[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 864 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 864

To amend title XIX of the Social Security Act to improve the provision 
              of managed care under the medicaid program.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 10, 1997

   Mr. Chafee (for himself, Mr. Breaux, Mr. Kerrey, 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 improve the provision 
              of managed care under the medicaid program.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS; AMENDMENTS TO THE SOCIAL 
              SECURITY ACT.

    (a) Short Title.--This Act may be cited as the ``Medicaid Managed 
Care Improvement Act of 1997''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents; amendments to the Social 
                            Security Act.
Sec. 2. Improvements in medicaid managed care program.
             ``Part B--Provisions Relating to Managed Care

        ``Sec. 1941. Beneficiary choice; enrollment.
        ``Sec. 1942. Beneficiary access to services generally.
        ``Sec. 1943. Beneficiary access to emergency care.
        ``Sec. 1944. Other beneficiary protections.
        ``Sec. 1945. Assuring quality care.
        ``Sec. 1946. Protections for providers.
        ``Sec. 1947. Assuring adequacy of payments to medicaid managed 
                            care organizations and entities.
        ``Sec. 1948. Fraud and abuse.
        ``Sec. 1949. Sanctions for noncompliance by managed care 
                            entities.
        ``Sec. 1950. Definitions; miscellaneous provisions.
Sec. 3. Studies and reports.
Sec. 4. Conforming amendments.
Sec. 5. Effective date; status of waivers.
    (c) Amendments to Social Security Act.--Except as otherwise 
specifically provided, whenever in this Act an amendment is expressed 
in terms of an amendment to or repeal of a section or other provision, 
the reference shall be considered to be made to that section or other 
provision of the Social Security Act.

SEC. 2. IMPROVEMENTS IN MEDICAID MANAGED CARE PROGRAM.

    Title XIX is amended--
            (1) by inserting after the title heading the following:

                  ``Part A--General Provisions''; and

            (2) by adding at the end the following new part:

             ``Part B--Provisions Relating to Managed Care

``SEC. 1941. BENEFICIARY CHOICE; ENROLLMENT.

