[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 839 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 839

    To amend title XIX of the Social Security Act to permit greater 
flexibility for States to enroll medicaid beneficiaries in managed care 
 arrangements, to remove barriers preventing the provision of medical 
  assistance under State medicaid plans through managed care, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                 May 22 (legislative day, May 15), 1995

  Mr. Chafee (for himself, Mr. Graham, and Mr. Conrad) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
    To amend title XIX of the Social Security Act to permit greater 
flexibility for States to enroll medicaid beneficiaries in managed care 
 arrangements, to remove barriers preventing the provision of medical 
  assistance under State medicaid plans through managed care, and for 
                            other purposes.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicaid Managed Care Act of 1995''.

SEC. 2. PERMITTING GREATER FLEXIBILITY FOR STATES TO ENROLL 
              BENEFICIARIES IN MANAGED CARE ARRANGEMENTS.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended--
            (1) by redesignating section 1931 as section 1932; and
            (2) by inserting after section 1930 the following new 
        section:

    ``state options for enrollment of beneficiaries in managed care 
                              arrangements

    ``Sec. 1931. (a) Mandatory Enrollment.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this section, a State may require an individual eligible for 
        medical assistance under the State plan under this title to 
        enroll with an eligible managed care provider as a condition of 
        receiving such assistance and, with respect to assistance 
        furnished by or under arrangements with such provider, to 
        receive such assistance through the provider, if the following 
        provisions are met:
                    ``(A) The provider meets the requirements of 
                section 1932.
                    ``(B) The provider enters into a contract with the 
                State to provide services for the benefit of 
                individuals eligible for benefits under this title 
                under which prepaid payments to such provider are made 
                on an actuarially sound basis.
                    ``(C) There is sufficient capacity among all 
                providers meeting such requirements to enroll and serve 
                the individuals required to enroll with such providers.
                    ``(D) The individual is not a special needs 
                individual (as defined in subsection (c)).
                    ``(E) The State--
                            ``(i) permits an individual to choose an 
                        eligible managed care provider--
                                    ``(I) from among not less than 2 
                                medicaid managed care plans; or
                                    ``(II) between a medicaid managed 
                                care plan and a primary care case 
                                management provider;
                            ``(ii) provides the individual with the 
                        opportunity to change enrollment among eligible 
                        managed care providers not less than once 
                        annually and notifies the individual of such 
                        opportunity not later than 60 days prior to the 
                        first date on which the individual may change 
                        enrollment;
                            ``(iii) establishes a method for 
                        establishing enrollment priorities in the case 
                        of an eligible managed care provider that does 
                        not have sufficient capacity to enroll all such 
                        individuals seeking enrollment under which 
                        individuals already enrolled with the provider 
                        are given priority in continuing enrollment 
                        with the provider;
                            ``(iv) establishes a default enrollment 
                        process which meets the requirements described 
                        in paragraph (2) and under which any such 
                        individual who does not enroll with an eligible 
                        managed care provider during the enrollment 
                        period specified by the State shall be enrolled 
                        by the State with such a provider in accordance 
                        with such process; and
                            ``(v) establishes the sanctions provided 
                        for in section 1933.
            ``(2) Default enrollment process requirements.--The default 
        enrollment process established by a State under paragraph 
        (1)(E)(iv) shall--
                    ``(A) provide that the State may not enroll 
                individuals with an eligible managed care provider 
                which is not in compliance with the requirements of 
                section 1932; and
                    ``(B) provide for an equitable distribution of 
                individuals among all eligible managed care providers 
                available to enroll individuals through such default 
                enrollment process, consistent with the enrollment 
                capacities of such providers.
            ``(3) Exception for certain services.--A State may not 
        require an individual eligible for medical assistance under the 
        State plan under this title to enroll with an eligible managed 
        care provider as a condition of receiving medical assistance 
        consisting of payment for medicare cost-sharing under section 
        1905(p)(3).
    ``(b) Reenrollment of Individuals Who Regain Eligibility.--
            ``(1) In general.--If an individual eligible for medical 
        assistance under a State plan under this title and enrolled 
        with an eligible managed care provider with a contract under 
        subsection (a)(1)(B) ceases to be eligible for such assistance 
        for a period of not greater than 2 months, the State may 
        provide for the automatic reenrollment of the individual with 
        the provider as of the first day of the month in which the 
        individual is again eligible for such assistance.
            ``(2) Conditions.--Paragraph (1) shall only apply if--
                    ``(A) the month for which the individual is to be 
                reenrolled occurs during the enrollment period covered 
                by the individual's original enrollment with the 
                eligible managed care provider;
                    ``(B) the eligible managed care provider continues 
                to have a contract with the State agency under 
                subsection (a)(1)(B) as of the first day of such month; 
                and
                    ``(C) the eligible managed care provider complies 
                with the requirements of section 1932.
            ``(3) Notice of reenrollment.--The State shall provide 
        timely notice to an eligible managed care provider of any 
        reenrollment of an individual under this subsection.
    ``(c) Special Needs Individuals Described.--In this section, a 
`special needs individual' means any of the following:
            ``(1) Special needs child.--An individual who is under 19 
        years of age who--
                    ``(A) is eligible for supplemental security income 
                under title XVI;
                    ``(B) is described under section 501(a)(1)(D);
                    ``(C) is a child described in section 1902(e)(3); 
                or
                    ``(D) is in foster care or is otherwise in an out-
                of-home placement.
            ``(2) Homeless individuals.--An individual who is homeless 
        (without regard to whether the individual is a member of a 
        family), including--
                    ``(A) an individual whose primary residence during 
                the night is a supervised public or private facility 
                that provides temporary living accommodations; or
                    ``(B) an individual who is a resident in 
                transitional housing.
            ``(3) Migrant agricultural workers.--A migratory 
        agricultural worker or a seasonal agricultural worker (as such 
        terms are defined in section 329 of the Public Health Service 
        Act), or the spouse or dependent of such a worker.''.
    (b) Conforming Amendment.--Section 1902(a)(23) of such Act (42 
U.S.C. 1396a(a)(23)) is amended--
            (1) in the matter preceding subparagraph (A), by striking 
        ``subsection (g) and in section 1915'' and inserting 
        ``subsection (g), section 1915, and section 1931,''; and
            (2) in subparagraph (B)--
                    (A) by striking ``a health maintenance 
                organization, or a'' and inserting ``or with an 
                eligible managed care provider, as defined in section 
                1932(g)(1), or''.
SEC. 3. REMOVAL OF BARRIERS TO PROVISION OF MEDICAID SERVICES THROUGH 
              MANAGED CARE.

