          (i) Sole community hospitals and 
                        medicare-dependent, small rural 
                        hospitals.--In the case of a medicare-
                        dependent, small rural hospital (with 
                        respect to discharges occurring during 
                        fiscal years 2012 and 2013) or a sole 
                        community hospital, in applying 
                        subparagraph (A)(i), the payment amount 
                        that would otherwise be made under 
                        subsection (d) shall be determined 
                        without regard to subparagraphs (I) and 
                        (L) of subsection (b)(3) and 
                        subparagraphs (D) and (G) of subsection 
                        (d)(5).
                          (ii) Hospitals paid under section 
                        1814.--In the case of a hospital that 
                        is paid under section 1814(b)(3), the 
                        Secretary may exempt such hospitals 
                        provided that States paid under such 
                        section submit an annual report to the 
                        Secretary describing how a similar 
                        program in the State for a 
                        participating hospital or hospitals 
                        achieves or surpasses the measured 
                        results in terms of patient health 
                        outcomes and cost savings established 
                        herein with respect to this section.
          (3) Adjustment factor.--
                  (A) In general.--For purposes of paragraph 
                (1), the adjustment factor under this paragraph 
                for an applicable hospital for a fiscal year is 
                equal to the greater of--
                          (i) the ratio described in 
                        subparagraph (B) for the hospital for 
                        the applicable period (as defined in 
                        paragraph (5)(D)) for such fiscal year; 
                        or
                          (ii) the floor adjustment factor 
                        specified in subparagraph (C).
                  (B) Ratio.--The ratio described in this 
                subparagraph for a hospital for an applicable 
                period is equal to 1 minus the ratio of--
                          (i) the aggregate payments for excess 
                        readmissions (as defined in paragraph 
                        (4)(A)) with respect to an applicable 
                        hospital for the applicable period; and
                          (ii) the aggregate payments for all 
                        discharges (as defined in paragraph 
                        (4)(B)) with respect to such applicable 
                        hospital for such applicable period.
                  (C) Floor adjustment factor.--For purposes of 
                subparagraph (A), the floor adjustment factor 
                specified in this subparagraph for--
                          (i) fiscal year 2013 is 0.99;
                          (ii) fiscal year 2014 is 0.98; or
                          (iii) fiscal year 2015 and subsequent 
                        fiscal years is 0.97.
          (4) Aggregate payments, excess readmission ratio 
        defined.--For purposes of this subsection:
                  (A) Aggregate payments for excess 
                readmissions.--The term ``aggregate payments 
                for excess readmissions'' means, for a hospital 
                for an applicable period, the sum, for 
                applicable conditions (as defined in paragraph 
                (5)(A)), of the product, for each applicable 
                condition, of--
                          (i) the base operating DRG payment 
                        amount for such hospital for such 
                        applicable period for such condition;
                          (ii) the number of admissions for 
                        such condition for such hospital for 
                        such applicable period; and
                          (iii) the excess readmissions ratio 
                        (as defined in subparagraph (C)) for 
                        such hospital for such applicable 
                        period minus 1.
                  (B) Aggregate payments for all discharges.--
                The term ``aggregate payments for all 
                discharges'' means, for a hospital for an 
                applicable period, the sum of the base 
                operating DRG payment amounts for all 
                discharges for all conditions from such 
                hospital for such applicable period.
                  (C) Excess readmission ratio.--
                          (i) In general.--Subject to clause 
                        (ii), the term ``excess readmissions 
                        ratio'' means, with respect to an 
                        applicable condition for a hospital for 
                        an applicable period, the ratio (but 
                        not less than 1.0) of--
                                  (I) the risk adjusted 
                                readmissions based on actual 
                                readmissions, as determined 
                                consistent with a readmission 
                                measure methodology that has 
                                been endorsed under paragraph 
                                (5)(A)(ii)(I), for an 
                                applicable hospital for such 
                                condition with respect to such 
                                applicable period; to
                                  (II) the risk adjusted 
                                expected readmissions (as 
                                determined consistent with such 
                                a methodology) for such 
                                hospital for such condition 
                                with respect to such applicable 
                                period.
                          (ii) Exclusion of certain 
                        readmissions.--For purposes of clause 
                        (i), with respect to a hospital, excess 
                        readmissions shall not include 
                        readmissions for an applicable 
                        condition for which there are fewer 
                        than a minimum number (as determined by 
                        the Secretary) of discharges for such 
                        applicable condition for the applicable 
                        period and such hospital.
          (5) Definitions.--For purposes of this subsection:
                  (A) Applicable condition.--The term 
                ``applicable condition'' means, subject to 
                subparagraph (B), a condition or procedure 
                selected by the Secretary among conditions and 
                procedures for which--
                          (i) readmissions (as defined in 
                        subparagraph (E)) that represent 
                        conditions or procedures that are high 
                        volume or high expenditures under this 
                        title (or other criteria specified by 
                        the Secretary); and
                          (ii) measures of such readmissions--
                                  (I) have been endorsed by the 
                                entity with a contract under 
                                section 1890(a); and
                                  (II) such endorsed measures 
                                have exclusions for 
                                readmissions that are unrelated 
                                to the prior discharge (such as 
                                a planned readmission or 
                                transfer to another applicable 
                                hospital).
                  (B) Expansion of applicable conditions.--
                Beginning with fiscal year 2015, the Secretary 
                shall, to the extent practicable, expand the 
                applicable conditions beyond the 3 conditions 
                for which measures have been endorsed as 
                described in subparagraph (A)(ii)(I) as of the 
                date of the enactment of this subsection to the 
                additional 4 conditions that have been 
                identified by the Medicare Payment Advisory 
                Commission in its report to Congress in June 
                2007 and to other conditions and procedures as 
                determined appropriate by the Secretary. In 
                expanding such applicable conditions, the 
                Secretary shall seek the endorsement described 
                in subparagraph (A)(ii)(I) but may apply such 
                measures without such an endorsement in the 
                case of a specified area or medical topic 
                determined appropriate by the Secretary for 
                which a feasible and practical measure has not 
                been endorsed by the entity with a contract 
                under section 1890(a) as long as due 
                consideration is given to measures that have 
                been endorsed or adopted by a consensus 
                organization identified by the Secretary.
                  (C) Applicable hospital.--The term 
                ``applicable hospital'' means a subsection (d) 
                hospital or a hospital that is paid under 
                section 1814(b)(3), as the case may be.
                  (D) Applicable period.--The term ``applicable 
                period'' means, with respect to a fiscal year, 
                such period as the Secretary shall specify.
                  (E) Readmission.--The term ``readmission'' 
                means, in the case of an individual who is 
                discharged from an applicable hospital, the 
                admission of the individual to the same or 
                another applicable hospital within a time 
                period specified by the Secretary from the date 
                of such discharge. Insofar as the discharge 
                relates to an applicable condition for which 
                there is an endorsed measure described in 
                subparagraph (A)(ii)(I), such time period (such 
                as 30 days) shall be consistent with the time 
                period specified for such measure.
          (6) Reporting hospital specific information.--
                  (A) In general.--The Secretary shall make 
                information available to the public regarding 
                readmission rates of each subsection (d) 
                hospital under the program.
                  (B) Opportunity to review and submit 
                corrections.--The Secretary shall ensure that a 
                subsection (d) hospital has the opportunity to 
                review, and submit corrections for, the 
                information to be made public with respect to 
                the hospital under subparagraph (A) prior to 
                such information being made public.
                  (C) Website.--Such information shall be 
                posted on the Hospital Compare Internet website 
                in an easily understandable format.
          (7) Limitations on review.--There shall be no 
        administrative or judicial review under section 1869, 
        section 1878, or otherwise of the following:
                  (A) The determination of base operating DRG 
                payment amounts.
                  (B) The methodology for determining the 
                adjustment factor under paragraph (3), 
                including excess readmissions ratio under 
                paragraph (4)(C), aggregate payments for excess 
                readmissions under paragraph (4)(A), and 
                aggregate payments for all discharges under 
                paragraph (4)(B), and applicable periods and 
                applicable conditions under paragraph (5).
                  (C) The measures of readmissions as described 
                in paragraph (5)(A)(ii).
          (8) Readmission rates for all patients.--
                  (A) Calculation of readmission.--The 
                Secretary shall calculate readmission rates for 
                all patients (as defined in subparagraph (D)) 
                for a specified hospital (as defined in 
                subparagraph (D)(ii)) for an applicable 
                condition (as defined in paragraph (5)(B)) and 
                other conditions deemed appropriate by the 
                Secretary for an applicable period (as defined 
                in paragraph (5)(D)) in the same manner as used 
                to calculate such readmission rates for 
                hospitals with respect to this title and posted 
                on the CMS Hospital Compare website.
                  (B) Posting of hospital specific all patient 
                readmission rates.--The Secretary shall make 
                information on all patient readmission rates 
                calculated under subparagraph (A) available on 
                the CMS Hospital Compare website in a form and 
                manner determined appropriate by the Secretary. 
                The Secretary may also make other information 
                determined appropriate by the Secretary 
                available on such website.
                  (C) Hospital submission of all patient 
                data.--
                          (i) Except as provided for in clause 
                        (ii), each specified hospital (as 
                        defined in subparagraph (D)(ii)) shall 
                        submit to the Secretary, in a form, 
                        manner and time specified by the 
                        Secretary, data and information 
                        determined necessary by the Secretary 
                        for the Secretary to calculate the all 
                        patient readmission rates described in 
                        subparagraph (A).
                          (ii) Instead of a specified hospital 
                        submitting to the Secretary the data 
                        and information described in clause 
                        (i), such data and information may be 
                        submitted to the Secretary, on behalf 
                        of such a specified hospital, by a 
                        state or an entity determined 
                        appropriate by the Secretary.
                  (D) Definitions.--For purposes of this 
                paragraph:
                          (i) The term ``all patients'' means 
                        patients who are treated on an 
                        inpatient basis and discharged from a 
                        specified hospital (as defined in 
                        clause (ii)).
                          (ii) The term ``specified hospital'' 
                        means a subsection (d) hospital, 
                        hospitals described in clauses (i) 
                        through (v) of subsection (d)(1)(B) 
                        and, as determined feasible and 
                        appropriate by the Secretary, other 
                        hospitals not otherwise described in 
                        this subparagraph.
  (r) Adjustments to Medicare DSH Payments.--
          (1) Empirically justified dsh payments.--For fiscal 
        year 2014 and each subsequent fiscal year, instead of 
        the amount of disproportionate share hospital payment 
        that would otherwise be made under subsection (d)(5)(F) 
        to a subsection (d) hospital for the fiscal year, the 
        Secretary shall pay to the subsection (d) hospital 25 
        percent of such amount (which represents the 
        empirically justified amount for such payment, as 
        determined by the Medicare Payment Advisory Commission 
        in its March 2007 Report to the Congress).
          (2) Additional payment.--In addition to the payment 
        made to a subsection (d) hospital under paragraph (1), 
        for fiscal year 2014 and each subsequent fiscal year, 
        the Secretary shall pay to such subsection (d) 
        hospitals an additional amount equal to the product of 
        the following factors:
                  (A) Factor one.--A factor equal to the 
                difference between--
                          (i) the aggregate amount of payments 
                        that would be made to subsection (d) 
                        hospitals under subsection (d)(5)(F) if 
                        this subsection did not apply for such 
                        fiscal year (as estimated by the 
                        Secretary); and
                          (ii) the aggregate amount of payments 
                        that are made to subsection (d) 
                        hospitals under paragraph (1) for such 
                        fiscal year (as so estimated).
                  (B) Factor two.--
                          (i) Fiscal years 2014, 2015, 2016, 
                        and 2017.--For each of fiscal years 
                        2014, 2015, 2016, and 2017, a factor 
                        equal to 1 minus the percent change in 
                        the percent of individuals under the 
                        age of 65 who are uninsured, as 
                        determined by comparing the percent of 
                        such individuals--
                                  (I) who are uninsured in 
                                2013, the last year before 
                                coverage expansion under the 
                                Patient Protection and 
                                Affordable Care Act (as 
                                calculated by the Secretary 
                                based on the most recent 
                                estimates available from the 
                                Director of the Congressional 
                                Budget Office before a vote in 
                                either House on the Health Care 
                                and Education Reconciliation 
                                Act of 2010 that, if determined 
                                in the affirmative, would clear 
                                such Act for enrollment); and
                                  (II) who are uninsured in the 
                                most recent period for which 
                                data is available (as so 
                                calculated),
                        minus 0.1 percentage points for fiscal 
                        year 2014 and minus 0.2 percentage 
                        points for each of fiscal years 2015, 
                        2016, and 2017.
                          (ii) 2018 and subsequent years.--For 
                        fiscal year 2018 and each subsequent 
                        fiscal year, a factor equal to 1 minus 
                        the percent change in the percent of 
                        individuals who are uninsured, as 
                        determined by comparing the percent of 
                        individuals--
                                  (I) who are uninsured in 2013 
                                (as estimated by the Secretary, 
                                based on data from the Census 
                                Bureau or other sources the 
                                Secretary determines 
                                appropriate, and certified by 
                                the Chief Actuary of the 
                                Centers for Medicare & Medicaid 
                                Services); and
                                  (II) who are uninsured in the 
                                most recent period for which 
                                data is available (as so 
                                estimated and certified),
                        minus 0.2 percentage points for each of 
                        fiscal years 2018 and 2019.
                  (C) Factor three.--A factor equal to the 
                percent, for each subsection (d) hospital, that 
                represents the quotient of--
                          (i) the amount of uncompensated care 
                        for such hospital for a period selected 
                        by the Secretary (as estimated by the 
                        Secretary, based on appropriate data 
                        (including, in the case where the 
                        Secretary determines that alternative 
                        data is available which is a better 
                        proxy for the costs of subsection (d) 
                        hospitals for treating the uninsured, 
                        the use of such alternative data)); and
                          (ii) the aggregate amount of 
                        uncompensated care for all subsection 
                        (d) hospitals that receive a payment 
                        under this subsection for such period 
                        (as so estimated, based on such data).
          (3) Limitations on review.--There shall be no 
        administrative or judicial review under section 1869, 
        section 1878, or otherwise of the following:
                  (A) Any estimate of the Secretary for 
                purposes of determining the factors described 
                in paragraph (2).
                  (B) Any period selected by the Secretary for 
                such purposes.
  (s) Prospective Payment for Psychiatric Hospitals.--
          (1) Reference to establishment and implementation of 
        system.--For provisions related to the establishment 
        and implementation of a prospective payment system for 
        payments under this title for inpatient hospital 
        services furnished by psychiatric hospitals (as 
        described in clause (i) of subsection (d)(1)(B)) and 
        psychiatric units (as described in the matter following 
        clause (v) of such subsection), see section 124 of the 
        Medicare, Medicaid, and SCHIP Balanced Budget 
        Refinement Act of 1999.
          (2) Implementation for rate year beginning in 2010 
        and subsequent rate years.--
                  (A) In general.--In implementing the system 
                described in paragraph (1) for the rate year 
                beginning in 2010 and any subsequent rate year, 
                any update to a base rate for days during the 
                rate year for a psychiatric hospital or unit, 
                respectively, shall be reduced--
                          (i) for the rate year beginning in 
                        2012 and each subsequent rate year, by 
                        the productivity adjustment described 
                        in section 1886(b)(3)(B)(xi)(II); and
                          (ii) for each of the rate years 
                        beginning in 2010 through 2019, by the 
                        other adjustment described in paragraph 
                        (3).
                  (B) Special rule.--The application of this 
                paragraph may result in such update being less 
                than 0.0 for a rate year, and may result in 
                payment rates under the system described in 
                paragraph (1) for a rate year being less than 
                such payment rates for the preceding rate year.
          (3) Other adjustment.--For purposes of paragraph 
        (2)(A)(ii), the other adjustment described in this 
        paragraph is--
                  (A) for each of the rate years beginning in 
                2010 and 2011, 0.25 percentage point;
                  (B) for each of the rate years beginning in 
                2012 and 2013, 0.1 percentage point;
                  (C) for the rate year beginning in 2014, 0.3 
                percentage point;
                  (D) for each of the rate years beginning in 
                2015 and 2016, 0.2 percentage point; and
                  (E) for each of the rate years beginning in 
                2017, 2018, and 2019, 0.75 percentage point.
          (4) Quality reporting.--
                  (A) Reduction in update for failure to 
                report.--
                          (i) In general.--Under the system 
                        described in paragraph (1), for rate 
                        year 2014 and each subsequent rate 
                        year, in the case of a psychiatric 
                        hospital or psychiatric unit that does 
                        not submit data to the Secretary in 
                        accordance with subparagraph (C) with 
                        respect to such a rate year, any annual 
                        update to a standard Federal rate for 
                        discharges for the hospital during the 
                        rate year, and after application of 
                        paragraph (2), shall be reduced by 2 
                        percentage points.
                          (ii) Special rule.--The application 
                        of this subparagraph may result in such 
                        annual update being less than 0.0 for a 
                        rate year, and may result in payment 
                        rates under the system described in 
                        paragraph (1) for a rate year being 
                        less than such payment rates for the 
                        preceding rate year.
                  (B) Noncumulative application.--Any reduction 
                under subparagraph (A) shall apply only with 
                respect to the rate year involved and the 
                Secretary shall not take into account such 
                reduction in computing the payment amount under 
                the system described in paragraph (1) for a 
                subsequent rate year.
                  (C) Submission of quality data.--For rate 
                year 2014 and each subsequent rate year, each 
                psychiatric hospital and psychiatric unit shall 
                submit to the Secretary data on quality 
                measures specified under subparagraph (D). Such 
                data shall be submitted in a form and manner, 
                and at a time, specified by the Secretary for 
                purposes of this subparagraph.
                  (D) Quality measures.--
                          (i) In general.--Subject to clause 
                        (ii), any measure specified by the 
                        Secretary under this subparagraph must 
                        have been endorsed by the entity with a 
                        contract under section 1890(a).
                          (ii) Exception.--In the case of a 
                        specified area or medical topic 
                        determined appropriate by the Secretary 
                        for which a feasible and practical 
                        measure has not been endorsed by the 
                        entity with a contract under section 
                        1890(a), the Secretary may specify a 
                        measure that is not so endorsed as long 
                        as due consideration is given to 
                        measures that have been endorsed or 
                        adopted by a consensus organization 
                        identified by the Secretary.
                          (iii) Time frame.--Not later than 
                        October 1, 2012, the Secretary shall 
                        publish the measures selected under 
                        this subparagraph that will be 
                        applicable with respect to rate year 
                        2014.
                  (E) Public availability of data submitted.--
                The Secretary shall establish procedures for 
                making data submitted under subparagraph (C) 
                available to the public. Such procedures shall 
                ensure that a psychiatric hospital and a 
                psychiatric unit has the opportunity to review 
                the data that is to be made public with respect 
                to the hospital or unit prior to such data 
                being made public. The Secretary shall report 
                quality measures that relate to services 
                furnished in inpatient settings in psychiatric 
                hospitals and psychiatric units on the Internet 
                website of the Centers for Medicare & Medicaid 
                Services.

           *       *       *       *       *       *       *


SEC. 1899B. STANDARDIZED POST-ACUTE CARE (PAC) ASSESSMENT DATA FOR 
                    QUALITY, PAYMENT, AND DISCHARGE PLANNING.

  (a) Requirement for Standardized Assessment Data.--
          (1) In general.--The Secretary shall--
                  (A) require under the applicable reporting 
                provisions post-acute care providers (as 
                defined in paragraph (2)(A)) to report--
                          (i) standardized patient assessment 
                        data in accordance with subsection (b);
                          (ii) data on quality measures under 
                        subsection (c)(1); and
                          (iii) data on resource use and other 
                        measures under subsection (d)(1);
                  (B) require data described in subparagraph 
                (A) to be standardized and interoperable so as 
                to allow for the exchange of such data among 
                such post-acute care providers and other 
                providers and the use by such providers of such 
                data that has been so exchanged, including by 
                using common standards and definitions, in 
                order to provide access to longitudinal 
                information for such providers to facilitate 
                coordinated care and improved Medicare 
                beneficiary outcomes; and
                  (C) in accordance with subsections (b)(1) and 
                (c)(2), modify PAC assessment instruments (as 
                defined in paragraph (2)(B)) applicable to 
                post-acute care providers to--
                          (i) provide for the submission of 
                        standardized patient assessment data 
                        under this title with respect to such 
                        providers; and
                          (ii) enable comparison of such 
                        assessment data across all such 
                        providers to whom such data are 
                        applicable.
          (2) Definitions.--For purposes of this section:
                  (A) Post-acute care (pac) provider.--The 
                terms ``post-acute care provider'' and ``PAC 
                provider'' mean--
                          (i) a home health agency;
                          (ii) a skilled nursing facility;
                          (iii) an inpatient rehabilitation 
                        facility; and
                          (iv) a long-term care hospital (other 
                        than a hospital classified under 
                        section 1886(d)(1)(B)(iv)(II)).
                  (B) PAC assessment instrument.--The term 
                ``PAC assessment instrument'' means--
                          (i) in the case of home health 
                        agencies, the instrument used for 
                        purposes of reporting and assessment 
                        with respect to the Outcome and 
                        Assessment Information Set (OASIS), as 
                        described in sections 484.55 and 
                        484.250 of title 42, the Code of 
                        Federal Regulations, or any successor 
                        regulation, or any other instrument 
                        used with respect to home health 
                        agencies for such purposes;
                          (ii) in the case of skilled nursing 
                        facilities, the resident's assessment 
                        under section 1819(b)(3);
                          (iii) in the case of inpatient 
                        rehabilitation facilities, any Medicare 
                        beneficiary assessment instrument 
                        established by the Secretary for 
                        purposes of section 1886(j); and
                          (iv) in the case of long-term care 
                        hospitals, the Medicare beneficiary 
                        assessment instrument used with respect 
                        to such hospitals for the collection of 
                        data elements necessary to calculate 
                        quality measures as described in the 
                        August 18, 2011, Federal Register (76 
                        Fed. Reg. 51754-51755), including for 
                        purposes of section 1886(m)(5)(C), or 
                        any other instrument used with respect 
                        to such hospitals for assessment 
                        purposes.
                  (C) Applicable reporting provision.--The term 
                ``applicable reporting provision'' means--
                          (i) for home health agencies, section 
                        1895(b)(3)(B)(v);
                          (ii) for skilled nursing facilities, 
                        section 1888(e)(6);
                          (iii) for inpatient rehabilitation 
                        facilities, section 1886(j)(7); and
                          (iv) for long-term care hospitals, 
                        section 1886(m)(5).
                  (D) PAC payment system.--The term ``PAC 
                payment system'' means--
                          (i) with respect to a home health 
                        agency, the prospective payment system 
                        under section 1895;
                          (ii) with respect to a skilled 
                        nursing facility, the prospective 
                        payment system under section 1888(e);
                          (iii) with respect to an inpatient 
                        rehabilitation facility, the 
                        prospective payment system under 
                        section 1886(j); and
                          (iv) with respect to a long-term care 
                        hospital, the prospective payment 
                        system under section 1886(m).
                  (E) Specified application date.--The term 
                ``specified application date'' means the 
                following:
                          (i) Quality measures.--In the case of 
                        quality measures under subsection 
                        (c)(1)--
                                  (I) with respect to the 
                                domain described in subsection 
                                (c)(1)(A) (relating to 
                                functional status, cognitive 
                                function, and changes in 
                                function and cognitive 
                                function)--
                                          (aa) for PAC 
                                        providers described in 
                                        clauses (ii) and (iii) 
                                        of paragraph (2)(A), 
                                        October 1, 2016;
                                          (bb) for PAC 
                                        providers described in 
                                        clause (iv) of such 
                                        paragraph, October 1, 
                                        2018; and
                                          (cc) for PAC 
                                        providers described in 
                                        clause (i) of such 
                                        paragraph, January 1, 
                                        2019;
                                  (II) with respect to the 
                                domain described in subsection 
                                (c)(1)(B) (relating to skin 
                                integrity and changes in skin 
                                integrity)--
                                          (aa) for PAC 
                                        providers described in 
                                        clauses (ii), (iii), 
                                        and (iv) of paragraph 
                                        (2)(A), October 1, 
                                        2016; and
                                          (bb) for PAC 
                                        providers described in 
                                        clause (i) of such 
                                        paragraph, January 1, 
                                        2017;
                                  (III) with respect to the 
                                domain described in subsection 
                                (c)(1)(C) (relating to 
                                medication reconciliation)--
                                          (aa) for PAC 
                                        providers described in 
                                        clause (i) of such 
                                        paragraph, January 1, 
                                        2017; and
                                          (bb) for PAC 
                                        providers described in 
                                        clauses (ii), (iii), 
                                        and (iv) of such 
                                        paragraph, October 1, 
                                        2018;
                                  (IV) with respect to the 
                                domain described in subsection 
                                (c)(1)(D) (relating to 
                                incidence of major falls)--
                                          (aa) for PAC 
                                        providers described in 
                                        clauses (ii), (iii), 
                                        and (iv) of paragraph 
                                        (2)(A), October 1, 
                                        2016; and
                                          (bb) for PAC 
                                        providers described in 
                                        clause (i) of such 
                                        paragraph, January 1, 
                                        2019; and
                                  (V) with respect to the 
                                domain described in subsection 
                                (c)(1)(E) (relating to 
                                accurately communicating the 
                                existence of and providing for 
                                the transfer of health 
                                information and care 
                                preferences)--
                                          (aa) for PAC 
                                        providers described in 
                                        clauses (ii), (iii), 
                                        and (iv) of paragraph 
                                        (2)(A), October 1, 
                                        2018; and
                                          (bb) for PAC 
                                        providers described in 
                                        clause (i) of such 
                                        paragraph, January 1, 
                                        2019.
                          (ii) Resource use and other 
                        measures.--In the case of resource use 
                        and other measures under subsection 
                        (d)(1)--
                                  (I) for PAC providers 
                                described in clauses (ii), 
                                (iii), and (iv) of paragraph 
                                (2)(A), October 1, 2016; and
                                  (II) for PAC providers 
                                described in clause (i) of such 
                                paragraph, January 1, 2017.
                  (F) Medicare beneficiary.--The term 
                ``Medicare beneficiary'' means an individual 
                entitled to benefits under part A or, as 
                appropriate, enrolled for benefits under part 
                B.
  (b) Standardized Patient Assessment Data.--
          (1) Requirement for reporting assessment data.--
                  (A) In general.--Beginning not later than 
                October 1, 2018, for PAC providers described in 
                clauses (ii), (iii), and (iv) of subsection 
                (a)(2)(A) and January 1, 2019, for PAC 
                providers described in clause (i) of such 
                subsection, the Secretary shall require PAC 
                providers to submit to the Secretary, under the 
                applicable reporting provisions and through the 
                use of PAC assessment instruments, the 
                standardized patient assessment data described 
                in subparagraph (B). The Secretary shall 
                require such data be submitted with respect to 
                admission and discharge of an individual (and 
                may be submitted more frequently as the 
                Secretary deems appropriate).
                  (B) Standardized patient assessment data 
                described.--For purposes of subparagraph (A), 
                the standardized patient assessment data 
                described in this subparagraph is data required 
                for at least the quality measures described in 
                subsection (c)(1) and that is with respect to 
                the following categories:
                          (i) Functional status, such as 
                        mobility and self care at admission to 
                        a PAC provider and before discharge 
                        from a PAC provider.
                          (ii) Cognitive function, such as 
                        ability to express ideas and to 
                        understand, and mental status, such as 
                        depression and dementia.
                          (iii) Special services, treatments, 
                        and interventions, such as need for 
                        ventilator use, dialysis, chemotherapy, 
                        central line placement, and total 
                        parenteral nutrition.
                          (iv) Medical conditions and co-
                        morbidities, such as diabetes, 
                        congestive heart failure, and pressure 
                        ulcers.
                          (v) Impairments, such as incontinence 
                        and an impaired ability to hear, see, 
                        or swallow.
                          (vi) Other categories deemed 
                        necessary and appropriate by the 
                        Secretary.
          (2) Alignment of claims data with standardized 
        patient assessment data.--To the extent practicable, 
        not later than October 1, 2018, for PAC providers 
        described in clauses (ii), (iii), and (iv) of 
        subsection (a)(2)(A), and January 1, 2019, for PAC 
        providers described in clause (i) of such subsection, 
        the Secretary shall match claims data with assessment 
        data pursuant to this section for purposes of assessing 
        prior service use and concurrent service use, such as 
        antecedent hospital or PAC provider use, and may use 
        such matched data for such other uses as the Secretary 
        determines appropriate.
          (3) Replacement of certain existing data.--In the 
        case of patient assessment data being used with respect 
        to a PAC assessment instrument that duplicates or 
        overlaps with standardized patient assessment data 
        within a category described in paragraph (1), the 
        Secretary shall, as soon as practicable, revise or 
        replace such existing data with the standardized data.
          (4) Clarification.--Standardized patient assessment 
        data submitted pursuant to this subsection shall not be 
        used to require individuals to be provided post-acute 
        care by a specific type of PAC provider in order for 
        such care to be eligible for payment under this title.
  (c) Quality Measures.--
          (1) Requirement for reporting quality measures.--Not 
        later than the specified application date, as 
        applicable to measures and PAC providers, the Secretary 
        shall specify quality measures on which PAC providers 
        are required under the applicable reporting provisions 
        to submit standardized patient assessment data 
        described in subsection (b)(1) and other necessary data 
        specified by the Secretary. Such measures shall be with 
        respect to at least the following domains:
                  (A) Functional status, cognitive function, 
                and changes in function and cognitive function.
                  (B) Skin integrity and changes in skin 
                integrity.
                  (C) Medication reconciliation.
                  (D) Incidence of major falls.
                  (E) Accurately communicating the existence of 
                and providing for the transfer of health 
                information and care preferences of an 
                individual to the individual, family caregiver 
                of the individual, and providers of services 
                furnishing items and services to the 
                individual, when the individual transitions--
                          (i) from a hospital or critical 
                        access hospital to another applicable 
                        setting, including a PAC provider or 
                        the home of the individual; or
                          (ii) from a PAC provider to another 
                        applicable setting, including a 
                        different PAC provider, a hospital, a 
                        critical access hospital, or the home 
                        of the individual.
          (2) Reporting through pac assessment instruments.--
                  (A) In general.--To the extent possible, the 
                Secretary shall require such reporting by a PAC 
                provider of quality measures under paragraph 
                (1) through the use of a PAC assessment 
                instrument and shall modify such PAC assessment 
                instrument as necessary to enable the use of 
                such instrument with respect to such quality 
                measures.
                  (B) Limitation.--The Secretary may not make 
                significant modifications to a PAC assessment 
                instrument more than once per calendar year or 
                fiscal year, as applicable, unless the 
                Secretary publishes in the Federal Register a 
                justification for such significant 
                modification.
          (3) Adjustments.--
                  (A) In general.--The Secretary shall consider 
                applying adjustments to the quality measures 
                under this subsection taking into consideration 
                the studies under section 2(d) of the IMPACT 
                Act of 2014.
                  (B) Risk adjustment.--Such quality measures 
                shall be risk adjusted, as determined 
                appropriate by the Secretary.
  (d) Resource Use and Other Measures.--
          (1) Requirement for resource use and other 
        measures.--Not later than the specified application 
        date, as applicable to measures and PAC providers, the 
        Secretary shall specify resource use and other measures 
        on which PAC providers are required under the 
        applicable reporting provisions to submit any necessary 
        data specified by the Secretary, which may include 
        standardized assessment data in addition to claims 
        data. Such measures shall be with respect to at least 
        the following domains:
                  (A) Resource use measures, including total 
                estimated Medicare spending per beneficiary.
                  (B) Discharge to community.
                  (C) Measures to reflect all-condition risk-
                adjusted potentially preventable hospital 
                readmission rates.
          (2) Aligning methodology adjustments for resource use 
        measures.--
                  (A) Period of time.--With respect to the 
                period of time used for calculating measures 
                under paragraph (1)(A), the Secretary shall, to 
                the extent the Secretary determines 
                appropriate, align resource use with the 
                methodology used for purposes of section 
                1886(o)(2)(B)(ii).
                  (B) Geographic and other adjustments.--The 
                Secretary shall standardize measures with 
                respect to the domain described in paragraph 
                (1)(A) for geographic payment rate differences 
                and payment differentials (and other 
                adjustments, as applicable) consistent with the 
                methodology published in the Federal Register 
                on August 18, 2011 (76 Fed. Reg. 51624 through 
                51626), or any subsequent modifications made to 
                the methodology.
                  (C) Medicare spending per beneficiary.--The 
                Secretary shall adjust, as appropriate, 
                measures with respect to the domain described 
                in paragraph (1)(A) for the factors applied 
                under section 1886(o)(2)(B)(ii).
          (3) Adjustments.--
                  (A) In general.--The Secretary shall consider 
                applying adjustments to the resource use and 
                other measures specified under this subsection 
                with respect to the domain described in 
                paragraph (1)(A), taking into consideration the 
                studies under section 2(d) of the IMPACT Act of 
                2014.
                  (B) Risk adjustment.--Such resource use and 
                other measures shall be risk adjusted, as 
                determined appropriate by the Secretary.
  (e) Measurement Implementation Phases; Selection of Quality 
Measures and Resource Use and Other Measures.--
          (1) Measurement implementation phases.--In the case 
        of quality measures specified under subsection (c)(1) 
        and resource use and other measures specified under 
        subsection (d)(1), the provisions of this section shall 
        be implemented in accordance with the following phases:
                  (A) Initial implementation phase.--The 
                initial implementation phase, with respect to 
                such a measure, shall, in accordance with 
                subsections (c) and (d), as applicable, consist 
                of--
                          (i) measure specification, including 
                        informing the public of the measure's 
                        numerator, denominator, exclusions, and 
                        any other aspects the Secretary 
                        determines necessary;
                          (ii) data collection, including, in 
                        the case of quality measures, requiring 
                        PAC providers to report data elements 
                        needed to calculate such a measure; and
                          (iii) data analysis, including, in 
                        the case of resource use and other 
                        measures, the use of claims data to 
                        calculate such a measure.
                  (B) Second implementation phase.--The second 
                implementation phase, with respect to such a 
                measure, shall consist of the provision of 
                feedback reports to PAC providers, in 
                accordance with subsection (f).
                  (C) Third implementation phase.--The third 
                implementation phase, with respect to such a 
                measure, shall consist of public reporting of 
                PAC providers' performance on such measure in 
                accordance with subsection (g).
          (2) Consensus-based entity.--
                  (A) In general.--Subject to subparagraph (B), 
                each measure specified by the Secretary under 
                this section shall be endorsed by the entity 
                with a contract under section 1890(a).
                  (B) Exception.--In the case of a specified 
                area or medical topic determined appropriate by 
                the Secretary for which a feasible and 
                practical measure has not been endorsed by the 
                entity with a contract under section 1890(a), 
                the Secretary may specify a measure that is not 
                so endorsed as long as due consideration is 
                given to measures that have been endorsed or 
                adopted by a consensus organization identified 
                by the Secretary.
          (3) Treatment of application of pre-rulemaking 
        process (measure applications partnership process).--
                  (A) In general.--Subject to subparagraph (B), 
                the provisions of section 1890A shall apply in 
                the case of a quality measure specified under 
                subsection (c) or a resource use or other 
                measure specified under subsection (d).
                  (B) Exceptions.--
                          (i) Expedited procedures.--For 
                        purposes of satisfying subparagraph 
                        (A), the Secretary may use expedited 
                        procedures, such as ad-hoc reviews, as 
                        necessary, in the case of a quality 
                        measure specified under subsection (c) 
                        or a resource use or other measure 
                        specified in subsection (d) required 
                        with respect to data submissions under 
                        the applicable reporting provisions 
                        during the 1-year period before the 
                        specified application date applicable 
                        to such a measure and provider 
                        involved.
                          (ii) Option to waive provisions.--The 
                        Secretary may waive the application of 
                        the provisions of section 1890A in the 
                        case of a quality measure or resource 
                        use or other measure described in 
                        clause (i), if the application of such 
                        provisions (including through the use 
                        of an expedited procedure described in 
                        such clause) would result in the 
                        inability of the Secretary to satisfy 
                        any deadline specified in this section 
                        with respect to such measure.
  (f) Feedback Reports to PAC Providers.--
          (1) In general.--Beginning one year after the 
        specified application date, as applicable to PAC 
        providers and quality measures and resource use and 
        other measures under this section, the Secretary shall 
        provide confidential feedback reports to such PAC 
        providers on the performance of such providers with 
        respect to such measures required under the applicable 
        provisions.
          (2) Frequency.--To the extent feasible, the Secretary 
        shall provide feedback reports described in paragraph 
        (1) not less frequently than on a quarterly basis. 
        Notwithstanding the previous sentence, with respect to 
        measures described in such paragraph that are reported 
        on an annual basis, the Secretary may provide such 
        feedback reports on an annual basis.
  (g) Public Reporting of PAC Provider Performance.--
          (1) In general.--Subject to the succeeding paragraphs 
        of this subsection, the Secretary shall provide for 
        public reporting of PAC provider performance on quality 
        measures under subsection (c)(1) and the resource use 
        and other measures under subsection (d)(1), including 
        by establishing procedures for making available to the 
        public information regarding the performance of 
        individual PAC providers with respect to such measures.
          (2) Opportunity to review.--The procedures under 
        paragraph (1) shall ensure, including through a process 
        consistent with the process applied under section 
        1886(b)(3)(B)(viii)(VII) for similar purposes, that a 
        PAC provider has the opportunity to review and submit 
        corrections to the data and information that is to be 
        made public with respect to the provider prior to such 
        data being made public.
          (3) Timing.--Such procedures shall provide that the 
        data and information described in paragraph (1), with 
        respect to a measure and PAC provider, is made publicly 
        available beginning not later than two years after the 
        specified application date applicable to such a measure 
        and provider.
          (4) Coordination with existing programs.--Such 
        procedures shall provide that data and information 
        described in paragraph (1) with respect to quality 
        measures and resource use and other measures under 
        subsections (c)(1) and (d)(1) shall be made publicly 
        available consistent with the following provisions:
                  (A) In the case of home health agencies, 
                section 1895(b)(3)(B)(v)(III).