    ``(a) State Options for Enrollment of Beneficiaries in Managed Care 
Arrangements.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this part and notwithstanding paragraphs (1), (10)(B), and 
        (23)(A) of section 1902(a), a State may require an individual 
        who is eligible for medical assistance under the State plan 
        under this title and who is not a special needs individual (as 
        defined in subsection (e)) to enroll with a managed care entity 
        (as defined in section 1950(a)(1)) as a condition of receiving 
        such assistance (and, with respect to assistance furnished by 
        or under arrangements with such entity, to receive such 
        assistance through the entity), if the following provisions are 
        met:
                    ``(A) Entity meets requirements.--The entity meets 
                the applicable requirements of this part.
                    ``(B) Contract with state.--The entity 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 entity are 
                made on an actuarially sound basis. Such contract shall 
                specify benefits the provision (or arrangement) for 
                which the entity is responsible.
                    ``(C) Choice of coverage.--
                            ``(i) In general.--The State permits an 
                        individual to choose a managed care entity from 
                        managed care organizations and primary care 
                        case providers who meet the requirements of 
                        this part but not less than from--
                                    ``(I) 2 medicaid managed care 
                                organizations,
                                    ``(II) a medicaid managed care 
                                organization and a primary care case 
                                management provider, or
                                    ``(III) a primary care case 
                                management provider as long as an 
                                individual may choose between 2 primary 
                                care case managers.
                            ``(ii) State option.--At the option of the 
                        State, a State shall be considered to meet the 
                        requirements of clause (i) in the case of an 
                        individual residing in a rural area, if the 
                        State--
                                    ``(I) requires the individual to 
                                enroll with a medicaid managed care 
                                organization or primary care case 
                                management provider if such 
                                organization or entity permits the 
                                individual to receive such assistance 
                                through not less than 2 physicians or 
                                case managers (to the extent that at 
                                least 2 physicians or case managers are 
                                available to provide such assistance in 
                                the area), and
                                    ``(II) permits the individual to 
                                obtain such assistance from any other 
                                provider in appropriate circumstances 
                                (as established by the State under 
                                regulations of the Secretary).
                    ``(D) Changes in enrollment.--The State provides 
                the individual with the opportunity to change 
                enrollment among managed care entities 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, permits individuals 
                to change their enrollment for cause at any time and 
                without cause at least every 12 months, and allows 
                individuals to disenroll without cause within 90 days 
                of notification of enrollment.
                    ``(E) Enrollment priorities.--The State establishes 
                a method for establishing enrollment priorities in the 
                case of a managed care entity that does not have 
                sufficient capacity to enroll all such individuals 
                seeking enrollment under which individuals already 
                enrolled with the entity are given priority in 
                continuing enrollment with the entity.
                    ``(F) Default enrollment process.--The State 
                establishes a default enrollment process which meets 
                the requirements described in paragraph (2) and under 
                which any such individual who does not enroll with a 
                managed care entity during the enrollment period 
                specified by the State shall be enrolled by the State 
                with such an entity in accordance with such process.
                    ``(G) Sanctions.--The State establishes the 
                sanctions provided for in section 1949.
            ``(2) Default enrollment process requirements.--The default 
        enrollment process established by a State under paragraph 
        (1)(F)--
                    ``(A) shall provide that the State may not enroll 
                individuals with a managed care entity which is not in 
                compliance with the applicable requirements of this 
                part;
                    ``(B) shall provide (consistent with subparagraph 
                (A)) for enrollment of such an individual with a 
                medicaid managed care organization--
                            ``(i) first, that maintains existing 
                        provider-individual relationships or that has 
                        entered into contracts with providers (such as 
                        Federally qualified health centers, rural 
                        health clinics, hospitals that qualify for 
                        disproportionate share hospital payments under 
                        section 1886(d)(5)(F), and hospitals described 
                        in section 1886(d)(1)(B)(iii)) that have 
                        traditionally served beneficiaries under this 
                        title, and
                            ``(ii) lastly, if there is no provider 
                        described in clause (i), in a manner that 
                        provides for an equitable distribution of 
                        individuals among all qualified managed care 
                        entities available to enroll individuals 
                        through such default enrollment process, 
                        consistent with the enrollment capacities of 
                        such entities;
                    ``(C) shall permit and assist an individual 
                enrolled with an entity under such process to change 
                such enrollment to another managed care entity during a 
                period (of at least 90 days) after the effective date 
                of the enrollment; and