    (a) Repeal of Current Barriers.--Except as provided in subsection 
(b), section 1903(m) of the Social Security Act (42 U.S.C. 1396b(m)) is 
repealed on the date of the enactment of this Act.
    (b) Existing Contracts.--In the case of any contract under section 
1903(m) of such Act which is in effect on the day before the date of 
the enactment of this Act, the provisions of such section shall apply 
to such contract until the earlier of--
            (1) the day after the date of the expiration of the 
        contract; or
            (2) the date which is 1 year after the date of the 
        enactment of this Act.
    (c) Eligible Managed Care Providers Described.--Title XIX of such 
Act (42 U.S.C. 1396 et seq.), as amended by section 2(a), is amended--
            (1) by redesignating section 1932 as section 1933; and
            (2) by inserting after section 1931 the following new 
        section:

                   ``eligible managed care providers

    ``Sec. 1932. (a) Definitions.--In this section, the following 
definitions shall apply:
            ``(1) Eligible managed care provider.--The term `eligible 
        managed care provider' means--
                    ``(A) a medicaid managed care plan; or
                    ``(B) a primary care case management provider.
            ``(2) Medicaid managed care plan.--The term `medicaid 
        managed care plan' means a health maintenance organization or 
        any other plan which provides or arranges for the provision of 
        one or more items and services to individuals eligible for 
        medical assistance under the State plan under this title in 
        accordance with a contract with the State under section 
        1931(a)(1)(B).
            ``(3) Primary care case management provider.--
                    ``(A) In general.--The term `primary care case 
                management provider' means a health care provider 
                that--
                            ``(i) is a physician, group of physicians, 
                        a Federally-qualified health center, a rural 
                        health clinic, or an entity employing or having 
                        other arrangements with physicians that 
                        provides or arranges for the provision of one 
                        or more items and services to individuals 
                        eligible for medical assistance under the State 
                        plan under this title in accordance with a 
                        contract with the State under section 
                        1931(a)(1)(B);
                            ``(ii) receives payment on a fee-for-
                        service basis (or, in the case of a Federally-
                        qualified health center or a rural health 
                        clinic, on a reasonable cost per encounter 
                        basis) for the provision of health care items 
                        and services specified in such contract to 
                        enrolled individuals;
                            ``(iii) receives an additional fixed fee 
                        per enrollee for a period specified in such 
                        contract for providing case management services 
                        (including approving and arranging for the 
                        provision of health care items and services 
                        specified in such contract on a referral basis) 
                        to enrolled individuals; and
                            ``(iv) is not an entity that is at risk.
                    ``(B) At risk.--In subparagraph (A)(iv), the term 
                `at risk' means an entity that--
                            ``(i) has a contract with the State under 
                        which such entity is paid a fixed amount for 
                        providing or arranging for the provision of 
                        health care items or services specified in such 
                        contract to an individual eligible for medical 
                        assistance under the State plan and enrolled 
                        with such entity, regardless of whether such 
                        items or services are furnished to such 
                        individual; and
                            ``(ii) is liable for all or part of the 
                        cost of furnishing such items or services, 
                        regardless of whether such cost exceeds such 
                        fixed payment.
    ``(b) Enrollment.--
            ``(1) Nondiscrimination.--An eligible managed care provider 
        may not discriminate on the basis of health status or 
        anticipated need for services in the enrollment, reenrollment, 
        or disenrollment of individuals eligible to receive medical 
        assistance under a State plan under this title.
            ``(2) Termination of enrollment.--
                    ``(A) In general.--An eligible managed care 
                provider shall permit an individual eligible for 
                medical assistance under the State plan under this 
                title who is enrolled with the provider to terminate 
                such enrollment for cause at any time, and without 
                cause during the 60-day period beginning on the date 
                the individual receives notice of enrollment, and shall 
                notify each such individual of the opportunity to 
                terminate enrollment under these conditions.
                    ``(B) Fraudulent inducement or coercion as grounds 
                for cause.--For purposes of subparagraph (A), an 
                individual terminating enrollment with an eligible 
                managed care provider on the grounds that the 
                enrollment was based on fraudulent inducement or was 
                obtained through coercion shall be considered to 
                terminate such enrollment for cause.
                    ``(C) Notice of termination.--
                            ``(i) Notice to state.--
                                    ``(I) By individuals.--Each 
                                individual terminating enrollment with 
                                an eligible managed care provider under 
                                subparagraph (A) shall do so by 
                                providing notice of the termination
                                 to an office of the State agency 
administering the State plan under this title, the State or local 
welfare agency, or an office of an eligible managed care provider.
                                    ``(II) By plans.--Any eligible 
                                managed care provider which receives 
                                notice of an individual's termination 
                                of enrollment with such provider 
                                through receipt of such notice at an 
                                office of an eligible managed care 
                                provider shall provide timely notice of 
                                the termination to the State agency 
                                administering the State plan under this 
                                title.
                            ``(ii) Notice to plan.--The State agency 
                        administering the State plan under this title 
                        or the State or local welfare agency which 
                        receives notice of an individual's termination 
                        of enrollment with an eligible managed care 
                        provider under clause (i) shall provide timely 
                        notice of the termination to such provider.
                    ``(D) Reenrollment.--Each State shall establish a 
                process under which an individual terminating 
                enrollment under this paragraph shall be promptly 
                enrolled with another eligible managed care provider 
                and notified of such enrollment.
            ``(3) Provision of enrollment materials in understandable 
        form.--Each eligible managed care provider shall provide all 
        enrollment materials in a manner and form which may be easily 
        understood by a typical adult enrollee of the provider who is 
        eligible for medical assistance under the State plan under this 
        title.
    ``(c) Quality Assurance.--
            ``(1) Access to services.--Each eligible managed care 
        provider shall provide or arrange for the provision of all 
        medically necessary medical assistance under this title which 
        is specified in the contract entered into between such provider 
        and the State under section 1931(a)(1)(B) for enrollees who are 
        eligible for medical assistance under the State plan under this 
        title.
            ``(2) Timely delivery of services.--Each eligible managed 
        care provider shall respond to requests from enrollees for the 
        delivery of medical assistance in a manner which--
                    ``(A) makes such assistance--
                            ``(i) available and accessible to each such 
                        individual, within the area served by the 
                        provider, with reasonable promptness and in a 
                        manner which assures continuity; and
                            ``(ii) when medically necessary, available 
                        and accessible 24 hours a day and 7 days a 
                        week; and
                    ``(B) with respect to assistance provided to such 
                an individual other than through the provider, or 
                without prior authorization, in the case of a primary 
                care case management provider, provides for 
                reimbursement to the individual (if applicable under 
                the contract between the State and the provider) if--
                            ``(i) the services were medically necessary 
                        and immediately required because of an 
                        unforeseen illness, injury, or condition; and
                            ``(ii) it was not reasonable given the 
                        circumstances to obtain the services through 
                        the provider, or, in the case of a primary care 
                        case management provider, with prior 
                        authorization.
            ``(3) External independent review of eligible managed care 
        provider activities.--
                    ``(A) Review of medicaid managed care plan 
                contract.--
                            ``(i) In general.--Except as provided in 
                        subparagraph (B), each medicaid managed care 
                        plan shall be subject to an annual external 
                        independent review of the quality and 
                        timeliness of, and access to, the items and 
                        services specified in such plan's contract with 
                        the State under section 1931(a)(1)(B). Such 
                        review shall specifically evaluate the extent 
                        to which the medicaid managed care plan 
                        provides such services in a timely manner.
                            ``(ii) Availability of results.--The 
                        results of each external independent review 
                        conducted under this subparagraph shall be 