                  (B) In the case of skilled nursing 
                facilities, sections 1819(i) and 1919(i).
                  (C) In the case of inpatient rehabilitation 
                facilities, section 1886(j)(7)(E).
                  (D) In the case of long-term care hospitals, 
                section 1886(m)(5)(E).
  (h) Removing, Suspending, or Adding Measures.--
          (1) In general.--The Secretary may remove, suspend, 
        or add a quality measure or resource use or other 
        measure described in subsection (c)(1) or (d)(1), so 
        long as, subject to paragraph (2), the Secretary 
        publishes in the Federal Register (with a notice and 
        comment period) a justification for such removal, 
        suspension, or addition.
          (2) Exception.--In the case of such a quality measure 
        or resource use or other measure for which there is a 
        reason to believe that the continued collection of such 
        measure raises potential safety concerns or would cause 
        other unintended consequences, the Secretary may 
        promptly suspend or remove such measure and satisfy 
        paragraph (1) by publishing in the Federal Register a 
        justification for such suspension or removal in the 
        next rulemaking cycle following such suspension or 
        removal.
  (i) Use of Standardized Assessment Data, Quality Measures, 
and Resource Use and Other Measures to Inform Discharge 
Planning and Incorporate Patient Preference.--
          (1) In general.--Not later than January 1, 2016, and 
        periodically thereafter (but not less frequently than 
        once every 5 years), the Secretary shall promulgate 
        regulations to modify conditions of participation and 
        subsequent interpretive guidance applicable to PAC 
        providers, hospitals, and critical access hospitals. 
        Such regulations and interpretive guidance shall 
        require such providers to take into account quality, 
        resource use, and other measures under the applicable 
        reporting provisions (which, as available, shall 
        include measures specified under subsections (c) and 
        (d), and other relevant measures) in the discharge 
        planning process. Specifically, such regulations and 
        interpretive guidance shall address the settings to 
        which a patient may be discharged in order to assist 
        subsection (d) hospitals, critical access hospitals, 
        hospitals described in section 1886(d)(1)(B)(v), PAC 
        providers, patients, and families of such patients with 
        discharge planning from inpatient settings, including 
        such hospitals, and from PAC provider settings. In 
        addition, such regulations and interpretive guidance 
        shall include procedures to address--
                  (A) treatment preferences of patients; and
                  (B) goals of care of patients.
          (2) Discharge planning.--All requirements applied 
        pursuant to paragraph (1) shall be used to help inform 
        and mandate the discharge planning process.
          (3) Clarification.--Such regulations shall not 
        require an individual to be provided post-acute care by 
        a specific type of PAC provider in order for such care 
        to be eligible for payment under this title.
  (j) Stakeholder Input.--Before the initial rulemaking process 
to implement this section, the Secretary shall allow for 
stakeholder input, such as through town halls, open door 
forums, and mail-box submissions.
  (k) Funding.--For purposes of carrying out this section, the 
Secretary shall provide for the transfer to the Centers for 
Medicare & Medicaid Services Program Management Account, from 
the Federal Hospital Insurance Trust Fund under section 1817 
and the Federal Supplementary Medical Insurance Trust Fund 
under section 1841, in such proportion as the Secretary 
determines appropriate, of $130,000,000. Fifty percent of such 
amount shall be available on the date of the enactment of this 
section and fifty percent of such amount shall be equally 
proportioned for each of fiscal years 2015 through 2019. Such 
sums shall remain available until expended.
  (l) Limitation.--There shall be no administrative or judicial 
review under sections 1869 and 1878 or otherwise of the 
specification of standardized patient assessment data required, 
the determination of measures, and the systems to report such 
standardized data under this section.
  (m) Non-application of Paperwork Reduction Act.--Chapter 35 
of title 44, United States Code (commonly referred to as the 
``Paperwork Reduction Act of 1995'') shall not apply to this 
section and the sections referenced in subsection (a)(2)(B) 
that require modification in order to achieve the 
standardization of patient assessment data.

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) provide that it shall be in effect in all 
        political subdivisions of the State, and, if 
        administered by them, be mandatory upon them;
          (2) provide for financial participation by the State 
        equal to not less than 40 per centum of the non-Federal 
        share of the expenditures under the plan with respect 
        to which payments under section 1903 are authorized by 
        this title; and, effective July 1, 1969, provide for 
        financial participation by the State equal to all of 
        such non-Federal share or provide for distribution of 
        funds from Federal or State sources, for carrying out 
        the State plan, on an equalization or other basis which 
        will assure that the lack of adequate funds from local 
        sources will not result in lowering the amount, 
        duration, scope, or quality of care and services 
        available under the plan;
          (3) provide for granting an opportunity for a fair 
        hearing before the State agency to any individual whose 
        claim for medical assistance under the plan is denied 
        or is not acted upon with reasonable promptness;
          (4) provide (A) such methods of administration 
        (including methods relating to the establishment and 
        maintenance of personnel standards on a merit basis, 
        except that the Secretary shall exercise no authority 
        with respect to the selection, tenure of office, and 
        compensation of any individual employed in accordance 
        with such methods, and including provision for 
        utilization of professional medical personnel in the 
        administration and, where administered locally, 
        supervision of administration of the plan) as are found 
        by the Secretary to be necessary for the proper and 
        efficient operation of the plan, (B) for the training 
        and effective use of paid subprofessional staff, with 
        particular emphasis on the full-time or part-time 
        employment of recipients and other persons of low 
        income, as community service aides, in the 
        administration of the plan and for the use of nonpaid 
        or partially paid volunteers in a social service 
        volunteer program in providing services to applicants 
        and recipients and in assisting any advisory committees 
        established by the State agency, (C) that each State or 
        local officer, employee, or independent contractor who 
        is responsible for the expenditure of substantial 
        amounts of funds under the State plan, each individual 
        who formerly was such an officer, employee, or 
        contractor, and each partner of such an officer, 
        employee, or contractor shall be prohibited from 
        committing any act, in relation to any activity under 
        the plan, the commission of which, in connection with 
        any activity concerning the United States Government, 
        by an officer or employee of the United States 
        Government, an individual who was such an officer or 
        employee, or a partner of such an officer or employee 
        is prohibited by section 207 or 208 of title 18, United 
        States Code, and (D) that each State or local officer, 
        employee, or independent contractor who is responsible 
        for selecting, awarding, or otherwise obtaining items 
        and services under the State plan shall be subject to 
        safeguards against conflicts of interest that are at 
        least as stringent as the safeguards that apply under 
        section 27 of the Office of Federal Procurement Policy 
        Act (41 U.S.C. 423) to persons described in subsection 
        (a)(2) of such section of that Act;
          (5) either provide for the establishment or 
        designation of a single State agency to administer or 
        to supervise the administration of the plan; or provide 
        for the establishment or designation of a single State 
        agency to administer or to supervise the administration 
        of the plan, except that the determination of 
        eligibility for medical assistance under the plan shall 
        be made by the State or local agency administering the 
        State plan approved under title I or XVI (insofar as it 
        relates to the aged) if the State is eligible to 
        participate in the State plan program established under 
        title XVI, or by the agency or agencies administering 
        the supplemental security income program established 
        under title XVI or the State plan approved under part A 
        of title IV if the State is not eligible to participate 
        in the State plan program established under title XVI;
          (6) provide that the State agency will make such 
        reports, in such form and containing such information, 
        as the Secretary may from time to time require, and 
        comply with such provisions as the Secretary may from 
        time to time find necessary to assure the correctness 
        and verification of such reports;
          (7) provide--
                  (A) safeguards which restrict the use or 
                disclosure of information concerning applicants 
                and recipients to purposes directly connected 
                with--
                          (i) the administration of the plan; 
                        and
                          (ii) the exchange of information 
                        necessary to certify or verify the 
                        certification of eligibility of 
                        children for free or reduced price 
                        breakfasts under the Child Nutrition 
                        Act of 1966 and free or reduced price 
                        lunches under the Richard B. Russell 
                        National School Lunch Act, in 
                        accordance with section 9(b) of that 
                        Act, using data standards and formats 
                        established by the State agency; and
                  (B) that, notwithstanding the Express Lane 
                option under subsection (e)(13), the State may 
                enter into an agreement with the State agency 
                administering the school lunch program 
                established under the Richard B. Russell 
                National School Lunch Act under which the State 
                shall establish procedures to ensure that--
                          (i) a child receiving medical 
                        assistance under the State plan under 
                        this title whose family income does not 
                        exceed 133 percent of the poverty line 
                        (as defined in section 673(2) of the 
                        Community Services Block Grant Act, 
                        including any revision required by such 
                        section), as determined without regard 
                        to any expense, block, or other income 
                        disregard, applicable to a family of 
                        the size involved, may be certified as 
                        eligible for free lunches under the 
                        Richard B. Russell National School 
                        Lunch Act and free breakfasts under the 
                        Child Nutrition Act of 1966 without 
                        further application; and
                          (ii) the State agencies responsible 
                        for administering the State plan under 
                        this title, and for carrying out the 
                        school lunch program established under 
                        the Richard B. Russell National School 
                        Lunch Act (42 U.S.C. 1751 et seq.) or 
                        the school breakfast program 
                        established by section 4 of the Child 
                        Nutrition Act of 1966 (42 U.S.C. 1773), 
                        cooperate in carrying out paragraphs 
                        (3)(F) and (15) of section 9(b) of that 
                        Act;
          (8) provide that all individuals wishing to make 
        application for medical assistance under the plan shall 
        have opportunity to do so, and that such assistance 
        shall be furnished with reasonable promptness to all 
        eligible individuals;
          (9) provide--
                  (A) that the State health agency, or other 
                appropriate State medical agency (whichever is 
                utilized by the Secretary for the purpose 
                specified in the first sentence of section 
                1864(a)), shall be responsible for establishing 
                and maintaining health standards for private or 
                public institutions in which recipients of 
                medical assistance under the plan may receive 
                care or services,
                  (B) for the establishment or designation of a 
                State authority or authorities which shall be 
                responsible for establishing and maintaining 
                standards, other than those relating to health, 
                for such institutions,
                  (C) that any laboratory services paid for 
                under such plan must be provided by a 
                laboratory which meets the applicable 
                requirements of section 1861(e)(9) or 
                paragraphs (16) and (17) of section 1861(s), 
                or, in the case of a laboratory which is in a 
                rural health clinic, of section 1861(aa)(2)(G), 
                and
                  (D) that the State maintain a consumer-
                oriented website providing useful information 
                to consumers regarding all skilled nursing 
                facilities and all nursing facilities in the 
                State, including for each facility, Form 2567 
                State inspection reports (or a successor form), 
                complaint investigation reports, the facility's 
                plan of correction, and such other information 
                that the State or the Secretary considers 
                useful in assisting the public to assess the 
                quality of long term care options and the 
                quality of care provided by individual 
                facilities;
          (10) provide--
                  (A) for making medical assistance available, 
                including at least the care and services listed 
                in paragraphs (1) through (5), (17), (21), and 
                (28) of section 1905(a), to--
                          (i) all individuals--
                                  (I) who are receiving aid or 
                                assistance under any plan of 
                                the State approved under title 
                                I, X, XIV, or XVI, or part A or 
                                part E of title IV (including 
                                individuals eligible under this 
                                title by reason of section 
                                402(a)(37), 406(h), or 473(b), 
                                or considered by the State to 
                                be receiving such aid as 
                                authorized under section 
                                482(e)(6)\2\),
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    \2\So in law. Section 108(e) of the Personal Responsibility and 
Work Opportunity Reconciliation Act of 1996 (P.L. 104-193) repealed 
sections 481 through 487 of the Social Security Act.
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                                  (II)(aa) with respect to whom 
                                supplemental security income 
                                benefits are being paid under 
                                title XVI (or were being paid 
                                as of the date of the enactment 
                                of section 211(a) of the 
                                Personal Responsibility and 
                                Work Opportunity Reconciliation 
                                Act of 1996 (P.L. 104-193) and 
                                would continue to be paid but 
                                for the enactment of that 
                                section), (bb) who are 
                                qualified severely impaired 
                                individuals (as defined in 
                                section 1905(q)), or (cc) who 
                                are under 21 years of age and 
                                with respect to whom 
                                supplemental security income 
                                benefits would be paid under 
                                title XVI if subparagraphs (A) 
                                and (B) of section 1611(c)(7) 
                                were applied without regard to 
                                the phrase ``the first day of 
                                the month following'',
                                  (III) who are qualified 
                                pregnant women or children as 
                                defined in section 1905(n),
                                  (IV) who are described in 
                                subparagraph (A) or (B) of 
                                subsection (l)(1) and whose 
                                family income does not exceed 
                                the minimum income level the 
                                State is required to establish 
                                under subsection (l)(2)(A) for 
                                such a family;
                                  (V) who are qualified family 
                                members as defined in section 
                                1905(m)(1),
                                  (VI) who are described in 
                                subparagraph (C) of subsection 
                                (l)(1) and whose family income 
                                does not exceed the income 
                                level the State is required to 
                                establish under subsection 
                                (l)(2)(B) for such a family,
                                  (VII) who are described in 
                                subparagraph (D) of subsection 
                                (l)(1) and whose family income 
                                does not exceed the income 
                                level the State is required to 
                                establish under subsection 
                                (l)(2)(C) for such a family;
                                  (VIII) beginning January 1, 
                                2014, who are under 65 years of 
                                age, not pregnant, not entitled 
                                to, or enrolled for, benefits 
                                under part A of title XVIII, or 
                                enrolled for benefits under 
                                part B of title XVIII, and are 
                                not described in a previous 
                                subclause of this clause, and 
                                whose income (as determined 
                                under subsection (e)(14)) does 
                                not exceed 133 percent of the 
                                poverty line (as defined in 
                                section 2110(c)(5)) applicable 
                                to a family of the size 
                                involved, subject to subsection 
                                (k); or
                                  (IX) who--
                                          (aa) are under 26 
                                        years of age;
                                          (bb) are not 
                                        described in or 
                                        enrolled under any of 
                                        subclauses (I) through 
                                        (VII) of this clause or 
                                        are described in any of 
                                        such subclauses but 
                                        have income that 
                                        exceeds the level of 
                                        income applicable under 
                                        the State plan for 
                                        eligibility to enroll 
                                        for medical assistance 
                                        under such subclause;
                                          (cc) were in foster 
                                        care under the 
                                        responsibility of the 
                                        State on the date of 
                                        attaining 18 years of 
                                        age or such higher age 
                                        as the State has 
                                        elected under section 
                                        475(8)(B)(iii); and
                                          (dd) were enrolled in 
                                        the State plan under 
                                        this title or under a 
                                        waiver of the plan 
                                        while in such foster 
                                        care;
                          (ii) at the option of the State, to 
                        any group or groups of individuals 
                        described in section 1905(a) (or, in 
                        the case of individuals described in 
                        section 1905(a)(i), to any reasonable 
                        categories of such individuals) who are 
                        not individuals described in clause (i) 
                        of this subparagraph but--
                                  (I) who meet the income and 
                                resources requirements of the 
                                appropriate State plan 
                                described in clause (i) or the 
                                supplemental security income 
                                program (as the case may be),
                                  (II) who would meet the 
                                income and resources 
                                requirements of the appropriate 
                                State plan described in clause 
                                (i) if their work-related child 
                                care costs were paid from their 
                                earnings rather than by a State 
                                agency as a service 
                                expenditure,
                                  (III) who would be eligible 
                                to receive aid under the 
                                appropriate State plan 
                                described in clause (i) if 
                                coverage under such plan was as 
                                broad as allowed under Federal 
                                law,
                                  (IV) with respect to whom 
                                there is being paid, or who are 
                                eligible, or would be eligible 
                                if they were not in a medical 
                                institution, to have paid with 
                                respect to them, aid or 
                                assistance under the 
                                appropriate State plan 
                                described in clause (i), 
                                supplemental security income 
                                benefits under title XVI, or a 
                                State supplementary payment;
                                  (V) who are in a medical 
                                institution for a period of not 
                                less than 30 consecutive days 
                                (with eligibility by reason of 
                                this subclause beginning on the 
                                first day of such period), who 
                                meet the resource requirements 
                                of the appropriate State plan 
                                described in clause (i) or the 
                                supplemental security income 
                                program, and whose income does 
                                not exceed a separate income 
                                standard established by the 
                                State which is consistent with 
                                the limit established under 
                                section 1903(f)(4)(C),
                                  (VI) who would be eligible 
                                under the State plan under this 
                                title if they were in a medical 
                                institution, with respect to 
                                whom there has been a 
                                determination that but for the 
                                provision of home or community-
                                based services described in 
                                subsection (c), (d), or (e) of 
                                section 1915 they would require 
                                the level of care provided in a 
                                hospital, nursing facility or 
                                intermediate care facility for 
                                the mentally retarded the cost 
                                of which could be reimbursed 
                                under the State plan, and who 
                                will receive home or community-
                                based services pursuant to a 
                                waiver granted by the Secretary 
                                under subsection (c), (d), or 
                                (e) of section 1915,
                                  (VII) who would be eligible 
                                under the State plan under this 
                                title if they were in a medical 
                                institution, who are terminally 
                                ill, and who will receive 
                                hospice care pursuant to a 
                                voluntary election described in 
                                section 1905(o);
                                  (VIII) who is a child 
                                described in section 
                                1905(a)(i)--
                                          (aa) for whom there 
                                        is in effect an 
                                        adoption assistance 
                                        agreement (other than 
                                        an agreement under part 
                                        E of title IV) between 
                                        the State and an 
                                        adoptive parent or 
                                        parents,
                                          (bb) who the State 
                                        agency responsible for 
                                        adoption assistance has 
                                        determined cannot be 
                                        placed with adoptive 
                                        parents without medical 
                                        assistance because such 
                                        child has special needs 
                                        for medical or 
                                        rehabilitative care, 
                                        and
                                          (cc) who was eligible 
                                        for medical assistance 
                                        under the State plan 
                                        prior to the adoption 
                                        assistance agreement 
                                        being entered into, or 
                                        who would have been 
                                        eligible for medical 
                                        assistance at such time 
                                        if the eligibility 
                                        standards and 
                                        methodologies of the 
                                        State's foster care 
                                        program under part E of 
                                        title IV were applied 
                                        rather than the 
                                        eligibility standards 
                                        and methodologies of 
                                        the State's aid to 
                                        families with dependent 
                                        children program under 
                                        part A of title IV;
                                  (IX) who are described in 
                                subsection (l)(1) and are not 
                                described in clause (i)(IV), 
                                clause (i)(VI), or clause 
                                (i)(VII);
                                  (X) who are described in 
                                subsection (m)(1);
                                  (XI) who receive only an 
                                optional State supplementary 
                                payment based on need and paid 
                                on a regular basis, equal to 
                                the difference between the 
                                individual's countable income 
                                and the income standard used to 
                                determine eligibility for such 
                                supplementary payment (with 
                                countable income being the 
                                income remaining after 
                                deductions as established by 
                                the State pursuant to standards 
                                that may be more restrictive 
                                than the standards for 
                                supplementary security income 
                                benefits under title XVI), 
                                which are available to all 
                                individuals in the State (but 
                                which may be based on different 
                                income standards by political 
                                subdivision according to cost 
                                of living differences), and 
                                which are paid by a State that 
                                does not have an agreement with 
                                the Commissioner of Social 
                                Security under section 1616 or 
                                1634;
                                  (XII) who are described in 
                                subsection (z)(1) (relating to 
                                certain TB-infected 
                                individuals);
                                  (XIII) who are in families 
                                whose income is less than 250 
                                percent of the income official 
                                poverty line (as defined by the 
                                Office of Management and 
                                Budget, and revised annually in 
                                accordance with section 673(2) 
                                of the Omnibus Budget 
                                Reconciliation Act of 1981) 
                                applicable to a family of the 
                                size involved, and who but for 
                                earnings in excess of the limit 
                                established under section 
                                1905(q)(2)(B), would be 
                                considered to be receiving 
                                supplemental security income 
                                (subject, notwithstanding 
                                section 1916, to payment of 
                                premiums or other cost-sharing 
                                charges (set on a sliding scale 
                                based on income) that the State 
                                may determine);
                                  (XIV) who are optional 
                                targeted low-income children 
                                described in section 
                                1905(u)(2)(B);
                                  (XV) who, but for earnings in 
                                excess of the limit established 
                                under section 1905(q)(2)(B), 
                                would be considered to be 
                                receiving supplemental security 
                                income, who is at least 16, but 
                                less than 65, years of age, and 
                                whose assets, resources, and 
                                earned or unearned income (or 
                                both) do not exceed such 
                                limitations (if any) as the 
                                State may establish;
                                  (XVI) who are employed 
                                individuals with a medically 
                                improved disability described 
                                in section 1905(v)(1) and whose 
                                assets, resources, and earned 
                                or unearned income (or both) do 
                                not exceed such limitations (if 
                                any) as the State may 
                                establish, but only if the 
                                State provides medical 
                                assistance to individuals 
                                described in subclause (XV);
                                  (XVII) who are independent 
                                foster care adolescents (as 
                                defined in section 1905(w)(1)), 
                                or who are within any 
                                reasonable categories of such 
                                adolescents specified by the 
                                State;
                                  (XVIII) who are described in 
                                subsection (aa) (relating to 
                                certain breast or cervical 
                                cancer patients);
                                  (XIX) who are disabled 
                                children described in 
                                subsection (cc)(1);
                                  (XX) beginning January 1, 
                                2014, who are under 65 years of 
                                age and are not described in or 
                                enrolled under a previous 
                                subclause of this clause, and 
                                whose income (as determined 
                                under subsection (e)(14)) 
                                exceeds 133 percent of the 
                                poverty line (as defined in 
                                section 2110(c)(5)) applicable 
                                to a family of the size 
                                involved but does not exceed 
                                the highest income eligibility 
                                level established under the 
                                State plan or under a waiver of 
                                the plan, subject to subsection 
                                (hh);
                                  (XXI) who are described in 
                                subsection (ii) (relating to 
                                individuals who meet certain 
                                income standards); or
                                  (XXII) who are eligible for 
                                home and community-based 
                                services under needs-based 
                                criteria established under 
                                paragraph (1)(A) of section 
                                1915(i), or who are eligible 
                                for home and community-based 
                                services under paragraph (6) of 
                                such section, and who will 
                                receive home and community-
                                based services pursuant to a 
                                State plan amendment under such 
                                subsection;
                  (B) that the medical assistance made 
                available to any individual described in 
                subparagraph (A)--
                          (i) shall not be less in amount, 
                        duration, or scope than the medical 
                        assistance made available to any other 
                        such individual, and
                          (ii) shall not be less in amount, 
                        duration, or scope than the medical 
                        assistance made available to 
                        individuals not described in 
                        subparagraph (A);
                  (C) that if medical assistance is included 
                for any group of individuals described in 
                section 1905(a) who are not described in 
                subparagraph (A) or (E), then--
                          (i) the plan must include a 
                        description of (I) the criteria for 
                        determining eligibility of individuals 
                        in the group for such medical 
                        assistance, (II) the amount, duration, 
                        and scope of medical assistance made 
                        available to individuals in the group, 
                        and (III) the single standard to be 
                        employed in determining income and 
                        resource eligibility for all such 
                        groups, and the methodology to be 
                        employed in determining such 
                        eligibility, which shall be no more 
                        restrictive than the methodology which 
                        would be employed under the 
                        supplemental security income program in 
                        the case of groups consisting of aged, 
                        blind, or disabled individuals in a 
                        State in which such program is in 
                        effect, and which shall be no more 
                        restrictive than the methodology which 
                        would be employed under the appropriate 
                        State plan (described in subparagraph 
                        (A)(i)) to which such group is most 
                        closely categorically related in the 
                        case of other groups;
                          (ii) the plan must make available 
                        medical assistance--
                                  (I) to individuals under the 
                                age of 18 who (but for income 
                                and resources) would be 
                                eligible for medical assistance 
                                as an individual described in 
                                subparagraph (A)(i), and
                                  (II) to pregnant women, 
                                during the course of their 
                                pregnancy, who (but for income 
                                and resources) would be 
                                eligible for medical assistance 
                                as an individual described in 
                                subparagraph (A);
                          (iii) such medical assistance must 
                        include (I) with respect to children 
                        under 18 and individuals entitled to 
                        institutional services, ambulatory 
                        services, and (II) with respect to 
                        pregnant women, prenatal care and 
                        delivery services; and
                          (iv) if such medical assistance 
                        includes services in institutions for 
                        mental diseases or in an intermediate 
                        care facility for the mentally retarded 
                        (or both) for any such group, it also 
                        must include for all groups covered at 
                        least the care and services listed in 
                        paragraphs (1) through (5) and (17) of 
                        section 1905(a) or the care and 
                        services listed in any 7 of the 
                        paragraphs numbered (1) through (24) of 
                        such section;
                  (D) for the inclusion of home health services 
                for any individual who, under the State plan, 
                is entitled to nursing facility services;
                  (E)(i) for making medical assistance 
                available for medicare cost-sharing (as defined 
                in section 1905(p)(3)) for qualified medicare 
                beneficiaries described in section 1905(p)(1);
                  (ii) for making medical assistance available 
                for payment of medicare cost-sharing described 
                in section 1905(p)(3)(A)(i) for qualified 
                disabled and working individuals described in 
                section 1905(s);
                  (iii) for making medical assistance available 
                for medicare cost sharing described in section 
                1905(p)(3)(A)(ii) subject to section 
                1905(p)(4), for individuals who would be 
                qualified medicare beneficiaries described in 
                section 1905(p)(1) but for the fact that their 
                income exceeds the income level established by 
                the State under section 1905(p)(2) but is less 
                than 110 percent in 1993 and 1994, and 120 
                percent in 1995 and years thereafter of the 
                official poverty line (referred to in such 
                section) for a family of the size involved; and
                  (iv) subject to sections 1933 and 1905(p)(4), 
                for making medical assistance available for 
                medicare cost-sharing described in section 
                1905(p)(3)(A)(ii) for individuals who would be 
                qualified medicare beneficiaries described in 
                section 1905(p)(1) but for the fact that their 
                income exceeds the income level established by 
                the State under section 1905(p)(2) and is at 
                least 120 percent, but less than 135 percent, 
                of the official poverty line (referred to in 
                such section) for a family of the size involved 
                and who are not otherwise eligible for medical 
                assistance under the State plan;
                  (F) at the option of a State, for making 
                medical assistance available for COBRA premiums 
                (as defined in subsection (u)(2)) for qualified 
                COBRA continuation beneficiaries described in 
                section 1902(u)(1); and
                  (G) that, in applying eligibility criteria of 
                the supplemental security income program under 
                title XVI for purposes of determining 
                eligibility for medical assistance under the 
                State plan of an individual who is not 
                receiving supplemental security income, the 
                State will disregard the provisions of 
                subsections (c) and (e) of section 1613;
        except that (I) the making available of the services 
        described in paragraph (4), (14), or (16) of section 
        1905(a) to individuals meeting the age requirements 
        prescribed therein shall not, by reason of this 
        paragraph (10), require the making available of any 
        such services, or the making available of such services 
        of the same amount, duration, and scope, to individuals 
        of any other ages, (II) the making available of 
        supplementary medical insurance benefits under part B 
        of title XVIII to individuals eligible therefor (either 
        pursuant to an agreement entered into under section 
        1843 or by reason of the payment of premiums under such 
        title by the State agency on behalf of such 
        individuals), or provision for meeting part or all of 
        the cost of deductibles, cost sharing, or similar 
        charges under part B of title XVIII for individuals 
        eligible for benefits under such part, shall not, by 
        reason of this paragraph (10), require the making 
        available of any such benefits, or the making available 
        of services of the same amount, duration, and scope, to 
        any other individuals, (III) the making available of 
        medical assistance equal in amount, duration, and scope 
        to the medical assistance made available to individuals 
        described in clause (A) to any classification of 
        individuals approved by the Secretary with respect to 
        whom there is being paid, or who are eligible, or would 
        be eligible if they were not in a medical institution, 
        to have paid with respect to them, a State 
        supplementary payment shall not, by reason of this 
        paragraph (10), require the making available of any 
        such assistance, or the making available of such 
        assistance of the same amount, duration, and scope, to 
        any other individuals not described in clause (A), (IV) 
        the imposition of a deductible, cost sharing, or 
        similar charge for any item or service furnished to an 
        individual not eligible for the exemption under section 
        1916(a)(2) or (b)(2) shall not require the imposition 
        of a deductible, cost sharing, or similar charge for 
        the same item or service furnished to an individual who 
        is eligible for such exemption, (V) the making 
        available to pregnant women covered under the plan of 
        services relating to pregnancy (including prenatal, 
        delivery, and postpartum services) or to any other 
        condition which may complicate pregnancy shall not, by 
        reason of this paragraph (10), require the making 
        available of such services, or the making available of 
        such services of the same amount, duration, and scope, 
        to any other individuals, provided such services are 
        made available (in the same amount, duration, and 
        scope) to all pregnant women covered under the State 
        plan, (VI) with respect to the making available of 
        medical assistance for hospice care to terminally ill 
        individuals who have made a voluntary election 
        described in section 1905(o) to receive hospice care 
        instead of medical assistance for certain other 
        services, such assistance may not be made available in 
        an amount, duration, or scope less than that provided 
        under title XVIII, and the making available of such 
        assistance shall not, by reason of this paragraph (10), 
        require the making available of medical assistance for 
        hospice care to other individuals or the making 
        available of medical assistance for services waived by 
        such terminally ill individuals, (VII) the medical 
        assistance made available to an individual described in 
        subsection (l)(1)(A) who is eligible for medical 
        assistance only because of subparagraph (A)(i)(IV) or 
        (A)(ii)(IX) shall be limited to medical assistance for 
        services related to pregnancy (including prenatal, 
        delivery, postpartum, and family planning services) and 
        to other conditions which may complicate pregnancy, 
        (VIII) the medical assistance made available to a 
        qualified medicare beneficiary described in section 
        1905(p)(1) who is only entitled to medical assistance 
        because the individual is such a beneficiary shall be 
        limited to medical assistance for medicare cost-sharing 
        (described in section 1905(p)(3)), subject to the 
        provisions of subsection (n) and section 1916(b), (IX) 
        the making available of respiratory care services in 
        accordance with subsection (e)(9) shall not, by reason 
        of this paragraph (10), require the making available of 
        such services, or the making available of such services 
        of the same amount, duration, and scope, to any 
        individuals not included under subsection (e)(9)(A), 
        provided such services are made available (in the same 
        amount, duration, and scope) to all individuals 
        described in such subsection, (X) if the plan provides 
        for any fixed durational limit on medical assistance 
        for inpatient hospital services (whether or not such a 
        limit varies by medical condition or diagnosis), the 
        plan must establish exceptions to such a limit for 
        medically necessary inpatient hospital services 
        furnished with respect to individuals under one year of 
        age in a hospital defined under the State plan, 
        pursuant to section 1923(a)(1)(A), as a 
        disproportionate share hospital and subparagraph (B) 
        (relating to comparability) shall not be construed as 
        requiring such an exception for other individuals, 
        services, or hospitals, (XI) the making available of 
        medical assistance to cover the costs of premiums, 
        deductibles, coinsurance, and other cost-sharing 
        obligations for certain individuals for private health 
        coverage as described in section 1906 shall not, by 
        reason of paragraph (10), require the making available 
        of any such benefits or the making available of 
        services of the same amount, duration, and scope of 
        such private coverage to any other individuals, (XII) 
        the medical assistance made available to an individual 
        described in subsection (u)(1) who is eligible for 
        medical assistance only because of subparagraph (F) 
        shall be limited to medical assistance for COBRA 
        continuation premiums (as defined in subsection 
        (u)(2)), (XIII) the medical assistance made available 
        to an individual described in subsection (z)(1) who is 
        eligible for medical assistance only because of 
        subparagraph (A)(ii)(XII) shall be limited to medical 
        assistance for TB-related services (described in 
        subsection (z)(2)), (XIV) the medical assistance made 
        available to an individual described in subsection (aa) 
        who is eligible for medical assistance only because of 
        subparagraph (A)(10)(ii)(XVIII) shall be limited to 
        medical assistance provided during the period in which 
        such an individual requires treatment for breast or 
        cervical cancer (XV)\3\ the medical assistance made 
        available to an individual described in subparagraph 
        (A)(i)(VIII) shall be limited to medical assistance 
        described in subsection (k)(1), (XVI) the medical 
        assistance made available to an individual described in 
        subsection (ii) shall be limited to family planning 
        services and supplies described in section 
        1905(a)(4)(C) including medical diagnosis and treatment 
        services that are provided pursuant to a family 
        planning service in a family planning setting and 
        (XVII) if an individual is described in subclause (IX) 
        of subparagraph (A)(i) and is also described in 
        subclause (VIII) of that subparagraph, the medical 
        assistance shall be made available to the individual 
        through subclause (IX) instead of through subclause 
        (VIII);
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    \3\So in law. There probably should be a comma preceding ``(XV)''. 
See amendments made by sections 2001(a)(5)(A) and 2303(a)(3)(A) of 
Public Law 111-148. The latter amendment does not execute because it 
attempts to strike ``and (XV)'' and insert ``(XV)'' but the word 
``and'' does not appear preceding ``(XV)'' (as amended by the former 
amendment). Also, section 10201(a)(2) of such Public Law attempts to 
strike ``and (XV)'' and insert ``(XV)'' which could not be executed.
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          (11)(A) provide for entering into cooperative 
        arrangements with the State agencies responsible for 
        administering or supervising the administration of 
        health services and vocational rehabilitation services 
        in the State looking toward maximum utilization of such 
        services in the provision of medical assistance under 
        the plan, (B) provide, to the extent prescribed by the 
        Secretary, for entering into agreements, with any 
        agency, institution, or organization receiving payments 
        under (or through an allotment under) title V, (i) 
        providing for utilizing such agency, institution, or 
        organization in furnishing care and services which are 
        available under such title or allotment and which are 
        included in the State plan approved under this section 
        (ii) making such provision as may be appropriate for 
        reimbursing such agency, institution, or organization 
        for the cost of any such care and services furnished 
        any individual for which payment would otherwise be 
        made to the State with respect to the individual under 
        section 1903, and (iii) providing for coordination of 
        information and education on pediatric vaccinations and 
        delivery of immunization services, and (C) provide for 
        coordination of the operations under this title, 
        including the provision of information and education on 
        pediatric vaccinations and the delivery of immunization 
        services, with the State's operations under the special 
        supplemental nutrition program for women, infants, and 
        children under section 17 of the Child Nutrition Act of 
        1966;
          (12) provide that, in determining whether an 
        individual is blind, there shall be an examination by a 
        physician skilled in the diseases of the eye or by an 
        optometrist, whichever the individual may select;
          (13) provide--
                  (A) for a public process for determination of 
                rates of payment under the plan for hospital 
                services, nursing facility services, and 
                services of intermediate care facilities for 
                the mentally retarded under which--
                          (i) proposed rates, the methodologies 
                        underlying the establishment of such 
                        rates, and justifications for the 
                        proposed rates are published,
                          (ii) providers, beneficiaries and 
                        their representatives, and other 
                        concerned State residents are given a 
                        reasonable opportunity for review and 
                        comment on the proposed rates, 
                        methodologies, and justifications,
                          (iii) final rates, the methodologies 
                        underlying the establishment of such 
                        rates, and justifications for such 
                        final rates are published, and
                          (iv) in the case of hospitals, such 
                        rates take into account (in a manner 
                        consistent with section 1923) the 
                        situation of hospitals which serve a 
                        disproportionate number of low-income 
                        patients with special needs;
                  (B) for payment for hospice care in amounts 
                no lower than the amounts, using the same 
                methodology, used under part A of title XVIII 
                and for payment of amounts under section 
                1905(o)(3); except that in the case of hospice 
                care which is furnished to an individual who is 
                a resident of a nursing facility or 
                intermediate care facility for the mentally 
                retarded, and who would be eligible under the 
                plan for nursing facility services or services 
                in an intermediate care facility for the 
                mentally retarded if he had not elected to 
                receive hospice care, there shall be paid an 
                additional amount, to take into account the 
                room and board furnished by the facility, equal 
                to at least 95 percent of the rate that would 
                have been paid by the State under the plan for 
                facility services in that facility for that 
                individual; and
                  (C) payment for primary care services (as 
                defined in subsection (jj)) furnished in 2013 
                and 2014 by a physician with a primary 
                specialty designation of family medicine, 
                general internal medicine, or pediatric 
                medicine at a rate not less than 100 percent of 
                the payment rate that applies to such services 
                and physician under part B of title XVIII (or, 
                if greater, the payment rate that would be 
                applicable under such part if the conversion 
                factor under section 1848(d) for the year 
                involved were the conversion factor under such 
                section for 2009);
          (14) provide that enrollment fees, premiums, or 
        similar charges, and deductions, cost sharing, or 
        similar charges, may be imposed only as provided in 
        section 1916;
          (15) provide for payment for services described in 
        clause (B) or (C) of section 1905(a)(2) under the plan 
        in accordance with subsection (bb);
          (16) provide for inclusion, to the extent required by 
        regulations prescribed by the Secretary, of provisions 
        (conforming to such regulations) with respect to the 
        furnishing of medical assistance under the plan to 
        individuals who are residents of the State but are 
        absent therefrom;
          (17) except as provided in subsections (e)(14), 
        (e)(14),\4\ (l)(3), (m)(3), and (m)(4), include 
        reasonable standards (which shall be comparable for all 
        groups and may, in accordance with standards prescribed 
        by the Secretary, differ with respect to income levels, 
        but only in the case of applicants or recipients of 
        assistance under the plan who are not receiving aid or 
        assistance under any plan of the State approved under 
        title I, X, XIV, or XVI, or part A of title IV, and 
        with respect to whom supplemental security income 
        benefits are not being paid under title XVI, based on 
        the variations between shelter costs in urban areas and 
        in rural areas) for determining eligibility for and the 
        extent of medical assistance under the plan which (A) 
        are consistent with the objectives of this title, (B) 
        provide for taking into account only such income and 
        resources as are, as determined in accordance with 
        standards prescribed by the Secretary, available to the 
        applicant or recipient and (in the case of any 
        applicant or recipient who would, except for income and 
        resources, be eligible for aid or assistance in the 
        form of money payments under any plan of the State 
        approved under title I, X, XIV, or XVI, or part A of 
        title IV, or to have paid with respect to him 
        supplemental security income benefits under title XVI) 
        as would not be disregarded (or set aside for future 
        needs) in determining his eligibility for such aid, 
        assistance, or benefits, (C) provide for reasonable 
        evaluation of any such income or resources, and (D) do 
        not take into account the financial responsibility of 
        any individual for any applicant or recipient of 
        assistance under the plan unless such applicant or 
        recipient is such individual's spouse or such 
        individual's child who is under age 21 or (with respect 
        to States eligible to participate in the State program 
        established under title XVI), is blind or permanently 
        and totally disabled, or is blind or disabled as 
        defined in section 1614 (with respect to States which 
        are not eligible to participate in such program); and 
        provide for flexibility in the application of such 
        standards with respect to income by taking into 
        account, except to the extent prescribed by the 
        Secretary, the costs (whether in the form of insurance 
        premiums, payments made to the State under section 
        1903(f)(2)(B), or otherwise and regardless of whether 
        such costs are reimbursed under another public program 
        of the State or political subdivision thereof) incurred 
        for medical care or for any other type of remedial care 
        recognized under State law;
---------------------------------------------------------------------------
    \4\The references to ``(e)(14),'' are so in law but relate to two 
distinct paragraph (14)s' of subsection (e). See amendments made by 
section 2002(b) of Public Law 111-148 and section 3(c)(2) of Public Law 
111-255 (124 Stat. 2641).