                    ``(D) may provide for consideration of factors such 
                as quality, geographic proximity, continuity of 
                providers, and capacity of the plan when conducting 
                such process.
    ``(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 a managed care entity 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 entity as 
        of the first day of the month in which the individual is again 
        eligible for such assistance, and may consider factors such as 
        quality, geographic proximity, continuity of providers, and 
        capacity of the plan when conducting such reenrollment.
            ``(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 
                managed care entity;
                    ``(B) the managed care entity 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 managed care entity complies with the 
                applicable requirements of this part.
            ``(3) Notice of reenrollment.--The State shall provide 
        timely notice to a managed care entity of any reenrollment of 
        an individual under this subsection.
    ``(c) State Option of Minimum Enrollment Period.--
            ``(1) In general.--In the case of an individual who is 
        enrolled with a managed care entity under this part and who 
        would (but for this subsection) lose eligibility for benefits 
        under this title before the end of the minimum enrollment 
        period (defined in paragraph (2)), the State plan under this 
        title 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 
        1902(a)(23)(B), only with respect to such benefits provided to 
        the individual as an enrollee of such entity.
            ``(2) Minimum enrollment period defined.--For purposes of 
        paragraph (1), the term `minimum enrollment period' means, with 
        respect to an individual's enrollment with an entity under a 
        State plan, a period, established by the State, of not more 
        than 6 months beginning on the date the individual's enrollment 
        with the entity becomes effective, except that a State may 
        extend such period for up to a total of 12 months in the case 
        of an individual's enrollment with a managed care entity (as 
        defined in section 1950(a)(1)) so long as such extension is 
        done uniformly for all individuals enrolled with all such 
        entities.
    ``(d) Other Enrollment-Related Provisions.--
            ``(1) Nondiscrimination.--A managed care entity 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 or by discouraging enrollment 
        (except as permitted by this section) by eligible individuals.
            ``(2) Termination of enrollment.--
                    ``(A) In general.--The State, enrollment broker, 
                and managed care entity (if any) shall permit an 
                individual eligible for medical assistance under the 
                State plan under this title who is enrolled with the 
                entity to terminate such enrollment for cause at any 
                time, and without cause during the 90-day period 
                beginning on the date the individual receives notice of 
                enrollment and at least every 12 months thereafter, 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 a managed care 
                entity on the grounds that the enrollment was based on 
                fraudulent inducement or was obtained through coercion 
                or pursuant to the imposition against the managed care 
                entity of the sanction described in section 1949(b)(3) 
                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 
                                a managed care entity 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 a managed care 
                                entity.
                                    ``(II) By organizations.--Any 
                                managed care entity which receives 
                                notice of an individual's termination 
                                of enrollment with such entity through 
                                receipt of such notice at an office of 
                                a managed care entity 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 a managed care entity under 
                        clause (i) shall provide timely notice of the 
                        termination to such entity.
            ``(3) Provision of information.--
                    ``(A) In general.--Each State, enrollment broker, 
                or managed care organization shall provide all 
                enrollment notices and informational and instructional 
                materials in a manner and form which may be easily 
                understood by enrollees of the entity who are eligible 
                for medical assistance under the State plan under this 
                title, including enrollees and potential enrollees who 
                are blind, deaf, disabled, or cannot read or understand 
                the English language.
                    ``(B) Information to health care providers, 
                enrollees, and potential enrollees.--Each medicaid 
                managed care organization shall--
                            ``(i) upon request, make the information 
                        described in section 1945(e)(1)(A) available to 
                        enrollees and potential enrollees in the 
                        organization'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 
                        organization that are covered either directly 
                        or through a method of referral and prior 
                        authorization.
    ``(e) Special Needs Individuals Described.--In this part, the term 
`special needs individual' means any of the following individuals:
            ``(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);
                    ``(D) is receiving services under a program under 
                part B or part E of title IV; or
                    ``(E) is not described in any preceding 
                subparagraph but is otherwise considered a child with 
                special health care needs who is adopted, in foster 
                care, or 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 330(g)(3) of the Public Health 
        Service Act), or the spouse or dependent of such a worker.
            ``(4) Indians.--An Indian (as defined in section 4(c) of 
        the Indian Health Care Improvement Act (25 U.S.C. 1603(c))).
            ``(5) Medicare beneficiaries.--A qualified medicare 
        beneficiary (as defined in section 1905(p)(1)) or an individual 
        otherwise eligible for benefits under title XVIII.
            ``(6) Disabled individuals.--Individuals who are disabled 
        (as determined under section 1614(a)(3)).
            ``(7) Persons with aids or hiv infection.--An individual 
        with acquired immune deficiency syndrome (AIDS) or who has been 
        determined to be infected with the HIV virus.