                        available to participating health care 
                        providers, enrollees, and potential enrollees 
                        of the medicaid managed care plan, except that 
                        the results may not be made available in a 
                        manner that discloses the identity of any 
                        individual patient.
                    ``(B) Deemed compliance.--
                            ``(i) Medicare plans.--The requirements of 
                        subparagraph (A) shall not apply with respect 
                        to a medicaid managed care plan if the plan is 
                        an eligible organization with a contract in 
                        effect under section 1876.
                            ``(ii) Private accreditation.--
                                    ``(I) In general.--The requirements 
                                of subparagraph (A) shall not apply 
                                with respect to a medicaid managed care 
                                plan if--
                                            ``(aa) the plan is 
                                        accredited by an organization 
                                        meeting the requirements 
                                        described in clause (iii); and
                                            ``(bb) the standards and 
                                        process under which the plan is 
                                        accredited meet such 
                                        requirements as are established 
                                        under subclause (II), without 
                                        regard to whether or not the 
                                        time requirement of such 
                                        subclause is satisfied.
                                    ``(II) Standards and process.--Not 
                                later than 180 days after the date of 
                                the enactment of this Act, the 
                                Secretary shall specify requirements 
                                for the standards and process under 
                                which a medicaid managed care plan is 
                                accredited by an organization meeting 
                                the requirements of clause (iii).
                            ``(iii) Accrediting organization.--An 
                        accrediting organization meets the requirements 
                        of this clause if the organization--
                                    ``(I) is a private, nonprofit 
                                organization;
                                    ``(II) exists for the primary 
                                purpose of accrediting managed care 
                                plans or health care providers; and
                                    ``(III) is independent of health 
                                care providers or associations of 
                                health care providers.
                    ``(C) Review of primary care case management 
                provider contract.--Each primary care case management 
                provider shall be subject to an annual external 
                independent review of the quality and timeliness of, 
                and access to, the items and services specified in the 
                contract entered into between the State and the primary 
                care case management provider under section 
                1931(a)(1)(B).
            ``(4) Providing information on services.--
                    ``(A) Requirements for medicaid managed care 
                plans.--
                            ``(i) Information to the state.--Each 
                        medicaid managed care plan shall provide to the 
                        State (at such frequency as the Secretary may 
                        require), complete and timely information 
                        concerning the following:
                                    ``(I) The services that the plan 
                                provides to (or arranges to be provided 
                                to) individuals eligible for medical 
                                assistance under the State plan under 
                                this title.
                                    ``(II) The identity, locations, 
                                qualifications, and availability of 
                                participating health care providers.
                                    ``(III) The rights and 
                                responsibilities of enrollees.
                                    ``(IV) The services provided by the 
                                plan which are subject to prior 
                                authorization by the plan as a 
                                condition of coverage (in accordance 
                                with paragraph (6)(A)).
                                    ``(V) The procedures available to 
                                an enrollee and a health care provider 
                                to appeal the failure of the plan to 
                                cover a service.
                                    ``(VI) The performance of the plan 
                                in serving individuals eligible for 
                                medical assistance under the State plan 
                                under this title.
                            ``(ii) Information to health care 
                        providers, enrollees, and potential 
                        enrollees.--Each medicaid managed care plan 
                        shall--
                                    ``(I) upon request, make the 
                                information described in clause (i) 
                                available to participating health care 
                                providers, enrollees, and potential 
                                enrollees in the plan's service area; 
                                and
                                    ``(II) provide to enrollees and 
                                potential enrollees information 
                                regarding all items and services that 
                                are available to enrollees under the 
                                contract between the State and the plan 
                                that are covered either directly or 
                                through a method of referral and prior 
                                authorization.
                    ``(B) Requirements for primary care case management 
                providers.--Each primary care case management provider 
                shall--
                            ``(i) provide to the State (at such 
                        frequency as the Secretary may require), 
                        complete and timely information concerning the 
                        services that the primary care case management 
                        provider provides to (or arranges to be 
                        provided to) individuals eligible for medical 
                        assistance under the State plan under this 
                        title;
                            ``(ii) make available to enrollees and 
                        potential enrollees information concerning 
                        services available to the enrollee for which 
                        prior authorization by the primary care case 
                        management provider is required; and
                            ``(iii) provide enrollees and potential 
                        enrollees information regarding all items and 
                        services that are available to enrollees under 
                        the contract between the State and the primary 
                        care case management provider that are covered 
                        either directly or
                         through a method of referral and prior 
authorization.
                    ``(C) Requirements for both medicaid managed care 
                plans and primary care case management providers.--Each 
                eligible managed care provider shall provide the State 
                with aggregate encounter data for early and periodic 
                screening, diagnostic, and treatment services under 
                section 1905(r) furnished to individuals under 21 years 
                of age. Any such data provided may be audited by the 
                State and the Secretary.
            ``(5) Timeliness of payment.--An eligible managed care 
        provider shall make payment to health care providers for items 
        and services which are subject to the contract under section 
        1931(a)(1)(B) and which are furnished to individuals eligible 
        for medical assistance under the State plan under this title 
        who are enrolled with the provider on a timely basis and under 
        the claims payment procedures described in section 
        1902(a)(37)(A), unless the health care provider and the 
        eligible managed care provider agree to an alternate payment 
        schedule.
            ``(6) Additional quality assurance requirements for 
        medicaid managed care plans.--
                    ``(A) Conditions for prior authorization.--A 
                medicaid managed care plan may require the approval of 
                medical assistance for nonemergency services before the 
                assistance is furnished to an enrollee only if the 
                system providing for such approval--
                            ``(i) provides that such decisions are made 
                        in a timely manner, depending upon the urgency 
                        of the situation; and
                            ``(ii) permits coverage of medically 
                        necessary medical assistance provided to an 
                        enrollee without prior authorization in the 
                        event of an emergency.
                    ``(B) Internal grievance procedure.--Each medicaid 
                managed care plan shall establish an internal grievance 
                procedure under which a plan enrollee or a provider on 
                behalf of such an enrollee who is eligible for medical 
                assistance under the State plan under this title may 
                challenge the denial of coverage of or payment for such 
                assistance.
                    ``(C) Use of unique physician identifier for 
                participating physicians.--Each medicaid managed care 
                plan shall require each physician providing services to 
                enrollees eligible for medical assistance under the 
                State plan under this title to have a unique identifier 
                in accordance with the system established under section 
                1902(x).
                    ``(D) Patient encounter data.--
                            ``(i) In general.--Each medicaid managed 
                        care plan shall maintain sufficient patient 
                        encounter data to identify the health care 
                        provider who delivers services to patients and 
                        to otherwise enable the State plan to meet the 
                        requirements of section 1902(a)(27). The plan 