     The amendment by section 3(c)(2) of Public Law 111-255 is a 
conforming amendment in order to include a reference to (e)(14) in 
section 1902(a)(17). Such amendment conforms to a new paragraph (14) 
added at the end of section 1902(e) (relating to exclusion of 
compensation for participation in a clinical trial for testing of 
treatments for a rare disease or condition) of this Act.
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          (18) comply with the provisions of section 1917 with 
        respect to liens, adjustments and recoveries of medical 
        assistance correctly paid, transfers of assets, and 
        treatment of certain trusts;
          (19) provide such safeguards as may be necessary to 
        assure that eligibility for care and services under the 
        plan will be determined, and such care and services 
        will be provided, in a manner consistent with 
        simplicity of administration and the best interests of 
        the recipients;
          (20) if the State plan includes medical assistance in 
        behalf of individuals 65 years of age or older who are 
        patients in institutions for mental diseases--
                  (A) provide for having in effect such 
                agreements or other arrangements with State 
                authorities concerned with mental diseases, 
                and, where appropriate, with such institutions, 
                as may be necessary for carrying out the State 
                plan, including arrangements for joint planning 
                and for development of alternate methods of 
                care, arrangements providing assurance of 
                immediate readmittance to institutions where 
                needed for individuals under alternate plans of 
                care, and arrangements providing for access to 
                patients and facilities, for furnishing 
                information, and for making reports;
                  (B) provide for an individual plan for each 
                such patient to assure that the institutional 
                care provided to him is in his best interests, 
                including, to that end, assurances that there 
                will be initial and periodic review of his 
                medical and other needs, that he will be given 
                appropriate medical treatment within the 
                institution, and that there will be a periodic 
                determination of his need for continued 
                treatment in the institution; and
                  (C) provide for the development of alternate 
                plans of care, making maximum utilization of 
                available resources, for recipients 65 years of 
                age or older who would otherwise need care in 
                such institutions, including appropriate 
                medical treatment and other aid or assistance; 
                for services referred to in section 
                3(a)(4)(A)(i) and (ii) or section 
                1603(a)(4)(A)(i) and (ii) which are appropriate 
                for such recipients and for such patients; and 
                for methods of administration necessary to 
                assure that the responsibilities of the State 
                agency under the State plan with respect to 
                such recipients and such patients will be 
                effectively carried out;
          (21) if the State plan includes medical assistance in 
        behalf of individuals 65 years of age or older who are 
        patients in public institutions for mental diseases, 
        show that the State is making satisfactory progress 
        toward developing and implementing a comprehensive 
        mental health program, including provision for 
        utilization of community mental health centers, nursing 
        facilities, and other alternatives to care in public 
        institutions for mental diseases;
          (22) include descriptions of (A) the kinds and 
        numbers of professional medical personnel and 
        supporting staff that will be used in the 
        administration of the plan and of the responsibilities 
        they will have, (B) the standards, for private or 
        public institutions in which recipients of medical 
        assistance under the plan may receive care or services, 
        that will be utilized by the State authority or 
        authorities responsible for establishing and 
        maintaining such standards, (C) the cooperative 
        arrangements with State health agencies and State 
        vocational rehabilitation agencies entered into with a 
        view to maximum utilization of and coordination of the 
        provision of medical assistance with the services 
        administered or supervised by such agencies, and (D) 
        other standards and methods that the State will use to 
        assure that medical or remedial care and services 
        provided to recipients of medical assistance are of 
        high quality;
          (23) provide that (A) any individual eligible for 
        medical assistance (including drugs) may obtain such 
        assistance from any institution, agency, community 
        pharmacy, or person, qualified to perform the service 
        or services required (including an organization which 
        provides such services, or arranges for their 
        availability, on a prepayment basis), who undertakes to 
        provide him such services, and (B) an enrollment of an 
        individual eligible for medical assistance in a primary 
        care case-management system (described in section 
        1915(b)(1)), a medicaid managed care organization, or a 
        similar entity shall not restrict the choice of the 
        qualified person from whom the individual may receive 
        services under section 1905(a)(4)(C), except as 
        provided in subsection (g) and in section 1915, except 
        that this paragraph shall not apply in the case of 
        Puerto Rico, the Virgin Islands, and Guam, and except 
        that nothing in this paragraph shall be construed as 
        requiring a State to provide medical assistance for 
        such services furnished by a person or entity convicted 
        of a felony under Federal or State law for an offense 
        which the State agency determines is inconsistent with 
        the best interests of beneficiaries under the State 
        plan or by a provider or supplier to which a moratorium 
        under subsection (kk)(4) is applied during the period 
        of such moratorium';
          (24) effective July 1, 1969, provide for consultative 
        services by health agencies and other appropriate 
        agencies of the State to hospitals, nursing facilities, 
        home health agencies, clinics, laboratories, and such 
        other institutions as the Secretary may specify in 
        order to assist them (A) to qualify for payments under 
        this Act, (B) to establish and maintain such fiscal 
        records as may be necessary for the proper and 
        efficient administration of this Act, and (C) to 
        provide information needed to determine payments due 
        under this Act on account of care and services 
        furnished to individuals;
          (25) provide--
                  (A) that the State or local agency 
                administering such plan will take all 
                reasonable measures to ascertain the legal 
                liability of third parties (including health 
                insurers, self-insured plans, group health 
                plans (as defined in section 607(1) of the 
                Employee Retirement Income Security Act of 
                1974), service benefit plans, managed care 
                organizations, pharmacy benefit managers, or 
                other parties that are, by statute, contract, 
                or agreement, legally responsible for payment 
                of a claim for a health care item or service) 
                to pay for care and services available under 
                the plan, including--
                          (i) the collection of sufficient 
                        information (as specified by the 
                        Secretary in regulations) to enable the 
                        State to pursue claims against such 
                        third parties, with such information 
                        being collected at the time of any 
                        determination or redetermination of 
                        eligibility for medical assistance, and
                          (ii) the submission to the Secretary 
                        of a plan (subject to approval by the 
                        Secretary) for pursuing claims against 
                        such third parties, which plan shall be 
                        integrated with, and be monitored as a 
                        part of the Secretary's review of, the 
                        State's mechanized claims processing 
                        and information retrieval systems 
                        required under section 1903(r);
                  (B)\5\ that in any case where such a legal 
                liability is found to exist after medical 
                assistance has been made available on behalf of 
                the individual and where the amount of 
                reimbursement the State can reasonably expect 
                to recover exceeds the costs of such recovery, 
                the State or local agency will seek 
                reimbursement for such assistance to the extent 
                of such legal liability;
---------------------------------------------------------------------------
    \5\Section 1902(a)(25)(B) is amended by section 202(b)(1)(A) of 
division A of Public Law 113-67 by striking ``to the extent of such 
legal liability''. Subsection (c) of section 202 (42 U.S.C. 1396a note) 
of such Public Law (as amended) provides "[t]he amendments made by this 
section shall take effect on October 1, 2016".
---------------------------------------------------------------------------
                  (C) that in the case of an individual who is 
                entitled to medical assistance under the State 
                plan with respect to a service for which a 
                third party is liable for payment, the person 
                furnishing the service may not seek to collect 
                from the individual (or any financially 
                responsible relative or representative of that 
                individual) payment of an amount for that 
                service (i) if the total of the amount of the 
                liabilities of third parties for that service 
                is at least equal to the amount payable for 
                that service under the plan (disregarding 
                section 1916), or (ii) in an amount which 
                exceeds the lesser of (I) the amount which may 
                be collected under section 1916, or (II) the 
                amount by which the amount payable for that 
                service under the plan (disregarding section 
                1916) exceeds the total of the amount of the 
                liabilities of third parties for that service;
                  (D) that a person who furnishes services and 
                is participating under the plan may not refuse 
                to furnish services to an individual (who is 
                entitled to have payment made under the plan 
                for the services the person furnishes) because 
                of a third party's potential liability for 
                payment for the service;
                  (E) that in the case of prenatal or 
                preventive pediatric care (including early and 
                periodic screening and diagnosis services under 
                section 1905(a)(4)(B)) covered under the State 
                plan, the State shall--
                          (i) make payment for such service in 
                        accordance with the usual payment 
                        schedule under such plan for such 
                        services without regard to the 
                        liability of a third party for payment 
                        for such services\6\; and
---------------------------------------------------------------------------
    \6\Section 1902(a)(25)(E)(i) is amended by section 202(a)(1) of 
division A of Public Law 113-67 by inserting ``, except that the State 
may, if the State determines doing so is cost-effective and will not 
adversely affect access to care, only make such payment if a third 
party so liable has not made payment within 90 days after the date the 
provider of such services has initially submitted a claim to such third 
party for payment for such services'' before the semicolon at the end. 
Subsection (c) of section 202 (42 U.S.C. 1396a note) of such Public Law 
(as amended) provides ``[t]he amendments made by this section shall 
take effect on October 1, 2016''.
---------------------------------------------------------------------------
                          (ii) seek reimbursement from such 
                        third party in accordance with 
                        subparagraph (B);
                  (F) that in the case of any services covered 
                under such plan which are provided to an 
                individual on whose behalf child support 
                enforcement is being carried out by the State 
                agency under part D of title IV of this Act, 
                the State shall--
                          (i) make payment for such service in 
                        accordance with the usual payment 
                        schedule under such plan for such 
                        services without regard to any third-
                        party liability for payment for such 
                        services, if such third-party liability 
                        is derived (through insurance or 
                        otherwise) from the parent whose 
                        obligation to pay support is being 
                        enforced by such agency, if payment has 
                        not been made by such third party 
                        within 30 days after such services are 
                        furnished;
                          (ii) seek reimbursement from such 
                        third party in accordance with 
                        subparagraph (B);
                  (G) that the State prohibits any health 
                insurer (including a group health plan, as 
                defined in section 607(1) of the Employee 
                Retirement Income Security Act of 1974, a self-
                insured plan, a service benefit plan, a managed 
                care organization, a pharmacy benefit manager, 
                or other party that is, by statute, contract, 
                or agreement, legally responsible for payment 
                of a claim for a health care item or service), 
                in enrolling an individual or in making any 
                payments for benefits to the individual or on 
                the individual's behalf, from taking into 
                account that the individual is eligible for or 
                is provided medical assistance under a plan 
                under this title for such State, or any other 
                State;
                  (H) that to the extent that payment has been 
                made under the State plan for medical 
                assistance in any case where a third party has 
                a legal liability to make payment for such 
                assistance, the State has in effect laws under 
                which, to the extent that payment has been made 
                under the State plan for medical assistance for 
                health care items or services furnished to an 
                individual, the State is considered to have 
                acquired the rights of such individual to 
                payment by any other party for such health care 
                items or services; and
                  (I) that the State shall provide assurances 
                satisfactory to the Secretary that the State 
                has in effect laws requiring health insurers, 
                including self-insured plans, group health 
                plans (as defined in section 607(1) of the 
                Employee Retirement Income Security Act of 
                1974), service benefit plans, managed care 
                organizations, pharmacy benefit managers, or 
                other parties that are, by statute, contract, 
                or agreement, legally responsible for payment 
                of a claim for a health care item or service, 
                as a condition of doing business in the State, 
                to--
                          (i) provide, with respect to 
                        individuals who are eligible (and, at 
                        State option, individuals who apply or 
                        whose eligibility for medical 
                        assistance is being evaluated in 
                        accordance with section 1902(e)(13)(D)) 
                        for, or are provided, medical 
                        assistance under the State plan under 
                        this title (and, at State option, child 
                        health assistance under title XXI), 
                        upon the request of the State, 
                        information to determine during what 
                        period the individual or their spouses 
                        or their dependents may be (or may have 
                        been) covered by a health insurer and 
                        the nature of the coverage that is or 
                        was provided by the health insurer 
                        (including the name, address, and 
                        identifying number of the plan) in a 
                        manner prescribed by the Secretary;
                          (ii) accept the State's right of 
                        recovery and the assignment to the 
                        State of any right of an individual or 
                        other entity to payment from the party 
                        for an item or service for which 
                        payment has been made under the State 
                        plan;
                          (iii) respond to any inquiry by the 
                        State regarding a claim for payment for 
                        any health care item or service that is 
                        submitted not later than 3 years after 
                        the date of the provision of such 
                        health care item or service; and
                          (iv) agree not to deny a claim 
                        submitted by the State solely on the 
                        basis of the date of submission of the 
                        claim, the type or format of the claim 
                        form, or a failure to present proper 
                        documentation at the point-of-sale that 
                        is the basis of the claim, if--
                                  (I) the claim is submitted by 
                                the State within the 3-year 
                                period beginning on the date on 
                                which the item or service was 
                                furnished; and
                                  (II) any action by the State 
                                to enforce its rights with 
                                respect to such claim is 
                                commenced within 6 years of the 
                                State's submission of such 
                                claim;
          (26) if the State plan includes medical assistance 
        for inpatient mental hospital services, provide, with 
        respect to each patient receiving such services, for a 
        regular program of medical review (including medical 
        evaluation) of his need for such services, and for a 
        written plan of care;
          (27) provide for agreements with every person or 
        institution providing services under the State plan 
        under which such person or institution agrees (A) to 
        keep such records as are necessary fully to disclose 
        the extent of the services provided to individuals 
        receiving assistance under the State plan, and (B) to 
        furnish the State agency or the Secretary with such 
        information, regarding any payments claimed by such 
        person or institution for providing services under the 
        State plan, as the State agency or the Secretary may 
        from time to time request;
          (28) provide--
                  (A) that any nursing facility receiving 
                payments under such plan must satisfy all the 
                requirements of subsections (b) through (d) of 
                section 1919 as they apply to such facilities;
                  (B) for including in ``nursing facility 
                services'' at least the items and services 
                specified (or deemed to be specified) by the 
                Secretary under section 1919(f)(7) and making 
                available upon request a description of the 
                items and services so included;
                  (C) for procedures to make available to the 
                public the data and methodology used in 
                establishing payment rates for nursing 
                facilities under this title; and
                  (D) for compliance (by the date specified in 
                the respective sections) with the requirements 
                of--
                          (i) section 1919(e);
                          (ii) section 1919(g) (relating to 
                        responsibility for survey and 
                        certification of nursing facilities); 
                        and
                          (iii) sections 1919(h)(2)(B) and 
                        1919(h)(2)(D) (relating to 
                        establishment and application of 
                        remedies);
          (29) include a State program which meets the 
        requirements set forth in section 1908, for the 
        licensing of administrators of nursing homes;
          (30)(A) provide such methods and procedures relating 
        to the utilization of, and the payment for, care and 
        services available under the plan (including but not 
        limited to utilization review plans as provided for in 
        section 1903(i)(4)) as may be necessary to safeguard 
        against unnecessary utilization of such care and 
        services and to assure that payments are consistent 
        with efficiency, economy, and quality of care and are 
        sufficient to enlist enough providers so that care and 
        services are available under the plan at least to the 
        extent that such care and services are available to the 
        general population in the geographic area; and
          (B) provide, under the program described in 
        subparagraph (A), that--
                  (i) each admission to a hospital, 
                intermediate care facility for the mentally 
                retarded, or hospital for mental diseases is 
                reviewed or screened in accordance with 
                criteria established by medical and other 
                professional personnel who are not themselves 
                directly responsible for the care of the 
                patient involved, and who do not have a 
                significant financial interest in any such 
                institution and are not, except in the case of 
                a hospital, employed by the institution 
                providing the care involved, and
                  (ii) the information developed from such 
                review or screening, along with the data 
                obtained from prior reviews of the necessity 
                for admission and continued stay of patients by 
                such professional personnel, shall be used as 
                the basis for establishing the size and 
                composition of the sample of admissions to be 
                subject to review and evaluation by such 
                personnel, and any such sample may be of any 
                size up to 100 percent of all admissions and 
                must be of sufficient size to serve the purpose 
                of (I) identifying the patterns of care being 
                provided and the changes occurring over time in 
                such patterns so that the need for modification 
                may be ascertained, and (II) subjecting 
                admissions to early or more extensive review 
                where information indicates that such 
                consideration is warranted to a hospital, 
                intermediate care facility for the mentally 
                retarded, or hospital for mental diseases;
          (31) with respect to services in an intermediate care 
        facility for the mentally retarded (where the State 
        plan includes medical assistance for such services) 
        provide, with respect to each patient receiving such 
        services, for a written plan of care, prior to 
        admission to or authorization of benefits in such 
        facility, in accordance with regulations of the 
        Secretary, and for a regular program of independent 
        professional review (including medical evaluation) 
        which shall periodically review his need for such 
        services;
          (32) provide that no payment under the plan for any 
        care or service provided to an individual shall be made 
        to anyone other than such individual or the person or 
        institution providing such care or service, under an 
        assignment or power of attorney or otherwise; except 
        that--
                  (A) in the case of any care or service 
                provided by a physician, dentist, or other 
                individual practitioner, such payment may be 
                made (i) to the employer of such physician, 
                dentist, or other practitioner if such 
                physician, dentist, or practitioner is required 
                as a condition of his employment to turn over 
                his fee for such care or service to his 
                employer, or (ii) (where the care or service 
                was provided in a hospital, clinic, or other 
                facility) to the facility in which the care or 
                service was provided if there is a contractual 
                arrangement between such physician, dentist, or 
                practitioner and such facility under which such 
                facility submits the bill for such care or 
                service;
                  (B) nothing in this paragraph shall be 
                construed (i) to prevent the making of such a 
                payment in accordance with an assignment from 
                the person or institution providing the care or 
                service involved if such assignment is made to 
                a governmental agency or entity or is 
                established by or pursuant to the order of a 
                court of competent jurisdiction, or (ii) to 
                preclude an agent of such person or institution 
                from receiving any such payment if (but only 
                if) such agent does so pursuant to an agency 
                agreement under which the compensation to be 
                paid to the agent for his services for or in 
                connection with the billing or collection of 
                payments due such person or institution under 
                the plan is unrelated (directly or indirectly) 
                to the amount of such payments or the billings 
                therefor, and is not dependent upon the actual 
                collection of any such payment;
                  (C) in the case of services furnished (during 
                a period that does not exceed 14 continuous 
                days in the case of an informal reciprocal 
                arrangement or 90 continuous days (or such 
                longer period as the Secretary may provide) in 
                the case of an arrangement involving per diem 
                or other fee-for-time compensation) by, or 
                incident to the services of, one physician to 
                the patients of another physician who submits 
                the claim for such services, payment shall be 
                made to the physician submitting the claim (as 
                if the services were furnished by, or incident 
                to, the physician's services), but only if the 
                claim identifies (in a manner specified by the 
                Secretary) the physician who furnished the 
                services; and
                  (D) in the case of payment for a childhood 
                vaccine administered before October 1, 1994, to 
                individuals entitled to medical assistance 
                under the State plan, the State plan may make 
                payment directly to the manufacturer of the 
                vaccine under a voluntary replacement program 
                agreed to by the State pursuant to which the 
                manufacturer (i) supplies doses of the vaccine 
                to providers administering the vaccine, (ii) 
                periodically replaces the supply of the 
                vaccine, and (iii) charges the State the 
                manufacturer's price to the Centers for Disease 
                Control and Prevention for the vaccine so 
                administered (which price includes a reasonable 
                amount to cover shipping and the handling of 
                returns);
          (33) provide--
                  (A) that the State health agency, or other 
                appropriate State medical agency, shall be 
                responsible for establishing a plan, consistent 
                with regulations prescribed by the Secretary, 
                for the review by appropriate professional 
                health personnel of the appropriateness and 
                quality of care and services furnished to 
                recipients of medical assistance under the plan 
                in order to provide guidance with respect 
                thereto in the administration of the plan to 
                the State agency established or designated 
                pursuant to paragraph (5) and, where 
                applicable, to the State agency described in 
                the second sentence of this subsection; and
                  (B) that, except as provided in section 
                1919(g), the State or local agency utilized by 
                the Secretary for the purpose specified in the 
                first sentence of section 1864(a), or, if such 
                agency is not the State agency which is 
                responsible for licensing health institutions, 
                the State agency responsible for such 
                licensing, will perform for the State agency 
                administering or supervising the administration 
                of the plan approved under this title the 
                function of determining whether institutions 
                and agencies meet the requirements for 
                participation in the program under such plan, 
                except that, if the Secretary has cause to 
                question the adequacy of such determinations, 
                the Secretary is authorized to validate State 
                determinations and, on that basis, make 
                independent and binding determinations 
                concerning the extent to which individual 
                institutions and agencies meet the requirements 
                for participation;
          (34) provide that in the case of any individual who 
        has been determined to be eligible for medical 
        assistance under the plan, such assistance will be made 
        available to him for care and services included under 
        the plan and furnished in or after the third month 
        before the month in which he made application (or 
        application was made on his behalf in the case of a 
        deceased individual) for such assistance if such 
        individual was (or upon application would have been) 
        eligible for such assistance at the time such care and 
        services were furnished;
          (35) provide that any disclosing entity (as defined 
        in section 1124(a)(2)) receiving payments under such 
        plan complies with the requirements of section 1124;
          (36) provide that within 90 days following the 
        completion of each survey of any health care facility, 
        laboratory, agency, clinic, or organization, by the 
        appropriate State agency described in paragraph (9), 
        such agency shall (in accordance with regulations of 
        the Secretary) make public in readily available form 
        and place the pertinent findings of each such survey 
        relating to the compliance of each such health care 
        facility, laboratory, clinic, agency, or organization 
        with (A) the statutory conditions of participation 
        imposed under this title, and (B) the major additional 
        conditions which the Secretary finds necessary in the 
        interest of health and safety of individuals who are 
        furnished care or services by any such facility, 
        laboratory, clinic, agency, or organization;
          (37) provide for claims payment procedures which (A) 
        ensure that 90 per centum of claims for payment (for 
        which no further written information or substantiation 
        is required in order to make payment) made for services 
        covered under the plan and furnished by health care 
        practitioners through individual or group practices or 
        through shared health facilities are paid within 30 
        days of the date of receipt of such claims and that 99 
        per centum of such claims are paid within 90 days of 
        the date of receipt of such claims, and (B) provide for 
        procedures of prepayment and postpayment claims review, 
        including review of appropriate data with respect to 
        the recipient and provider of a service and the nature 
        of the service for which payment is claimed, to ensure 
        the proper and efficient payment of claims and 
        management of the program;
          (38) require that an entity (other than an individual 
        practitioner or a group of practitioners) that 
        furnishes, or arranges for the furnishing of, items or 
        services under the plan, shall supply (within such 
        period as may be specified in regulations by the 
        Secretary or by the single State agency which 
        administers or supervises the administration of the 
        plan) upon request specifically addressed to such 
        entity by the Secretary or such State agency, the 
        information described in section 1128(b)(9);
          (39) provide that the State agency shall exclude any 
        specified individual or entity from participation in 
        the program under the State plan for the period 
        specified by the Secretary, when required by him to do 
        so pursuant to section 1128 or section 1128A, terminate 
        the participation of any individual or entity in such 
        program if (subject to such exceptions as are permitted 
        with respect to exclusion under sections 1128(c)(3)(B) 
        and 1128(d)(3)(B)) participation of such individual or 
        entity is terminated under title XVIII or any other 
        State plan under this title, and provide that no 
        payment may be made under the plan with respect to any 
        item or service furnished by such individual or entity 
        during such period;
          (40) require each health services facility or 
        organization which receives payments under the plan and 
        of a type for which a uniform reporting system has been 
        established under section 1121(a) to make reports to 
        the Secretary of information described in such section 
        in accordance with the uniform reporting system 
        (established under such section) for that type of 
        facility or organization;
          (41) provide that whenever a provider of services or 
        any other person is terminated, suspended, or otherwise 
        sanctioned or prohibited from participating under the 
        State plan, the State agency shall promptly notify the 
        Secretary and, in the case of a physician and 
        notwithstanding paragraph (7), the State medical 
        licensing board of such action;
          (42) provide that--
                  (A) the records of any entity participating 
                in the plan and providing services reimbursable 
                on a cost-related basis will be audited as the 
                Secretary determines to be necessary to insure 
                that proper payments are made under the plan; 
                and
                  (B) not later than December 31, 2010, the 
                State shall--
                          (i) establish a program under which 
                        the State contracts (consistent with 
                        State law and in the same manner as the 
                        Secretary enters into contracts with 
                        recovery audit contractors under 
                        section 1893(h), subject to such 
                        exceptions or requirements as the 
                        Secretary may require for purposes of 
                        this title or a particular State) with 
                        1 or more recovery audit contractors 
                        for the purpose of identifying 
                        underpayments and overpayments and 
                        recouping overpayments under the State 
                        plan and under any waiver of the State 
                        plan with respect to all services for 
                        which payment is made to any entity 
                        under such plan or waiver; and
                          (ii) provide assurances satisfactory 
                        to the Secretary that--
                                  (I) under such contracts, 
                                payment shall be made to such a 
                                contractor only from amounts 
                                recovered;
                                  (II) from such amounts 
                                recovered, payment--
                                          (aa) shall be made on 
                                        a contingent basis for 
                                        collecting 
                                        overpayments; and
                                          (bb) may be made in 
                                        such amounts as the 
                                        State may specify for 
                                        identifying 
                                        underpayments;
                                  (III) the State has an 
                                adequate process for entities 
                                to appeal any adverse 
                                determination made by such 
                                contractors; and
                                  (IV) such program is carried 
                                out in accordance with such 
                                requirements as the Secretary 
                                shall specify, including--
                                          (aa) for purposes of 
                                        section 1903(a)(7), 
                                        that amounts expended 
                                        by the State to carry 
                                        out the program shall 
                                        be considered amounts 
                                        expended as necessary 
                                        for the proper and 
                                        efficient 
                                        administration of the 
                                        State plan or a waiver 
                                        of the plan;
                                          (bb) that section 
                                        1903(d) shall apply to 
                                        amounts recovered under 
                                        the program; and
                                          (cc) that the State 
                                        and any such 
                                        contractors under 
                                        contract with the State 
                                        shall coordinate such 
                                        recovery audit efforts 
                                        with other contractors 
                                        or entities performing 
                                        audits of entities 
                                        receiving payments 
                                        under the State plan or 
                                        waiver in the State, 
                                        including efforts with 
                                        Federal and State law 
                                        enforcement with 
                                        respect to the 
                                        Department of Justice, 
                                        including the Federal 
                                        Bureau of 
                                        Investigations, the 
                                        Inspector General of 
                                        the Department of 
                                        Health and Human 
                                        Services, and the State 
                                        medicaid fraud control 
                                        unit; and\10\
---------------------------------------------------------------------------
    \10\So in law. The word ``and'' after the semicolong at the end of 
paragraph (42) probably should not appear.
---------------------------------------------------------------------------
          (43) provide for--
                  (A) informing all persons in the State who 
                are under the age of 21 and who have been 
                determined to be eligible for medical 
                assistance including services described in 
                section 1905(a)(4)(B), of the availability of 
                early and periodic screening, diagnostic, and 
                treatment services as described in section 
                1905(r) and the need for age-appropriate 
                immunizations against vaccine-preventable 
                diseases,
                  (B) providing or arranging for the provision 
                of such screening services in all cases where 
                they are requested,
                  (C) arranging for (directly or through 
                referral to appropriate agencies, 
                organizations, or individuals) corrective 
                treatment the need for which is disclosed by 
                such child health screening services, and
                  (D) reporting to the Secretary (in a uniform 
                form and manner established by the Secretary, 
                by age group and by basis of eligibility for 
                medical assistance, and by not later than April 
                1 after the end of each fiscal year, beginning 
                with fiscal year 1990) the following 
                information relating to early and periodic 
                screening, diagnostic, and treatment services 
                provided under the plan during each fiscal 
                year:
                          (i) the number of children provided 
                        child health screening services,
                          (ii) the number of children referred 
                        for corrective treatment (the need for 
                        which is disclosed by such child health 
                        screening services),
                          (iii) the number of children 
                        receiving dental services, and other 
                        information relating to the provision 
                        of dental services to such children 
                        described in section 2108(e)\11\ and
---------------------------------------------------------------------------
    \11\Missing punctuation in clause (iii) so in law. See amendment 
made by section 501(e)(1) of Public Law 111-3.
---------------------------------------------------------------------------
                          (iv) the State's results in attaining 
                        the participation goals set for the 
                        State under section 1905(r);
          (44) in each case for which payment for inpatient 
        hospital services, services in an intermediate care 
        facility for the mentally retarded, or inpatient mental 
        hospital services is made under the State plan--
                  (A) a physician (or, in the case of skilled 
                nursing facility services or intermediate care 
                facility services, a physician, or a nurse 
                practitioner or clinical nurse specialist who 
                is not an employee of the facility but is 
                working in collaboration with a physician) 
                certifies at the time of admission, or, if 
                later, the time the individual applies for 
                medical assistance under the State plan (and a 
                physician, a physician assistant under the 
                supervision of a physician, or, in the case of 
                skilled nursing facility services or 
                intermediate care facility services, a 
                physician, or a nurse practitioner or clinical 
                nurse specialist who is not an employee of the 
                facility but is working in collaboration with a 
                physician, recertifies, where such services are 
                furnished over a period of time, in such cases, 
                at least as often as required under section 
                1903(g)(6) (or, in the case of services that 
                are services provided in an intermediate care 
                facility for the mentally retarded, every 
                year), and accompanied by such supporting 
                material, appropriate to the case involved, as 
                may be provided in regulations of the 
                Secretary), that such services are or were 
                required to be given on an inpatient basis 
                because the individual needs or needed such 
                services, and
                  (B) such services were furnished under a plan 
                established and periodically reviewed and 
                evaluated by a physician, or, in the case of 
                skilled nursing facility services or 
                intermediate care facility services, a 
                physician, or a nurse practitioner or clinical 
                nurse specialist who is not an employee of the 
                facility but is working in collaboration with a 
                physician;
          (45) provide for mandatory assignment of rights of 
        payment for medical support and other medical care owed 
        to recipients, in accordance with section 1912;
          (46)(A) provide that information is requested and 
        exchanged for purposes of income and eligibility 
        verification in accordance with a State system which 
        meets the requirements of section 1137 of this Act; and
          (B) provide, with respect to an individual declaring 
        to be a citizen or national of the United States for 
        purposes of establishing eligibility under this title, 
        that the State shall satisfy the requirements of--
                  (i) section 1903(x); or
                  (ii) subsection (ee);
          (47) provide--
                  (A) at the option of the State, for making 
                ambulatory prenatal care available to pregnant 
                women during a presumptive eligibility period 
                in accordance with section 1920 and provide for 
                making medical assistance for items and 
                services described in subsection (a) of section 
                1920A available to children during a 
                presumptive eligibility period in accordance 
                with such section and provide for making 
                medical assistance available to individuals 
                described in subsection (a) of section 1920B 
                during a presumptive eligibility period in 
                accordance with such section and provide for 
                making medical assistance available to 
                individuals described in subsection (a) of 
                section 1920C during a presumptive eligibility 
                period in accordance with such section; and
                  (B) that any hospital that is a participating 
                provider under the State plan may elect to be a 
                qualified entity for purposes of determining, 
                on the basis of preliminary information, 
                whether any individual is eligible for medical 
                assistance under the State plan or under a 
                waiver of the plan for purposes of providing 
                the individual with medical assistance during a 
                presumptive eligibility period, in the same 
                manner, and subject to the same requirements, 
                as apply to the State options with respect to 
                populations described in section 1920, 1920A, 
                1920B, or 1920C (but without regard to whether 
                the State has elected to provide for a 
                presumptive eligibility period under any such 
                sections), subject to such guidance as the 
                Secretary shall establish;
          (48) provide a method of making cards evidencing 
        eligibility for medical assistance available to an 
        eligible individual who does not reside in a permanent 
        dwelling or does not have a fixed home or mailing 
        address;
          (49) provide that the State will provide information 
        and access to certain information respecting sanctions 
        taken against health care practitioners and providers 
        by State licensing authorities in accordance with 
        section 1921;
          (50) provide, in accordance with subsection (q), for 
        a monthly personal needs allowance for certain 
        institutionalized individuals and couples;
          (51) meet the requirements of section 1924 (relating 
        to protection of community spouses);
          (52) meet the requirements of section 1925 (relating 
        to extension of eligibility for medical assistance);
          (53) provide--
                  (A) for notifying in a timely manner all 
                individuals in the State who are determined to 
                be eligible for medical assistance and who are 
                pregnant women, breastfeeding or postpartum 
                women (as defined in section 17 of the Child 
                Nutrition Act of 1966), or children below the 
                age of 5, of the availability of benefits 
                furnished by the special supplemental nutrition 
                program under such section, and
                  (B) for referring any such individual to the 
                State agency responsible for administering such 
                program;
          (54) in the case of a State plan that provides 
        medical assistance for covered outpatient drugs (as 
        defined in section 1927(k)), comply with the applicable 
        requirements of section 1927;
          (55) provide for receipt and initial processing of 
        applications of individuals for medical assistance 
        under subsection (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), 
        (a)(10)(A)(i)(VII), or (a)(10)(A)(ii)(IX)--
                  (A) at locations which are other than those 
                used for the receipt and processing of 
                applications for aid under part A of title IV 
                and which include facilities defined as 
                disproportionate share hospitals under section 
                1923(a)(1)(A) and Federally-qualified health 
                centers described in section 1905(1)(2)(B), and
                  (B) using applications which are other than 
                those used for applications for aid under such 
                part;
          (56) provide, in accordance with subsection (s), for 
        adjusted payments for certain inpatient hospital 
        services;
          (57) provide that each hospital, nursing facility, 
        provider of home health care or personal care services, 
        hospice program, or medicaid managed care organization 
        (as defined in section 1903(m)(1)(A)) receiving funds 
        under the plan shall comply with the requirements of 
        subsection (w);
          (58) provide that the State, acting through a State 
        agency, association, or other private nonprofit entity, 
        develop a written description of the law of the State 
        (whether statutory or as recognized by the courts of 
        the State) concerning advance directives that would be 
        distributed by providers or organizations under the 
        requirements of subsection (w);
          (59) maintain a list (updated not less often than 
        monthly, and containing each physician's unique 
        identifier provided under the system established under 
        subsection (x)) of all physicians who are certified to 
        participate under the State plan;
          (60) provide that the State agency shall provide 
        assurances satisfactory to the Secretary that the State 
        has in effect the laws relating to medical child 
        support required under section 1908A;
          (61) provide that the State must demonstrate that it 
        operates a medicaid fraud and abuse control unit 
        described in section 1903(q) that effectively carries 
        out the functions and requirements described in such 
        section, as determined in accordance with standards 
        established by the Secretary, unless the State 
        demonstrates to the satisfaction of the Secretary that 
        the effective operation of such a unit in the State 
        would not be cost-effective because minimal fraud 
        exists in connection with the provision of covered 
        services to eligible individuals under the State plan, 
        and that beneficiaries under the plan will be protected 
        from abuse and neglect in connection with the provision 
        of medical assistance under the plan without the 
        existence of such a unit;
          (62) provide for a program for the distribution of 
        pediatric vaccines to program-registered providers for 
        the immunization of vaccine-eligible children in 
        accordance with section 1928;
          (63) provide for administration and determinations of 
        eligibility with respect to individuals who are (or 
        seek to be) eligible for medical assistance based on 
        the application of section 1931;
          (64) provide, not later than 1 year after the date of 
        the enactment of this paragraph, a mechanism to receive 
        reports from beneficiaries and others and compile data 
        concerning alleged instances of waste, fraud, and abuse 
        relating to the operation of this title;
          (65) provide that the State shall issue provider 
        numbers for all suppliers of medical assistance 
        consisting of durable medical equipment, as defined in 
        section 1861(n), and the State shall not issue or renew 
        such a supplier number for any such supplier unless--
                  (A)(i) full and complete information as to 
                the identity of each person with an ownership 
                or control interest (as defined in section 
                1124(a)(3)) in the supplier or in any 
                subcontractor (as defined by the Secretary in 
                regulations) in which the supplier directly or 
                indirectly has a 5 percent or more ownership 
                interest; and
                  (ii) to the extent determined to be feasible 
                under regulations of the Secretary, the name of 
                any disclosing entity (as defined in section 
                1124(a)(2)) with respect to which a person with 
                such an ownership or control interest in the 
                supplier is a person with such an ownership or 
                control interest in the disclosing entity; and
                  (B) a surety bond in a form specified by the 
                Secretary under section 1834(a)(16)(B) and in 
                an amount that is not less than $50,000 or such 
                comparable surety bond as the Secretary may 
                permit under the second sentence of such 
                section;
          (66) provide for making eligibility determinations 
        under section 1935(a);
          (67) provide, with respect to services covered under 
        the State plan (but not under title XVIII) that are 
        furnished to a PACE program eligible individual 
        enrolled with a PACE provider by a provider 
        participating under the State plan that does not have a 
        contract or other agreement with the PACE provider that 
        establishes payment amounts for such services, that 
        such participating provider may not require the PACE 
        provider to pay the participating provider an amount 
        greater than the amount that would otherwise be payable 
        for the service to the participating provider under the 
        State plan for the State where the PACE provider is 
        located (in accordance with regulations issued by the 
        Secretary);
          (68) provide that any entity that receives or makes 
        annual payments under the State plan of at least 
        $5,000,000, as a condition of receiving such payments, 
        shall--
                  (A) establish written policies for all 
                employees of the entity (including management), 
                and of any contractor or agent of the entity, 
                that provide detailed information about the 
                False Claims Act established under sections 
                3729 through 3733 of title 31, United States 
                Code, administrative remedies for false claims 
                and statements established under chapter 38 of 
                title 31, United States Code, any State laws 
                pertaining to civil or criminal penalties for 
                false claims and statements, and whistleblower 
                protections under such laws, with respect to 
                the role of such laws in preventing and 
                detecting fraud, waste, and abuse in Federal 
                health care programs (as defined in section 
                1128B(f));
                  (B) include as part of such written policies, 
                detailed provisions regarding the entity's 
                policies and procedures for detecting and 
                preventing fraud, waste, and abuse; and
                  (C) include in any employee handbook for the 
                entity, a specific discussion of the laws 
                described in subparagraph (A), the rights of 
                employees to be protected as whistleblowers, 
                and the entity's policies and procedures for 
                detecting and preventing fraud, waste, and 
                abuse;
          (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;
          (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) may include a wheelchair van, taxi, 
                stretcher car, bus passes and tickets, secured 
                transportation, and such other transportation 
                as the Secretary determines appropriate; and
                  (B) may be conducted under contract with a 
                broker who--
                          (i) is selected through a competitive 
                        bidding process based on the State's 
                        evaluation of the broker's experience, 
                        performance, references, resources, 
                        qualifications, and costs;
                          (ii) has oversight procedures to 
                        monitor beneficiary access and 
                        complaints and ensure that transport 
                        personnel are licensed, qualified, 
                        competent, and courteous;
                          (iii) is subject to regular auditing 
                        and oversight by the State in order to 
                        ensure the quality of the 
                        transportation services provided and 
                        the adequacy of beneficiary access to 
                        medical care and services; and
                          (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);
          (71) provide that the State will implement an asset 
        verification program as required under section 1940;
          (72) provide that the State will not prevent a 
        Federally-qualified health center from entering into 
        contractual relationships with private practice dental 
        providers in the provision of Federally-qualified 
        health center services;
          (73) in the case of any State in which 1 or more 
        Indian Health Programs or Urban Indian Organizations 
        furnishes health care services, provide for a process 
        under which the State seeks advice on a regular, 
        ongoing basis from designees of such Indian Health 
        Programs and Urban Indian Organizations on matters 
        relating to the application of this title that are 
        likely to have a direct effect on such Indian Health 
        Programs and Urban Indian Organizations and that--
                  (A) shall include solicitation of advice 
                prior to submission of any plan amendments, 
                waiver requests, and proposals for 
                demonstration projects likely to have a direct 
                effect on Indians, Indian Health Programs, or 
                Urban Indian Organizations; and
                  (B) may include appointment of an advisory 
                committee and of a designee of such Indian 
                Health Programs and Urban Indian Organizations 
                to the medical care advisory committee advising 
                the State on its State plan under this title;
          (74) provide for maintenance of effort under the 
        State plan or under any waiver of the plan in 
        accordance with subsection (gg); and\12\
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    \12\So in law. The word ``and'' probably should not appear at the 
end of paragraph (74). Section 4302(b)(1)(A)(i) of Public Law 111-148 
provides for an amendment to strike ``paragraph 4), by striking `and' 
at the end'' but could not be executed. Such amendment probably should 
have been made to paragraph (74).