``SEC. 1942. BENEFICIARY ACCESS TO SERVICES GENERALLY.

    ``(a) Access to Services.--
            ``(1) In general.--Each managed care entity 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 entity and the State under section 
        1941(a)(1)(B) for enrollees who are eligible for medical 
        assistance under the State plan under this title.
            ``(2) Primary-care-provider-to-enrollee ratio and maximum 
        travel time.--Each such entity shall assure adequate access to 
        primary care services by meeting standards, established by the 
        Secretary, relating to the maximum ratio of enrollees under 
        this title to full-time-equivalent primary care providers 
        available to serve such enrollees and to maximum travel time 
        for such enrollees to access such providers. The Secretary may 
        permit such a maximum ratio to vary depending on the area and 
        population served. Such standards shall be based on standards 
        commonly applied in the commercial market, commonly used in 
        accreditation of managed care organizations, and standards used 
        in the approval of waiver applications under section 1115, and 
shall be consistent with the requirements under section 1876(c)(4)(A).
    ``(b) Obstetrical and Gynecological Care.--
            ``(1) In general.--A managed care entity may not require 
        prior authorization by the individual's primary care provider 
        or otherwise restrict the individual's access to gynecological 
        and obstetrical care provided by a participating provider who 
        specializes in obstetrics and gynecology to the extent such 
        care is otherwise covered, and may treat the ordering of other 
        obstetrical and gynecological care by such a participating 
        provider as the prior authorization of the primary care 
        provider with respect to such care under the coverage.
            ``(2) Construction.--Nothing in paragraph (1)(B)(ii) shall 
        waive any requirements of coverage relating to medical 
        necessity or appropriateness with respect to coverage of 
        gynecological care so ordered.
    ``(c) Specialty Care.--
            ``(1) Referral to specialty care for enrollees requiring 
        treatment by specialists.--
                    ``(A) In general.--In the case of an enrollee under 
                a managed care entity and who has a condition or 
                disease of sufficient seriousness and complexity to 
                require treatment by a specialist, the entity shall 
                make or provide for a referral to a specialist who is 
                available and accessible to provide the treatment for 
                such condition or disease.
                    ``(B) Specialist defined.--For purposes of this 
                subsection, the term `specialist' means, with respect 
                to a condition, a health care practitioner, facility, 
                or center (such as a center of excellence) that has 
                adequate expertise through appropriate training and 
                experience (including, in the case of a child, an 
                appropriate pediatric specialist) to provide high 
                quality care in treating the condition.
                    ``(C) Care under referral.--Care provided pursuant 
                to such referral under subparagraph (A) shall be--
                            ``(i) pursuant to a treatment plan (if any) 
                        developed by the specialist and approved by the 
                        entity, in consultation with the designated 
                        primary care provider or specialist and the 
                        enrollee (or the enrollee's designee), and
                            ``(ii) in accordance with applicable 
                        quality assurance and utilization review 
                        standards of the entity.
                Nothing in this subsection shall be construed as 
                preventing such a treatment plan for an enrollee from 
                requiring a specialist to provide the primary care 
                provider with regular updates on the specialty care 
                provided, as well as all necessary medical information.
                    ``(D) Referrals to participating providers.--An 
                entity is not required under subparagraph (A) to 
                provide for a referral to a specialist that is not a 
                participating provider, unless the entity does not have 
                an appropriate specialist that is available and 
                accessible to treat the enrollee's condition and that 
                is a participating provider with respect to such 
                treatment.
                    ``(E) Treatment of nonparticipating providers.--If 
                an entity refers an enrollee to a nonparticipating 
                specialist, services provided pursuant to the approved 
                treatment plan shall be provided at no additional cost 
                to the enrollee beyond what the enrollee would 
                otherwise pay for services received by such a 
                specialist that is a participating provider.
            ``(2) Specialists as primary care providers.--
                    ``(A) In general.--A managed care entity shall have 
                a procedure by which a new enrollee upon enrollment, or 
                an enrollee upon diagnosis, with an ongoing special 
                condition (as defined in subparagraph (C)) may receive 
                a referral to a specialist for such condition who shall 
                be responsible for and capable of providing and 
                coordinating the enrollee's primary and specialty care. 
                If such an enrollee's care would most appropriately be 
                coordinated by such a specialist, the entity shall 
                refer the enrollee to such specialist.
                    ``(B) Treatment as primary care provider.--Such 