                        shall incorporate such information in the 
                        maintenance of patient encounter data with 
                        respect to such health care provider.
                            ``(ii) Compliance.--A medicaid managed care 
                        plan shall--
                                    ``(I) submit the data maintained 
                                under clause (i) to the State; or
                                    ``(II) demonstrate to the State 
                                that the data complies with managed 
                                care quality assurance guidelines 
                                established by the Secretary in 
                                accordance with clause (iii).
                            ``(iii) Standards.--In establishing managed 
                        care quality assurance guidelines under clause 
                        (ii)(II), the Secretary shall consider--
                                    ``(I) managed care industry 
                                standards for--
                                            ``(aa) internal quality 
                                        assurance; and
                                            ``(bb) performance 
                                        measures; and
                                    ``(II) any managed care quality 
                                standards established by the National 
                                Association of Insurance Commissioners.
    ``(d) Due Process Requirements for Eligible Managed Care 
Providers.--
            ``(1) Denial of or unreasonable delay in determining 
        coverage as grounds for hearing.--If an eligible managed care 
        provider--
                    ``(A) denies coverage of or payment for medical 
                assistance with respect to an enrollee
                 who is eligible for such assistance under the State 
plan under this title; or
                    ``(B) fails to make any eligibility or coverage 
                determination sought by an enrollee or, in the case of 
                a medicaid managed care plan, by a participating health 
                care provider or enrollee, in a timely manner, 
                depending upon the urgency of the situation,
        the enrollee or the health care provider furnishing such 
        assistance to the enrollee (as applicable) may obtain a hearing 
        before the State agency administering the State plan under this 
        title in accordance with section 1902(a)(3), but only, with 
        respect to a medicaid managed care plan, after completion of 
        the internal grievance procedure established by the plan under 
        subsection (c)(6)(B).
            ``(2) Completion of internal grievance procedure.--Nothing 
        in this subsection shall require completion of an internal 
        grievance procedure if such procedure does not exist or if the 
        procedure does not provide for timely review of health needs 
        considered by the enrollee's health care provider to be of an 
        urgent nature.
    ``(e) Miscellaneous.--
            ``(1) Protecting enrollees against the insolvency of 
        eligible managed care providers and against the failure of the 
        state to pay such providers.--Each eligible managed care 
        provider shall provide that an individual eligible for medical 
        assistance under the State plan under this title who is 
        enrolled with the provider may not be held liable--
                    ``(A) for the debts of the eligible managed care 
                provider, in the event of the provider's insolvency;
                    ``(B) for services provided to the individual--
                            ``(i) in the event of the provider failing 
                        to receive payment from the State for such 
                        services; or
                            ``(ii) in the event of a health care 
                        provider with a contractual or other 
                        arrangement with the eligible managed care 
                        provider failing to receive payment from the 
                        State or the eligible managed care provider for 
                        such services; or
                    ``(C) for the debts of any health care provider 
                with a contractual or other arrangement with the 
                provider to provide services to the individual, in the 
                event of the insolvency of the health care provider.
            ``(2) Treatment of children with special health care 
        needs.--
                    ``(A) In general.--In the case of an enrollee of an 
                eligible managed care provider who is a child with 
                special health care needs--
                            ``(i) if any medical assistance specified 
                        in the contract with the State is identified in 
                        a treatment plan prepared for the enrollee by a 
                        program described in subparagraph (C), the 
                        eligible managed care provider shall provide 
                        (or arrange to be provided) such assistance in 
                        accordance with the treatment plan either--
                                    ``(I) by referring the enrollee to 
                                a pediatric health care provider who is 
                                trained and experienced in the 
                                provision of such assistance and who 
                                has a contract with the eligible 
                                managed care provider to provide such 
                                assistance; or
                                    ``(II) if appropriate services are 
                                not available through the eligible 
                                managed care provider, permitting such 
                                enrollee to seek appropriate specialty 
                                services from pediatric health care 
                                providers outside of or apart from the 
                                eligible managed care provider; and
                            ``(ii) the eligible managed care provider 
                        shall require each health care provider with 
                        whom the eligible managed care provider has 
                        entered into an agreement to provide medical 
                        assistance to enrollees to furnish the medical 
                        assistance specified in such enrollee's 
                        treatment plan to the extent the health care 
                        provider is able to carry out such treatment 
                        plan.
                    ``(B) Prior authorization.--An enrollee referred 
                for treatment under subparagraph (A)(i)(I), or 
                permitted to seek treatment outside of or apart from 
                the eligible managed care provider under subparagraph 
                (A)(i)(II) shall be deemed to have obtained any prior 
                authorization required by the provider.
                    ``(C) Child with special health care needs.--For 
                purposes of subparagraph (A), a child with special 
                health care needs is a child who is receiving services 
                under--
                            ``(i) a program administered under part B 
                        or part H of the Individuals with Disabilities 
                        Education Act;
                            ``(ii) a program for children with special 
                        health care needs under title V;
                            ``(iii) a program under part B or part D of 
                        title IV; or
                            ``(iv) any other program for children with 
                        special health care needs identified by the 
                        Secretary.
            ``(3) Physician incentive plans.--Each medicaid managed 
        care plan shall require that any physician incentive plan 
        covering physicians who are participating in the medicaid 
        managed care plan shall meet the requirements of section 
        1876(i)(8).
            ``(4) Incentives for high quality eligible managed care 
        providers.--The Secretary and the State may establish a program 
        to reward, through public recognition, incentive payments, or 
        enrollment of additional individuals (or combinations of such 
        rewards), eligible managed care providers that provide the 
        highest quality care to individuals eligible for medical 
        assistance under the State plan under this title who are 
        enrolled with such providers. For purposes of section 
        1903(a)(7), proper expenses incurred by a State in carrying out 
        such a program shall be considered to be expenses necessary for 
        the proper and efficient administration of the State plan under 
        this title.''.
    (d) Clarification of Application of FFP Denial Rules to Payments 
Made Pursuant to Medicaid Managed Care Plans.--Section 1903(i) of such 
Act (42 U.S.C. 1396b(i)) is amended by adding at the end the following 
sentence: ``Paragraphs (1)(A), (1)(B), (2), (5), and (12) shall apply 
with respect to items or services furnished and amounts expended by or 
through an eligible managed care provider (as defined in section 
1932(a)(1)) in the same manner as such paragraphs apply to items or 
services furnished and amounts expended directly by the State.''.
    (e) Clarification of Certification Requirements for Physicians 
Providing Services to Children and Pregnant Women.--Section 1903(i)(12) 
of such Act (42 U.S.C. 1396b(i)(12)) is amended--
            (1) in subparagraph (A)(i), to read as follows:
                            ``(i) is certified in family practice or 
                        pediatrics by the medical specialty board 
                        recognized by the American Board of Medical 
                        Specialties for family practice or pediatrics 
                        or is certified in general practice or 
                        pediatrics by the medical specialty board 
                        recognized by the American Osteopathic 
                        Association,'';
            (2) in subparagraph (B)(i), to read as follows:
                            ``(i) is certified in family practice or 
                        obstetrics by the medical specialty board 
                        recognized by the American Board of Medical 
                        Specialties for family practice or obstetrics 
                        or is certified in family practice or 
                        obstetrics by the medical specialty board 
                        recognized by the American Osteopathic 
                        Association,''; and
            (3) in both subparagraphs (A) and (B)--
                    (A) by striking ``or'' at the end of clause (v);
                    (B) by redesignating clause (vi) as clause (vii); 
                and
                    (C) by inserting after clause (v) the following new 
                clause:
                            ``(vi) delivers such services in the 
                        emergency department of a hospital 
                        participating in the State plan approved under 
                        this title, or''.