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          (75) provide that, beginning January 2015, and 
        annually thereafter, the State shall submit a report to 
        the Secretary that contains--
                  (A) the total number of enrolled and newly 
                enrolled individuals in the State plan or under 
                a waiver of the plan for the fiscal year ending 
                on September 30 of the preceding calendar year, 
                disaggregated by population, including 
                children, parents, nonpregnant childless 
                adults, disabled individuals, elderly 
                individuals, and such other categories or sub-
                categories of individuals eligible for medical 
                assistance under the State plan or under a 
                waiver of the plan as the Secretary may 
                require;
                  (B) a description, which may be specified by 
                population, of the outreach and enrollment 
                processes used by the State during such fiscal 
                year; and
                  (C) any other data reporting determined 
                necessary by the Secretary to monitor 
                enrollment and retention of individuals 
                eligible for medical assistance under the State 
                plan or under a waiver of the plan;
          (76) provide that any data collected under the State 
        plan meets the requirements of section 3101 of the 
        Public Health Service Act;
          (77) provide that the State shall comply with 
        provider and supplier screening, oversight, and 
        reporting requirements in accordance with subsection 
        (kk);
          (79) provide that any agent, clearinghouse, or other 
        alternate payee (as defined by the Secretary) that 
        submits claims on behalf of a health care provider must 
        register with the State and the Secretary in a form and 
        manner specified by the Secretary;
          (80) provide that the State shall not provide any 
        payments for items or services provided under the State 
        plan or under a waiver to any financial institution or 
        entity located outside of the United States; and
          (81) provide for implementation of the payment models 
        specified by the Secretary under section 1115A(c) for 
        implementation on a nationwide basis unless the State 
        demonstrates to the satisfaction of the Secretary that 
        implementation would not be administratively feasible 
        or appropriate to the health care delivery system of 
        the State.
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)).
  For purposes of paragraph (10) any individual who, for the 
month of August 1972, was eligible for or receiving aid or 
assistance under a State plan approved under title I, X, XIV, 
or XVI, or part A of title IV and who for such month was 
entitled to monthly insurance benefits under title II shall for 
purposes of this title only be deemed to be eligible for 
financial aid or assistance for any month thereafter if such 
individual would have been eligible for financial aid or 
assistance for such month had the increase in monthly insurance 
benefits under title II resulting from enactment of Public Law 
92-336 not been applicable to such individual.
  The requirement of clause (A) of paragraph (37) with respect 
to a State plan may be waived by the Secretary if he finds that 
the State has exercised good faith in trying to meet such 
requirement. For purposes of this title, any child who meets 
the requirements of paragraph (1) or (2) of section 473(b) 
shall be deemed to be a dependent child as defined in section 
406 and shall be deemed to be a recipient of aid to families 
with dependent children under part A of title IV in the State 
where such child resides. Notwithstanding paragraph (10)(B) or 
any other provision of this subsection, a State plan shall 
provide medical assistance with respect to an alien who is not 
lawfully admitted for permanent residence or otherwise 
permanently residing in the United States under color of law 
only in accordance with section 1903(v).
  (b) The Secretary shall approve any plan which fulfills the 
conditions specified in subsection (a) of this section, except 
that he shall not approve any plan which imposes, as a 
condition of eligibility for medical assistance under the 
plan--
          (1) an age requirement of more than 65 years; or
          (2) any residence requirement which excludes any 
        individual who resides in the State, regardless of 
        whether or not the residence is maintained permanently 
        or at a fixed address; or
          (3) any citizenship requirement which excludes any 
        citizen of the United States.
  (c) Notwithstanding subsection (b), the Secretary shall not 
approve any State plan for medical assistance if the State 
requires individuals described in subsection (l)(1) to apply 
for assistance under the State program funded under part A of 
title IV as a condition of applying for or receiving medical 
assistance under this title.
  (d) If a State contracts with an entity which meets the 
requirements of section 1152, as determined by the Secretary, 
or a utilization and quality control peer review organization 
having a contract with the Secretary under part B of title XI 
for the performance of medical or utilization review functions 
(including quality review functions described in subsection 
(a)(30)(C)) required under this title of a State plan with 
respect to specific services or providers (or services or 
providers in a geographic area of the State), such requirements 
shall be deemed to be met for those services or providers (or 
services or providers in that area) by delegation to such an 
entity or organization under the contract of the State's 
authority to conduct such review activities if the contract 
provides for the performance of activities not inconsistent 
with part B of title XI and provides for such assurances of 
satisfactory performance by such an entity or organization as 
the Secretary may prescribe.
  (e)(1) Beginning April 1, 1990, for provisions relating to 
the extension of eligibility for medical assistance for certain 
families who have received aid pursuant to a State plan 
approved under part A of title IV and have earned income, see 
section 1925.
  (2)(A) In the case of an individual who is enrolled with a 
medicaid managed care organization (as defined in section 
1903(m)(1)(A)), with a primary care case manager (as defined in 
section 1905(t)), or with an eligible organization with a 
contract under section 1876 and who would (but for this 
paragraph) lose eligibility for benefits under this title 
before the end of the minimum enrollment period (defined in 
subparagraph (B)), the State plan may provide, notwithstanding 
any other provision of this title, that the individual shall be 
deemed to continue to be eligible for such benefits until the 
end of such minimum period, but, except for benefits furnished 
under section 1905(a)(4)(C), only with respect to such benefits 
provided to the individual as an enrollee of such organization 
or entity or by or through the case manager.
  (B) For purposes of subparagraph (A), the term ``minimum 
enrollment period'' means, with respect to an individual's 
enrollment with an organization or entity under a State plan, a 
period, established by the State, of not more than six months 
beginning on the date the individual's enrollment with the 
organization or entity becomes effective.
  (3) At the option of the State, any individual who--
          (A) is 18 years of age or younger and qualifies as a 
        disabled individual under section 1614(a);
          (B) with respect to whom there has been a 
        determination by the State that--
                  (i) the individual requires a level of care 
                provided in a hospital, nursing facility, or 
                intermediate care facility for the mentally 
                retarded,
                  (ii) it is appropriate to provide such care 
                for the individual outside such an institution, 
                and
                  (iii) the estimated amount which would be 
                expended for medical assistance for the 
                individual for such care outside an institution 
                is not greater than the estimated amount which 
                would otherwise be expended for medical 
                assistance for the individual within an 
                appropriate institution; and
          (C) if the individual were in a medical institution, 
        would be eligible for medical assistance under the 
        State plan under this title,
        shall be deemed, for purposes of this title only, to be 
        an individual with respect to whom a supplemental 
        security income payment, or State supplemental payment, 
        respectively, is being paid under title XVI.
  (4) A child born to a woman eligible for and receiving 
medical assistance under a State plan on the date of the 
child's birth shall be deemed to have applied for medical 
assistance and to have been found eligible for such assistance 
under such plan on the date of such birth and to remain 
eligible for such assistance for a period of one year. During 
the period in which a child is deemed under the preceding 
sentence to be eligible for medical assistance, the medical 
assistance eligibility identification number of the mother 
shall also serve as the identification number of the child, and 
all claims shall be submitted and paid under such number 
(unless the State issues a separate identification number for 
the child before such period expires). Notwithstanding the 
preceding sentence, in the case of a child who is born in the 
United States to an alien mother for whom medical assistance 
for the delivery of the child is made available pursuant to 
section 1903(v), the State immediately shall issue a separate 
identification number for the child upon notification by the 
facility at which such delivery occurred of the child's birth.
  (5) A woman who, while pregnant, is eligible for, has applied 
for, and has received medical assistance under the State plan, 
shall continue to be eligible under the plan, as though she 
were pregnant, for all pregnancy-related and postpartum medical 
assistance under the plan, through the end of the month in 
which the 60-day period (beginning on the last day of her 
pregnancy) ends.
  (6) In the case of a pregnant woman described in subsection 
(a)(10) who, because of a change in income of the family of 
which she is a member, would not otherwise continue to be 
described in such subsection, the woman shall be deemed to 
continue to be an individual described in subsection 
(a)(10)(A)(i)(IV) and subsection (l)(1)(A) without regard to 
such change of income through the end of the month in which the 
60-day period (beginning on the last day of her pregnancy) 
ends. The preceding sentence shall not apply in the case of a 
woman who has been provided ambulatory prenatal care pursuant 
to section 1920 during a presumptive eligibility period and is 
then, in accordance with such section, determined to be 
ineligible for medical assistance under the State plan.
  (7) In the case of an infant or child described in 
subparagraph (B), (C), or (D) of subsection (l)(1) or paragraph 
(2) of section 1905(n)--
          (A) who is receiving inpatient services for which 
        medical assistance is provided on the date the infant 
        or child attains the maximum age with respect to which 
        coverage is provided under the State plan for such 
        individuals, and
          (B) who, but for attaining such age, would remain 
        eligible for medical assistance under such subsection,
the infant or child shall continue to be treated as an 
individual described in such respective provision until the end 
of the stay for which the inpatient services are furnished.
  (8) If an individual is determined to be a qualified medicare 
beneficiary (as defined in section 1905(p)(1)), such 
determination shall apply to services furnished after the end 
of the month in which the determination first occurs. For 
purposes of payment to a State under section 1903(a), such 
determination shall be considered to be valid for an individual 
for a period of 12 months, except that a State may provide for 
such determinations more frequently, but not more frequently 
than once every 6 months for an individual.
  (9)(A) At the option of the State, the plan may include as 
medical assistance respiratory care services for any individual 
who--
          (i) is medically dependent on a ventilator for life 
        support at least six hours per day;
          (ii) has been so dependent for at least 30 
        consecutive days (or the maximum number of days 
        authorized under the State plan, whichever is less) as 
        an inpatient;
          (iii) but for the availability of respiratory care 
        services, would require respiratory care as an 
        inpatient in a hospital, nursing facility, or 
        intermediate care facility for the mentally retarded 
        and would be eligible to have payment made for such 
        inpatient care under the State plan;
          (iv) has adequate social support services to be cared 
        for at home; and
          (v) wishes to be cared for at home.
  (B) The requirements of subparagraph (A)(ii) may be satisfied 
by a continuous stay in one or more hospitals, nursing 
facilities, or intermediate care facilities for the mentally 
retarded.
  (C) For purposes of this paragraph, respiratory care services 
means services provided on a part-time basis in the home of the 
individual by a respiratory therapist or other health care 
professional trained in respiratory therapy (as determined by 
the State), payment for which is not otherwise included within 
other items and services furnished to such individual as 
medical assistance under the plan.
  (10)(A) The fact that an individual, child, or pregnant woman 
may be denied aid under part A of title IV pursuant to section 
402(a)(43) shall not be construed as denying (or permitting a 
State to deny) medical assistance under this title to such 
individual, child, or woman who is eligible for assistance 
under this title on a basis other than the receipt of aid under 
such part.
  (B) If an individual, child, or pregnant woman is receiving 
aid under part A of title IV and such aid is terminated 
pursuant to section 402(a)(43), the State may not discontinue 
medical assistance under this title for the individual, child, 
or woman until the State has determined that the individual, 
child, or woman is not eligible for assistance under this title 
on a basis other than the receipt of aid under such part.
  (11)(A) In the case of an individual who is enrolled with a 
group health plan under section 1906 and who would (but for 
this paragraph) lose eligibility for benefits under this title 
before the end of the minimum enrollment period (defined in 
subparagraph (B)), the State plan may provide, notwithstanding 
any other provision of this title, that the individual shall be 
deemed to continue to be eligible for such benefits until the 
end of such minimum period, but only with respect to such 
benefits provided to the individual as an enrollee of such 
plan.
  (B) For purposes of subparagraph (A), the term ``minimum 
enrollment period'' means, with respect to an individual's 
enrollment with a group health plan, a period established by 
the State, of not more than 6 months beginning on the date the 
individual's enrollment under the plan becomes effective.
  (12) At the option of the State, the plan may provide that an 
individual who is under an age specified by the State (not to 
exceed 19 years of age) and who is determined to be eligible 
for benefits under a State plan approved under this title under 
subsection (a)(10)(A) shall remain eligible for those benefits 
until the earlier of--
          (A) the end of a period (not to exceed 12 months) 
        following the determination; or
          (B) the time that the individual exceeds that age.
  (13) Express Lane Option.--
          (A) In general.--
                  (i) Option to use a finding from an express 
                lane agency.--At the option of the State, the 
                State plan may provide that in determining 
                eligibility under this title for a child (as 
                defined in subparagraph (G)), the State may 
                rely on a finding made within a reasonable 
                period (as determined by the State) from an 
                Express Lane agency (as defined in subparagraph 
                (F)) when it determines whether a child 
                satisfies one or more components of eligibility 
                for medical assistance under this title. The 
                State may rely on a finding from an Express 
                Lane agency notwithstanding sections 
                1902(a)(46)(B) and 1137(d) or any differences 
                in budget unit, disregard, deeming or other 
                methodology, if the following requirements are 
                met:
                          (I) Prohibition on determining 
                        children ineligible for coverage.--If a 
                        finding from an Express Lane agency 
                        would result in a determination that a 
                        child does not satisfy an eligibility 
                        requirement for medical assistance 
                        under this title and for child health 
                        assistance under title XXI, the State 
                        shall determine eligibility for 
                        assistance using its regular 
                        procedures.
                          (II) Notice requirement.--For any 
                        child who is found eligible for medical 
                        assistance under the State plan under 
                        this title or child health assistance 
                        under title XXI and who is subject to 
                        premiums based on an Express Lane 
                        agency's finding of such child's income 
                        level, the State shall provide notice 
                        that the child may qualify for lower 
                        premium payments if evaluated by the 
                        State using its regular policies and of 
                        the procedures for requesting such an 
                        evaluation.
                          (III) Compliance with screen and 
                        enroll requirement.--The State shall 
                        satisfy the requirements under 
                        subparagraphs (A) and (B) of section 
                        2102(b)(3) (relating to screen and 
                        enroll) before enrolling a child in 
                        child health assistance under title 
                        XXI. At its option, the State may 
                        fulfill such requirements in accordance 
                        with either option provided under 
                        subparagraph (C) of this paragraph.
                          (IV) Verification of citizenship or 
                        nationality status.--The State shall 
                        satisfy the requirements of section 
                        1902(a)(46)(B) or 2105(c)(9), as 
                        applicable for verifications of 
                        citizenship or nationality status.
                          (V) Coding.--The State meets the 
                        requirements of subparagraph (E).
                  (ii) Option to apply to renewals and 
                redeterminations.--The State may apply the 
                provisions of this paragraph when conducting 
                initial determinations of eligibility, 
                redeterminations of eligibility, or both, as 
                described in the State plan.
          (B) Rules of construction.--Nothing in this paragraph 
        shall be construed--
                  (i) to limit or prohibit a State from taking 
                any actions otherwise permitted under this 
                title or title XXI in determining eligibility 
                for or enrolling children into medical 
                assistance under this title or child health 
                assistance under title XXI; or
                  (ii) to modify the limitations in section 
                1902(a)(5) concerning the agencies that may 
                make a determination of eligibility for medical 
                assistance under this title.
          (C) Options for satisfying the screen and enroll 
        requirement.--
                  (i) In general.--With respect to a child 
                whose eligibility for medical assistance under 
                this title or for child health assistance under 
                title XXI has been evaluated by a State agency 
                using an income finding from an Express Lane 
                agency, a State may carry out its duties under 
                subparagraphs (A) and (B) of section 2102(b)(3) 
                (relating to screen and enroll) in accordance 
                with either clause (ii) or clause (iii).
                  (ii) Establishing a screening threshold.--
                          (I) In general.--Under this clause, 
                        the State establishes a screening 
                        threshold set as a percentage of the 
                        Federal poverty level that exceeds the 
                        highest income threshold applicable 
                        under this title to the child by a 
                        minimum of 30 percentage points or, at 
                        State option, a higher number of 
                        percentage points that reflects the 
                        value (as determined by the State and 
                        described in the State plan) of any 
                        differences between income 
                        methodologies used by the program 
                        administered by the Express Lane agency 
                        and the methodologies used by the State 
                        in determining eligibility for medical 
                        assistance under this title.
                          (II) Children with income not above 
                        threshold.--If the income of a child 
                        does not exceed the screening 
                        threshold, the child is deemed to 
                        satisfy the income eligibility criteria 
                        for medical assistance under this title 
                        regardless of whether such child would 
                        otherwise satisfy such criteria.
                          (III) Children with income above 
                        threshold.--If the income of a child 
                        exceeds the screening threshold, the 
                        child shall be considered to have an 
                        income above the Medicaid applicable 
                        income level described in section 
                        2110(b)(4) and to satisfy the 
                        requirement under section 2110(b)(1)(C) 
                        (relating to the requirement that CHIP 
                        matching funds be used only for 
                        children not eligible for Medicaid). If 
                        such a child is enrolled in child 
                        health assistance under title XXI, the 
                        State shall provide the parent, 
                        guardian, or custodial relative with 
                        the following:
                                  (aa) Notice that the child 
                                may be eligible to receive 
                                medical assistance under the 
                                State plan under this title if 
                                evaluated for such assistance 
                                under the State's regular 
                                procedures and notice of the 
                                process through which a parent, 
                                guardian, or custodial relative 
                                can request that the State 
                                evaluate the child's 
                                eligibility for medical 
                                assistance under this title 
                                using such regular procedures.
                                  (bb) A description of 
                                differences between the medical 
                                assistance provided under this 
                                title and child health 
                                assistance under title XXI, 
                                including differences in cost-
                                sharing requirements and 
                                covered benefits.
                  (iii) Temporary enrollment in chip pending 
                screen and enroll.--
                          (I) In general.--Under this clause, a 
                        State enrolls a child in child health 
                        assistance under title XXI for a 
                        temporary period if the child appears 
                        eligible for such assistance based on 
                        an income finding by an Express Lane 
                        agency.
                          (II) Determination of eligibility.--
                        During such temporary enrollment 
                        period, the State shall determine the 
                        child's eligibility for child health 
                        assistance under title XXI or for 
                        medical assistance under this title in 
                        accordance with this clause.
                          (III) Prompt follow up.--In making 
                        such a determination, the State shall 
                        take prompt action to determine whether 
                        the child should be enrolled in medical 
                        assistance under this title or child 
                        health assistance under title XXI 
                        pursuant to subparagraphs (A) and (B) 
                        of section 2102(b)(3) (relating to 
                        screen and enroll).
                          (IV) Requirement for simplified 
                        determination.--In making such a 
                        determination, the State shall use 
                        procedures that, to the maximum 
                        feasible extent, reduce the burden 
                        imposed on the individual of such 
                        determination. Such procedures may not 
                        require the child's parent, guardian, 
                        or custodial relative to provide or 
                        verify information that already has 
                        been provided to the State agency by an 
                        Express Lane agency or another source 
                        of information unless the State agency 
                        has reason to believe the information 
                        is erroneous.
                          (V) Availability of chip matching 
                        funds during temporary enrollment 
                        period.--Medical assistance for items 
                        and services that are provided to a 
                        child enrolled in title XXI during a 
                        temporary enrollment period under this 
                        clause shall be treated as child health 
                        assistance under such title.
          (D) Option for automatic enrollment.--
                  (i) In general.--The State may initiate and 
                determine eligibility for medical assistance 
                under the State Medicaid plan or for child 
                health assistance under the State CHIP plan 
                without a program application from, or on 
                behalf of, the child based on data obtained 
                from sources other than the child (or the 
                child's family), but a child can only be 
                automatically enrolled in the State Medicaid 
                plan or the State CHIP plan if the child or the 
                family affirmatively consents to being enrolled 
                through affirmation in writing, by telephone, 
                orally, through electronic signature, or 
                through any other means specified by the 
                Secretary or by signature on an Express Lane 
                agency application, if the requirement of 
                clause (ii) is met.
                  (ii) Information requirement.--The 
                requirement of this clause is that the State 
                informs the parent, guardian, or custodial 
                relative of the child of the services that will 
                be covered, appropriate methods for using such 
                services, premium or other cost sharing charges 
                (if any) that apply, medical support 
                obligations (under section 1912(a)) created by 
                enrollment (if applicable), and the actions the 
                parent, guardian, or relative must take to 
                maintain enrollment and renew coverage.
          (E) Coding; application to enrollment error rates.--
                  (i) In general.--For purposes of subparagraph 
                (A)(iv), the requirement of this subparagraph 
                for a State is that the State agrees to--
                          (I) assign such codes as the 
                        Secretary shall require to the children 
                        who are enrolled in the State Medicaid 
                        plan or the State CHIP plan through 
                        reliance on a finding made by an 
                        Express Lane agency for the duration of 
                        the State's election under this 
                        paragraph;
                          (II) annually provide the Secretary 
                        with a statistically valid sample (that 
                        is approved by Secretary) of the 
                        children enrolled in such plans through 
                        reliance on such a finding by 
                        conducting a full Medicaid eligibility 
                        review of the children identified for 
                        such sample for purposes of determining 
                        an eligibility error rate (as described 
                        in clause (iv)) with respect to the 
                        enrollment of such children (and shall 
                        not include such children in any data 
                        or samples used for purposes of 
                        complying with a Medicaid Eligibility 
                        Quality Control (MEQC) review or a 
                        payment error rate measurement (PERM) 
                        requirement);
                          (III) submit the error rate 
                        determined under subclause (II) to the 
                        Secretary;
                          (IV) if such error rate exceeds 3 
                        percent for either of the first 2 
                        fiscal years in which the State elects 
                        to apply this paragraph, demonstrate to 
                        the satisfaction of the Secretary the 
                        specific corrective actions implemented 
                        by the State to improve upon such error 
                        rate; and
                          (V) if such error rate exceeds 3 
                        percent for any fiscal year in which 
                        the State elects to apply this 
                        paragraph, a reduction in the amount 
                        otherwise payable to the State under 
                        section 1903(a) for quarters for that 
                        fiscal year, equal to the total amount 
                        of erroneous excess payments determined 
                        for the fiscal year only with respect 
                        to the children included in the sample 
                        for the fiscal year that are in excess 
                        of a 3 percent error rate with respect 
                        to such children.
                  (ii) No punitive action based on error 
                rate.--The Secretary shall not apply the error 
                rate derived from the sample under clause (i) 
                to the entire population of children enrolled 
                in the State Medicaid plan or the State CHIP 
                plan through reliance on a finding made by an 
                Express Lane agency, or to the population of 
                children enrolled in such plans on the basis of 
                the State's regular procedures for determining 
                eligibility, or penalize the State on the basis 
                of such error rate in any manner other than the 
                reduction of payments provided for under clause 
                (i)(V).
                  (iii) Rule of construction.--Nothing in this 
                paragraph shall be construed as relieving a 
                State that elects to apply this paragraph from 
                being subject to a penalty under section 
                1903(u), for payments made under the State 
                Medicaid plan with respect to ineligible 
                individuals and families that are determined to 
                exceed the error rate permitted under that 
                section (as determined without regard to the 
                error rate determined under clause (i)(II)).
                  (iv) Error rate defined.--In this 
                subparagraph, the term ``error rate'' means the 
                rate of erroneous excess payments for medical 
                assistance (as defined in section 
                1903(u)(1)(D)) for the period involved, except 
                that such payments shall be limited to 
                individuals for which eligibility 
                determinations are made under this paragraph 
                and except that in applying this paragraph 
                under title XXI, there shall be substituted for 
                references to provisions of this title 
                corresponding provisions within title XXI.
          (F) Express lane agency.--
                  (i) In general.--In this paragraph, the term 
                ``Express Lane agency'' means a public agency 
                that--
                          (I) is determined by the State 
                        Medicaid agency or the State CHIP 
                        agency (as applicable) to be capable of 
                        making the determinations of one or 
                        more eligibility requirements described 
                        in subparagraph (A)(i);
                          (II) is identified in the State 
                        Medicaid plan or the State CHIP plan; 
                        and
                          (III) notifies the child's family--
                                  (aa) of the information which 
                                shall be disclosed in 
                                accordance with this paragraph;
                                  (bb) that the information 
                                disclosed will be used solely 
                                for purposes of determining 
                                eligibility for medical 
                                assistance under the State 
                                Medicaid plan or for child 
                                health assistance under the 
                                State CHIP plan; and
                                  (cc) that the family may 
                                elect to not have the 
                                information disclosed for such 
                                purposes; and
                          (IV) enters into, or is subject to, 
                        an interagency agreement to limit the 
                        disclosure and use of the information 
                        disclosed.
                  (ii) Inclusion of specific public agencies 
                and indian tribes and tribal organizations.--
                Such term includes the following:
                          (I) A public agency that determines 
                        eligibility for assistance under any of 
                        the following:
                                  (aa) The temporary assistance 
                                for needy families program 
                                funded under part A of title 
                                IV.
                                  (bb) A State program funded 
                                under part D of title IV.
                                  (cc) The State Medicaid plan.
                                  (dd) The State CHIP plan.
                                  (ee) The Food and Nutrition 
                                Act of 2008 (7 U.S.C. 2011 et 
                                seq.).
                                  (ff) The Head Start Act (42 
                                U.S.C. 9801 et seq.).
                                  (gg) The Richard B. Russell 
                                National School Lunch Act (42 
                                U.S.C. 1751 et seq.).
                                  (hh) The Child Nutrition Act 
                                of 1966 (42 U.S.C. 1771 et 
                                seq.).
                                  (ii) The Child Care and 
                                Development Block Grant Act of 
                                1990 (42 U.S.C. 9858 et seq.).
                                  (jj) The Stewart B. McKinney 
                                Homeless Assistance Act (42 
                                U.S.C. 11301 et seq.).
                                  (kk) The United States 
                                Housing Act of 1937 (42 U.S.C. 
                                1437 et seq.).
                                  (ll) The Native American 
                                Housing Assistance and Self-
                                Determination Act of 1996 (25 
                                U.S.C. 4101 et seq.).
                          (II) A State-specified governmental 
                        agency that has fiscal liability or 
                        legal responsibility for the accuracy 
                        of the eligibility determination 
                        findings relied on by the State.
                          (III) A public agency that is subject 
                        to an interagency agreement limiting 
                        the disclosure and use of the 
                        information disclosed for purposes of 
                        determining eligibility under the State 
                        Medicaid plan or the State CHIP plan.
                          (IV)\13\ The Indian Health Service, 
                        an Indian Tribe, Tribal Organization, 
                        or Urban Indian Organization (as 
                        defined in section 1139(c)).
---------------------------------------------------------------------------
    \13\Margin for subclause (IV) so in law. See amendment made by 
section 2901(c)(2) of Public Law 111-148 which added this new 
subclause.
---------------------------------------------------------------------------
                  (iii) Exclusions.--Such term does not include 
                an agency that determines eligibility for a 
                program established under the Social Services 
                Block Grant established under title XX or a 
                private, for-profit organization.
                  (iv) Rules of construction.--Nothing in this 
                paragraph shall be construed as--
                          (I) exempting a State Medicaid agency 
                        from complying with the requirements of 
                        section 1902(a)(4) relating to merit-
                        based personnel standards for employees 
                        of the State Medicaid agency and 
                        safeguards against conflicts of 
                        interest); or
                          (II) authorizing a State Medicaid 
                        agency that elects to use Express Lane 
                        agencies under this subparagraph to use 
                        the Express Lane option to avoid 
                        complying with such requirements for 
                        purposes of making eligibility 
                        determinations under the State Medicaid 
                        plan.
                  (v) Additional definitions.--In this 
                paragraph:
                          (I) State.--The term ``State'' means 
                        1 of the 50 States or the District of 
                        Columbia.
                          (II) State chip agency.--The term 
                        ``State CHIP agency'' means the State 
                        agency responsible for administering 
                        the State CHIP plan.
                          (III) State chip plan.--The term 
                        ``State CHIP plan'' means the State 
                        child health plan established under 
                        title XXI and includes any waiver of 
                        such plan.
                          (IV) State medicaid agency.--The term 
                        ``State Medicaid agency'' means the 
                        State agency responsible for 
                        administering the State Medicaid plan.
                          (V) State medicaid plan.--The term 
                        ``State Medicaid plan'' means the State 
                        plan established under title XIX and 
                        includes any waiver of such plan.
          (G) Child defined.--For purposes of this paragraph, 
        the term ``child'' means an individual under 19 years 
        of age, or, at the option of a State, such higher age, 
        not to exceed 21 years of age, as the State may elect.
          (H) State option to rely on state income tax data or 
        return.--At the option of the State, a finding from an 
        Express Lane agency may include gross income or 
        adjusted gross income shown by State income tax records 
        or returns.
          (I) Application.--This paragraph shall not apply with 
        respect to eligibility determinations made after 
        September 30, 2017.
          (14)\14\ Income determined using modified adjusted 
        gross income.--
---------------------------------------------------------------------------
    \14\There is another paragraph designated as paragraph (14) that 
appears in a note after this paragraph (14) that was added by section 
3(c)(1) of Public Law 111-255.
---------------------------------------------------------------------------
                  (A) In general.--Notwithstanding subsection 
                (r) or any other provision of this title, 
                except as provided in subparagraph (D), for 
                purposes of determining income eligibility for 
                medical assistance under the State plan or 
                under any waiver of such plan and for any other 
                purpose applicable under the plan or waiver for 
                which a determination of income is required, 
                including with respect to the imposition of 
                premiums and cost-sharing, a State shall use 
                the modified adjusted gross income of an 
                individual and, in the case of an individual in 
                a family greater than 1, the household income 
                of such family. A State shall establish income 
                eligibility thresholds for populations to be 
                eligible for medical assistance under the State 
                plan or a waiver of the plan using modified 
                adjusted gross income and household income that 
                are not less than the effective income 
                eligibility levels that applied under the State 
                plan or waiver on the date of enactment of the 
                Patient Protection and Affordable Care Act. For 
                purposes of complying with the maintenance of 
                effort requirements under subsection (gg) 
                during the transition to modified adjusted 
                gross income and household income, a State 
                shall, working with the Secretary, establish an 
                equivalent income test that ensures individuals 
                eligible for medical assistance under the State 
                plan or under a waiver of the plan on the date 
                of enactment of the Patient Protection and 
                Affordable Care Act, do not lose coverage under 
                the State plan or under a waiver of the plan. 
                The Secretary may waive such provisions of this 
                title and title XXI as are necessary to ensure 
                that States establish income and eligibility 
                determination systems that protect 
                beneficiaries.
                  (B) No income or expense disregards.--Subject 
                to subparagraph (I), no type of expense, block, 
                or other income disregard shall be applied by a 
                State to determine income eligibility for 
                medical assistance under the State plan or 
                under any waiver of such plan or for any other 
                purpose applicable under the plan or waiver for 
                which a determination of income is required.
                  (C) No assets test.--A State shall not apply 
                any assets or resources test for purposes of 
                determining eligibility for medical assistance 
                under the State plan or under a waiver of the 
                plan.
                  (D) Exceptions.--
                          (i) Individuals eligible because of 
                        other aid or assistance, elderly 
                        individuals, medically needy 
                        individuals, and individuals eligible 
                        for medicare cost-sharing.--
                        Subparagraphs (A), (B), and (C) shall 
                        not apply to the determination of 
                        eligibility under the State plan or 
                        under a waiver for medical assistance 
                        for the following:
                                  (I) Individuals who are 
                                eligible for medical assistance 
                                under the State plan or under a 
                                waiver of the plan on a basis 
                                that does not require a 
                                determination of income by the 
                                State agency administering the 
                                State plan or waiver, including 
                                as a result of eligibility for, 
                                or receipt of, other Federal or 
                                State aid or assistance, 
                                individuals who are eligible on 
                                the basis of receiving (or 
                                being treated as if receiving) 
                                supplemental security income 
                                benefits under title XVI, and 
                                individuals who are eligible as 
                                a result of being or being 
                                deemed to be a child in foster 
                                care under the responsibility 
                                of the State.
                                  (II) Individuals who have 
                                attained age 65.
                                  (III) Individuals who qualify 
                                for medical assistance under 
                                the State plan or under any 
                                waiver of such plan on the 
                                basis of being blind or 
                                disabled (or being treated as 
                                being blind or disabled) 
                                without regard to whether the 
                                individual is eligible for 
                                supplemental security income 
                                benefits under title XVI on the 
                                basis of being blind or 
                                disabled and including an 
                                individual who is eligible for 
                                medical assistance on the basis 
                                of section 1902(e)(3).
                                  (IV) Individuals described in 
                                subsection (a)(10)(C).
                                  (V) Individuals described in 
                                any clause of subsection 
                                (a)(10)(E).
                          (ii) Express lane agency findings.--
                        In the case of a State that elects the 
                        Express Lane option under paragraph 
                        (13), notwithstanding subparagraphs 
                        (A), (B), and (C), the State may rely 
                        on a finding made by an Express Lane 
                        agency in accordance with that 
                        paragraph relating to the income of an 
                        individual for purposes of determining 
                        the individual's eligibility for 
                        medical assistance under the State plan 
                        or under a waiver of the plan.
                          (iii) Medicare prescription drug 
                        subsidies determinations.--
                        Subparagraphs (A), (B), and (C) shall 
                        not apply to any determinations of 
                        eligibility for premium and cost-
                        sharing subsidies under and in 
                        accordance with section 1860D-14 made 
                        by the State pursuant to section 
                        1935(a)(2).
                          (iv) Long-term care.--Subparagraphs 
                        (A), (B), and (C) shall not apply to 
                        any determinations of eligibility of 
                        individuals for purposes of medical 
                        assistance for nursing facility 
                        services, a level of care in any 
                        institution equivalent to that of 
                        nursing facility services, home or 
                        community-based services furnished 
                        under a waiver or State plan amendment 
                        under section 1915 or a waiver under 
                        section 1115, and services described in 
                        section 1917(c)(1)(C)(ii).
                          (v) Grandfather of current enrollees 
                        until date of next regular 
                        redetermination.--An individual who, on 
                        January 1, 2014, is enrolled in the 
                        State plan or under a waiver of the 
                        plan and who would be determined 
                        ineligible for medical assistance 
                        solely because of the application of 
                        the modified adjusted gross income or 
                        household income standard described in 
                        subparagraph (A), shall remain eligible 
                        for medical assistance under the State 
                        plan or waiver (and subject to the same 
                        premiums and cost-sharing as applied to 
                        the individual on that date) through 
                        March 31, 2014, or the date on which 
                        the individual's next regularly 
                        scheduled redetermination of 
                        eligibility is to occur, whichever is 
                        later.