                specialist shall be permitted to treat the enrollee 
                without a referral from the enrollee's primary care 
                provider and may authorize such referrals, procedures, 
                tests, and other medical services as the enrollee's 
                primary care provider would otherwise be permitted to 
                provide or authorize, subject to the terms of 
the treatment plan (referred to in paragraph (1)(C)(i)).
                    ``(C) Ongoing special condition defined.--In this 
                paragraph, the term `special condition' means a 
                physical and mental condition or disease that--
                            ``(i) is life-threatening, degenerative, or 
                        disabling, and
                            ``(ii) requires specialized medical care 
                        over a prolonged period of time.
                    ``(D) Terms of referral.--The provisions of 
                subparagraphs (C) through (E) of paragraph (1) shall 
                apply with respect to referrals under subparagraph (A) 
                of this paragraph in the same manner as they apply to 
                referrals under paragraph (1)(A).
            ``(3) Standing referrals.--
                    ``(A) In general.--A managed care entity shall have 
                a procedure by which an enrollee who has a condition 
                that requires ongoing care from a specialist may 
                receive a standing referral to such specialist for 
                treatment of such condition. If the issuer, or the 
                primary care provider in consultation with the medical 
                director of the entity and the specialist (if any), 
                determines that such a standing referral is 
                appropriate, the entity shall make such a referral to 
                such a specialist.
                    ``(B) Terms of referral.--The provisions of 
                subparagraphs (C) through (E) of paragraph (1) shall 
                apply with respect to referrals under subparagraph (A) 
                of this paragraph in the same manner as they apply to 
                referrals under paragraph (1)(A).
    ``(d) Timely Delivery of Services.--Each managed care entity shall 
respond to requests from enrollees for the delivery of medical 
assistance in a manner which--
            ``(1) makes such assistance--
                    ``(A) available and accessible to each such 
                individual, within the area served by the entity, with 
                reasonable promptness and in a manner which assures 
                continuity; and
                    ``(B) when medically necessary, available and 
                accessible 24 hours a day and 7 days a week; and
            ``(2) with respect to assistance provided to such an 
        individual other than through the entity, 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 entity) 
        if--
                    ``(A) the services were medically necessary and 
                immediately required because of an unforeseen illness, 
                injury, or condition and meet the requirements of 
                section 1943; and
                    ``(B) it was not reasonable given the circumstances 
                to obtain the services through the entity, or, in the 
                case of a primary care case management provider, with 
                prior authorization.
    ``(e) Internal Grievance Procedure.--Each medicaid managed care 
organization shall establish an internal grievance procedure under 
which an enrollee who is eligible for medical assistance under the 
State plan under this title, or a provider on behalf of such an 
enrollee, may challenge the denial of coverage of or payment for such 
assistance.
    ``(f) Information on Benefit Carve Outs.--Each managed care entity 
shall inform each enrollee, in a written and prominent manner, of any 
benefits to which the enrollee may be entitled to medical assistance 
under this title but which are not made available to the enrollee 
through the entity. Such information shall include information on where 
and how such enrollees may access benefits not made available to the 
enrollee through the entity.
    ``(g) Due Process Requirements for Managed Care Entities.--
            ``(1) Denial of or unreasonable delay in determining 
        coverage as grounds for hearing.--If a managed care entity (or 
        entity acting an agreement with a managed care entity)--
                    ``(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 organization, 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 fair 
        hearing before, and shall be provided a timely decision by, the 
        State agency administering the State plan under this title in 
        accordance with section 1902(a)(3). Such decisions shall be 
        rendered as soon as possible in accordance with the medical 
        exigencies of the cases, and in no event later than 72 hours in 
        the case of hearings on decisions regarding urgent care and 5 
        days in the case of all other hearings.
            ``(2) Completion of internal grievance procedure.--Nothing 
        in this subsection shall require completion of an internal 
        grievance procedure 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 or is not 
        otherwise consistent with the requirements for such procedures 
        under section 1876(c).
    ``(h) Demonstration of Adequate Capacity and Services.--
            ``(1) In general.--Subject to paragraph (3), each medicaid 
        managed care organization shall provide the State and the 
        Secretary with adequate assurances (as determined by the 
        Secretary) that the organization, with respect to a service 
        area--
                    ``(A) has the capacity to serve the expected 
                enrollment in such service area;
                    ``(B) 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;