SEC. 4. ADDITIONAL REQUIREMENTS FOR MEDICAID MANAGED CARE PLANS.

    Section 1932 of the Social Security Act, as added by section 
3(c)(2), is amended--
            (1) by redesignating subsections (d) and (e) as subsections 
        (e) and (f), respectively; and
            (2) by inserting after subsection (c) the following new 
        subsection:
    ``(d) Additional Requirements for Medicaid Managed Care Plans.--
            ``(1) Demonstration of adequate capacity and services.--
                    ``(A) In general.--Subject to subparagraph (C), 
                each medicaid managed care plan shall provide the State 
                and the Secretary with adequate assurances (as 
                determined by the Secretary) that the plan, with 
                respect to a service area--
                            ``(i) has the capacity to serve the 
                        expected enrollment in such service area;
                            ``(ii) offers an appropriate range of 
                        services for the population expected to be 
                        enrolled in such service area, including 
                        transportation services and translation 
                        services consisting of the principal languages 
                        spoken in the service area;
                            ``(iii) maintains sufficient numbers of 
                        providers of services included in the contract 
                        with the State to ensure that services are 
                        available to individuals receiving medical 
                        assistance and enrolled in the plan to the same 
                        extent that such services are available to 
                        individuals enrolled in the plan who are not 
                        recipients of medical assistance under the 
                        State plan under this title;
                            ``(iv) maintains extended hours of 
                        operation with respect to primary care services 
                        that are beyond those maintained during a 
                        normal business day;
                            ``(v) provides preventive and primary care 
                        services in locations that are readily 
                        accessible to members of the community; and
                            ``(vi) provides information concerning 
                        educational, social, health, and nutritional 
                        services offered by other programs for which 
                        enrollees may be eligible.
                    ``(B) Proof of adequate primary care capacity and 
                services.--Subject to subparagraph (C), a medicaid 
                managed care plan that contracts with a reasonable 
                number of primary care providers (as determined by the 
                Secretary) and whose primary care membership includes a 
                reasonable number (as so determined) of the following 
                providers will be deemed to have satisfied the 
                requirements of subparagraph (A):
                            ``(i) Rural health clinics, as defined in 
                        section 1905(l)(1).
                            ``(ii) Federally-qualified health centers, 
                        as defined in section 1905(l)(2)(B).
                            ``(iii) Clinics which are eligible to 
                        receive payment for services provided under 
                        title X of the Public Health Service Act.
                    ``(C) Sufficient providers of specialized 
                services.--Notwithstanding subparagraphs (A) and (B), a 
                medicaid managed care plan may not be considered to 
                have satisfied the requirements of subparagraph (A) if 
                the plan does not have a sufficient number (as 
                determined by the Secretary) of providers of 
                specialized services, including perinatal and pediatric 
                specialty care, to ensure that such services are 
                available and accessible.
            ``(2) Written provider participation agreements for certain 
        providers.--Each medicaid managed care plan that enters into a 
        written provider participation agreement with a provider 
        described in paragraph (1)(B) shall--
                    ``(A) include terms and conditions that are no more 
                restrictive than the terms and conditions that the 
                medicaid managed care plan includes in its agreements 
                with other participating providers with respect to--
                            ``(i) the scope of covered services for 
                        which payment is made to the provider;
                            ``(ii) the assignment of enrollees by the 
                        plan to the provider;
                            ``(iii) the limitation on financial risk or 
                        availability of financial incentives to the 
                        provider;
                            ``(iv) accessibility of care;
                            ``(v) professional credentialing and 
                        recredentialing;
                            ``(vi) licensure;
                            ``(vii) quality and utilization management;
                            ``(viii) confidentiality of patient 
                        records;
                            ``(ix) grievance procedures; and
                            ``(x) indemnification arrangements between 
                        the plans and providers; and
                    ``(B) provide for payment to the provider on a 
                basis that is comparable to the basis on which other 
                providers are paid.''.

SEC. 5. PREVENTING FRAUD IN MEDICAID MANAGED CARE.