                  (E) Transition planning and oversight.--Each 
                State shall submit to the Secretary for the 
                Secretary's approval the income eligibility 
                thresholds proposed to be established using 
                modified adjusted gross income and household 
                income, the methodologies and procedures to be 
                used to determine income eligibility using 
                modified adjusted gross income and household 
                income and, if applicable, a State plan 
                amendment establishing an optional eligibility 
                category under subsection (a)(10)(A)(ii)(XX). 
                To the extent practicable, the State shall use 
                the same methodologies and procedures for 
                purposes of making such determinations as the 
                State used on the date of enactment of the 
                Patient Protection and Affordable Care Act. The 
                Secretary shall ensure that the income 
                eligibility thresholds proposed to be 
                established using modified adjusted gross 
                income and household income, including under 
                the eligibility category established under 
                subsection (a)(10)(A)(ii)(XX), and the 
                methodologies and procedures proposed to be 
                used to determine income eligibility, will not 
                result in children who would have been eligible 
                for medical assistance under the State plan or 
                under a waiver of the plan on the date of 
                enactment of the Patient Protection and 
                Affordable Care Act no longer being eligible 
                for such assistance.
                  (F) Limitation on secretarial authority.--The 
                Secretary shall not waive compliance with the 
                requirements of this paragraph except to the 
                extent necessary to permit a State to 
                coordinate eligibility requirements for dual 
                eligible individuals (as defined in section 
                1915(h)(2)(B)) under the State plan or under a 
                waiver of the plan and under title XVIII and 
                individuals who require the level of care 
                provided in a hospital, a nursing facility, or 
                an intermediate care facility for the mentally 
                retarded.
                  (G) Definitions of modified adjusted gross 
                income and household income.--In this 
                paragraph, the terms ``modified adjusted gross 
                income'' and ``household income'' have the 
                meanings given such terms in section 36B(d)(2) 
                of the Internal Revenue Code of 1986.
                  (H) Continued application of medicaid rules 
                regarding point-in-time income and sources of 
                income.--The requirement under this paragraph 
                for States to use modified adjusted gross 
                income and household income to determine income 
                eligibility for medical assistance under the 
                State plan or under any waiver of such plan and 
                for any other purpose applicable under the plan 
                or waiver for which a determination of income 
                is required shall not be construed as affecting 
                or limiting the application of--
                          (i) the requirement under this title 
                        and under the State plan or a waiver of 
                        the plan to determine an individual's 
                        income as of the point in time at which 
                        an application for medical assistance 
                        under the State plan or a waiver of the 
                        plan is processed; or
                          (ii) any rules established under this 
                        title or under the State plan or a 
                        waiver of the plan regarding sources of 
                        countable income.
                  (I) Treatment of portion of modified adjusted 
                gross income.--For purposes of determining the 
                income eligibility of an individual for medical 
                assistance whose eligibility is determined 
                based on the application of modified adjusted 
                gross income under subparagraph (A), the State 
                shall--
                          (i) determine the dollar equivalent 
                        of the difference between the upper 
                        income limit on eligibility for such an 
                        individual (expressed as a percentage 
                        of the poverty line) and such upper 
                        income limit increased by 5 percentage 
                        points; and
                          (ii) notwithstanding the requirement 
                        in subparagraph (A) with respect to use 
                        of modified adjusted gross income, 
                        utilize as the applicable income of 
                        such individual, in determining such 
                        income eligibility, an amount equal to 
                        the modified adjusted gross income 
                        applicable to such individual reduced 
                        by such dollar equivalent amount.
          (14)\15\ Exclusion of compensation for participation 
        in a clinical trial for testing of treatments for a 
        rare disease or condition.--The first $2,000 received 
        by an individual (who has attained 19 years of age) as 
        compensation for participation in a clinical trial 
        meeting the requirements of section 1612(b)(26) shall 
        be disregarded for purposes of determining the income 
        eligibility of such individual for medical assistance 
        under the State plan or any waiver of such plan.
---------------------------------------------------------------------------
    \15\There is another paragraph designated as paragraph (14) that 
appears in a note before this paragraph (14) that was added by section 
2002(a) of Public Law 111-148.
---------------------------------------------------------------------------
  (f) Notwithstanding any other provision of this title, except 
as provided in subsection (e) and section 1619(b)(3) and 
section 1924, except with respect to qualified disabled and 
working individuals (described in section 1905(s)), and except 
with respect to qualified medicare beneficiaries, qualified 
severely impaired individuals, and individuals described in 
subsection (m)(1), no State not eligible to participate in the 
State plan program established under title XVI shall be 
required to provide medical assistance to any aged, blind, or 
disabled individual (within the meaning of title XVI) for any 
month unless such State would be (or would have been) required 
to provide medical assistance to such individual for such month 
had its plan for medical assistance approved under this title 
and in effect on January 1, 1972, been in effect in such month, 
except that for this purpose any such individual shall be 
deemed eligible for medical assistance under such State plan if 
(in addition to meeting such other requirements as are or may 
be imposed under the State plan) the income of any such 
individual as determined in accordance with section 1903(f) 
(after deducting any supplemental security income payment and 
State supplementary payment made with respect to such 
individual, and incurred expenses for medical care as 
recognized under State law regardless of whether such expenses 
are reimbursed under another public program of the State or 
political subdivision thereof) is not in excess of the standard 
for medical assistance established under the State plan as in 
effect on January 1, 1972. In States which provide medical 
assistance to individuals pursuant to paragraph (10)(C) of 
subsection (a) of this section, an individual who is eligible 
for medical assistance by reason of the requirements of this 
section concerning the deduction of incurred medical expenses 
from income shall be considered an individual eligible for 
medical assistance under paragraph (10)(A) of that subsection 
if that individual is, or is eligible to be (1) an individual 
with respect to whom there is payable a State supplementary 
payment on the basis of which similarly situated individuals 
are eligible to receive medical assistance equal in amount, 
duration, and scope to that provided to individuals eligible 
under paragraph (10)(A), or (2) an eligible individual or 
eligible spouse, as defined in title XVI, with respect to whom 
supplemental security income benefits are payable; otherwise 
that individual shall be considered to be an individual 
eligible for medical assistance under paragraph (10)(C) of that 
subsection. In States which do not provide medical assistance 
to individuals pursuant to paragraph (10)(C) of that 
subsection, an individual who is eligible for medical 
assistance by reason of the requirements of this section 
concerning the deduction of incurred medical expenses from 
income shall be considered an individual eligible for medical 
assistance under paragraph (10)(A) of that subsection.
  (g) In addition to any other sanction available to a State, a 
State may provide for a reduction of any payment amount 
otherwise due with respect to a person who furnishes services 
under the plan in an amount equal to up to three times the 
amount of any payment sought to be collected by that person in 
violation of subsection (a)(25)(C).
  (h) Nothing in this title (including subsections (a)(13) and 
(a)(30) of this section) shall be construed as authorizing the 
Secretary to limit the amount of payment that may be made under 
a plan under this title for home and community care.
  (i)(1) In addition to any other authority under State law, 
where a State determines that a intermediate care facility for 
the mentally retarded which is certified for participation 
under its plan no longer substantially meets the requirements 
for such a facility under this title and further determines 
that the facility's deficiencies--
          (A) immediately jeopardize the health and safety of 
        its patients, the State shall provide for the 
        termination of the facility's certification for 
        participation under the plan and may provide, or
          (B) do not immediately jeopardize the health and 
        safety of its patients, the State may, in lieu of 
        providing for terminating the facility's certification 
        for participation under the plan, establish alternative 
        remedies if the State demonstrates to the Secretary's 
        satisfaction that the alternative remedies are 
        effective in deterring noncompliance and correcting 
        deficiencies, and may provide
that no payment will be made under the State plan with respect 
to any individual admitted to such facility after a date 
specified by the State.
  (2) The State shall not make such a decision with respect to 
a facility until the facility has had a reasonable opportunity, 
following the initial determination that it no longer 
substantially meets the requirements for such a facility under 
this title, to correct its deficiencies, and, following this 
period, has been given reasonable notice and opportunity for a 
hearing.
  (3) The State's decision to deny payment may be made 
effective only after such notice to the public and to the 
facility as may be provided for by the State, and its 
effectiveness shall terminate (A) when the State finds that the 
facility is in substantial compliance (or is making good faith 
efforts to achieve substantial compliance) with the 
requirements for such a facility under this title, or (B) in 
the case described in paragraph (1)(B), with the end of the 
eleventh month following the month such decision is made 
effective, whichever occurs first. If a facility to which 
clause (B) of the previous sentence applies still fails to 
substantially meet the provisions of the respective section on 
the date specified in such clause, the State shall terminate 
such facility's certification for participation under the plan 
effective with the first day of the first month following the 
month specified in such clause.
  (j) Notwithstanding any other requirement of this title, the 
Secretary may waive or modify any requirement of this title 
with respect to the medical assistance program in American 
Samoa and the Northern Mariana Islands, other than a waiver of 
the Federal medical assistance percentage, the limitation in 
section 1108(f), or the requirement that payment may be made 
for medical assistance only with respect to amounts expended by 
American Samoa or the Northern Mariana Islands for care and 
services described in a numbered paragraph of section 1905(a).
  (k)(1) The medical assistance provided to an individual 
described in subclause (VIII) of subsection (a)(10)(A)(i) shall 
consist of benchmark coverage described in section 1937(b)(1) 
or benchmark equivalent coverage described in section 
1937(b)(2). Such medical assistance shall be provided subject 
to the requirements of section 1937, without regard to whether 
a State otherwise has elected the option to provide medical 
assistance through coverage under that section, unless an 
individual described in subclause (VIII) of subsection 
(a)(10)(A)(i) is also an individual for whom, under 
subparagraph (B) of section 1937(a)(2), the State may not 
require enrollment in benchmark coverage described in 
subsection (b)(1) of section 1937 or benchmark equivalent 
coverage described in subsection (b)(2) of that section.
  (2) Beginning with the first day of any fiscal year quarter 
that begins on or after April 1, 2010, and before January 1, 
2014, a State may elect through a State plan amendment to 
provide medical assistance to individuals who would be 
described in subclause (VIII) of subsection (a)(10)(A)(i) if 
that subclause were effective before January 1, 2014. A State 
may elect to phase-in the extension of eligibility for medical 
assistance to such individuals based on income, so long as the 
State does not extend such eligibility to individuals described 
in such subclause with higher income before making individuals 
described in such subclause with lower income eligible for 
medical assistance.
  (3) If an individual described in subclause (VIII) of 
subsection (a)(10)(A)(i) is the parent of a child who is under 
19 years of age (or such higher age as the State may have 
elected) who is eligible for medical assistance under the State 
plan or under a waiver of such plan (under that subclause or 
under a State plan amendment under paragraph (2), the 
individual may not be enrolled under the State plan unless the 
individual's child is enrolled under the State plan or under a 
waiver of the plan or is enrolled in other health insurance 
coverage. For purposes of the preceding sentence, the term 
``parent'' includes an individual treated as a caretaker 
relative for purposes of carrying out section 1931.
  (l)(1) Individuals described in this paragraph are--
          (A) women during pregnancy (and during the 60-day 
        period beginning on the last day of the pregnancy),
          (B) infants under one year of age,
          (C) children who have attained one year of age but 
        have not attained 6 years of age, and
          (D) children born after September 30, 1983 (or, at 
        the option of a State, after any earlier date), who 
        have attained 6 years of age but have not attained 19 
        years of age,
who are not described in any of subclauses (I) through (III) of 
subsection (a)(10)(A)(i) and whose family income does not 
exceed the income level established by the State under 
paragraph (2) for a family size equal to the size of the 
family, including the woman, infant, or child.
  (2)(A)(i) For purposes of paragraph (1) with respect to 
individuals described in subparagraph (A) or (B) of that 
paragraph, the State shall establish an income level which is a 
percentage (not less than the percentage provided under clause 
(ii) and not more than 185 percent) of the income official 
poverty line (as defined by the Office of Management and 
Budget, and revised annually in accordance with section 673(2) 
of the Omnibus Budget Reconciliation Act of 1981) applicable to 
a family of the size involved.
  (ii) The percentage provided under this clause, with respect 
to eligibility for medical assistance on or after--
          (I) July 1, 1989, is 75 percent, or, if greater, the 
        percentage provided under clause (iii), and
          (II) April 1, 1990, 133 percent, or, if greater, the 
        percentage provided under clause (iv).
  (iii) In the case of a State which, as of the date of the 
enactment of this clause, has elected to provide, and provides, 
medical assistance to individuals described in this subsection 
or has enacted legislation authorizing, or appropriating funds, 
to provide such assistance to such individuals before July 1, 
1989, the percentage provided under clause (ii)(I) shall not be 
less than--
          (I) the percentage specified by the State in an 
        amendment to its State plan (whether approved or not) 
        as of the date of the enactment of this clause, or
          (II) if no such percentage is specified as of the 
        date of the enactment of this clause, the percentage 
        established under the State's authorizing legislation 
        or provided for under the State's appropriations;
but in no case shall this clause require the percentage 
provided under clause (ii)(I) to exceed 100 percent.
  (iv) In the case of a State which, as of the date of the 
enactment of this clause, has established under clause (i), or 
has enacted legislation authorizing, or appropriating funds, to 
provide for, a percentage (of the income official poverty line) 
that is greater than 133 percent, the percentage provided under 
clause (ii) for medical assistance on or after April 1, 1990, 
shall not be less than--
          (I) the percentage specified by the State in an 
        amendment to its State plan (whether approved or not) 
        as of the date of the enactment of this clause, or
          (II) if no such percentage is specified as of the 
        date of the enactment of this clause, the percentage 
        established under the State's authorizing legislation 
        or provided for under the State's appropriations.
  (B) For purposes of paragraph (1) with respect to individuals 
described in subparagraph (C) of such paragraph, the State 
shall establish an income level which is equal to 133 percent 
of the income official poverty line described in subparagraph 
(A) applicable to a family of the size involved.
  (C) For purposes of paragraph (1) with respect to individuals 
described in subparagraph (D) of that paragraph, the State 
shall establish an income level which is equal to 100 percent 
(or, beginning January 1, 2014, 133 percent) of the income 
official poverty line described in subparagraph (A) applicable 
to a family of the size involved.
  (3) Notwithstanding subsection (a)(17), for individuals who 
are eligible for medical assistance because of subsection 
(a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), (a)(10)(A)(i)(VII), or 
(a)(10)(A)(ii)(IX)--
          (A) application of a resource standard shall be at 
        the option of the State;
          (B) any resource standard or methodology that is 
        applied with respect to an individual described in 
        subparagraph (A) of paragraph (1) may not be more 
        restrictive than the resource standard or methodology 
        that is applied under title XVI;
          (C) any resource standard or methodology that is 
        applied with respect to an individual described in 
        subparagraph (B), (C), or (D) of paragraph (1) may not 
        be more restrictive than the corresponding methodology 
        that is applied under the State plan under part A of 
        title IV;
          (D) the income standard to be applied is the 
        appropriate income standard established under paragraph 
        (2); and
          (E) family income shall be determined in accordance 
        with the methodology employed under the State plan 
        under part A or E of title IV (except to the extent 
        such methodology is inconsistent with clause (D) of 
        subsection (a)(17)), and costs incurred for medical 
        care or for any other type of remedial care shall not 
        be taken into account.
Any different treatment provided under this paragraph for such 
individuals shall not, because of subsection (a)(17), require 
or permit such treatment for other individuals.
  (4)(A) In the case of any State which is providing medical 
assistance to its residents under a waiver granted under 
section 1115, the Secretary shall require the State to provide 
medical assistance for pregnant women and infants under age 1 
described in subsection (a)(10)(A)(i)(IV) and for children 
described in subsection (a)(10)(A)(i)(VI) or subsection 
(a)(10)(A)(i)(VII) in the same manner as the State would be 
required to provide such assistance for such individuals if the 
State had in effect a plan approved under this title.
  (B) In the case of a State which is not one of the 50 States 
or the District of Columbia, the State need not meet the 
requirement of subsection (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), 
or (a)(10)(A)(i)(VII) and, for purposes of paragraph (2)(A), 
the State may substitute for the percentage provided under 
clause (ii) of such paragraph any percentage.
  (m)(1) Individuals described in this paragraph are 
individuals--
          (A) who are 65 years of age or older or are disabled 
        individuals (as determined under section 1614(a)(3)),
          (B) whose income (as determined under section 1612 
        for purposes of the supplemental security income 
        program, except as provided in paragraph (2)(C)) does 
        not exceed an income level established by the State 
        consistent with paragraph (2)(A), and
          (C) whose resources (as determined under section 1613 
        for purposes of the supplemental security income 
        program) do not exceed (except as provided in paragraph 
        (2)(B)) the maximum amount of resources that an 
        individual may have and obtain benefits under that 
        program.
  (2)(A) The income level established under paragraph (1)(B) 
may not exceed a percentage (not more than 100 percent) of the 
official poverty line (as defined by the Office of Management 
and Budget, and revised annually in accordance with section 
673(2) of the Omnibus Budget Reconciliation Act of 1981) 
applicable to a family of the size involved.
  (B) In the case of a State that provides medical assistance 
to individuals not described in subsection (a)(10)(A) and at 
the State's option, the State may use under paragraph (1)(C) 
such resource level (which is higher than the level described 
in that paragraph) as may be applicable with respect to 
individuals described in paragraph (1)(A) who are not described 
in subsection (a)(10)(A).
  (C) The provisions of section 1905(p)(2)(D) shall apply to 
determinations of income under this subsection in the same 
manner as they apply to determinations of income under section 
1905(p).
  (3) Notwithstanding subsection (a)(17), for individuals 
described in paragraph (1) who are covered under the State plan 
by virtue of subsection (a)(10)(A)(ii)(X)--
          (A) the income standard to be applied is the income 
        standard described in paragraph (1)(B), and
          (B) except as provided in section 1612(b)(4)(B)(ii), 
        costs incurred for medical care or for any other type 
        of remedial care shall not be taken into account in 
        determining income.
Any different treatment provided under this paragraph for such 
individuals shall not, because of subsection (a)(17), require 
or permit such treatment for other individuals.
  (4) Notwithstanding subsection (a)(17), for qualified 
medicare beneficiaries described in section 1905(p)(1)--
          (A) the income standard to be applied is the income 
        standard described in section 1905(p)(1)(B), and
          (B) except as provided in section 1612(b)(4)(B)(ii), 
        costs incurred for medical care or for any other type 
        of remedial care shall not be taken into account in 
        determining income.
Any different treatment provided under this paragraph for such 
individuals shall not, because of subsection (a)(17), require 
or permit such treatment for other individuals.
  (n)(1) In the case of medical assistance furnished under this 
title for medicare cost-sharing respecting the furnishing of a 
service or item to a qualified medicare beneficiary, the State 
plan may provide payment in an amount with respect to the 
service or item that results in the sum of such payment amount 
and any amount of payment made under title XVIII with respect 
to the service or item exceeding the amount that is otherwise 
payable under the State plan for the item or service for 
eligible individuals who are not qualified medicare 
beneficiaries.
  (2) In carrying out paragraph (1), a State is not required to 
provide any payment for any expenses incurred relating to 
payment for deductibles, coinsurance, or copayments for 
medicare cost-sharing to the extent that payment under title 
XVIII for the service would exceed the payment amount that 
otherwise would be made under the State plan under this title 
for such service if provided to an eligible recipient other 
than a medicare beneficiary.
  (3) In the case in which a State's payment for medicare cost-
sharing for a qualified medicare beneficiary with respect to an 
item or service is reduced or eliminated through the 
application of paragraph (2)--
          (A) for purposes of applying any limitation under 
        title XVIII on the amount that the beneficiary may be 
        billed or charged for the service, the amount of 
        payment made under title XVIII plus the amount of 
        payment (if any) under the State plan shall be 
        considered to be payment in full for the service;
          (B) the beneficiary shall not have any legal 
        liability to make payment to a provider or to an 
        organization described in section 1903(m)(1)(A) for the 
        service; and
          (C) any lawful sanction that may be imposed upon a 
        provider or such an organization for excess charges 
        under this title or title XVIII shall apply to the 
        imposition of any charge imposed upon the individual in 
        such case.
This paragraph shall not be construed as preventing payment of 
any medicare cost-sharing by a medicare supplemental policy or 
an employer retiree health plan on behalf of an individual.
  (o) Notwithstanding any provision of subsection (a) to the 
contrary, a State plan under this title shall provide that any 
supplemental security income benefits paid by reason of 
subparagraph (E) or (G) of section 1611(e)(1) to an individual 
who--
          (1) is eligible for medical assistance under the 
        plan, and
          (2) is in a hospital, skilled nursing facility, or 
        intermediate care facility at the time such benefits 
        are paid,
will be disregarded for purposes of determining the amount of 
any post-eligibility contribution by the individual to the cost 
of the care and services provided by the hospital, skilled 
nursing facility, or intermediate care facility.
  (p)(1) In addition to any other authority, a State may 
exclude any individual or entity for purposes of participating 
under the State plan under this title for any reason for which 
the Secretary could exclude the individual or entity from 
participation in a program under title XVIII under section 
1128, 1128A, or 1866(b)(2).
  (2) In order for a State to receive payments for medical 
assistance under section 1903(a), with respect to payments the 
State makes to a medicaid managed care organization (as defined 
in section 1903(m)) or to an entity furnishing services under a 
waiver approved under section 1915(b)(1), the State must 
provide that it will exclude from participation, as such an 
organization or entity, any organization or entity that--
          (A) could be excluded under section 1128(b)(8) 
        (relating to owners and managing employees who have 
        been convicted of certain crimes or received other 
        sanctions),
          (B) has, directly or indirectly, a substantial 
        contractual relationship (as defined by the Secretary) 
        with an individual or entity that is described in 
        section 1128(b)(8)(B), or
          (C) employs or contracts with any individual or 
        entity that is excluded from participation under this 
        title under section 1128 or 1128A for the provision of 
        health care, utilization review, medical social work, 
        or administrative services or employs or contracts with 
        any entity for the provision (directly or indirectly) 
        through such an excluded individual or entity of such 
        services.
  (3) As used in this subsection, the term ``exclude'' includes 
the refusal to enter into or renew a participation agreement or 
the termination of such an agreement.
  (q)(1)(A) In order to meet the requirement of subsection 
(a)(50), the State plan must provide that, in the case of an 
institutionalized individual or couple described in 
subparagraph (B), in determining the amount of the individual's 
or couple's income to be applied monthly to payment for the 
cost of care in an institution, there shall be deducted from 
the monthly income (in addition to other allowances otherwise 
provided under the State plan) a monthly personal needs 
allowance--
          (i) which is reasonable in amount for clothing and 
        other personal needs of the individual (or couple) 
        while in an institution, and
          (ii) which is not less (and may be greater) than the 
        minimum monthly personal needs allowance described in 
        paragraph (2).
  (B) In this subsection, the term ``institutionalized 
individual or couple'' means an individual or married couple--
          (i) who is an inpatient (or who are inpatients) in a 
        medical institution or nursing facility for which 
        payments are made under this title throughout a month, 
        and
          (ii) who is or are determined to be eligible for 
        medical assistance under the State plan.
  (2) The minimum monthly personal needs allowance described in 
this paragraph is $30 for an institutionalized individual and 
$60 for an institutionalized couple (if both are aged, blind, 
or disabled, and their incomes are considered available to each 
other in determining eligibility).
  (r)(1)(A) For purposes of sections 1902(a)(17) and 
1924(d)(1)(D) and for purposes of a waiver under section 1915, 
with respect to the post-eligibility treatment of income of 
individuals who are institutionalized or receiving home or 
community-based services under such a waiver, the treatment 
described in subparagraph (B) shall apply, there shall be 
disregarded reparation payments made by the Federal Republic of 
Germany, and there shall be taken into account amounts for 
incurred expenses for medical or remedial care that are not 
subject to payment by a third party, including--
          (i) medicare and other health insurance premiums, 
        deductibles, or coinsurance, and
          (ii) necessary medical or remedial care recognized 
        under State law but not covered under the State plan 
        under this title, subject to reasonable limits the 
        State may establish on the amount of these expenses.
  (B)(i) In the case of a veteran who does not have a spouse or 
a child, if the veteran--
          (I) receives, after the veteran has been determined 
        to be eligible for medical assistance under the State 
        plan under this title, a veteran's pension in excess of 
        $90 per month, and
          (II) resides in a State veterans home with respect to 
        which the Secretary of Veterans Affairs makes per diem 
        payments for nursing home care pursuant to section 
        1741(a) of title 38, United States Code,
any such pension payment, including any payment made due to the 
need for aid and attendance, or for unreimbursed medical 
expenses, that is in excess of $90 per month shall be counted 
as income only for the purpose of applying such excess payment 
to the State veterans home's cost of providing nursing home 
care to the veteran.
  (ii) The provisions of clause (i) shall apply with respect to 
a surviving spouse of a veteran who does not have a child in 
the same manner as they apply to a veteran described in such 
clause.
  (2)(A) The methodology to be employed in determining income 
and resource eligibility for individuals under subsection 
(a)(10)(A)(i)(III), (a)(10)(A)(i)(IV), (a)(10)(A)(i)(VI), 
(a)(10)(A)(i)(VII), (a)(10)(A)(ii), (a)(10)(C)(i)(III), or (f) 
or under section 1905(p) may be less restrictive, and shall be 
no more restrictive, than the methodology--
          (i) in the case of groups consisting of aged, blind, 
        or disabled individuals, under the supplemental 
        security income program under title XVI, or
          (ii) in the case of other groups, under the State 
        plan most closely categorically related.
  (B) For purposes of this subsection and subsection (a)(10), 
methodology is considered to be ``no more restrictive'' if, 
using the methodology, additional individuals may be eligible 
for medical assistance and no individuals who are otherwise 
eligible are made ineligible for such assistance.
  (s) In order to meet the requirements of subsection (a)(55), 
the State plan must provide that payments to hospitals under 
the plan for inpatient hospital services furnished to infants 
who have not attained the age of 1 year, and to children who 
have not attained the age of 6 years and who receive such 
services in a disproportionate share hospital described in 
section 1923(b)(1), shall--
          (1) if made on a prospective basis (whether per diem, 
        per case, or otherwise) provide for an outlier 
        adjustment in payment amounts for medically necessary 
        inpatient hospital services involving exceptionally 
        high costs or exceptionally long lengths of stay,
          (2) not be limited by the imposition of day limits 
        with respect to the delivery of such services to such 
        individuals, and
          (3) not be limited by the imposition of dollar limits 
        (other than such limits resulting from prospective 
        payments as adjusted pursuant to paragraph (1)) with 
        respect to the delivery of such services to any such 
        individual who has not attained their first birthday 
        (or in the case of such an individual who is an 
        inpatient on his first birthday until such individual 
        is discharged).
  (t) Nothing in this title (including sections 1903(a) and 
1905(a)) shall be construed as authorizing the Secretary to 
deny or limit payments to a State for expenditures, for medical 
assistance for items or services, attributable to taxes of 
general applicability imposed with respect to the provision of 
such items or services.
  (u)(1) Individuals described in this paragraph are 
individuals--
          (A) who are entitled to elect COBRA continuation 
        coverage (as defined in paragraph (3)),
          (B) whose income (as determined under section 1612 
        for purposes of the supplemental security income 
        program) does not exceed 100 percent of the official 
        poverty line (as defined by the Office of Management 
        and Budget, and revised annually in accordance with 
        section 673(2) of the Omnibus Budget Reconciliation Act 
        of 1981) applicable to a family of the size involved,
          (C) whose resources (as determined under section 1613 
        for purposes of the supplemental security income 
        program) do not exceed twice the maximum amount of 
        resources that an individual may have and obtain 
        benefits under that program, and
          (D) with respect to whose enrollment for COBRA 
        continuation coverage the State has determined that the 
        savings in expenditures under this title resulting from 
        such enrollment is likely to exceed the amount of 
        payments for COBRA premiums made.
  (2) For purposes of subsection (a)(10)(F) and this 
subsection, the term ``COBRA premiums'' means the applicable 
premium imposed with respect to COBRA continuation coverage.
  (3) In this subsection, the term ``COBRA continuation 
coverage'' means coverage under a group health plan provided by 
an employer with 75 or more employees provided pursuant to 
title XXII of the Public Health Service Act, section 4980B of 
the Internal Revenue Code of 1986, or title VI of the Employee 
Retirement Income Security Act of 1974.
  (4) Notwithstanding subsection (a)(17), for individuals 
described in paragraph (1) who are covered under the State plan 
by virtue of subsection (a)(10)(A)(ii)(XI)--
          (A) the income standard to be applied is the income 
        standard described in paragraph (1)(B), and
          (B) except as provided in section 1612(b)(4)(B)(ii), 
        costs incurred for medical care or for any other type 
        of remedial care shall not be taken into account in 
        determining income.
Any different treatment provided under this paragraph for such 
individuals shall not, because of subsection (a)(10)(B) or 
(a)(17), require or permit such treatment for other 
individuals.
  (v) A State plan may provide for the making of determinations 
of disability or blindness for the purpose of determining 
eligibility for medical assistance under the State plan by the 
single State agency or its designee, and make medical 
assistance available to individuals whom it finds to be blind 
or disabled and who are determined otherwise eligible for such 
assistance during the period of time prior to which a final 
determination of disability or blindness is made by the Social 
Security Administration with respect to such an individual. In 
making such determinations, the State must apply the 
definitions of disability and blindness found in section 
1614(a) of the Social Security Act.
  (w)(1) For purposes of subsection (a)(57) and sections 
1903(m)(1)(A) and 1919(c)(2)(E), the requirement of this 
subsection is that a provider or organization (as the case may 
be) maintain written policies and procedures with respect to 
all adult individuals receiving medical care by or through the 
provider or organization--
          (A) to provide written information to each such 
        individual concerning--
                  (i) an individual's rights under State law 
                (whether statutory or as recognized by the 
                courts of the State) to make decisions 
                concerning such medical care, including the 
                right to accept or refuse medical or surgical 
                treatment and the right to formulate advance 
                directives (as defined in paragraph (3)), and
                  (ii) the provider's or organization's written 
                policies respecting the implementation of such 
                rights;
          (B) to document in the individual's medical record 
        whether or not the individual has executed an advance 
        directive;
          (C) not to condition the provision of care or 
        otherwise discriminate against an individual based on 
        whether or not the individual has executed an advance 
        directive;
          (D) to ensure compliance with requirements of State 
        law (whether statutory or as recognized by the courts 
        of the State) respecting advance directives; and
          (E) to provide (individually or with others) for 
        education for staff and the community on issues 
        concerning advance directives.
Subparagraph (C) shall not be construed as requiring the 
provision of care which conflicts with an advance directive.
  (2) The written information described in paragraph (1)(A) 
shall be provided to an adult individual--
          (A) in the case of a hospital, at the time of the 
        individual's admission as an inpatient,
          (B) in the case of a nursing facility, at the time of 
        the individual's admission as a resident,
          (C) in the case of a provider of home health care or 
        personal care services, in advance of the individual 
        coming under the care of the provider,
          (D) in the case of a hospice program, at the time of 
        initial receipt of hospice care by the individual from 
        the program, and
          (E) in the case of a medicaid managed care 
        organization, at the time of enrollment of the 
        individual with the organization.
  (3) Nothing in this section shall be construed to prohibit 
the application of a State law which allows for an objection on 
the basis of conscience for any health care provider or any 
agent of such provider which as a matter of conscience cannot 
implement an advance directive.
  (4) In this subsection, the term ``advance directive'' means 
a written instruction, such as a living will or durable power 
of attorney for health care, recognized under State law 
(whether statutory or as recognized by the courts of the State) 
and relating to the provision of such care when the individual 
is incapacitated.
  (5) For construction relating to this subsection, see section 
7 of the Assisted Suicide Funding Restriction Act of 1997 
(relating to clarification respecting assisted suicide, 
euthanasia, and mercy killing).
  (x) The Secretary shall establish a system, for 
implementation by not later than July 1, 1991, which provides 
for a unique identifier for each physician who furnishes 
services for which payment may be made under a State plan 
approved under this title.
  (y)(1) In addition to any other authority under State law, 
where a State determines that a psychiatric hospital which is 
certified for participation under its plan no longer meets the 
requirements for a psychiatric hospital (referred to in section 
1905(h)) and further finds that the hospital's deficiencies--
          (A) immediately jeopardize the health and safety of 
        its patients, the State shall terminate the hospital's 
        participation under the State plan; or
          (B) do not immediately jeopardize the health and 
        safety of its patients, the State may terminate the 
        hospital's participation under the State plan, or 
        provide that no payment will be made under the State 
        plan with respect to any individual admitted to such 
        hospital after the effective date of the finding, or 
        both.
  (2) Except as provided in paragraph (3), if a psychiatric 
hospital described in paragraph (1)(B) has not complied with 
the requirements for a psychiatric hospital under this title--
          (A) within 3 months after the date the hospital is 
        found to be out of compliance with such requirements, 
        the State shall provide that no payment will be made 
        under the State plan with respect to any individual 
        admitted to such hospital after the end of such 3-month 
        period, or
          (B) within 6 months after the date the hospital is 
        found to be out of compliance with such requirements, 
        no Federal financial participation shall be provided 
        under section 1903(a) with respect to further services 
        provided in the hospital until the State finds that the 
        hospital is in compliance with the requirements of this 
        title.
  (3) The Secretary may continue payments, over a period of not 
longer than 6 months from the date the hospital is found to be 
out of compliance with such requirements, if--
          (A) the State finds that it is more appropriate to 
        take alternative action to assure compliance of the 
        hospital with the requirements than to terminate the 
        certification of the hospital,
          (B) the State has submitted a plan and timetable for 
        corrective action to the Secretary for approval and the 
        Secretary approves the plan of corrective action, and
          (C) the State agrees to repay to the Federal 
        Government payments received under this paragraph if 
        the corrective action is not taken in accordance with 
        the approved plan and timetable.
  (z)(1) Individuals described in this paragraph are 
individuals not described in subsection (a)(10)(A)(i)--
          (A) who are infected with tuberculosis;
          (B) whose income (as determined under the State plan 
        under this title with respect to disabled individuals) 
        does not exceed the maximum amount of income a disabled 
        individual described in subsection (a)(10)(A)(i) may 
        have and obtain medical assistance under the plan; and
          (C) whose resources (as determined under the State 
        plan under this title with respect to disabled 
        individuals) do not exceed the maximum amount of 
        resources a disabled individual described in subsection 
        (a)(10)(A)(i) may have and obtain medical assistance 
        under the plan.
  (2) For purposes of subsection (a)(10), the term ``TB-related 
services'' means each of the following services relating to 
treatment of infection with tuberculosis:
          (A) Prescribed drugs.
          (B) Physicians' services and services described in 
        section 1905(a)(2).
          (C) Laboratory and X-ray services (including services 
        to confirm the presence of infection).
          (D) Clinic services and Federally-qualified health 
        center services.
          (E) Case management services (as defined in section 
        1915(g)(2)).
          (F) Services (other than room and board) designed to 
        encourage completion of regimens of prescribed drugs by 
        outpatients, including services to observe directly the 
        intake of prescribed drugs.
  (aa) Individuals described in this subsection are individuals 
who--
          (1) are not described in subsection (a)(10)(A)(i);
          (2) have not attained age 65;
          (3) have been screened for breast and cervical cancer 
        under the Centers for Disease Control and Prevention 
        breast and cervical cancer early detection program 
        established under title XV of the Public Health Service 
        Act (42 U.S.C. 300k et seq.) in accordance with the 
        requirements of section 1504 of that Act (42 U.S.C. 
        300n) and need treatment for breast or cervical cancer; 
        and
          (4) are not otherwise covered under creditable 
        coverage, as defined in section 2701(c) of the Public 
        Health Service Act (42 U.S.C. 300gg(c)), but applied 
        without regard to paragraph (1)(F) of such section.
  (bb) Payment for Services Provided by Federally-Qualified 
Health Centers and Rural Health Clinics.--
          (1) In general.--Beginning with fiscal year 2001 with 
        respect to services furnished on or after January 1, 
        2001, and each succeeding fiscal year, the State plan 
        shall provide for payment for services described in 
        section 1905(a)(2)(C) furnished by a Federally-
        qualified health center and services described in 
        section 1905(a)(2)(B) furnished by a rural health 
        clinic in accordance with the provisions of this 
        subsection.
          (2) Fiscal year 2001.--Subject to paragraph (4), for 
        services furnished on and after January 1, 2001, during 
        fiscal year 2001, the State plan shall provide for 
        payment for such services in an amount (calculated on a 
        per visit basis) that is equal to 100 percent of the 
        average of the costs of the center or clinic of 
        furnishing such services during fiscal years 1999 and 
        2000 which are reasonable and related to the cost of 
        furnishing such services, or based on such other tests 
        of reasonableness as the Secretary prescribes in 
        regulations under section 1833(a)(3), or, in the case 
        of services to which such regulations do not apply, the 
        same methodology used under section 1833(a)(3), 
        adjusted to take into account any increase or decrease 
        in the scope of such services furnished by the center 
        or clinic during fiscal year 2001.
          (3) Fiscal year 2002 and succeeding fiscal years.--
        Subject to paragraph (4), for services furnished during 
        fiscal year 2002 or a succeeding fiscal year, the State 
        plan shall provide for payment for such services in an 
        amount (calculated on a per visit basis) that is equal 
        to the amount calculated for such services under this 
        subsection for the preceding fiscal year--
                  (A) increased by the percentage increase in 
                the MEI (as defined in section 1842(i)(3)) 
                applicable to primary care services (as defined 
                in section 1842(i)(4)) for that fiscal year; 
                and
                  (B) adjusted to take into account any 
                increase or decrease in the scope of such 
                services furnished by the center or clinic 
                during that fiscal year.