    (a) In General.--Section 1932 of the Social Security Act, as added 
by section 3(c)(2) and amended by section 4, is amended--
            (1) by redesignating subsection (f) as subsection (g); and
            (2) by inserting after subsection (e) the following new 
        subsection:
    ``(f) Anti-Fraud Provisions.--
            ``(1) Provisions applicable to eligible managed care 
        providers.--
                    ``(A) Prohibiting affiliations with individuals 
                debarred by federal agencies.--
                            ``(i) In general.--An eligible managed care 
                        provider may not knowingly--
                                    ``(I) have a person described in 
                                clause (iii) as a director, officer, 
                                partner, or person with beneficial 
                                ownership of more than 5 percent of the 
                                plan's equity; or
                                    ``(II) have an employment, 
                                consulting, or other agreement with a 
                                person described in clause (iii) for 
                                the provision of items and services 
                                that are significant and material to 
                                the organization's obligations under 
                                its contract with the State.
                            ``(ii) Effect of noncompliance.--If a State 
                        finds that an eligible managed care provider is 
                        not in compliance with subclause (I) or (II) of 
                        clause (i), the State--
                                    ``(I) shall notify the Secretary of 
                                such noncompliance;
                                    ``(II) may continue an existing 
                                agreement with the provider unless the 
                                Secretary (in consultation with the 
                                Inspector General of the Department of 
                                Health and Human Services) directs 
                                otherwise; and
                                    ``(III) may not renew or otherwise 
                                extend the duration of an existing 
                                agreement with the provider unless the 
                                Secretary (in consultation with the 
                                Inspector General of the Department of 
                                Health and Human Services) provides to 
                                the State and to the Congress a written 
                                statement describing compelling reasons 
                                that exist for renewing or extending 
                                the agreement.
                            ``(iii) Persons described.--A person is 
                        described in this clause if such person--
                                    ``(I) is debarred or suspended by 
                                the Federal Government, pursuant to the 
                                Federal acquisition regulation, from 
                                Government contracting and 
                                subcontracting;
                                    ``(II) is an affiliate (within the 
                                meaning of the Federal acquisition 
                                regulation) of a person described in 
                                clause (i); or
                                    ``(III) is excluded from 
                                participation in any program under 
                                title XVIII or any State health care 
                                program, as defined in section 1128(h).
                    ``(B) Restrictions on marketing.--
                            ``(i) Distribution of materials.--
                                    ``(I) In general.--An eligible 
                                managed care provider may not 
                                distribute marketing materials within 
                                any State--
                                            ``(aa) without the prior 
                                        approval of the State; and
                                            ``(bb) that contain false 
                                        or materially misleading 
                                        information.
                                    ``(II) Prohibition.--The State may 
                                not enter into or renew a contract with 
                                an eligible managed care provider for 
                                the provision of services to 
                                individuals enrolled under the State 
                                plan under this title if the State 
                                determines that the provider 
                                intentionally distributed false or 
                                materially misleading information in 
                                violation of subclause (I)(bb).
                            ``(ii) Service market.--An eligible managed 
                        care provider shall distribute marketing 
                        materials to the entire service area of such 
                        provider.
                            ``(iii) Prohibition of tie-ins.--An 
                        eligible managed care provider, or any agency 
                        of such provider, may not seek to influence an 
                        individual's enrollment with the provider in 
                        conjunction with the sale of any other 
                        insurance.
                            ``(iv) Prohibiting marketing fraud.--Each 
                        eligible managed care provider shall comply 
                        with such procedures and conditions as the 
                        Secretary prescribes in order to ensure that, 
                        before an individual is enrolled with the 
                        provider, the individual is provided accurate 
                        and sufficient information to make an informed 
                        decision whether or not to enroll.
            ``(2) Provisions applicable only to medicaid managed care 
        plans.--
                    ``(A) State conflict-of-interest safeguards in 
                medicaid risk contracting.--A medicaid managed care 
                plan may not enter into a contract with any State under 
                section 1931(a)(1)(B) unless the State has in effect 
                conflict-of-interest safeguards with respect to 
                officers and employees of the State with 
                responsibilities relating to contracts with such plans 
                or to the default enrollment process described in 
                section 1931(a)(1)(D)(iv) that are at least as 
                effective as the Federal safeguards provided under 
                section 27 of the Office of Federal Procurement Policy 
                Act (41 U.S.C. 423), against conflicts of interest that 
                apply with respect to Federal procurement officials 
                with comparable responsibilities with respect to such 
                contracts.
                    ``(B) Requiring disclosure of financial 
                information.--In addition to any requirements 
                applicable under section 1902(a)(27) or 1902(a)(35), a 
                medicaid managed care plan shall--
                            ``(i) report to the State (and to the 
                        Secretary upon the Secretary's request) such 
                        financial information as the State or the 
                        Secretary may require to demonstrate that--
                                    ``(I) the plan has the ability to 
                                bear the risk of potential financial 
                                losses and otherwise has a fiscally 
                                sound operation;
                                    ``(II) the plan uses the funds paid 
                                to it by the State and the Secretary 
                                for activities consistent with the 
                                requirements of this title and the 
                                contract between the State and plan; 
                                and
                                    ``(III) the plan does not place an 
                                individual physician, physician group, 
                                or other health care provider at 
                                substantial risk (as determined by the 
                                Secretary) for services not provided by 
                                such physician, group, or health care 
                                provider, by providing adequate 
                                protection (as determined by the 
                                Secretary) to limit the liability of 
                                such physician, group, or health care 
                                provider, through measures such as stop 
                                loss insurance or appropriate risk 
                                corridors;
                            ``(ii) agree 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 plan (and 
                        of any subcontractor) relating to the 
                        information reported pursuant to clause (i) and 
                        any information required to be furnished under 
                        section paragraphs (27) or (35) of section 
                        1902(a);
                            ``(iii) make available to the Secretary and 
                        the State a description of each transaction 
                        described in subparagraphs (A) through (C) of 
                        section 1318(a)(3) of the Public Health Service 
                        Act between the plan and a party in interest 
                        (as defined in section 1318(b) of such Act); 
                        and
                            ``(iv) agree to make available to its 
                        enrollees upon reasonable request--
                                    ``(I) the information reported 
                                pursuant to clause (i); and
                                    ``(II) the information required to 
                                be disclosed under sections 1124 and 
                                1126.
                    ``(C) Adequate provision against risk of 
                insolvency.--
                            ``(i) Establishment of standards.--The 
                        Secretary shall establish standards, including 
                        appropriate equity standards, under which each 
                        medicaid managed care plan shall make adequate 
                        provision against the risk of insolvency.
                            ``(ii) Consideration of other standards.--
                        In establishing the standards described in 
                        clause (i), the Secretary shall consider--
                                    ``(I) such solvency standards as 
                                the National Association of Insurance 
                                Commissioners may prescribe; and
                                    ``(II) solvency standards 
                                applicable to eligible organizations 
                                with a risk-sharing contract under 
                                section 1876.
                    ``(D) Requiring report on net earnings and 
                additional benefits.--Each medicaid managed care plan 
                shall submit a report to the State and the Secretary 
                not later than 12 months after the close of a contract 
                year containing--
                            ``(i) the most recent audited financial 
                        statement of the plan's net earnings, in 
                        accordance with guidelines established by the 
                        Secretary in consultation with the States, and 
                        consistent with generally accepted accounting 
                        principles; and
                            ``(ii) a description of any benefits that 
                        are in addition to the benefits required to be 
                        provided under the contract that were provided 
                        during the contract year to members enrolled 
                        with the plan and entitled to medical 
                        assistance under the State plan under this 
                        title.''.

SEC. 6. SANCTIONS FOR NONCOMPLIANCE BY ELIGIBLE MANAGED CARE PROVIDERS.

    (a) Sanctions Described.--Title XIX of such Act (42 U.S.C. 1396 et 
seq.), as amended by section 3(c), is amended--
            (1) by redesignating section 1933 as section 1934; and
            (2) by inserting after section 1932 the following new 
        section:

    ``sanctions for noncompliance by eligible managed care providers

    ``Sec. 1933. (a) Use of Intermediate Sanctions by the State To 
Enforce Requirements.--Each State shall establish intermediate 
sanctions, which may include any of the types described in subsection 
(b) other than the termination of a contract with an eligible managed 
care provider, which the State may impose against an eligible managed 
care provider with a contract under section 1931(a)(1)(B) if the 
provider--
            ``(1) fails substantially to provide medically necessary 
        items and services that are required (under law or under such 
        provider's contract with the State) to be provided to an 
        enrollee covered under the contract, if the failure has 
        adversely affected (or has a substantial likelihood of 
        adversely affecting) the enrollee;
            ``(2) imposes premiums on enrollees in excess of the 
        premiums permitted under this title;
            ``(3) acts to discriminate among enrollees on the basis of 
        their health status or requirements for health care services, 
        including expulsion or refusal to reenroll an individual, 
        except as permitted by sections 1931 and 1932, or engaging in 
        any practice that would reasonably be expected to have the 
        effect of denying or discouraging enrollment with the provider 
        by eligible individuals whose medical condition or history 
        indicates a need for substantial future medical services;
            ``(4) misrepresents or falsifies information that is 
        furnished--
                    ``(A) to the Secretary or the State under section 
                1931 or 1932; or
                    ``(B) to an enrollee, potential enrollee, or a 
                health care provider under such sections; or
            ``(5) fails to comply with the requirements of section 
        1876(i)(8).
    ``(b) Intermediate Sanctions.--The sanctions described in this 
subsection are as follows:
            ``(1) Civil money penalties as follows:
                    ``(A) Except as provided in subparagraph (B), (C), 
                or (D), not more than $25,000 for each determination 
                under subsection (a).
                    ``(B) With respect to a determination under 
                paragraph (3) or (4)(A) of subsection (a), not more 
                than $100,000 for each such determination.
                    ``(C) With respect to a determination under 
                subsection (a)(2), double the excess amount charged in 
                violation of such subsection (and the excess amount 
                charged shall be deducted from the penalty and returned 
                to the individual concerned).
                    ``(D) Subject to subparagraph (B), with respect to 
                a determination under subsection (a)(3), $15,000 for 
                each individual not enrolled as a result of a practice 
                described in such subsection.
            ``(2) The appointment of temporary management to oversee 
        the operation of the eligible managed care provider and to 
        assure the health of the provider's enrollees, if there is a 
        need for temporary management while--
                    ``(A) there is an orderly termination or 
                reorganization of the eligible managed care provider; 
                or
                    ``(B) improvements are made to remedy the 
                violations found under subsection (a),
        except that temporary management under this paragraph may not 
        be terminated until the State has determined that the eligible 
        managed care provider has the capability to ensure that the 
        violations shall not recur.
            ``(3) Permitting individuals enrolled with the eligible 
        managed care provider to terminate enrollment without cause, 
        and notifying such individuals of such right to terminate 
        enrollment.
    ``(c) Treatment of Chronic Substandard Providers.--In the case of 
an eligible managed care provider which has repeatedly failed to meet 
the requirements of section 1931 or 1932, the State shall (regardless 
of what other sanctions are provided) impose the sanctions described in 
paragraphs (2) and (3) of subsection (b).
    ``(d) Authority To Terminate Contract.--In the case of an eligible 
managed care provider which has failed to meet the requirements of 
section 1931 or 1932, the State shall have the authority to terminate 
its contract with such provider under section 1931(a)(1)(B) and to 
enroll such provider's enrollees with other eligible managed care 
providers (or to permit such enrollees to receive medical assistance 
under the State plan under this title other than through an eligible 
managed care provider).
    ``(e) Availability of Sanctions to the Secretary.--
            ``(1) Intermediate sanctions.--In addition to the sanctions 
        described in paragraph (2) and any other sanctions available 
        under law, the Secretary may provide for any of the sanctions 
        described in subsection (b) if the Secretary determines that--
                    ``(A) an eligible managed care provider with a 
                contract under section 1931(a)(1)(B) fails to meet any 
                of the requirements of section 1931 or 1932; and
                    ``(B) the State has failed to act appropriately to 
                address such failure.
            ``(2) Denial of payments to the state.--The Secretary may 
        deny payments to the State for medical assistance furnished 
        under the contract under section 1931(a)(1)(B) for individuals 
        enrolled after the date the Secretary notifies an eligible 
        managed care provider of a determination under subsection (a) 
        and until the Secretary is satisfied that the basis for such 
        determination has been corrected and is not likely to recur.
    ``(f) Due Process for Eligible Managed Care Providers.--
            ``(1) Availability of hearing prior to termination of 
        contract.--A State may not terminate a contract with an 
        eligible managed care provider under section 1931(a)(1)(B) 
        unless the provider is provided with a hearing prior to the 
        termination.
            ``(2) Notice to enrollees of termination hearing.--A State 
        shall notify all individuals enrolled with an eligible managed 
        care provider which is the subject of a hearing to terminate 
        the provider's contract with the State of the hearing and that 
        the enrollees may immediately disenroll with the provider for 
        cause.
            ``(3) Other protections for eligible managed care providers 
        against sanctions imposed by state.--Before imposing any 
        sanction against an eligible managed care provider other than 
        termination of the provider's contract, the State shall provide 
        the provider with notice and such other due process protections 
        as the State may provide, except that a State may not provide 
        an eligible managed care provider with a pretermination hearing 
        before imposing the sanction described in subsection (b)(2).
            ``(4) Imposition of civil monetary penalties by 
        secretary.--The provisions of section 1128A (other than 
        subsections (a) and (b)) shall apply with respect to a civil 
        money penalty imposed by the Secretary under subsection (b)(1) 
        in the same manner as such provisions apply to a penalty or 
        proceeding under section 1128A.''.
    (b) Conforming Amendment Relating to Termination of Enrollment for 
Cause.--Section 1932(b)(2)(B) of the Social Security Act, as added by 
section 3(c)(2), is amended by inserting after ``coercion'' the 
following: ``, or pursuant to the imposition against the eligible 
managed care provider of the sanction described in section 
1933(b)(3),''.

SEC. 7. CONFORMING AMENDMENTS.

    (a) Exclusion of Certain Individuals and Entities From 
Participation in Program.--Section 1128(b)(6)(C) of the Social Security 
Act (42 U.S.C. 1320a-7(b)(6)(C)) is amended--
            (1) in clause (i), by striking ``a health maintenance 
        organization (as defined in section 1903(m))''
         and inserting ``an eligible managed care provider, as defined 
in section 1932(a)(1),''; and
            (2) in clause (ii), by inserting ``section 1115 or'' after 
        ``approved under''.
    (b) State Plan Requirements.--Section 1902 of the Social Security 
Act (42 U.S.C. 1396a) is amended--
            (1) in subsection (a)(30)(C), by striking ``section 
        1903(m)'' and inserting ``section 1931(a)(1)(B)''; and
            (2) in subsection (a)(57), by striking ``hospice program, 
        or health maintenance organization (as defined in section 
        1903(m)(1)(A))'' and inserting ``or hospice program'';
            (3) in subsection (e)(2)(A), by striking ``or with an 
        entity described in paragraph (2)(B)(iii), (2)(E), (2)(G), or 
        (6) of section 1903(m) under a contract described in section 
        1903(m)(2)(A)'';
            (4) in subsection (p)(2)--
                    (A) by striking ``a health maintenance organization 
                (as defined in section 1903(m))'' and inserting ``an 
                eligible managed care provider, as defined in section 
                1932(a)(1),'';
                    (B) by striking ``an organization'' and inserting 
                ``a provider''; and
                    (C) by striking ``any organization'' and inserting 
                ``any provider''; and
            (5) in subsection (w)(1), by striking ``sections 
        1903(m)(1)(A) and'' and inserting ``section''.
    (c) Payment to States.--Section 1903(w)(7)(A)(viii) of the Social 
Security Act (42 U.S.C. 1396b(w)(7)(A)(viii)) is amended to read as 
follows:
                    ``(viii) Services of an eligible managed care 
                provider with a contract under section 
                1931(a)(1)(B).''.
    (d) Use of Enrollment Fees and Other Charges.--Section 1916 of the 
Social Security Act (42 U.S.C. 1396o) is amended in subsections 
(a)(2)(D) and (b)(2)(D) by striking ``a health maintenance organization 
(as defined in section 1903(m))'' and inserting ``an eligible managed 
care provider, as defined in section 1932(a)(1),'' each place it 
appears.
    (e) Extension of Eligibility for Medical Assistance.--Section 
1925(b)(4)(D)(iv) of the Social Security Act (42 U.S.C. 1396r-
6(b)(4)(D)(iv)) is amended to read as follows:
                            ``(iv) Enrollment with eligible managed 
                        care provider.--Enrollment of the caretaker 
                        relative and dependent children with an 
                        eligible managed care provider, as defined in 
                        section 1932(a)(1), less than 50 percent of the 
                        membership (enrolled on a prepaid basis) of 
                        which consists of individuals who are eligible 
                        to receive benefits under this title (other 
                        than because of the option offered under this 
                        clause). The option of enrollment under this 
                        clause is in addition to, and not in lieu of, 
                        any enrollment option that the State might 
                        offer under subparagraph (A)(i) with respect to 
                        receiving services through an eligible managed 
                        care provider in accordance with sections 1931, 
                        1932, and 1933.''.
    (f) Assuring Adequate Payment Levels for Obstetrical and Pediatric 
Services.--Section 1926(a) of the Social Security Act (42 U.S.C. 1396r-
7(a)) is amended in paragraphs (1) and (2) by striking ``health 
maintenance organizations under section 1903(m)'' and inserting 
``eligible managed care providers under contracts entered into under 
section 1931(a)(1)(B)'' each place it appears.
    (g) Payment for Covered Outpatient Drugs.--Section 1927(j)(1) of 
the Social Security Act (42 U.S.C. 1396r-8(j)(1)) is amended by 
striking ``***Health Maintenance Organizations, including those 
organizations that contract under section 1903(m),'' and inserting 
``health maintenance organizations and medicaid managed care plans, as 
defined in section 1932(a)(2),''.
    (h) Demonstration Projects To Study Effect of Allowing States To 
Extend Medicaid Coverage for Certain Families.--Section 4745(a)(5)(A) 
of the Omnibus Budget Reconciliation Act of 1990 (42 U.S.C. 1396a note) 
is amended by striking ``(except section 1903(m)'' and inserting 
``(except sections 1931, 1932, and 1933)''.