          (4) Establishment of initial year payment amount for 
        new centers or clinics.--In any case in which an entity 
        first qualifies as a Federally-qualified health center 
        or rural health clinic after fiscal year 2000, the 
        State plan shall provide for payment for services 
        described in section 1905(a)(2)(C) furnished by the 
        center or services described in section 1905(a)(2)(B) 
        furnished by the clinic in the first fiscal year in 
        which the center or clinic so qualifies in an amount 
        (calculated on a per visit basis) that is equal to 100 
        percent of the costs of furnishing such services during 
        such fiscal year based on the rates established under 
        this subsection for the fiscal year for other such 
        centers or clinics located in the same or adjacent area 
        with a similar case load or, in the absence of such a 
        center or clinic, in accordance with the regulations 
        and methodology referred to in paragraph (2) or based 
        on such other tests of reasonableness as the Secretary 
        may specify. For each fiscal year following the fiscal 
        year in which the entity first qualifies as a 
        Federally-qualified health center or rural health 
        clinic, the State plan shall provide for the payment 
        amount to be calculated in accordance with paragraph 
        (3).
          (5) Administration in the case of managed care.--
                  (A) In general.--In the case of services 
                furnished by a Federally-qualified health 
                center or rural health clinic pursuant to a 
                contract between the center or clinic and a 
                managed care entity (as defined in section 
                1932(a)(1)(B)), the State plan shall provide 
                for payment to the center or clinic by the 
                State of a supplemental payment equal to the 
                amount (if any) by which the amount determined 
                under paragraphs (2), (3), and (4) of this 
                subsection exceeds the amount of the payments 
                provided under the contract.
                  (B) Payment schedule.--The supplemental 
                payment required under subparagraph (A) shall 
                be made pursuant to a payment schedule agreed 
                to by the State and the Federally-qualified 
                health center or rural health clinic, but in no 
                case less frequently than every 4 months.
          (6) Alternative payment methodologies.--
        Notwithstanding any other provision of this section, 
        the State plan may provide for payment in any fiscal 
        year to a Federally-qualified health center for 
        services described in section 1905(a)(2)(C) or to a 
        rural health clinic for services described in section 
        1905(a)(2)(B) in an amount which is determined under an 
        alternative payment methodology that--
                  (A) is agreed to by the State and the center 
                or clinic; and
                  (B) results in payment to the center or 
                clinic of an amount which is at least equal to 
                the amount otherwise required to be paid to the 
                center or clinic under this section.
  (cc)(1) Individuals described in this paragraph are 
individuals--
          (A) who are children who have not attained 19 years 
        of age and are born--
                  (i) on or after January 1, 2001 (or, at the 
                option of a State, on or after an earlier 
                date), in the case of the second, third, and 
                fourth quarters of fiscal year 2007;
                  (ii) on or after October 1, 1995 (or, at the 
                option of a State, on or after an earlier 
                date), in the case of each quarter of fiscal 
                year 2008; and
                  (iii) after October 1, 1989, in the case of 
                each quarter of fiscal year 2009 and each 
                quarter of any fiscal year thereafter;
          (B) who would be considered disabled under section 
        1614(a)(3)(C) (as determined under title XVI for 
        children but without regard to any income or asset 
        eligibility requirements that apply under such title 
        with respect to children); and
          (C) whose family income does not exceed such income 
        level as the State establishes and does not exceed--
                  (i) 300 percent of the poverty line (as 
                defined in section 2110(c)(5)) applicable to a 
                family of the size involved; or
                  (ii) such higher percent of such poverty line 
                as a State may establish, except that--
                          (I) any medical assistance provided 
                        to an individual whose family income 
                        exceeds 300 percent of such poverty 
                        line may only be provided with State 
                        funds; and
                          (II) no Federal financial 
                        participation shall be provided under 
                        section 1903(a) for any medical 
                        assistance provided to such an 
                        individual.
  (2)(A) If an employer of a parent of an individual described 
in paragraph (1) offers family coverage under a group health 
plan (as defined in section 2791(a) of the Public Health 
Service Act), the State shall--
          (i) notwithstanding section 1906, require such parent 
        to apply for, enroll in, and pay premiums for such 
        coverage as a condition of such parent's child being or 
        remaining eligible for medical assistance under 
        subsection (a)(10)(A)(ii)(XIX) if the parent is 
        determined eligible for such coverage and the employer 
        contributes at least 50 percent of the total cost of 
        annual premiums for such coverage; and
          (ii) if such coverage is obtained--
                  (I) subject to paragraph (2) of section 
                1916(h), reduce the premium imposed by the 
                State under that section in an amount that 
                reasonably reflects the premium contribution 
                made by the parent for private coverage on 
                behalf of a child with a disability; and
                  (II) treat such coverage as a third party 
                liability under subsection (a)(25).
  (B) In the case of a parent to which subparagraph (A) 
applies, a State, notwithstanding section 1906 but subject to 
paragraph (1)(C)(ii), may provide for payment of any portion of 
the annual premium for such family coverage that the parent is 
required to pay. Any payments made by the State under this 
subparagraph shall be considered, for purposes of section 
1903(a), to be payments for medical assistance.
  (dd) Electronic Transmission of Information.--If the State 
agency determining eligibility for medical assistance under 
this title or child health assistance under title XXI verifies 
an element of eligibility based on information from an Express 
Lane Agency (as defined in subsection (e)(13)(F)), or from 
another public agency, then the applicant's signature under 
penalty of perjury shall not be required as to such element. 
Any signature requirement for an application for medical 
assistance may be satisfied through an electronic signature, as 
defined in section 1710(1) of the Government Paperwork 
Elimination Act (44 U.S.C. 3504 note). The requirements of 
subparagraphs (A) and (B) of section 1137(d)(2) may be met 
through evidence in digital or electronic form.
  (ee)(1) For purposes of subsection (a)(46)(B)(ii), the 
requirements of this subsection with respect to an individual 
declaring to be a citizen or national of the United States for 
purposes of establishing eligibility under this title, are, in 
lieu of requiring the individual to present satisfactory 
documentary evidence of citizenship or nationality under 
section 1903(x) (if the individual is not described in 
paragraph (2) of that section), as follows:
          (A) The State submits the name and social security 
        number of the individual to the Commissioner of Social 
        Security as part of the program established under 
        paragraph (2).
          (B) If the State receives notice from the 
        Commissioner of Social Security that the name or social 
        security number, or the declaration of citizenship or 
        nationality, of the individual is inconsistent with 
        information in the records maintained by the 
        Commissioner--
                  (i) the State makes a reasonable effort to 
                identify and address the causes of such 
                inconsistency, including through typographical 
                or other clerical errors, by contacting the 
                individual to confirm the accuracy of the name 
                or social security number submitted or 
                declaration of citizenship or nationality and 
                by taking such additional actions as the 
                Secretary, through regulation or other 
                guidance, or the State may identify, and 
                continues to provide the individual with 
                medical assistance while making such effort; 
                and
                  (ii) in the case such inconsistency is not 
                resolved under clause (i), the State--
                          (I) notifies the individual of such 
                        fact;
                          (II) provides the individual with a 
                        period of 90 days from the date on 
                        which the notice required under 
                        subclause (I) is received by the 
                        individual to either present 
                        satisfactory documentary evidence of 
                        citizenship or nationality (as defined 
                        in section 1903(x)(3)) or resolve the 
                        inconsistency with the Commissioner of 
                        Social Security (and continues to 
                        provide the individual with medical 
                        assistance during such 90-day period); 
                        and
                          (III) disenrolls the individual from 
                        the State plan under this title within 
                        30 days after the end of such 90-day 
                        period if no such documentary evidence 
                        is presented or if such inconsistency 
                        is not resolved.
  (2)(A) Each State electing to satisfy the requirements of 
this subsection for purposes of section 1902(a)(46)(B) shall 
establish a program under which the State submits at least 
monthly to the Commissioner of Social Security for comparison 
of the name and social security number, of each individual 
newly enrolled in the State plan under this title that month 
who is not described in section 1903(x)(2) and who declares to 
be a United States citizen or national, with information in 
records maintained by the Commissioner.
  (B) In establishing the State program under this paragraph, 
the State may enter into an agreement with the Commissioner of 
Social Security--
          (i) to provide, through an on-line system or 
        otherwise, for the electronic submission of, and 
        response to, the information submitted under 
        subparagraph (A) for an individual enrolled in the 
        State plan under this title who declares to be citizen 
        or national on at least a monthly basis; or
          (ii) to provide for a determination of the 
        consistency of the information submitted with the 
        information maintained in the records of the 
        Commissioner through such other method as agreed to by 
        the State and the Commissioner and approved by the 
        Secretary, provided that such method is no more 
        burdensome for individuals to comply with than any 
        burdens that may apply under a method described in 
        clause (i).
  (C) The program established under this paragraph shall 
provide that, in the case of any individual who is required to 
submit a social security number to the State under subparagraph 
(A) and who is unable to provide the State with such number, 
shall be provided with at least the reasonable opportunity to 
present satisfactory documentary evidence of citizenship or 
nationality (as defined in section 1903(x)(3)) as is provided 
under clauses (i) and (ii) of section 1137(d)(4)(A) to an 
individual for the submittal to the State of evidence 
indicating a satisfactory immigration status.
  (3)(A) The State agency implementing the plan approved under 
this title shall, at such times and in such form as the 
Secretary may specify, provide information on the percentage 
each month that the inconsistent submissions bears to the total 
submissions made for comparison for such month. For purposes of 
this subparagraph, a name, social security number, or 
declaration of citizenship or nationality of an individual 
shall be treated as inconsistent and included in the 
determination of such percentage only if--
          (i) the information submitted by the individual is 
        not consistent with information in records maintained 
        by the Commissioner of Social Security;
          (ii) the inconsistency is not resolved by the State;
          (iii) the individual was provided with a reasonable 
        period of time to resolve the inconsistency with the 
        Commissioner of Social Security or provide satisfactory 
        documentation of citizenship status and did not 
        successfully resolve such inconsistency; and
          (iv) payment has been made for an item or service 
        furnished to the individual under this title.
  (B) If, for any fiscal year, the average monthly percentage 
determined under subparagraph (A) is greater than 3 percent--
          (i) the State shall develop and adopt a corrective 
        plan to review its procedures for verifying the 
        identities of individuals seeking to enroll in the 
        State plan under this title and to identify and 
        implement changes in such procedures to improve their 
        accuracy; and
          (ii) pay to the Secretary an amount equal to the 
        amount which bears the same ratio to the total payments 
        under the State plan for the fiscal year for providing 
        medical assistance to individuals who provided 
        inconsistent information as the number of individuals 
        with inconsistent information in excess of 3 percent of 
        such total submitted bears to the total number of 
        individuals with inconsistent information.
  (C) The Secretary may waive, in certain limited cases, all or 
part of the payment under subparagraph (B)(ii) if the State is 
unable to reach the allowable error rate despite a good faith 
effort by such State.
  (D) Subparagraphs (A) and (B) shall not apply to a State for 
a fiscal year if there is an agreement described in paragraph 
(2)(B) in effect as of the close of the fiscal year that 
provides for the submission on a real-time basis of the 
information described in such paragraph.
  (4) Nothing in this subsection shall affect the rights of any 
individual under this title to appeal any disenrollment from a 
State plan.
  (ff) Notwithstanding any other requirement of this title or 
any other provision of Federal or State law, a State shall 
disregard the following property from resources for purposes of 
determining the eligibility of an individual who is an Indian 
for medical assistance under this title:
          (1) Property, including real property and 
        improvements, that is held in trust, subject to Federal 
        restrictions, or otherwise under the supervision of the 
        Secretary of the Interior, located on a reservation, 
        including any federally recognized Indian Tribe's 
        reservation, pueblo, or colony, including former 
        reservations in Oklahoma, Alaska Native regions 
        established by the Alaska Native Claims Settlement Act, 
        and Indian allotments on or near a reservation as 
        designated and approved by the Bureau of Indian Affairs 
        of the Department of the Interior.
          (2) For any federally recognized Tribe not described 
        in paragraph (1), property located within the most 
        recent boundaries of a prior Federal reservation.
          (3) Ownership interests in rents, leases, royalties, 
        or usage rights related to natural resources (including 
        extraction of natural resources or harvesting of 
        timber, other plants and plant products, animals, fish, 
        and shellfish) resulting from the exercise of federally 
        protected rights.
          (4) Ownership interests in or usage rights to items 
        not covered by paragraphs (1) through (3) that have 
        unique religious, spiritual, traditional, or cultural 
        significance or rights that support subsistence or a 
        traditional lifestyle according to applicable tribal 
        law or custom.
  (gg) Maintenance of Effort.--
          (1) General requirement to maintain eligibility 
        standards until state exchange is fully operational.--
        Subject to the succeeding paragraphs of this 
        subsection, during the period that begins on the date 
        of enactment of the Patient Protection and Affordable 
        Care Act and ends on the date on which the Secretary 
        determines that an Exchange established by the State 
        under section 1311 of the Patient Protection and 
        Affordable Care Act is fully operational, as a 
        condition for receiving any Federal payments under 
        section 1903(a) for calendar quarters occurring during 
        such period, a State shall not have in effect 
        eligibility standards, methodologies, or procedures 
        under the State plan under this title or under any 
        waiver of such plan that is in effect during that 
        period, that are more restrictive than the eligibility 
        standards, methodologies, or procedures, respectively, 
        under the plan or waiver that are in effect on the date 
        of enactment of the Patient Protection and Affordable 
        Care Act.
          (2) Continuation of eligibility standards for 
        children until october 1, 2019.--The requirement under 
        paragraph (1) shall continue to apply to a State 
        through September 30, 2019, with respect to the 
        eligibility standards, methodologies, and procedures 
        under the State plan under this title or under any 
        waiver of such plan that are applicable to determining 
        the eligibility for medical assistance of any child who 
        is under 19 years of age (or such higher age as the 
        State may have elected).
          (3) Nonapplication.--During the period that begins on 
        January 1, 2011, and ends on December 31, 2013, the 
        requirement under paragraph (1) shall not apply to a 
        State with respect to nonpregnant, nondisabled adults 
        who are eligible for medical assistance under the State 
        plan or under a waiver of the plan at the option of the 
        State and whose income exceeds 133 percent of the 
        poverty line (as defined in section 2110(c)(5)) 
        applicable to a family of the size involved if, on or 
        after December 31, 2010, the State certifies to the 
        Secretary that, with respect to the State fiscal year 
        during which the certification is made, the State has a 
        budget deficit, or with respect to the succeeding State 
        fiscal year, the State is projected to have a budget 
        deficit. Upon submission of such a certification to the 
        Secretary, the requirement under paragraph (1) shall 
        not apply to the State with respect to any remaining 
        portion of the period described in the preceding 
        sentence.
          (4) Determination of compliance.--
                  (A) States shall apply modified adjusted 
                gross income.--A State's determination of 
                income in accordance with subsection (e)(14) 
                shall not be considered to be eligibility 
                standards, methodologies, or procedures that 
                are more restrictive than the standards, 
                methodologies, or procedures in effect under 
                the State plan or under a waiver of the plan on 
                the date of enactment of the Patient Protection 
                and Affordable Care Act for purposes of 
                determining compliance with the requirements of 
                paragraph (1), (2), or (3).
                  (B) States may expand eligibility or move 
                waivered populations into coverage under the 
                state plan.--With respect to any period 
                applicable under paragraph (1), (2), or (3), a 
                State that applies eligibility standards, 
                methodologies, or procedures under the State 
                plan under this title or under any waiver of 
                the plan that are less restrictive than the 
                eligibility standards, methodologies, or 
                procedures, applied under the State plan or 
                under a waiver of the plan on the date of 
                enactment of the Patient Protection and 
                Affordable Care Act, or that makes individuals 
                who, on such date of enactment, are eligible 
                for medical assistance under a waiver of the 
                State plan, after such date of enactment 
                eligible for medical assistance through a State 
                plan amendment with an income eligibility level 
                that is not less than the income eligibility 
                level that applied under the waiver, or as a 
                result of the application of subclause (VIII) 
                of section 1902(a)(10)(A)(i), shall not be 
                considered to have in effect eligibility 
                standards, methodologies, or procedures that 
                are more restrictive than the standards, 
                methodologies, or procedures in effect under 
                the State plan or under a waiver of the plan on 
                the date of enactment of the Patient Protection 
                and Affordable Care Act for purposes of 
                determining compliance with the requirements of 
                paragraph (1), (2), or (3).
  (hh)(1) A State may elect to phase-in the extension of 
eligibility for medical assistance to individuals described in 
subclause (XX) of subsection (a)(10)(A)(ii) based on the 
categorical group (including nonpregnant childless adults) or 
income, so long as the State does not extend such eligibility 
to individuals described in such subclause with higher income 
before making individuals described in such subclause with 
lower income eligible for medical assistance.
  (2) If an individual described in subclause (XX) of 
subsection (a)(10)(A)(ii) is the parent of a child who is under 
19 years of age (or such higher age as the State may have 
elected) who is eligible for medical assistance under the State 
plan or under a waiver of such plan, the individual may not be 
enrolled under the State plan unless the individual's child is 
enrolled under the State plan or under a waiver of the plan or 
is enrolled in other health insurance coverage. For purposes of 
the preceding sentence, the term ``parent'' includes an 
individual treated as a caretaker relative for purposes of 
carrying out section 1931.
  (ii)(1) Individuals described in this subsection are 
individuals--
                  (A) whose income does not exceed an income 
                eligibility level established by the State that 
                does not exceed the highest income eligibility 
                level established under the State plan under 
                this title (or under its State child health 
                plan under title XXI) for pregnant women; and
                  (B) who are not pregnant.
          (2) At the option of a State, individuals described 
        in this subsection may include individuals who, had 
        individuals applied on or before January 1, 2007, would 
        have been made eligible pursuant to the standards and 
        processes imposed by that State for benefits described 
        in clause (XVI) of the matter following subparagraph 
        (G) of section subsection (a)(10) pursuant to a waiver 
        granted under section 1115.
          (3) At the option of a State, for purposes of 
        subsection (a)(17)(B), in determining eligibility for 
        services under this subsection, the State may consider 
        only the income of the applicant or recipient.
  (jj) Primary Care Services Defined.--For purposes of 
subsection (a)(13)(C), the term ``primary care services'' 
means--
          (1) evaluation and management services that are 
        procedure codes (for services covered under title 
        XVIII) for services in the category designated 
        Evaluation and Management in the Healthcare Common 
        Procedure Coding System (established by the Secretary 
        under section 1848(c)(5) as of December 31, 2009, and 
        as subsequently modified); and
          (2) services related to immunization administration 
        for vaccines and toxoids for which CPT codes 90465, 
        90466, 90467, 90468, 90471, 90472, 90473, or 90474 (as 
        subsequently modified) apply under such System.
  (kk) Provider and Supplier Screening, Oversight, and 
Reporting Requirements.--For purposes of subsection (a)(77), 
the requirements of this subsection are the following:
          (1) Screening.--The State complies with the process 
        for screening providers and suppliers under this title, 
        as established by the Secretary under section 
        1886(j)(2).
          (2) Provisional period of enhanced oversight for new 
        providers and suppliers.--The State complies with 
        procedures to provide for a provisional period of 
        enhanced oversight for new providers and suppliers 
        under this title, as established by the Secretary under 
        section 1886(j)(3).
          (3) Disclosure requirements.--The State requires 
        providers and suppliers under the State plan or under a 
        waiver of the plan to comply with the disclosure 
        requirements established by the Secretary under section 
        1886(j)(4).
          (4) Temporary moratorium on enrollment of new 
        providers or suppliers.--
                  (A) Temporary moratorium imposed by the 
                secretary.--
                          (i) In general.--Subject to clause 
                        (ii), the State complies with any 
                        temporary moratorium on the enrollment 
                        of new providers or suppliers imposed 
                        by the Secretary under section 
                        1886(j)(6).
                          (ii) Exception.--A State shall not be 
                        required to comply with a temporary 
                        moratorium described in clause (i) if 
                        the State determines that the 
                        imposition of such temporary moratorium 
                        would adversely impact beneficiaries' 
                        access to medical assistance.
                  (B) Moratorium on enrollment of providers and 
                suppliers.--At the option of the State, the 
                State imposes, for purposes of entering into 
                participation agreements with providers or 
                suppliers under the State plan or under a 
                waiver of the plan, periods of enrollment 
                moratoria, or numerical caps or other limits, 
                for providers or suppliers identified by the 
                Secretary as being at high-risk for fraud, 
                waste, or abuse as necessary to combat fraud, 
                waste, or abuse, but only if the State 
                determines that the imposition of any such 
                period, cap, or other limits would not 
                adversely impact beneficiaries' access to 
                medical assistance.
          (5) Compliance programs.--The State requires 
        providers and suppliers under the State plan or under a 
        waiver of the plan to establish, in accordance with the 
        requirements of section 1866(j)(7), a compliance 
        program that contains the core elements established 
        under subparagraph (B) of that section 1866(j)(7) for 
        providers or suppliers within a particular industry or 
        category.
          (6) Reporting of adverse provider actions.--The State 
        complies with the national system for reporting 
        criminal and civil convictions, sanctions, negative 
        licensure actions, and other adverse provider actions 
        to the Secretary, through the Administrator of the 
        Centers for Medicare & Medicaid Services, in accordance 
        with regulations of the Secretary.
          (7) Enrollment and npi of ordering or referring 
        providers.--The State requires--
                  (A) all ordering or referring physicians or 
                other professionals to be enrolled under the 
                State plan or under a waiver of the plan as a 
                participating provider; and
                  (B) the national provider identifier of any 
                ordering or referring physician or other 
                professional to be specified on any claim for 
                payment that is based on an order or referral 
                of the physician or other professional.
          (8) Other state oversight.--Nothing in this 
        subsection shall be interpreted to preclude or limit 
        the ability of a State to engage in provider and 
        supplier screening or enhanced provider and supplier 
        oversight activities beyond those required by the 
        Secretary.
                           payment to states
  Sec. 1903. (a) From the sums appropriated therefor, the 
Secretary (except as otherwise provided in this section) shall 
pay to each State which has a plan approved under this title, 
for each quarter, beginning with the quarter commencing January 
1, 1966--
          (1) an amount equal to the Federal medical assistance 
        percentage (as defined in section 1905(b), subject to 
        subsections (g) and (j) of this section and subsection 
        1923(f)) of the total amount expended during such 
        quarter as medical assistance under the State plan; 
        plus
          (2)(A) an amount equal to 75 per centum of so much of 
        the sums expended during such quarter (as found 
        necessary by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to compensation or training of skilled professional 
        medical personnel, and staff directly supporting such 
        personnel, of the State agency or any other public 
        agency; plus
          (B) notwithstanding paragraph (1) or subparagraph 
        (A), with respect to amounts expended for nursing aide 
        training and competency evaluation programs, and 
        competency evaluation programs, described in section 
        1919(e)(1) (including the costs for nurse aides to 
        complete such competency evaluation programs), 
        regardless of whether the programs are provided in or 
        outside nursing facilities or of the skill of the 
        personnel involved in such programs, an amount equal to 
        50 percent (or, for calendar quarters beginning on or 
        after July 1, 1988, and before October 1, 1990, the 
        lesser of 90 percent or the Federal medical assistance 
        percentage plus 25 percentage points) of so much of the 
        sums expended during such quarter (as found necessary 
        by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to such programs; plus
          (C) an amount equal to 75 percent of so much of the 
        sums expended during such quarter (as found necessary 
        by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to preadmission screening and resident review 
        activities conducted by the State under section 
        1919(e)(7); plus
          (D) for each calendar quarter during--
                  (i) fiscal year 1991, an amount equal to 90 
                percent,
                  (ii) fiscal year 1992, an amount equal to 85 
                percent,
                  (iii) fiscal year 1993, an amount equal to 80 
                percent, and
                  (iv) fiscal year 1994 and thereafter, an 
                amount equal to 75 percent,
        of so much of the sums expended during such quarter (as 
        found necessary by the Secretary for the proper and 
        efficient administration of the State plan) as are 
        attributable to State activities under section 1919(g); 
        plus
          (E) an amount equal to 75 percent of so much of the 
        sums expended during such quarter (as found necessary 
        by the Secretary for the proper and efficient 
        administration of the State plan) as are attributable 
        to translation or interpretation services in connection 
        with the enrollment of, retention of, and use of 
        services under this title by, children of families for 
        whom English is not the primary language; plus
          (3) an amount equal to--
                  (A)(i) 90 per centum of so much of the sums 
                expended during such quarter as are 
                attributable to the design, development, or 
                installation of such mechanized claims 
                processing and information retrieval systems as 
                the Secretary determines are likely to provide 
                more efficient, economical, and effective 
                administration of the plan and to be compatible 
                with the claims processing and information 
                retrieval systems utilized in the 
                administration of title XVIII, including the 
                State's share of the cost of installing such a 
                system to be used jointly in the administration 
                of such State's plan and the plan of any other 
                State approved under this title,
                  (ii) 90 per centum of so much of the sums 
                expended during any such quarter in the fiscal 
                year ending June 30, 1972, or the fiscal year 
                ending June 30, 1973, as are attributable to 
                the design, development, or installation of 
                cost determination systems for State-owned 
                general hospitals (except that the total amount 
                paid to all States under this clause for either 
                such fiscal year shall not exceed $150,000), 
                and
                  (iii) an amount equal to the Federal medical 
                assistance percentage (as defined in section 
                1905(b)) of so much of the sums expended during 
                such quarter (as found necessary by the 
                Secretary for the proper and efficient 
                administration of the State plan) as are 
                attributable to such developments or 
                modifications of systems of the type described 
                in clause (i) as are necessary for the 
                efficient collection and reporting on child 
                health measures; and
                  (B) 75 per centum of so much of the sums 
                expended during such quarter as are 
                attributable to the operation of systems 
                (whether such systems are operated directly by 
                the State or by another person under a contract 
                with the State) of the type described in 
                subparagraph (A)(i) (whether or not designed, 
                developed, or installed with assistance under 
                such subparagraph) which are approved by the 
                Secretary and which include provision for 
                prompt written notice to each individual who is 
                furnished services covered by the plan, or to 
                each individual in a sample group of 
                individuals who are furnished such services, of 
                the specific services (other than confidential 
                services) so covered, the name of the person or 
                persons furnishing the services, the date or 
                dates on which the services were furnished, and 
                the amount of the payment or payments made 
                under the plan on account of the services; and
                  (C)(i) 75 per centum of the sums expended 
                with respect to costs incurred during such 
                quarter (as found necessary by the Secretary 
                for the proper and efficient administration of 
                the State plan) as are attributable to the 
                performance of medical and utilization review 
                by a utilization and quality control peer 
                review organization or by an entity which meets 
                the requirements of section 1152, as determined 
                by the Secretary, under a contract entered into 
                under section 1902(d); and
                  (ii) 75 percent of the sums expended with 
                respect to costs incurred during such quarter 
                (as found necessary by the Secretary for the 
                proper and efficient administration of the 
                State plan) as are attributable to the 
                performance of independent external reviews 
                conducted under section 1932(c)(2); and
                  (D) 75 percent of so much of the sums 
                expended by the State plan during a quarter in 
                1991, 1992, or 1993, as the Secretary 
                determines is attributable to the statewide 
                adoption of a drug use review program which 
                conforms to the requirements of section 
                1927(g);
                  (E) 50 percent of the sums expended with 
                respect to costs incurred during such quarter 
                as are attributable to providing--
                          (i) services to identify and educate 
                        individuals who are likely to be 
                        eligible for medical assistance under 
                        this title and who have Sickle Cell 
                        Disease or who are carriers of the 
                        sickle cell gene, including education 
                        regarding how to identify such 
                        individuals; or
                          (ii) education regarding the risks of 
                        stroke and other complications, as well 
                        as the prevention of stroke and other 
                        complications, in individuals who are 
                        likely to be eligible for medical 
                        assistance under this title and who 
                        have Sickle Cell Disease; and
                  (F)(i) 100 percent of so much of the sums 
                expended during such quarter as are 
                attributable to payments to Medicaid providers 
                described in subsection (t)(1) to encourage the 
                adoption and use of certified EHR technology; 
                and
                  (ii) 90 percent of so much of the sums 
                expended during such quarter as are 
                attributable to payments for reasonable 
                administrative expenses related to the 
                administration of payments described in clause 
                (i) if the State meets the condition described 
                in subsection (t)(9); plus
                  (H)(i)\16\ 90 percent of the sums expended 
                during the quarter as are attributable to the 
                design, development, or installation of such 
                mechanized verification and information 
                retrieval systems as the Secretary determines 
                are necessary to implement section 1902(ee) 
                (including a system described in paragraph 
                (2)(B) thereof), and
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    \16\So in law, there is no subparagraph (G).
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                  (ii) 75 percent of the sums expended during 
                the quarter as are attributable to the 
                operation of systems to which clause (i) 
                applies, plus
          (4) an amount equal to 100 percent of the sums 
        expended during the quarter which are attributable to 
        the costs of the implementation and operation of the 
        immigration status verification system described in 
        section 1137(d); plus
          (5) an amount equal to 90 per centum of the sums 
        expended during such quarter which are attributable to 
        the offering, arranging, and furnishing (directly or on 
        a contract basis) of family planning services and 
        supplies;
          (6) subject to subsection (b)(3), an amount equal 
        to--
                  (A) 90 per centum of the sums expended during 
                such a quarter within the twelve-quarter period 
                beginning with the first quarter in which a 
                payment is made to the State pursuant to this 
                paragraph, and
                  (B) 75 per centum of the sums expended during 
                each succeeding calendar quarter,
        with respect to costs incurred during such quarter (as 
        found necessary by the Secretary for the elimination of 
        fraud in the provision and administration of medical 
        assistance provided under the State plan) which are 
        attributable to the establishment and operation of 
        (including the training of personnel employed by) a 
        State medicaid fraud control unit (described in 
        subsection (q)); plus
          (7) subject to section 1919(g)(3)(B), an amount equal 
        to 50 per centum of the remainder of the amounts 
        expended during such quarter as found necessary by the 
        Secretary for the proper and efficient administration 
        of the State plan.
  (b)(1) Notwithstanding the preceding provisions of this 
section, the amount determined under subsection (a)(1) for any 
State for any quarter beginning after December 31, 1969, shall 
not take into account any amounts expended as medical 
assistance with respect to individuals aged 65 or over and 
disabled individuals entitled to hospital insurance benefits 
under title XVIII which would not have been so expended if the 
individuals involved had been enrolled in the insurance program 
established by part B of title XVIII, other than amounts 
expended under provisions of the plan of such State required by 
section 1902(a)(34).
  (2) For limitation on Federal participation for capital 
expenditures which are out of conformity with a comprehensive 
plan of a State or areawide planning agency, see section 1122.
  (3) The amount of funds which the Secretary is otherwise 
obligated to pay a State during a quarter under subsection 
(a)(6) may not exceed the higher of--
          (A) $125,000, or
          (B) one-quarter of 1 per centum of the sums expended 
        by the Federal, State, and local governments during the 
        previous quarter in carrying out the State's plan under 
        this title.
  (4) Amounts expended by a State for the use of an enrollment 
broker in marketing medicaid managed care organizations and 
other managed care entities to eligible individuals under this 
title shall be considered, for purposes of subsection (a)(7), 
to be necessary for the proper and efficient administration of 
the State plan but only if the following conditions are met 
with respect to the broker:
          (A) The broker is independent of any such entity and 
        of any health care providers (whether or not any such 
        provider participates in the State plan under this 
        title) that provide coverage of services in the same 
        State in which the broker is conducting enrollment 
        activities.
          (B) No person who is an owner, employee, consultant, 
        or has a contract with the broker either has any direct 
        or indirect financial interest with such an entity or 
        health care provider or has been excluded from 
        participation in the program under this title or title 
        XVIII or debarred by any Federal agency, or subject to 
        a civil money penalty under this Act.
  (5) Notwithstanding the preceding provisions of this section, 
the amount determined under subsection (a)(1) for any State 
shall be decreased in a quarter by the amount of any health 
care related taxes (described in section 1902(w)(3)(A)) that 
are imposed on a hospital described in subsection\17\ (w)(3)(F) 
in that quarter.
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    \17\So in original. Probably should be ``section 1902''.
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  (c) Nothing in this title shall be construed as prohibiting 
or restricting, or authorizing the Secretary 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 or furnished 
to an infant or toddler with a disability because such services 
are included in the child's individualized family service plan 
adopted pursuant to part C of such Act.
  (d)(1) Prior to the beginning of each quarter, the Secretary 
shall estimate the amount to which a State will be entitled 
under subsections (a) and (b) for such quarter, such estimates 
to be based on (A) a report filed by the State containing its 
estimate of the total sum to be expended in such quarter in 
accordance with the provisions of such subsections, and stating 
the amount appropriated or made available by the State and its 
political subdivisions for such expenditures in such quarter, 
and if such amount is less than the State's proportionate share 
of the total sum of such estimated expenditures, the source or 
sources from which the difference is expected to be derived, 
and (B) such other investigation as the Secretary may find 
necessary.
  (2)(A) The Secretary shall then pay to the State, in such 
installments as he may determine, the amount so estimated, 
reduced or increased to the extent of any overpayment or 
underpayment which the Secretary determines was made under this 
section to such State for any prior quarter and with respect to 
which adjustment has not already been made under this 
subsection.
  (B) Expenditures for which payments were made to the State 
under subsection (a) shall be treated as an overpayment to the 
extent that the State or local agency administering such plan 
has been reimbursed for such expenditures by a third party 
pursuant to the provisions of its plan in compliance with 
section 1902(a)(25).
  (C) For purposes of this subsection, when an overpayment is 
discovered, which was made by a State to a person or other 
entity, the State shall have a period of 1 year in which to 
recover or attempt to recover such overpayment before 
adjustment is made in the Federal payment to such State on 
account of such overpayment. Except as otherwise provided in 
subparagraph (D), the adjustment in the Federal payment shall 
be made at the end of the 1-year period, whether or not 
recovery was made.
  (D)(i) In any case where the State is unable to recover a 
debt which represents an overpayment (or any portion thereof) 
made to a person or other entity on account of such debt having 
been discharged in bankruptcy or otherwise being uncollectable, 
no adjustment shall be made in the Federal payment to such 
State on account of such overpayment (or portion thereof).
  (ii) In any case where the State is unable to recover a debt 
which represents an overpayment (or any portion thereof) made 
to a person or other entity due to fraud within 1 year of 
discovery because there is not a final determination of the 
amount of the overpayment under an administrative or judicial 
process (as applicable), including as a result of a judgment 
being under appeal, no adjustment shall be made in the Federal 
payment to such State on account of such overpayment (or 
portion thereof) before the date that is 30 days after the date 
on which a final judgment (including, if applicable, a final 
determination on an appeal) is made.
  (3)(A) The pro rata share to which the United States is 
equitably entitled, as determined by the Secretary, of the net 
amount recovered during any quarter by the State or any 
political subdivision thereof with respect to medical 
assistance furnished under the State plan shall be considered 
an overpayment to be adjusted under this subsection.
  (B)(i) Subparagraph (A) and paragraph (2)(B) shall not apply 
to any amount recovered or paid to a State as part of the 
comprehensive settlement of November 1998 between manufacturers 
of tobacco products, as defined in section 5702(d) of the 
Internal Revenue Code of 1986, and State Attorneys General, or 
as part of any individual State settlement or judgment reached 
in litigation initiated or pursued by a State against one or 
more such manufacturers.
  (ii) Except as provided in subsection (i)(19), a State may 
use amounts recovered or paid to the State as part of a 
comprehensive or individual settlement, or a judgment, 
described in clause (i) for any expenditures determined 
appropriate by the State.
  (4) Upon the making of any estimate by the Secretary under 
this subsection, any appropriations available for payments 
under this section shall be deemed obligated.
  (5) In any case in which the Secretary estimates that there 
has been an overpayment under this section to a State on the 
basis of a claim by such State that has been disallowed by the 
Secretary under section 1116(d), and such State disputes such 
disallowance, the amount of the Federal payment in controversy 
shall, at the option of the State, be retained by such State or 
recovered by the Secretary pending a final determination with 
respect to such payment amount. If such final determination is 
to the effect that any amount was properly disallowed, and the 
State chose to retain payment of the amount in controversy, the 
Secretary shall offset, from any subsequent payments made to 
such State under this title, an amount equal to the proper 
amount of the disallowance plus interest on such amount 
disallowed for the period beginning on the date such amount was 
disallowed and ending on the date of such final determination 
at a rate (determined by the Secretary) based on the average of 
the bond equivalent of the weekly 90-day treasury bill auction 
rates during such period.
  (6)(A) Each State (as defined in subsection (w)(7)(D)) shall 
include, in the first report submitted under paragraph (1) 
after the end of each fiscal year, information related to--
          (i) provider-related donations made to the State or 
        units of local government during such fiscal year, and
          (ii) health care related taxes collected by the State 
        or such units during such fiscal year.
  (B) Each State shall include, in the first report submitted 
under paragraph (1) after the end of each fiscal year, 
information related to the total amount of payment adjustments 
made, and the amount of payment adjustments made to individual 
providers (by provider), under section 1923(c) during such 
fiscal year.
  (e) A State plan approved under this title may include, as a 
cost with respect to hospital services under the plan under 
this title, periodic expenditures made to reflect transitional 
allowances established with respect to a hospital closure or 
conversion under section 1884.
  (f)(1)(A) Except as provided in paragraph (4), payment under 
the preceding provisions of this section shall not be made with 
respect to any amount expended as medical assistance in a 
calendar quarter, in any State, for any member of a family the 
annual income of which exceeds the applicable income limitation 
determined under this paragraph.
  (B)(i) Except as provided in clause (ii) of this 
subparagraph, the applicable income limitation with respect to 
any family is the amount determined, in accordance with 
standards prescribed by the Secretary, to be equivalent to 
133\1/3\ percent of the highest amount which would ordinarily 
be paid to a family of the same size without any income or 
resources, in the form of money payments, under the plan of the 
State approved under part A of title IV of this Act.
  (ii) If the Secretary finds that the operation of a uniform 
maximum limits payments to families of more than one size, he 
may adjust the amount otherwise determined under clause (i) to 
take account of families of different sizes.
  (C) The total amount of any applicable income limitation 
determined under subparagraph (B) shall, if it is not a 
multiple of $100 or such other amount as the Secretary may 
prescribe, be rounded to the next higher multiple of $100 or 
such other amount, as the case may be.