SEC. 8. EFFECTIVE DATE; STATUS OF WAIVERS.

    (a) Effective Date.--Except as provided in subsection (b), the 
amendments made by this Act shall apply to medical assistance 
furnished--
            (1) during quarters beginning on or after October 1, 1995; 
        or
            (2) in the case of assistance furnished under a contract 
        described in section 3(b), during quarters beginning after the 
        earlier of--
                    (A) the date of the expiration of the contract; or
                    (B) the expiration of the 1-year period which 
                begins on the date of the enactment of this Act.
    (b) Application to Waivers.--
            (1) Existing waivers.--If any waiver granted to a State 
        under section 1115 or 1915 of the Social Security Act (42 
        U.S.C. 1315, 1396n) or otherwise which relates to the provision 
        of medical assistance under a State plan under title XIX of the 
        such Act (42 U.S.C. 1396 et seq.), is in effect or approved by 
        the Secretary of Health and Human Services (in this subsection 
        referred to as the ``Secretary'') as of the applicable 
        effective date described in subsection (a), the amendments made 
        by this Act shall not apply with respect to the State before 
        the expiration (determined without regard to any extensions) of 
        the waiver to the extent such amendments are inconsistent with 
        the terms of the waiver.
            (2) Secretarial evaluation and report for existing waivers 
        and extensions.--
                    (A) Prior to approval.--On and after the applicable 
                effective date described in subsection (a), the 
                Secretary, prior to extending any waiver granted under 
                section 1115 or 1915 of the Social Security Act (42 
                U.S.C. 1315, 1396n) or otherwise which relates to the 
                provision of medical assistance under a State plan 
                under title XIX of the such Act (42 U.S.C. 1396 et 
                seq.), shall--
                            (i) conduct an evaluation of--
                                    (I) the waivers existing under such 
                                sections or other provision of law as 
                                of the date of the enactment of this 
                                Act; and
                                    (II) any applications pending, as 
                                of the date of the enactment of this 
                                Act, for extensions of waivers under 
                                such sections or other provision of 
                                law; and
                            (ii) submit a report to the Congress 
                        recommending whether the extension of a waiver 
                        under such sections or provision of law should 
                        be conditioned on the State submitting the 
                        request for an extension complying with the 
                        provisions of sections 1931, 1932, and 1933 of 
                        the Social Security Act (as added by this Act).
                    (B) Deemed approval.--If the Congress has not 
                enacted legislation based on a report submitted under 
                subparagraph (A)(ii) within 120 days after the date 
                such report is submitted to the Congress, the 
                recommendations contained in such report shall be 
                deemed to be approved by the Congress.
            (3) Future waivers.--
                    (A) In general.--Except as provided in paragraphs 
                (1) and (2), and subparagraph (B), the Secretary may 
                not waive the application of section 1931, 1932, or 
                1933 of such Act (as added by this Act) with respect to 
                any State.
                    (B) Special rule regarding a waiver of the 
                requirements applicable to eligible managed care 
                providers for children with special health care 
                needs.--Notwithstanding the provisions of subparagraph 
                (A), the Secretary may waive, pursuant to section 1115 
                or 1915 of the Social Security Act (42 U.S.C. 1315, 
                1396n), or otherwise, the application of section 
                1932(g)(2) of such Act (as added by this Act) if the 
                State applying for the waiver demonstrates that, with 
                respect to each eligible managed care provider having 
                an enrollee who is a child with special health care 
                needs (as defined in section 1932(g)(2)(B) of such 
                Act), such provider shall--
                            (i) provide (or arrange to be provided) any 
                        medical assistance specified in the provider's 
                        contract with the State that is identified in a 
                        treatment plan for the enrollee prepared by a 
                        program described in section 1932(g)(2)(B) of 
                        such Act in accordance with such treatment 
                        plan--
                                    (I) without regard to any prior 
                                authorization requirement which would 
                                otherwise apply to the provision of 
                                such assistance; and
                                    (II) unless the eligible managed 
                                care provider demonstrates to the 
                                satisfaction of the Secretary that the 
                                provider is or has an arrangement with 
                                a health care provider with the 
                                specialized pediatric expertise 
                                required to provide the medical 
                                assistance specified in the treatment 
                                plan, without regard to whether or not 
                                the health care provider specified in 
                                the treatment plan has otherwise 
                                entered into an agreement with the 
                                eligible managed care provider to 
                                provide medical assistance to plan 
                                enrollees;
                            (ii) require each health care provider with 
                        whom the eligible managed care provider has 
                        entered into an agreement to provide medical 
                        assistance to enrollees to furnish medical 
                        assistance specified in such treatment plan to 
                        the extent necessary to carry out such 
                        treatment plan; and
                            (iii) demonstrate that it has adequate 
                        written agreements with pediatric specialists 
                        as determined by the Secretary to ensure 
                        appropriate specialist care and referrals.
                                 <all>
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