  (2)(A) In computing a family's income for purposes of 
paragraph (1), there shall be excluded any costs (whether in 
the form of insurance premiums or otherwise and regardless of 
whether such costs are reimbursed under another public program 
of the State or political subdivision thereof) incurred by such 
family for medical care or for any other type of remedial care 
recognized under State law or, (B) notwithstanding section 1916 
at State option, an amount paid by such family, at the family's 
option, to the State, provided that the amount, when combined 
with costs incurred in prior months, is sufficient when 
excluded from the family's income to reduce such family's 
income below the applicable income limitation described in 
paragraph (1). The amount of State expenditures for which 
medical assistance is available under subsection (a)(1) will be 
reduced by amounts paid to the State pursuant to this 
subparagraph.
  (3) For purposes of paragraph (1)(B), in the case of a family 
consisting of only one individual, the ``highest amount which 
would ordinarily be paid'' to such family under the State's 
plan approved under part A of title IV of this Act shall be the 
amount determined by the State agency (on the basis of 
reasonable relationship to the amounts payable under such plan 
to families consisting of two or more persons) to be the amount 
of the aid which would ordinarily be payable under such plan to 
a family (without any income or resources) consisting of one 
person if such plan provided for aid to such a family.
  (4) The limitations on payment imposed by the preceding 
provisions of this subsection shall not apply with respect to 
any amount expended by a State as medical assistance for any 
individual described in section 1902(a)(10)(A)(i)(III), 
1902(a)(10)(A)(i)(IV), 1902(a)(10)(A)(i)(V), 
1902(a)(10)(A)(i)(VI), 1902(a)(10)(A)(i)(VII), 
1902(a)(10)(A)(i)(VIII),1902(a)(10)(A)(i)(IX), 
1902(a)(10)(A)(ii)(IX), 1902(a)(10)(A)(ii)(X), 
1902(a)(10)(A)(ii)(XIII), 1902(a)(10)(A)(ii)(XIV), 
or\18\1902(a)(10)(A)(ii)(XV), 1902(a)(10)(A)(ii)(XVI), 
1902(a)(10)(A)(ii)(XVII), 1902(a)(10)(A)(ii)(XVIII), 
1902(a)(10)(A)(ii)(XIX), 1902(a)(10)(A)(ii)(XX), 
1902(a)(10)(A)(ii)(XXI), 1902(a)(10)(A)(ii)(XXII), 1905(p)(1) 
or for any individual--
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    \18\So in law. The word ``or'' probably should precede 
``1905(p)(1).
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          (A) who is receiving aid or assistance under any plan 
        of the State approved under title I, X, XIV or XVI, or 
        part A of title IV, or with respect to whom 
        supplemental security income benefits are being paid 
        under title XVI, or
          (B) who is not receiving such aid or assistance, and 
        with respect to whom such benefits are not being paid, 
        but (i) is eligible to receive such aid or assistance, 
        or to have such benefits paid with respect to him, or 
        (ii) would be eligible to receive such aid or 
        assistance, or to have such benefits paid with respect 
        to him if he were not in a medical institution, or
          (C) with respect to whom there is being paid, or who 
        is eligible, or would be eligible if he were not in a 
        medical institution, to have paid with respect to him, 
        a State supplementary payment and is eligible for 
        medical assistance equal in amount, duration, and scope 
        to the medical assistance made available to individuals 
        described in section 1902(a)(10)(A), or who is a PACE 
        program eligible individual enrolled in a PACE program 
        under section 1934, but only if the income of such 
        individual (as determined under section 1612, but 
        without regard to subsection (b) thereof) does not 
        exceed 300 percent of the supplemental security income 
        benefit rate established by section 1611(b)(1),
at the time of the provision of the medical assistance giving 
rise to such expenditure.
  (g)(1) Subject to paragraph (3), with respect to amounts paid 
for the following services furnished under the State plan after 
June 30, 1973 (other than services furnished pursuant to a 
contract with a health maintenance organization as defined in 
section 1876 or which is a qualified health maintenance 
organization (as defined in section 1310(d) of the Public 
Health Service Act)), the Federal medical assistance percentage 
shall be decreased as follows: After an individual has received 
inpatient hospital services or services in an intermediate care 
facility for the mentally retarded for 60 days or inpatient 
mental hospital services for 90 days (whether or not such days 
are consecutive), during any fiscal year, the Federal medical 
assistance percentage with respect to amounts paid for any such 
care furnished thereafter to such individual shall be decreased 
by a per centum thereof (determined under paragraph (5)) unless 
the State agency responsible for the administration of the plan 
makes a showing satisfactory to the Secretary that, with 
respect to each calendar quarter for which the State submits a 
request for payment at the full Federal medical assistance 
percentage for amounts paid for inpatient hospital services or 
services in an intermediate care facility for the mentally 
retarded furnished beyond 60 days (or inpatient mental hospital 
services furnished beyond 90 days), such State has an effective 
program of medical review of the care of patients in mental 
hospitals and intermediate care facilities for the mentally 
retarded pursuant to paragraphs (26) and (31) of section 
1902(a) whereby the professional management of each case is 
reviewed and evaluated at least annually by independent 
professional review teams. In determining the number of days on 
which an individual has received services described in this 
subsection, there shall not be counted any days with respect to 
which such individual is entitled to have payments made (in 
whole or in part) on his behalf under section 1812.
  (2) The Secretary shall, as part of his validation procedures 
under this subsection, conduct timely sample onsite surveys of 
private and public institutions in which recipients of medical 
assistance may receive care and services under a State plan 
approved under this title, and his findings with respect to 
such surveys (as well as the showings of the State agency 
required under this subsection) shall be made available for 
public inspection.
  (3)(A) No reduction in the Federal medical assistance 
percentage of a State otherwise required to be imposed under 
this subsection shall take effect--
          (i) if such reduction is due to the State's 
        unsatisfactory or invalid showing made with respect to 
        a calendar quarter beginning before January 1, 1977;
          (ii) before January 1, 1978;
          (iii) unless a notice of such reduction has been 
        provided to the State at least 30 days before the date 
        such reduction takes effect; or
          (iv) due to the State's unsatisfactory or invalid 
        showing made with respect to a calendar quarter 
        beginning after September 30, 1977, unless notice of 
        such reduction has been provided to the State no later 
        than the first day of the fourth calendar quarter 
        following the calendar quarter with respect to which 
        such showing was made.
  (B) The Secretary shall waive application of any reduction in 
the Federal medical assistance percentage of a State otherwise 
required to be imposed under paragraph (1) because a showing by 
the State, made under such paragraph with respect to a calendar 
quarter ending after January 1, 1977, and before January 1, 
1978, is determined to be either unsatisfactory under such 
paragraph or invalid under paragraph (2), if the Secretary 
determines that the State's showing made under paragraph (1) 
with respect to any calendar quarter ending on or before 
December 31, 1978, is satisfactory under such paragraph and is 
valid under paragraph (2).
  (4)(A) The Secretary may not find the showing of a State, 
with respect to a calendar quarter under paragraph (1), to be 
satisfactory if the showing is submitted to the Secretary later 
than the 30th day after the last day of the calendar quarter, 
unless the State demonstrates to the satisfaction of the 
Secretary good cause for not meeting such deadline.
  (B) The Secretary shall find a showing of a State, with 
respect to a calendar quarter under paragraph (1), to be 
satisfactory under such paragraph with respect to the 
requirement that the State conduct annual onsite inspections in 
mental hospitals and intermediate care facilities for the 
mentally retarded under paragraphs (26) and (31) of section 
1902(a), if the showing demonstrates that the State has 
conducted such an onsite inspection during the 12-month period 
ending on the last date of the calendar quarter--
          (i) in each of not less than 98 per centum of the 
        number of such hospitals and facilities requiring such 
        inspection, and
          (ii) in every such hospital or facility which has 200 
        or more beds,
and that, with respect to such hospitals and facilities not 
inspected within such period, the State has exercised good 
faith and due diligence in attempting to conduct such 
inspection, or if the State demonstrates to the satisfaction of 
the Secretary that it would have made such a showing but for 
failings of a technical nature only.
  (5) In the case of a State's unsatisfactory or invalid 
showing made with respect to a type of facility or 
institutional services in a calendar quarter, the per centum 
amount of the reduction of the State's Federal medical 
assistance percentage for that type of services under paragraph 
(1) is equal to 33\1/3\ per centum multiplied by a fraction, 
the denominator of which is equal to the total number of 
patients receiving that type of services in that quarter under 
the State plan in facilities or institutions for which a 
showing was required to be made under this subsection, and the 
numerator of which is equal to the number of such patients 
receiving such type of services in that quarter in those 
facilities or institutions for which a satisfactory and valid 
showing was not made for that calendar quarter.
  (6)(A) Recertifications required under section 1902(a)(44) 
shall be conducted at least every 60 days in the case of 
inpatient hospital services.
  (B) Such recertifications in the case of services in an 
intermediate care facility for the mentally retarded shall be 
conducted at least--
          (i) 60 days after the date of the initial 
        certification,
          (ii) 180 days after the date of the initial 
        certification,
          (iii) 12 months after the date of the initial 
        certification,
          (iv) 18 months after the date of the initial 
        certification,
          (v) 24 months after the date of the initial 
        certification, and
          (vi) every 12 months thereafter.
  (C) For purposes of determining compliance with the schedule 
established by this paragraph, a recertification shall be 
considered to have been done on a timely basis if it was 
performed not later than 10 days after the date the 
recertification was otherwise required and the State 
establishes good cause why the physician or other person making 
such recertification did not meet such schedule.
  (i) Payment under the preceding provisions of this section 
shall not be made--
          (1) for organ transplant procedures unless the State 
        plan provides for written standards respecting the 
        coverage of such procedures and unless such standards 
        provide that--
                  (A) similarly situated individuals are 
                treated alike; and
                  (B) any restriction, on the facilities or 
                practitioners which may provide such 
                procedures, is consistent with the 
                accessibility of high quality care to 
                individuals eligible for the procedures under 
                the State plan; or
          (2) with respect to any amount expended for an item 
        or service (other than an emergency item or service, 
        not including items or services furnished in an 
        emergency room of a hospital) furnished--
                  (A) under the plan by any individual or 
                entity during any period when the individual or 
                entity is excluded from participation under 
                title V, XVIII, or XX or under this title 
                pursuant to section 1128, 1128A, 1156, or 
                1842(j)(2),
                  (B) at the medical direction or on the 
                prescription of a physician, during the period 
                when such physician is excluded from 
                participation under title V, XVIII, or XX or 
                under this title pursuant to section 1128, 
                1128A, 1156, or 1842(j)(2) and when the person 
                furnishing such item or service knew or had 
                reason to know of the exclusion (after a 
                reasonable time period after reasonable notice 
                has been furnished to the person); or
                  (C) by any individual or entity to whom the 
                State has failed to suspend payments under the 
                plan during any period when there is pending an 
                investigation of a credible allegation of fraud 
                against the individual or entity, as determined 
                by the State in accordance with regulations 
                promulgated by the Secretary for purposes of 
                section 1862(o) and this subparagraph, unless 
                the State determines in accordance with such 
                regulations there is good cause not to suspend 
                such payments; or
          (3) with respect to any amount expended for inpatient 
        hospital services furnished under the plan (other than 
        amounts attributable to the special situation of a 
        hospital which serves a disproportionate number of low 
        income patients with special needs) to the extent that 
        such amount exceeds the hospital's customary charges 
        with respect to such services or (if such services are 
        furnished under the plan by a public institution free 
        of charge or at nominal charges to the public) exceeds 
        an amount determined on the basis of those items 
        (specified in regulations prescribed by the Secretary) 
        included in the determination of such payment which the 
        Secretary finds will provide fair compensation to such 
        institution for such services; or
          (4) with respect to any amount expended for care or 
        services furnished under the plan by a hospital unless 
        such hospital has in effect a utilization review plan 
        which meets the requirements imposed by section 1861(k) 
        for purposes of title XVIII; and if such hospital has 
        in effect such a utilization review plan for purposes 
        of title XVIII, such plan shall serve as the plan 
        required by this subsection (with the same standards 
        and procedures and the same review committee or group) 
        as a condition of payment under this title; the 
        Secretary is authorized to waive the requirements of 
        this paragraph if the State agency demonstrates to his 
        satisfaction that it has in operation utilization 
        review procedures which are superior in their 
        effectiveness to the procedures required under section 
        1861(k); or
          (5) with respect to any amount expended for any drug 
        product for which payment may not be made under part B 
        of title XVIII because of section 1862(c); or
          (6) with respect to any amount expended for inpatient 
        hospital tests (other than in emergency situations) not 
        specifically ordered by the attending physician or 
        other responsible practitioner; or
          (7) with respect to any amount expended for clinical 
        diagnostic laboratory tests performed by a physician, 
        independent laboratory, or hospital, to the extent such 
        amount exceeds the amount that would be recognized 
        under section 1833(h) for such tests performed for an 
        individual enrolled under part B of title XVIII; or
          (8) with respect to any amount expended for medical 
        assistance (A) for nursing facility services to 
        reimburse (or otherwise compensate) a nursing facility 
        for payment of a civil money penalty imposed under 
        section 1919(h) or (B) for home and community care to 
        reimburse (or otherwise compensate) a provider of such 
        care for payment of a civil money penalty imposed under 
        this title or title XI or for legal expenses in defense 
        of an exclusion or civil money penalty under this title 
        or title XI if there is no reasonable legal ground for 
        the provider's case; or
          (10)(A) with respect to covered outpatient drugs 
        unless there is a rebate agreement in effect under 
        section 1927 with respect to such drugs or unless 
        section 1927(a)(3) applies,
          (B) with respect to any amount expended for an 
        innovator multiple source drug (as defined in section 
        1927(k)) dispensed on or after July 1, 1991, if, under 
        applicable State law, a less expensive multiple source 
        drug could have been dispensed, but only to the extent 
        that such amount exceeds the upper payment limit for 
        such multiple source drug;
                  (C)\19\ with respect to covered outpatient 
                drugs described in section 1927(a)(7), unless 
                information respecting utilization data and 
                coding on such drugs that is required to be 
                submitted under such section is submitted in 
                accordance with such section, and
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    \19\Margin so in law.
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          (D) with respect to any amount expended for 
        reimbursement to a pharmacy under this title for the 
        ingredient cost of a covered outpatient drug for which 
        the pharmacy has already received payment under this 
        title (other than with respect to a reasonable 
        restocking fee for such drug); or
          (11) with respect to any amount expended for 
        physicians' services furnished on or after the first 
        day of the first quarter beginning more than 60 days 
        after the date of establishment of the physician 
        identifier system under section 1902(x), unless the 
        claim for the services includes the unique physician 
        identifier provided under such system; or
          (13) with respect to any amount expended to reimburse 
        (or otherwise compensate) a nursing facility for 
        payment of legal expenses associated with any action 
        initiated by the facility that is dismissed on the 
        basis that no reasonable legal ground existed for the 
        institution of such action; or
          (14) with respect to any amount expended on 
        administrative costs to carry out the program under 
        section 1928; or
          (15) with respect to any amount expended for a 
        single-antigen vaccine and its administration in any 
        case in which the administration of a combined-antigen 
        vaccine was medically appropriate (as determined by the 
        Secretary); or
          (16) with respect to any amount expended for which 
        funds may not be used under the Assisted Suicide 
        Funding Restriction Act of 1997; or
          (17) with respect to any amount expended for roads, 
        bridges, stadiums, or any other item or service not 
        covered under a State plan under this title; or
          (18) with respect to any amount expended for home 
        health care services provided by an agency or 
        organization unless the agency or organization provides 
        the State agency on a continuing basis a surety bond in 
        a form specified by the Secretary under paragraph (7) 
        of section 1861(o) and in an amount that is not less 
        than $50,000 or such comparable surety bond as the 
        Secretary may permit under the last sentence of such 
        section; or
          (19) with respect to any amount expended on 
        administrative costs to initiate or pursue litigation 
        described in subsection (d)(3)(B);
          (20) with respect to amounts expended for medical 
        assistance provided to an individual described in 
        subclause (XV) or (XVI) of section 1902(a)(10)(A)(ii) 
        for a fiscal year unless the State demonstrates to the 
        satisfaction of the Secretary that the level of State 
        funds expended for such fiscal year for programs to 
        enable working individuals with disabilities to work 
        (other than for such medical assistance) is not less 
        than the level expended for such programs during the 
        most recent State fiscal year ending before the date of 
        the enactment of this paragraph;
          (21) with respect to amounts expended for covered 
        outpatient drugs described in section 1927(d)(2)(K) 
        (relating to drugs when used for treatment of sexual or 
        erectile dysfunction);
          (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 
        section 1902(a)(46)(B) is met;
          (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;
          (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;
          (25)\20\ with respect to any amounts expended for 
        medical assistance for individuals for whom the State 
        does not report enrollee encounter data (as defined by 
        the Secretary) to the Medicaid Statistical Information 
        System (MSIS) in a timely manner (as determined by the 
        Secretary);
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    \20\The placement of paragraph (25) after paragraph (24) as shown 
above has been carried out to reflect the probable intent of Congress. 
Section 6402(c)(3) of Public Law 111-148 inserts paragraph (25) ``at 
the end'' of subsection (i), which would result in paragraph (25) 
technically appearing after the continuation text in subsection (i).

     The identical placement issue with paragraph (26) as with 
paragraph (25). See amendment made by section 2001(a)(2)(B)(iii) of 
Public Law 111-148.
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          (26) with respect to any amounts expended for medical 
        assistance for individuals described in subclause 
        (VIII) of subsection (a)(10)(A)(i) other than medical 
        assistance provided through benchmark coverage 
        described in section 1937(b)(1) or benchmark equivalent 
        coverage described in section 1937(b)(2); or
          (27) with respect to any amounts expended by the 
        State on the basis of a fee schedule for items 
        described in section 1861(n) and furnished on or after 
        January 1, 2019, as determined in the aggregate with 
        respect to each class of such items as defined by the 
        Secretary, in excess of the aggregate amount, if any, 
        that would be paid for such items within such class on 
        a fee-for-service basis under the program under part B 
        of title XVIII, including, as applicable, under a 
        competitive acquisition program under section 1847 in 
        an area of the State.
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.
  (j) Notwithstanding the preceding provisions of this section, 
the amount determined under subsection (a)(1) for any State for 
any quarter shall be adjusted in accordance with section 1914.
  (k) The Secretary is authorized to provide at the request of 
any State (and without cost to such State) such technical and 
actuarial assistance as may be necessary to assist such State 
to contract with any medicaid managed care organization which 
meets the requirements of subsection (m) of this section for 
the purpose of providing medical care and services to 
individuals who are entitled to medical assistance under this 
title.
  (m)(1)(A) The term ``medicaid managed care organization'' 
means a health maintenance organization, an eligible 
organization with a contract under section 1876 or a 
Medicare+Choice organization with a contract under part C of 
title XVIII, a provider sponsored organization, or any other 
public or private organization, which meets the requirement of 
section 1902(w) and--
          (i) makes services it provides to individuals 
        eligible for benefits under this title accessible to 
        such individuals, within the area served by the 
        organization, to the same extent as such services are 
        made accessible to individuals (eligible for medical 
        assistance under the State plan) not enrolled with the 
        organization, and
          (ii) has made adequate provision against the risk of 
        insolvency, which provision is satisfactory to the 
        State, meets the requirements of subparagraph (C)(i) 
        (if applicable), and which assures that individuals 
        eligible for benefits under this title are in no case 
        held liable for debts of the organization in case of 
        the organization's insolvency.
An organization that is a qualified health maintenance 
organization (as defined in section 1310(d) of the Public 
Health Service Act) is deemed to meet the requirements of 
clauses (i) and (ii).
  (B) The duties and functions of the Secretary, insofar as 
they involve making determinations as to whether an 
organization is a medicaid managed care organization within the 
meaning of subparagraph (A), shall be integrated with the 
administration of section 1312 (a) and (b) of the Public Health 
Service Act.
  (C)(i) Subject to clause (ii), a provision meets the 
requirements of this subparagraph for an organization if the 
organization meets solvency standards established by the State 
for private health maintenance organizations or is licensed or 
certified by the State as a risk-bearing entity.
  (ii) Clause (i) shall not apply to an organization if--
          (I) the organization is not responsible for the 
        provision (directly or through arrangements with 
        providers of services) of inpatient hospital services 
        and physicians' services;
          (II) the organization is a public entity;
          (III) the solvency of the organization is guaranteed 
        by the State; or
          (IV) the organization is (or is controlled by) one or 
        more Federally-qualified\21\ health centers and meets 
        solvency standards established by the State for such an 
        organization.
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    \21\So in original. Probably should be ``federally qualified''.
---------------------------------------------------------------------------
For purposes of subclause (IV), the term ``control'' means the 
possession, whether direct or indirect, of the power to direct 
or cause the direction of the management and policies of the 
organization through membership, board representation, or an 
ownership interest equal to or greater than 50.1 percent.
  (2)(A) Except as provided in subparagraphs (B), (C), and (G), 
no payment shall be made under this title to a State with 
respect to expenditures incurred by it for payment (determined 
under a prepaid capitation basis or under any other risk basis) 
for services provided by any entity (including a health 
insuring organization) which is responsible for the provision 
(directly or through arrangements with providers of services) 
of inpatient hospital services and any other service described 
in paragraph (2), (3), (4), (5), or (7) of section 1905(a) or 
for the provision of any three or more of the services 
described in such paragraphs unless--
          (i) the Secretary has determined that the entity is a 
        medicaid managed care organization organization as 
        defined in paragraph (1);
          (iii) such services are provided for the benefit of 
        individuals eligible for benefits under this title in 
        accordance with a contract between the State and the 
        entity under which prepaid payments to the entity are 
        made on an actuarially sound basis and under which the 
        Secretary must provide prior approval for contracts 
        providing for expenditures in excess of $1,000,000 for 
        1998 and, for a subsequent year, the amount established 
        under this clause for the previous year increased by 
        the percentage increase in the consumer price index for 
        all urban consumers over the previous year;
          (iv) such contract provides that the Secretary and 
        the State (or any person or organization designated by 
        either) shall have the right to audit and inspect any 
        books and records of the entity (and of any 
        subcontractor) that pertain (I) to the ability of the 
        entity to bear the risk of potential financial losses, 
        or (II) to services performed or determinations of 
        amounts payable under the contract;
          (v) such contract provides that in the entity's 
        enrollment, reenrollment, or disenrollment of 
        individuals who are eligible for benefits under this 
        title and eligible to enroll, reenroll, or disenroll 
        with the entity pursuant to the contract, the entity 
        will not discriminate among such individuals on the 
        basis of their health status or requirements for health 
        care services;
          (vi) such contract (I) permits individuals who have 
        elected under the plan to enroll with the entity for 
        provision of such benefits to terminate such enrollment 
        in accordance with section 1932(a)(4), and (II) 
        provides for notification in accordance with such 
        section of each such individual, at the time of the 
        individual's enrollment, of such right to terminate 
        such enrollment;
          (vii) such contract provides that, in the case of 
        medically necessary services which were provided (I) to 
        an individual enrolled with the entity under the 
        contract and entitled to benefits with respect to such 
        services under the State's plan and (II) other than 
        through the organization because the services were 
        immediately required due to an unforeseen illness, 
        injury, or condition, either the entity or the State 
        provides for reimbursement with respect to those 
        services,
          (viii) such contract provides for disclosure of 
        information in accordance with section 1124 and 
        paragraph (4) of this subsection;
          (ix)\22\ such contract provides, in the case of an 
        entity that has entered into a contract for the 
        provision of services with a Federally-qualified health 
        center or a rural health clinic, that the entity shall 
        provide payment that is not less than the level and 
        amount of payment which the entity would make for the 
        services if the services were furnished by a provider 
        which is not a Federally-qualified health center or a 
        rural health clinic;
---------------------------------------------------------------------------
    \22\Section 4712(c)(2) of Public Law 105-33 (111 Stat. 509) 
provides as follows:

    (c) End of Transitional Payment Rules.--Effective for services 
furnished on or after October 1, 2003--
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          (1) * * *
          (2) clause (ix) of section 1903(m)(2)(A) (42 U.S.C. 
        1396b(m)(2)(A)) is repealed.
          (x) any physician incentive plan that it operates 
        meets the requirements described in section 1876(i)(8);
          (xi) such contract provides for maintenance of 
        sufficient patient encounter data to identify the 
        physician who delivers services to patients and for the 
        provision of such data to the State at a frequency and 
        level of detail to be specified by the Secretary;
          (xii) such contract, and the entity complies with the 
        applicable requirements of section 1932; and
                  (xiii)\23\ such contract provides that (I) 
                covered outpatient drugs dispensed to 
                individuals eligible for medical assistance who 
                are enrolled with the entity shall be subject 
                to the same rebate required by the agreement 
                entered into under section 1927 as the State is 
                subject to and that the State shall collect 
                such rebates from manufacturers, (II) 
                capitation rates paid to the entity shall be 
                based on actual cost experience related to 
                rebates and subject to the Federal regulations 
                requiring actuarially sound rates, and (III) 
                the entity shall report to the State, on such 
                timely and periodic basis as specified by the 
                Secretary in order to include in the 
                information submitted by the State to a 
                manufacturer and the Secretary under section 
                1927(b)(2)(A), information on the total number 
                of units of each dosage form and strength and 
                package size by National Drug Code of each 
                covered outpatient drug dispensed to 
                individuals eligible for medical assistance who 
                are enrolled with the entity and for which the 
                entity is responsible for coverage of such drug 
                under this subsection (other than covered 
                outpatient drugs that under subsection (j)(1) 
                of section 1927 are not subject to the 
                requirements of that section) and such other 
                data as the Secretary determines necessary to 
                carry out this subsection.
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    \23\Margin for clause (xiii) so in law.
---------------------------------------------------------------------------
  (B) Subparagraph (A) except with respect to clause (ix) of 
subparagraph (A), does not apply with respect to payments under 
this title to a State with respect to expenditures incurred by 
it for payment for services provided by an entity which--
          (i)(I) received a grant of at least $100,000 in the 
        fiscal year ending June 30, 1976, under section 
        329(d)(1)(A) or 330(d)(1) of the Public Health Service 
        Act, and for the period beginning July 1, 1976, and 
        ending on the expiration of the period for which 
        payments are to be made under this title has been the 
        recipient of a grant under either such section; and
          (II) provides to its enrollees, on a prepaid 
        capitation risk basis or on any other risk basis, all 
        of the services and benefits described in paragraphs 
        (1), (2), (3), (4)(C), and (5) of section 1905(a) and, 
        to the extent required by section 1902(a)(10)(D) to be 
        provided under a State plan for medical assistance, the 
        services and benefits described in paragraph (7) of 
        section 1905(a); or
          (ii) is a nonprofit primary health care entity 
        located in a rural area (as defined by the Appalachian 
        Regional Commission)--
                  (I) which received in the fiscal year ending 
                June 30, 1976, at least $100,000 (by grant, 
                subgrant, or subcontract) under the Appalachian 
                Regional Development Act of 1965, and
                  (II) for the period beginning July 1, 1976, 
                and ending on the expiration of the period for 
                which payments are to be made under this title 
                either has been the recipient of a grant, 
                subgrant, or subcontract under such Act or has 
                provided services under a contract (initially 
                entered into during a year in which the entity 
                was the recipient of such a grant, subgrant, or 
                subcontract) with a State agency under this 
                title on a prepaid capitation risk basis or on 
                any other risk basis; or
          (iii) which has contracted with the single State 
        agency for the provision of services (but not including 
        inpatient hospital services) to persons eligible under 
        this title on a prepaid risk basis prior to 1970.
  (G) In the case of an entity which is receiving (and has 
received during the previous two years) a grant of at least 
$100,000 under section 329(d)(1)(A) or 330(d)(1) of the Public 
Health Service Act or is receiving (and has received during the 
previous two years) at least $100,000 (by grant, subgrant, or 
subcontract) under the Appalachian Regional Development Act of 
1965, clause (i) of subparagraph (A) shall not apply.
  (H) In the case of an individual who--
          (i) in a month is eligible for benefits under this 
        title and enrolled with a medicaid managed care 
        organization with a contract under this paragraph or 
        with a primary care case manager with a contract 
        described in section 1905(t)(3),
          (ii) in the next month (or in the next 2 months) is 
        not eligible for such benefits, but
          (iii) in the succeeding month is again eligible for 
        such benefits,
the State plan, subject to subparagraph (A)(vi), may enroll the 
individual for that succeeding month with the organization 
described in clause (i) if the organization continues to have a 
contract under this paragraph with the State or with the 
manager described in such clause if the manager continues to 
have a contract described in section 1905(t)(3) with the State.
  (4)(A) Each medicaid managed care organization which is not a 
qualified health maintenance organization (as defined in 
section 1310(d) of the Public Health Service Act) must report 
to the State and, upon request, to the Secretary, the Inspector 
General of the Department of Health and Human Services, and the 
Comptroller General a description of transactions between the 
organization and a party in interest (as defined in section 
1318(b) of such Act), including the following transactions:
          (i) Any sale or exchange, or leasing of any property 
        between the organization and such a party.
          (ii) Any furnishing for consideration of goods, 
        services (including management services), or facilities 
        between the organization and such a party, but not 
        including salaries paid to employees for services 
        provided in the normal course of their employment.
          (iii) Any lending of money or other extension of 
        credit between the organization and such a party.
The State or Secretary may require that information reported 
respecting an organization which controls, or is controlled by, 
or is under common control with, another entity be in the form 
of a consolidated financial statement for the organization and 
such entity.
  (B) Each organization shall make the information reported 
pursuant to subparagraph (A) available to its enrollees upon 
reasonable request.
  (5)(A) If the Secretary determines that an entity with a 
contract under this subsection--
          (i) fails substantially to provide medically 
        necessary items and services that are required (under 
        law or under the contract) to be provided to an 
        individual covered under the contract, if the failure 
        has adversely affected (or has substantial likelihood 
        of adversely affecting) the individual;
          (ii) imposes premiums on individuals enrolled under 
        this subsection in excess of the premiums permitted 
        under this title;
          (iii) acts to discriminate among individuals in 
        violation of the provision of paragraph (2)(A)(v), 
        including expulsion or refusal to re-enroll an 
        individual or engaging in any practice that would 
        reasonably be expected to have the effect of denying or 
        discouraging enrollment (except as permitted by this 
        subsection) by eligible individuals with the 
        organization whose medical condition or history 
        indicates a need for substantial future medical 
        services;
          (iv) misrepresents or falsifies information that is 
        furnished--
                  (I) to the Secretary or the State under this 
                subsection, or
                  (II) to an individual or to any other entity 
                under this subsection, or
          (v) fails to comply with the requirements of section 
        1876(i)(8),
the Secretary may provide, in addition to any other remedies 
available under law, for any of the remedies described in 
subparagraph (B).
  (B) The remedies described in this subparagraph are--
          (i) civil money penalties of not more than $25,000 
        for each determination under subparagraph (A), or, with 
        respect to a determination under clause (iii) or 
        (iv)(I) of such subparagraph, of not more than $100,000 
        for each such determination, plus, with respect to a 
        determination under subparagraph (A)(ii), double the 
        excess amount charged in violation of such subparagraph 
        (and the excess amount charged shall be deducted from 
        the penalty and returned to the individual concerned), 
        and plus, with respect to a determination under 
        subparagraph (A)(iii), $15,000 for each individual not 
        enrolled as a result of a practice described in such 
        subparagraph, or
          (ii) denial of payment to the State for medical 
        assistance furnished under the contract under this 
        subsection for individuals enrolled after the date the 
        Secretary notifies the organization of a determination 
        under subparagraph (A) and until the Secretary is 
        satisfied that the basis for such determination has 
        been corrected and is not likely to recur.
The provisions of section 1128A (other than subsections (a) and 
(b)) shall apply to a civil money penalty under clause (i) in 
the same manner as such provisions apply to a penalty or 
proceeding under section 1128A(a).
  (6)(A) For purposes of this subsection and section 
1902(e)(2)(A), in the case of the State of New Jersey, the term 
``contract'' shall be deemed to include an undertaking by the 
State agency, in the State plan under this title, to operate a 
program meeting all requirements of this subsection.
  (B) The undertaking described in subparagraph (A) must 
provide--
          (i) for the establishment of a separate entity 
        responsible for the operation of a program meeting the 
        requirements of this subsection, which entity may be a 
        subdivision of the State agency administering the State 
        plan under this title;
          (ii) for separate accounting for the funds used to 
        operate such program; and
          (iii) for setting the capitation rates and any other 
        payment rates for services provided in accordance with 
        this subsection using a methodology satisfactory to the 
        Secretary designed to ensure that total Federal 
        matching payments under this title for such services 
        will be lower than the matching payments that would be 
        made for the same services, if provided under the State 
        plan on a fee for service basis to an actuarially 
        equivalent population.
  (C) The undertaking described in subparagraph (A) shall be 
subject to approval (and annual re-approval) by the Secretary 
in the same manner as a contract under this subsection.
  (D) The undertaking described in subparagraph (A) shall not 
be eligible for a waiver under section 1915(b).
  (o) Notwithstanding the preceding provisions of this section, 
no payment shall be made to a State under the preceding 
provisions of this section for expenditures for medical 
assistance provided for an individual under its State plan 
approved under this title to the extent that a private insurer 
(as defined by the Secretary by regulation and including a 
group health plan (as defined in section 607(1) of the Employee 
Retirement Income Security Act of 1974), a service benefit 
plan, and a health maintenance organization) would have been 
obligated to provide such assistance but for a provision of its 
insurance contract which has the effect of limiting or 
excluding such obligation because the individual is eligible 
for or is provided medical assistance under the plan.
  (p)(1) When a political subdivision of a State makes, for the 
State of which it is a political subdivision, or one State 
makes, for another State, the enforcement and collection of 
rights of support or payment assigned under section 1912, 
pursuant to a cooperative arrangement under such section 
(either within or outside of such State), there shall be paid 
to such political subdivision or such other State from amounts 
which would otherwise represent the Federal share of payments 
for medical assistance provided to the eligible individuals on 
whose behalf such enforcement and collection was made, an 
amount equal to 15 percent of any amount collected which is 
attributable to such rights of support or payment.
  (2) Where more than one jurisdiction is involved in such 
enforcement or collection, the amount of the incentive payment 
determined under paragraph (1) shall be allocated among the 
jurisdictions in a manner to be prescribed by the Secretary.
  (q) For the purposes of this section, the term ``State 
medicaid fraud control unit'' means a single identifiable 
entity of the State government which the Secretary certifies 
(and annually recertifies) as meeting the following 
requirements:
          (1) The entity (A) is a unit of the office of the 
        State Attorney General or of another department of 
        State government which possesses statewide authority to 
        prosecute individuals for criminal violations, (B) is 
        in a State the constitution of which does not provide 
        for the criminal prosecution of individuals by a 
        statewide authority and has formal procedures, approved 
        by the Secretary, that (i) assure its referral of 
        suspected criminal violations relating to the program 
        under this title to the appropriate authority or 
        authorities in the State for prosecution and (ii) 
        assure its assistance of, and coordination with, such 
        authority or authorities in such prosecutions, or (C) 
        has a formal working relationship with the office of 
        the State Attorney General and has formal procedures 
        (including procedures for its referral of suspected 
        criminal violations to such office) which are approved 
        by the Secretary and which provide effective 
        coordination of activities between the entity and such 
        office with respect to the detection, investigation, 
        and prosecution of suspected criminal violations 
        relating to the program under this title.
          (2) The entity is separate and distinct from the 
        single State agency that administers or supervises the 
        administration of the State plan under this title.
          (3) The entity's function is conducting a statewide 
        program for the investigation and prosecution of 
        violations of all applicable State laws regarding any 
        and all aspects of fraud in connection with (A) any 
        aspect of the provision of medical assistance and the 
        activities of providers of such assistance under the 
        State plan under this title; and (B) upon the approval 
        of the Inspector General of the relevant Federal 
        agency, any aspect of the provision of health care 
        services and activities of providers of such services 
        under any Federal health care program (as defined in 
        section 1128B(f)(1)), if the suspected fraud or 
        violation of law in such case or investigation is 
        primarily related to the State plan under this title.
          (4)(A) The entity has--
                  (i) procedures for reviewing complaints of 
                abuse or neglect of patients in health care 
                facilities which receive payments under the 
                State plan under this title;
                  (ii) at the option of the entity, procedures 
                for reviewing complaints of abuse or neglect of 
                patients residing in board and care facilities; 
                and
                  (iii) procedures for acting upon such 
                complaints under the criminal laws of the State 
                or for referring such complaints to other State 
                agencies for action.
          (B) For purposes of this paragraph, the term ``board 
        and care facility'' means a residential setting which 
        receives payment (regardless of whether such payment is 
        made under the State plan under this title) from or on 
        behalf of two or more unrelated adults who reside in 
        such facility, and for whom one or both of the 
        following is provided:
                  (i) Nursing care services provided by, or 
                under the supervision of, a registered nurse, 
                licensed practical nurse, or licensed nursing 
                assistant.
                  (ii) A substantial amount of personal care 
                services that assist residents with the 
                activities of daily living, including personal 
                hygiene, dressing, bathing, eating, toileting, 
                ambulation, transfer, positioning, self-
                medication, body care, travel to medical 
                services, essential shopping, meal preparation, 
                laundry, and housework.
          (5) The entity provides for the collection, or 
        referral for collection to a single State agency, of 
        overpayments that are made under the State plan or 
        under any Federal health care program (as so defined) 
        to health care facilities and that are discovered by 
        the entity in carrying out its activities. All funds 
        collected in accordance with this paragraph shall be 
        credited exclusively to, and available for expenditure 
        under, the Federal health care program (including the 
        State plan under this title) that was subject to the 
        activity that was the basis for the collection.
          (6) The entity employs such auditors, attorneys, 
        investigators, and other necessary personnel and is 
        organized in such a manner as is necessary to promote 
        the effective and efficient conduct of the entity's 
        activities.
          (7) The entity submits to the Secretary an 
        application and annual reports containing such 
        information as the Secretary determines, by regulation, 
        to be necessary to determine whether the entity meets 
        the other requirements of this subsection.
  (r)(1) In order to receive payments under subsection (a) for 
use of automated data systems in administration of the State 
plan under this title, a State must, in addition to meeting the 
requirements of paragraph (3), have in operation mechanized 
claims processing and information retrieval systems that meet 
the requirements of this subsection and that the Secretary has 
found--
          (A) are adequate to provide efficient, economical, 
        and effective administration of such State plan;
          (B) are compatible with the claims processing and 
        information retrieval systems used in the 
        administration of title XVIII, and for this purpose--
                  (i) have a uniform identification coding 
                system for providers, other payees, and 
                beneficiaries under this title or title XVIII;
                  (ii) provide liaison between States and 
                carriers and intermediaries with agreements 
                under title XVIII to facilitate timely exchange 
                of appropriate data;
                  (iii) provide for exchange of data between 
                the States and the Secretary with respect to 
                persons sanctioned under this title or title 
                XVIII; and
                  (iv) effective for claims filed on or after 
                October 1, 2010, incorporate compatible 
                methodologies of the National Correct Coding 
                Initiative administered by the Secretary (or 
                any successor initiative to promote correct 
                coding and to control improper coding leading 
                to inappropriate payment) and such other 
                methodologies of that Initiative (or such other 
                national correct coding methodologies) as the 
                Secretary identifies in accordance with 
                paragraph (4);
          (C) are capable of providing accurate and timely 
        data;
          (D) are complying with the applicable provisions of 
        part C of title XI;
          (E) are designed to receive provider claims in 
        standard formats to the extent specified by the 
        Secretary; and
          (F) effective for claims filed on or after January 1, 
        1999, provide for electronic transmission of claims 
        data in the format specified by the Secretary and 
        consistent with the Medicaid Statistical Information 
        System (MSIS) (including detailed individual enrollee 
        encounter data and other information that the Secretary 
        may find necessary and including, for data submitted to 
        the Secretary on or after January 1, 2010, data 
        elements from the automated data system that the 
        Secretary determines to be necessary for program 
        integrity, program oversight, and administration, at 
        such frequency as the Secretary shall determine).
  (2) In order to meet the requirements of this paragraph, 
mechanized claims processing and information retrieval systems 
must meet the following requirements:
          (A) The systems must be capable of developing 
        provider, physician, and patient profiles which are 
        sufficient to provide specific information as to the 
        use of covered types of services and items, including 
        prescribed drugs.
          (B) The State must provide that information on 
        probable fraud or abuse which is obtained from, or 
        developed by, the systems, is made available to the 
        State's medicaid fraud control unit (if any) certified 
        under subsection (q) of this section.
          (C) The systems must meet all performance standards 
        and other requirements for initial approval developed 
        by the Secretary.
  (3) In order to meet the requirements of this paragraph, a 
State must have in operation an eligibility determination 
system which provides for data matching through the Public 
Assistance Reporting Information System (PARIS) facilitated by 
the Secretary (or any successor system), including matching 
with medical assistance programs operated by other States.
  (4) For purposes of paragraph (1)(B)(iv), the Secretary shall 
do the following:
          (A) Not later than September 1, 2010:
                  (i) Identify those methodologies of the 
                National Correct Coding Initiative administered 
                by the Secretary (or any successor initiative 
                to promote correct coding and to control 
                improper coding leading to inappropriate 
                payment) which are compatible to claims filed 
                under this title.
                  (ii) Identify those methodologies of such 
                Initiative (or such other national correct 
                coding methodologies) that should be 
                incorporated into claims filed under this title 
                with respect to items or services for which 
                States provide medical assistance under this 
                title and no national correct coding 
                methodologies have been established under such 
                Initiative with respect to title XVIII.
                  (iii) Notify States of--
                          (I) the methodologies identified 
                        under subparagraphs (A) and (B) (and of 
                        any other national correct coding 
                        methodologies identified under 
                        subparagraph (B)); and
                          (II) how States are to incorporate 
                        such methodologies into claims filed 
                        under this title.
          (B) Not later than March 1, 2011, submit a report to 
        Congress that includes the notice to States under 
        clause (iii) of subparagraph (A) and an analysis 
        supporting the identification of the methodologies made 
        under clauses (i) and (ii) of subparagraph (A).
  (s) Notwithstanding the preceding provisions of this section, 
no payment shall be made to a State under this section for 
expenditures for medical assistance under the State plan 
consisting of a designated health service (as defined in 
subsection (h)(6) of section 1877) furnished to an individual 
on the basis of a referral that would result in the denial of 
payment for the service under title XVIII if such title 
provided for coverage of such service to the same extent and 
under the same terms and conditions as under the State plan, 
and subsections (f) and (g)(5) of such section shall apply to a 
provider of such a designated health service for which payment 
may be made under this title in the same manner as such 
subsections apply to a provider of such a service for which 
payment may be made under such title.
  (t)(1) For purposes of subsection (a)(3)(F), the payments 
described in this paragraph to encourage the adoption and use 
of certified EHR technology are payments made by the State in 
accordance with this subsection --
          (A) to Medicaid providers described in paragraph 
        (2)(A) not in excess of 85 percent of net average 
        allowable costs (as defined in paragraph (3)(E)) for 
        certified EHR technology (and support services 
        including maintenance and training that is for, or is 
        necessary for the adoption and operation of, such 
        technology) with respect to such providers; and
          (B) to Medicaid providers described in paragraph 
        (2)(B) not in excess of the maximum amount permitted 
        under paragraph (5) for the provider involved.
  (2) In this subsection and subsection (a)(3)(F), the term 
``Medicaid provider'' means--
          (A) an eligible professional (as defined in paragraph 
        (3)(B))--
                  (i) who is not hospital-based and has at 
                least 30 percent of the professional's patient 
                volume (as estimated in accordance with a 
                methodology established by the Secretary) 
                attributable to individuals who are receiving 
                medical assistance under this title;
                  (ii) who is not described in clause (i), who 
                is a pediatrician, who is not hospital-based, 
                and who has at least 20 percent of the 
                professional's patient volume (as estimated in 
                accordance with a methodology established by 
                the Secretary) attributable to individuals who 
                are receiving medical assistance under this 
                title; and
                  (iii) who practices predominantly in a 
                Federally qualified health center or rural 
                health clinic and has at least 30 percent of 
                the professional's patient volume (as estimated 
                in accordance with a methodology established by 
                the Secretary) attributable to needy 
                individuals (as defined in paragraph (3)(F)); 
                and
          (B)(i) a children's hospital, or
          (ii) an acute-care hospital that is not described in 
        clause (i) and that has at least 10 percent of the 
        hospital's patient volume (as estimated in accordance 
        with a methodology established by the Secretary) 
        attributable to individuals who are receiving medical 
        assistance under this title.
An eligible professional shall not qualify as a Medicaid 
provider under this subsection unless any right to payment 
under sections 1848(o) and 1853(l) with respect to the eligible 
professional has been waived in a manner specified by the 
Secretary. For purposes of calculating patient volume under 
subparagraph (A)(iii), insofar as it is related to 
uncompensated care, the Secretary may require the adjustment of 
such uncompensated care data so that it would be an appropriate 
proxy for charity care, including a downward adjustment to 
eliminate bad debt data from uncompensated care. In applying 
subparagraphs (A) and (B)(ii), the methodology established by 
the Secretary for patient volume shall include individuals 
enrolled in a Medicaid managed care plan (under section 1903(m) 
or section 1932).
  (3) In this subsection and subsection (a)(3)(F):
          (A) The term ``certified EHR technology'' means a 
        qualified electronic health record (as defined in 
        3000(13) of the Public Health Service Act) that is 
        certified pursuant to section 3001(c)(5) of such Act as 
        meeting standards adopted under section 3004 of such 
        Act that are applicable to the type of record involved 
        (as determined by the Secretary, such as an ambulatory 
        electronic health record for office-based physicians or 
        an inpatient hospital electronic health record for 
        hospitals).
          (B) The term ``eligible professional'' means a--
                  (i) physician;
                  (ii) dentist;
                  (iii) certified nurse mid-wife;
                  (iv) nurse practitioner; and
                  (v) physician assistant insofar as the 
                assistant is practicing in a rural health 
                clinic that is led by a physician assistant or 
                is practicing in a Federally qualified health 
                center that is so led.
          (C) The term ``average allowable costs'' means, with 
        respect to certified EHR technology of Medicaid 
        providers described in paragraph (2)(A) for--
                  (i) the first year of payment with respect to 
                such a provider, the average costs for the 
                purchase and initial implementation or upgrade 
                of such technology (and support services 
                including training that is for, or is necessary 
                for the adoption and initial operation of, such 
                technology) for such providers, as determined 
                by the Secretary based upon studies conducted 
                under paragraph (4)(C); and
                  (ii) a subsequent year of payment with 
                respect to such a provider, the average costs 
                not described in clause (i) relating to the 
                operation, maintenance, and use of such 
                technology for such providers, as determined by 
                the Secretary based upon studies conducted 
                under paragraph (4)(C).
          (D) The term ``hospital-based'' means, with respect 
        to an eligible professional, a professional (such as a 
        pathologist, anesthesiologist, or emergency physician) 
        who furnishes substantially all of the individual's 
        professional services in a hospital inpatient or 
        emergency room setting and through the use of the 
        facilities and equipment, including qualified 
        electronic health records, of the hospital. The 
        determination of whether an eligible professional is a 
        hospital-based eligible professional shall be made on 
        the basis of the site of service (as defined by the 
        Secretary) and without regard to any employment or 
        billing arrangement between the eligible professional 
        and any other provider.
          (E) The term ``net average allowable costs'' means, 
        with respect to a Medicaid provider described in 
        paragraph (2)(A), average allowable costs reduced by 
        the average payment the Secretary estimates will be 
        made to such Medicaid providers (determined on a 
        percentage or other basis for such classes or types of 
        providers as the Secretary may specify) from other 
        sources (other than under this subsection, or by the 
        Federal government or a State or local government) that 
        is directly attributable to payment for certified EHR 
        technology or support services described in 
        subparagraph (C).
          (F) The term ``needy individual'' means, with respect 
        to a Medicaid provider, an individual--
                  (i) who is receiving assistance under this 
                title;
                  (ii) who is receiving assistance under title 
                XXI;
                  (iii) who is furnished uncompensated care by 
                the provider; or
                  (iv) for whom charges are reduced by the 
                provider on a sliding scale basis based on an 
                individual's ability to pay.
  (4)(A) With respect to a Medicaid provider described in 
paragraph (2)(A), subject to subparagraph (B), in no case 
shall--
                  (i) the net average allowable costs under 
                this subsection for the first year of payment 
                (which may not be later than 2016), which is 
                intended to cover the costs described in 
                paragraph (3)(C)(i), exceed $25,000 (or such 
                lesser amount as the Secretary determines based 
                on studies conducted under subparagraph (C));
                  (ii) the net average allowable costs under 
                this subsection for a subsequent year of 
                payment, which is intended to cover costs 
                described in paragraph (3)(C)(ii), exceed 
                $10,000; and
                  (iii) payments be made for costs described in 
                clause (ii) after 2021 or over a period of 
                longer than 5 years.
  (B) In the case of Medicaid provider described in paragraph 
(2)(A)(ii), the dollar amounts specified in subparagraph (A) 
shall be \2/3\ of the dollar amounts otherwise specified.
  (C) For the purposes of determining average allowable costs 
under this subsection, the Secretary shall study the average 
costs to Medicaid providers described in paragraph (2)(A) of 
purchase and initial implementation and upgrade of certified 
EHR technology described in paragraph (3)(C)(i) and the average 
costs to such providers of operations, maintenance, and use of 
such technology described in paragraph (3)(C)(ii). In 
determining such costs for such providers, the Secretary may 
utilize studies of such amounts submitted by States.
  (5)(A) In no case shall the payments described in paragraph 
(1)(B) with respect to a Medicaid provider described in 
paragraph (2)(B) exceed--
          (i) in the aggregate the product of--
                          (I) the overall hospital EHR amount 
                        for the provider computed under 
                        subparagraph (B); and
                          (II) the Medicaid share for such 
                        provider computed under subparagraph 
                        (C);
          (ii) in any year 50 percent of the product described 
        in clause (i); and
          (iii) in any 2-year period 90 percent of such 
        product.
  (B) For purposes of this paragraph, the overall hospital EHR 
amount, with respect to a Medicaid provider, is the sum of the 
applicable amounts specified in section 1886(n)(2)(A) for such 
provider for the first 4 payment years (as estimated by the 
Secretary) determined as if the Medicare share specified in 
clause (ii) of such section were 1. The Secretary shall 
establish, in consultation with the State, the overall hospital 
EHR amount for each such Medicaid provider eligible for 
payments under paragraph (1)(B). For purposes of this 
subparagraph in computing the amounts under section 
1886(n)(2)(C) for payment years after the first payment year, 
the Secretary shall assume that in subsequent payment years 
discharges increase at the average annual rate of growth of the 
most recent 3 years for which discharge data are available per 
year.
  (C) The Medicaid share computed under this subparagraph, for 
a Medicaid provider for a period specified by the Secretary, 
shall be calculated in the same manner as the Medicare share 
under section 1886(n)(2)(D) for such a hospital and period, 
except that there shall be substituted for the numerator under 
clause (i) of such section the amount that is equal to the 
number of inpatient-bed-days (as established by the Secretary) 
which are attributable to individuals who are receiving medical 
assistance under this title and who are not described in 
section 1886(n)(2)(D)(i). In computing inpatient-bed-days under 
the previous sentence, the Secretary shall take into account 
inpatient-bed-days attributable to inpatient-bed-days that are 
paid for individuals enrolled in a Medicaid managed care plan 
(under section 1903(m) or section 1932).
  (D) In no case may the payments described in paragraph (1)(B) 
with respect to a Medicaid provider described in paragraph 
(2)(B) be paid--
          (i) for any year beginning after 2016 unless the 
        provider has been provided payment under paragraph 
        (1)(B) for the previous year; and
          (ii) over a period of more than 6 years of payment.
  (6) Payments described in paragraph (1) are not in accordance 
with this subsection unless the following requirements are met:
          (A)(i) The State provides assurances satisfactory to 
        the Secretary that amounts received under subsection 
        (a)(3)(F) with respect to payments to a Medicaid 
        provider are paid, subject to clause (ii), directly to 
        such provider (or to an employer or facility to which 
        such provider has assigned payments) without any 
        deduction or rebate.
          (ii) Amounts described in clause (i) may also be paid 
        to an entity promoting the adoption of certified EHR 
        technology, as designated by the State, if 
        participation in such a payment arrangement is 
        voluntary for the eligible professional involved and if 
        such entity does not retain more than 5 percent of such 
        payments for costs not related to certified EHR 
        technology (and support services including maintenance 
        and training) that is for, or is necessary for the 
        operation of, such technology.
          (B) A Medicaid provider described in paragraph (2)(A) 
        is responsible for payment of the remaining 15 percent 
        of the net average allowable cost and shall be 
        determined to have met such responsibility to the 
        extent that the payment to the Medicaid provider is not 
        in excess of 85 percent of the net average allowable 
        cost.
          (C)(i) Subject to clause (ii), with respect to 
        payments to a Medicaid provider--
                  (I) for the first year of payment to the 
                Medicaid provider under this subsection, the 
                Medicaid provider demonstrates that it is 
                engaged in efforts to adopt, implement, or 
                upgrade certified EHR technology; and
                  (II) for a year of payment, other than the 
                first year of payment to the Medicaid provider 
                under this subsection, the Medicaid provider 
                demonstrates meaningful use of certified EHR 
                technology through a means that is approved by 
                the State and acceptable to the Secretary, and 
                that may be based upon the methodologies 
                applied under section 1848(o) or 1886(n).
          (ii) In the case of a Medicaid provider who has 
        completed adopting, implementing, or upgrading such 
        technology prior to the first year of payment to the 
        Medicaid provider under this subsection, clause (i)(I) 
        shall not apply and clause (i)(II) shall apply to each 
        year of payment to the Medicaid provider under this 
        subsection, including the first year of payment.
          (D) To the extent specified by the Secretary, the 
        certified EHR technology is compatible with State or 
        Federal administrative management systems.
For purposes of subparagraph (B), a Medicaid provider described 
in paragraph (2)(A) may accept payments for the costs described 
in such subparagraph from a State or local government. For 
purposes of subparagraph (C), in establishing the means 
described in such subparagraph, which may include clinical 
quality reporting to the State, the State shall ensure that 
populations with unique needs, such as children, are 
appropriately addressed.
  (7) With respect to Medicaid providers described in paragraph 
(2)(A), the Secretary shall ensure coordination of payment with 
respect to such providers under sections 1848(o) and 1853(l) 
and under this subsection to assure no duplication of funding. 
Such coordination shall include, to the extent practicable, a 
data matching process between State Medicaid agencies and the 
Centers for Medicare & Medicaid Services using national 
provider identifiers. For such purposes, the Secretary may 
require the submission of such data relating to payments to 
such Medicaid providers as the Secretary may specify.
  (8) In carrying out paragraph (6)(C), the State and Secretary 
shall seek, to the maximum extent practicable, to avoid 
duplicative requirements from Federal and State governments to 
demonstrate meaningful use of certified EHR technology under 
this title and title XVIII. In doing so, the Secretary may deem 
satisfaction of requirements for such meaningful use for a 
payment year under title XVIII to be sufficient to qualify as 
meaningful use under this subsection. The Secretary may also 
specify the reporting periods under this subsection in order to 
carry out this paragraph.
  (9) In order to be provided Federal financial participation 
under subsection (a)(3)(F)(ii), a State must demonstrate to the 
satisfaction of the Secretary, that the State--
          (A) is using the funds provided for the purposes of 
        administering payments under this subsection, including 
        tracking of meaningful use by Medicaid providers;
          (B) is conducting adequate oversight of the program 
        under this subsection, including routine tracking of 
        meaningful use attestations and reporting mechanisms; 
        and
          (C) is pursuing initiatives to encourage the adoption 
        of certified EHR technology to promote health care 
        quality and the exchange of health care information 
        under this title, subject to applicable laws and 
        regulations governing such exchange.
  (10) The Secretary shall periodically submit reports to the 
Committee on Energy and Commerce of the House of 
Representatives and the Committee on Finance of the Senate on 
status, progress, and oversight of payments described in 
paragraph (1), including steps taken to carry out paragraph 
(7). Such reports shall also describe the extent of adoption of 
certified EHR technology among Medicaid providers resulting 
from the provisions of this subsection and any improvements in 
health outcomes, clinical quality, or efficiency resulting from 
such adoption.
  (u)(1)(A) Notwithstanding subsection (a)(1), if the ratio of 
a State's erroneous excess payments for medical assistance (as 
defined in subparagraph (D)) to its total expenditures for 
medical assistance under the State plan approved under this 
title exceeds 0.03, for the period consisting of the third and 
fourth quarters of fiscal year 1983, or for any full fiscal 
year thereafter, then the Secretary shall make no payment for 
such period or fiscal year with respect to so much of such 
erroneous excess payments as exceeds such allowable error rate 
of 0.03.
  (B) The Secretary may waive, in certain limited cases, all or 
part of the reduction required under subparagraph (A) with 
respect to any State if such State is unable to reach the 
allowable error rate for a period or fiscal year despite a good 
faith effort by such State.
  (C) In estimating the amount to be paid to a State under 
subsection (d), the Secretary shall take into consideration the 
limitation on Federal financial participation imposed by 
subparagraph (A) and shall reduce the estimate he makes under 
subsection (d)(1), for purposes of payment to the State under 
subsection (d)(3), in light of any expected erroneous excess 
payments for medical assistance (estimated in accordance with 
such criteria, including sampling procedures, as he may 
prescribe and subject to subsequent adjustment, if necessary, 
under subsection (d)(2)).
  (D)(i) For purposes of this subsection, the term ``erroneous 
excess payments for medical assistance'' means the total of--
          (I) payments under the State plan with respect to 
        ineligible individuals and families, and
          (II) overpayments on behalf of eligible individuals 
        and families by reason of error in determining the 
        amount of expenditures for medical care required of an 
        individual or family as a condition of eligibility.
  (ii) In determining the amount of erroneous excess payments 
for medical assistance to an ineligible individual or family 
under clause (i)(I), if such ineligibility is the result of an 
error in determining the amount of the resources of such 
individual or family, the amount of the erroneous excess 
payment shall be the smaller of (I) the amount of the payment 
with respect to such individual or family, or (II) the 
difference between the actual amount of such resources and the 
allowable resource level established under the State plan.
  (iii) In determining the amount of erroneous excess payments 
for medical assistance to an individual or family under clause 
(i)(II), the amount of the erroneous excess payment shall be 
the smaller of (I) the amount of the payment on behalf of the 
individual or family, or (II) the difference between the actual 
amount incurred for medical care by the individual or family 
and the amount which should have been incurred in order to 
establish eligibility for medical assistance.
  (iv) In determining the amount of erroneous excess payments, 
there shall not be included any error resulting from a failure 
of an individual to cooperate or give correct information with 
respect to third-party liability as required under section 
1912(a)(1)(C) or 402(a)(26)(C) or with respect to payments made 
in violation of section 1906.
  (v) In determining the amount of erroneous excess payments, 
there shall not be included any erroneous payments made for 
ambulatory prenatal care provided during a presumptive 
eligibility period (as defined in section 1920(b)(1)), for 
items and services described in subsection (a) of section 1920A 
provided to a child during a presumptive eligibility period 
under such section, for medical assistance provided to an 
individual described in subsection (a) of section 1920B during 
a presumptive eligibility period under such section, or for 
medical assistance provided to an individual during a 
presumptive eligibility period resulting from a determination 
of presumptive eligibility made by a hospital that elects under 
section 1902(a)(47)(B) to be a qualified entity for such 
purpose.\24\
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    \24\Effective on date of enactment of Public Law 111-148 (March 23, 
2010), section 2303(b)(2)(B) of Public Law 111-148 to section 
1903(u)(1)(D)(v) (as amended by section 2202(b) of such Public Law) 
attempts to amend this clause by inserting ``or for medical assistance 
provided to an individual described in subsection (a) of section 1920C 
during a presumptive eligibility period under such section,'' after 
``1920B during a presumptive eligibility period under such section,''. 
Such amendment could not be carried out because a comma at the end of 
the phrase specifying where to place new language does not appear in 
law.
---------------------------------------------------------------------------
  (E) For purposes of subparagraph (D), there shall be 
excluded, in determining both erroneous excess payments for 
medical assistance and total expenditures for medical 
assistance--
          (i) payments with respect to any individual whose 
        eligibility therefor was determined exclusively by the 
        Secretary under an agreement pursuant to section 1634 
        and such other classes of individuals as the Secretary 
        may by regulation prescribe whose eligibility was 
        determined in part under such an agreement; and
          (ii) payments made as the result of a technical 
        error.
  (2) The State agency administering the plan approved under 
this title shall, at such times and in such form as the 
Secretary may specify, provide information on the rates of 
erroneous excess payments made (or expected, with respect to 
future periods specified by the Secretary) in connection with 
its administration of such plan, together with any other data 
he requests that are reasonably necessary for him to carry out 
the provisions of this subsection.
  (3)(A) If a State fails to cooperate with the Secretary in 
providing information necessary to carry out this subsection, 
the Secretary, directly or through contractual or such other 
arrangements as he may find appropriate, shall establish the 
error rates for that State on the basis of the best data 
reasonably available to him and in accordance with such 
techniques for sampling and estimating as he finds appropriate.
  (B) In any case in which it is necessary for the Secretary to 
exercise his authority under subparagraph (A) to determine a 
State's error rates for a fiscal year, the amount that would 
otherwise be payable to such State under this title for 
quarters in such year shall be reduced by the costs incurred by 
the Secretary in making (directly or otherwise) such 
determination.
  (4) This subsection shall not apply with respect to Puerto 
Rico, Guam, the Virgin Islands, the Northern Mariana Islands, 
or American Samoa.
  (v)(1) Notwithstanding the preceding provisions of this 
section, except as provided in paragraphs (2) and (4), no 
payment may be made to a State under this section for medical 
assistance furnished to an alien who is not lawfully admitted 
for permanent residence or otherwise permanently residing in 
the United States under color of law.
  (2) Payment shall be made under this section for care and 
services that are furnished to an alien described in paragraph 
(1) only if--
          (A) such care and services are necessary for the 
        treatment of an emergency medical condition of the 
        alien,
          (B) such alien otherwise meets the eligibility 
        requirements for medical assistance under the State 
        plan approved under this title (other than the 
        requirement of the receipt of aid or assistance under 
        title IV, supplemental security income benefits under 
        title XVI, or a State supplementary payment), and
          (C) such care and services are not related to an 
        organ transplant procedure.
  (3) For purposes of this subsection, the term ``emergency 
medical condition'' means a medical condition (including 
emergency labor and delivery) manifesting itself by acute 
symptoms of sufficient severity (including severe pain) such 
that the absence of immediate medical attention could 
reasonably be expected to result in--
          (A) placing the patient's health in serious jeopardy,
          (B) serious impairment to bodily functions, or
          (C) serious dysfunction of any bodily organ or part.
  (4)(A) A State may elect (in a plan amendment under this 
title) to provide medical assistance under this title, 
notwithstanding sections 401(a), 402(b), 403, and 421 of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996, to children and pregnant women who are lawfully 
residing in the United States (including battered individuals 
described in section 431(c) of such Act) and who are otherwise 
eligible for such assistance, within either or both of the 
following eligibility categories:
          (i) Pregnant women.--Women during pregnancy (and 
        during the 60-day period beginning on the last day of 
        the pregnancy).
          (ii) Children.--Individuals under 21 years of age, 
        including optional targeted low-income children 
        described in section 1905(u)(2)(B).
  (B) In the case of a State that has elected to provide 
medical assistance to a category of aliens under subparagraph 
(A), no debt shall accrue under an affidavit of support against 
any sponsor of such an alien on the basis of provision of 
assistance to such category and the cost of such assistance 
shall not be considered as an unreimbursed cost.
  (C) As part of the State's ongoing eligibility 
redetermination requirements and procedures for an individual 
provided medical assistance as a result of an election by the 
State under subparagraph (A), a State shall verify that the 
individual continues to lawfully reside in the United States 
using the documentation presented to the State by the 
individual on initial enrollment. If the State cannot 
successfully verify that the individual is lawfully residing in 
the United States in this manner, it shall require that the 
individual provide the State with further documentation or 
other evidence to verify that the individual is lawfully 
residing in the United States.
  (w)(1)(A) Notwithstanding the previous provisions of this 
section, for purposes of determining the amount to be paid to a 
State (as defined in paragraph (7)(D)) under subsection (a)(1) 
for quarters in any fiscal year, the total amount expended 
during such fiscal year as medical assistance under the State 
plan (as determined without regard to this subsection) shall be 
reduced by the sum of any revenues received by the State (or by 
a unit of local government in the State) during the fiscal 
year--
          (i) from provider-related donations (as defined in 
        paragraph (2)(A)), other than--
                  (I) bona fide provider-related donations (as 
                defined in paragraph (2)(B)), and
                  (II) donations described in paragraph (2)(C);
          (ii) from health care related taxes (as defined in 
        paragraph (3)(A)), other than broad-based health care 
        related taxes (as defined in paragraph (3)(B));
          (iii) from a broad-based health care related tax, if 
        there is in effect a hold harmless provision (described 
        in paragraph (4)) with respect to the tax; or
          (iv) only with respect to State fiscal years (or 
        portions thereof) occurring on or after January 1, 
        1992, and before October 1, 1995, from broad-based 
        health care related taxes to the extent the amount of 
        such taxes collected exceeds the limit established 
        under paragraph (5).
  (B) Notwithstanding the previous provisions of this section, 
for purposes of determining the amount to be paid to a State 
under subsection (a)(7) for all quarters in a Federal fiscal 
year (beginning with fiscal year 1993), the total amount 
expended during the fiscal year for administrative expenditures 
under the State plan (as determined without regard to this 
subsection) shall be reduced by the sum of any revenues 
received by the State (or by a unit of local government in the 
State) during such quarters from donations described in 
paragraph (2)(C), to the extent the amount of such donations 
exceeds 10 percent of the amounts expended under the State plan 
under this title during the fiscal year for purposes described 
in paragraphs (2), (3), (4), (6), and (7) of subsection (a).
  (C)(i) Except as otherwise provided in clause (ii), 
subparagraph (A)(i) shall apply to donations received on or 
after January 1, 1992.
  (ii) Subject to the limits described in clause (iii) and 
subparagraph (E), subparagraph (A)(i) shall not apply to 
donations received before the effective date specified in 
subparagraph (F) if such donations are received under programs 
in effect or as described in State plan amendments or related 
documents submitted to the Secretary by September 30, 1991, and 
applicable to State fiscal year 1992, as demonstrated by State 
plan amendments, written agreements, State budget 
documentation, or other documentary evidence in existence on 
that date.
  (iii) In applying clause (ii) in the case of donations 
received in State fiscal year 1993, the maximum amount of such 
donations to which such clause may be applied may not exceed 
the total amount of such donations received in the 
corresponding period in State fiscal year 1992 (or not later 
than 5 days after the last day of the corresponding period).
  (D)(i) Except as otherwise provided in clause (ii), 
subparagraphs (A)(ii) and (A)(iii) shall apply to taxes 
received on or after January 1, 1992.
  (ii) Subparagraphs (A)(ii) and (A)(iii) shall not apply to 
impermissible taxes (as defined in clause (iii)) received 
before the effective date specified in subparagraph (F) to the 
extent the taxes (including the tax rate or base) were in 
effect, or the legislation or regulations imposing such taxes 
were enacted or adopted, as of November 22, 1991.
  (iii) In this subparagraph and subparagraph (E), the term 
``impermissible tax'' means a health care related tax for which 
a reduction may be made under clause (ii) or (iii) of 
subparagraph (A).
  (E)(i) In no case may the total amount of donations and taxes 
permitted under the exception provided in subparagraphs (C)(ii) 
and (D)(ii) for the portion of State fiscal year 1992 occurring 
during calendar year 1992 exceed the limit under paragraph (5) 
minus the total amount of broad-based health care related taxes 
received in the portion of that fiscal year.
  (ii) In no case may the total amount of donations and taxes 
permitted under the exception provided in subparagraphs (C)(ii) 
and (D)(ii) for State fiscal year 1993 exceed the limit under 
paragraph (5) minus the total amount of broad-based health care 
related taxes received in that fiscal year.
  (F) In this paragraph in the case of a State--
          (i) except as provided in clause (iii), with a State 
        fiscal year beginning on or before July 1, the 
        effective date is October 1, 1992,
          (ii) except as provided in clause (iii), with a State 
        fiscal year that begins after July 1, the effective 
        date is January 1, 1993, or
          (iii) with a State legislature which is not scheduled 
        to have a regular legislative session in 1992, with a 
        State legislature which is not scheduled to have a 
        regular legislative session in 1993, or with a 
        provider-specific tax enacted on November 4, 1991, the 
        effective date is July 1, 1993.
  (2)(A) In this subsection (except as provided in paragraph 
(6)), the term ``provider-related donation'' means any donation 
or other voluntary payment (whether in cash or in kind) made 
(directly or indirectly) to a State or unit of local government 
by--
          (i) a health care provider (as defined in paragraph 
        (7)(B)),
          (ii) an entity related to a health care provider (as 
        defined in paragraph (7)(C)), or
          (iii) an entity providing goods or services under the 
        State plan for which payment is made to the State under 
        paragraph (2), (3), (4), (6), or (7) of subsection (a).
  (B) For purposes of paragraph (1)(A)(i)(I), the term ``bona 
fide provider-related donation'' means a provider-related 
donation that has no direct or indirect relationship (as 
determined by the Secretary) to payments made under this title 
to that provider, to providers furnishing the same class of 
items and services as that provider, or to any related entity, 
as established by the State to the satisfaction of the 
Secretary. The Secretary may by regulation specify types of 
provider-related donations described in the previous sentence 
that will be considered to be bona fide provider-related 
donations.
  (C) For purposes of paragraph (1)(A)(i)(II), donations 
described in this subparagraph are funds expended by a 
hospital, clinic, or similar entity for the direct cost 
(including costs of training and of preparing and distributing 
outreach materials) of State or local agency personnel who are 
stationed at the hospital, clinic, or entity to determine the 
eligibility of individuals for medical assistance under this 
title and to provide outreach services to eligible or 
potentially eligible individuals.
  (3)(A) In this subsection (except as provided in paragraph 
(6)), the term ``health care related tax'' means a tax (as 
defined in paragraph (7)(F)) that--
          (i) is related to health care items or services, or 
        to the provision of, the authority to provide, or 
        payment for, such items or services, or
          (ii) is not limited to such items or services but 
        provides for treatment of individuals or entities that 
        are providing or paying for such items or services that 
        is different from the treatment provided to other 
        individuals or entities.
In applying clause (i), a tax is considered to relate to health 
care items or services if at least 85 percent of the burden of 
such tax falls on health care providers.
  (B) In this subsection, the term ``broad-based health care 
related tax'' means a health care related tax which is imposed 
with respect to a class of health care items or services (as 
described in paragraph (7)(A)) or with respect to providers of 
such items or services and which, except as provided in 
subparagraphs (D), (E), and (F)--
          (i) is imposed at least with respect to all items or 
        services in the class furnished by all non-Federal, 
        nonpublic providers in the State (or, in the case of a 
        tax imposed by a unit of local government, the area 
        over which the unit has jurisdiction) or is imposed 
        with respect to all non-Federal, nonpublic providers in 
        the class; and
          (ii) is imposed uniformly (in accordance with 
        subparagraph (C)).
  (C)(i) Subject to clause (ii), for purposes of subparagraph 
(B)(ii), a tax is considered to be imposed uniformly if--
          (I) in the case of a tax consisting of a licensing 
        fee or similar tax on a class of health care items or 
        services (or providers of such items or services), the 
        amount of the tax imposed is the same for every 
        provider providing items or services within the class;
          (II) in the case of a tax consisting of a licensing 
        fee or similar tax imposed on a class of health care 
        items or services (or providers of such services) on 
        the basis of the number of beds (licensed or otherwise) 
        of the provider, the amount of the tax is the same for 
        each bed of each provider of such items or services in 
        the class;
          (III) in the case of a tax based on revenues or 
        receipts with respect to a class of items or services 
        (or providers of items or services) the tax is imposed 
        at a uniform rate for all items and services (or 
        providers of such items of services) in the class on 
        all the gross revenues or receipts, or net operating 
        revenues, relating to the provision of all such items 
        or services (or all such providers) in the State (or, 
        in the case of a tax imposed by a unit of local 
        government within the State, in the area over which the 
        unit has jurisdiction); or
          (IV) in the case of any other tax, the State 
        establishes to the satisfaction of the Secretary that 
        the tax is imposed uniformly.
  (ii) Subject to subparagraphs (D) and (E), a tax imposed with 
respect to a class of health care items and services is not 
considered to be imposed uniformly if the tax provides for any 
credits, exclusions, or deductions which have as their purpose 
or effect the return to providers of all or a portion of the 
tax paid in a manner that is inconsistent with subclauses (I) 
and (II) of subparagraph (E)(ii) or provides for a hold 
harmless provision described in paragraph (4).
  (D) A tax imposed with respect to a class of health care 
items and services is considered to be imposed uniformly--
          (i) notwithstanding that the tax is not imposed with 
        respect to items or services (or the providers thereof) 
        for which payment is made under a State plan under this 
        title or title XVIII, or
          (ii) in the case of a tax described in subparagraph 
        (C)(i)(III), notwithstanding that the tax provides for 
        exclusion (in whole or in part) of revenues or receipts 
        from a State plan under this title or title XVIII.
  (E)(i) A State may submit an application to the Secretary 
requesting that the Secretary treat a tax as a broad-based 
health care related tax, notwithstanding that the tax does not 
apply to all health care items or services in class (or all 
providers of such items and services), provides for a credit, 
deduction, or exclusion, is not applied uniformly, or otherwise 
does not meet the requirements of subparagraph (B) or (C). 
Permissible waivers may include exemptions for rural or sole-
community providers.
  (ii) The Secretary shall approve such an application if the 
State establishes to the satisfaction of the Secretary that--
          (I) the net impact of the tax and associated 
        expenditures under this title as proposed by the State 
        is generally redistributive in nature, and
          (II) the amount of the tax is not directly correlated 
        to payments under this title for items or services with 
        respect to which the tax is imposed.
The Secretary shall by regulation specify types of credits, 
exclusions, and deductions that will be considered to meet the 
requirements of this subparagraph.
  (F) In no case shall a tax not qualify as a broad-based 
health care related tax under this paragraph because it does 
not apply to a hospital that is described in section 501(c)(3) 
of the Internal Revenue Code of 1986 and exempt from taxation 
under section 501(a) of such Code and that does not accept 
payment under the State plan under this title or under title 
XVIII.
  (4) For purposes of paragraph (1)(A)(iii), there is in effect 
a hold harmless provision with respect to a broad-based health 
care related tax imposed with respect to a class of items or 
services if the Secretary determines that any of the following 
applies:
          (A) The State or other unit of government imposing 
        the tax provides (directly or indirectly) for a payment 
        (other than under this title) to taxpayers and the 
        amount of such payment is positively correlated either 
        to the amount of such tax or to the difference between 
        the amount of the tax and the amount of payment under 
        the State plan.
          (B) All or any portion of the payment made under this 
        title to the taxpayer varies based only upon the amount 
        of the total tax paid.
          (C)(i) The State or other unit of government imposing 
        the tax provides (directly or indirectly) for any 
        payment, offset, or waiver that guarantees to hold 
        taxpayers harmless for any portion of the costs of the 
        tax.
          (ii) For purposes of clause (i), a determination of 
        the existence of an indirect guarantee shall be made 
        under paragraph (3)(i) of section 433.68(f) of title 
        42, Code of Federal Regulations, as in effect on 
        November 1, 2006, except that for portions of fiscal 
        years beginning on or after January 1, 2008, and before 
        October 1, 2011, ``5.5 percent'' shall be substituted 
        for ``6 percent'' each place it appears.
The provisions of this paragraph shall not prevent use of