                    ``(C) maintains a sufficient number, mix, and 
                geographic distribution 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 organization to the same 
                extent that such services are available to individuals 
                enrolled in the organization who are not recipients of 
                medical assistance under the State plan under this 
                title;
                    ``(D) maintains extended hours of operation with 
                respect to primary care services that are beyond those 
                maintained during a normal business day;
                    ``(E) provides preventive and primary care services 
                in locations that are readily accessible to members of 
                the community;
                    ``(F) provides information concerning educational, 
                social, health, and nutritional services offered by 
                other programs for which enrollees may be eligible; and
                    ``(G) complies with such other requirements 
                relating to access to care as the Secretary or the 
                State may impose.
            ``(2) Proof of adequate primary care capacity and 
        services.--Subject to paragraph (3), a medicaid managed care 
        organization 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 paragraph (1):
                    ``(A) Rural health clinics, as defined in section 
                1905(l)(1).
                    ``(B) Federally-qualified health centers, as 
                defined in section 1905(l)(2)(B).
                    ``(C) Clinics which are eligible to receive payment 
                for services provided under title X of the Public 
                Health Service Act.
            ``(3) Sufficient providers of specialized services.--
        Notwithstanding paragraphs (1) and (2), a medicaid managed care 
        organization may not be considered to have satisfied the 
        requirements of paragraph (1) if the organization 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.
    ``(i) Compliance With Certain Maternity and Mental Health 
Requirements.--Each medicaid managed care organization shall comply 
with the requirements of subpart 2 of part A of title XXVII of the 
Public Health Service Act insofar as such requirements apply with 
respect to a health insurance issuer that offers group health insurance 
coverage.
    ``(j) Treatment of Children With Special Health Care Needs.--
            ``(1) In general.--In the case of an enrollee of a managed 
        care entity who is a child described in section 1941(e)(1) or 
        who has special health care needs (as defined in paragraph 
        (3))--
                    ``(A) 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 subsection (c)(1) or paragraph (3), the managed care 
                entity 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 
                        managed care entity to provide such assistance; 
                        or
                            ``(ii) if appropriate services are not 
                        available through the managed care entity, 
                        permitting such enrollee to seek appropriate 
                        specialty services from pediatric health care 
                        providers outside of or apart from the managed 
                        care entity; and
                    ``(B) the managed care entity shall require each 
                health care provider with whom the managed care entity 
                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.
            ``(2) Prior authorization.--An enrollee referred for 
        treatment under paragraph (1)(A)(i), or permitted to seek 
        treatment outside of or apart from the managed care entity 
        under paragraph (1)(A)(ii) shall be deemed to have obtained any 
        prior authorization required by the entity.
            ``(3) Child with special health care needs.--For purposes 
        of paragraph (1), a child has special health care needs if the 
        child is receiving services under--
                    ``(A) a program administered under part B or part H 
                of the Individuals with Disabilities Education Act; or
                    ``(B) any other program for children with special 
                health care needs identified by the Secretary.

``SEC. 1943. BENEFICIARY ACCESS TO EMERGENCY CARE.

    ``(a) Prohibition of Certain Restrictions on Coverage of Emergency 
Services.--
            ``(1) In general.--If a managed care entity provides any 
        benefits under a State plan with respect to emergency services 
        (as defined in paragraph (2)(B)), the entity shall cover 
        emergency services furnished to an enrollee--
                    ``(A) without the need for any prior authorization 
                determination,
                    ``(B) subject to paragraph (3), whether or not the 
                physician or provider furnishing such services is a 
                participating physician or provider with respect to 
                such services, and
                    ``(C) subject to paragraph (3), without regard to 
                any other term or condition of such coverage (other 
                than an exclusion of benefits).
            ``(2) Emergency services; emergency medical condition.--For 
        purposes of this section--
                    ``(A) Emergency medical condition based on prudent 
                layperson.--The term `emergency medical condition' 
                means a medical condition manifesting itself by acute 
                symptoms of sufficient severity (including severe pain) 
                such that a prudent layperson, who possesses an average 
                knowledge of health and medicine, could reasonably 
                expect the absence of immediate medical attention to 
                result in--
                            ``(i) placing the health of the individual 
                        (or, with respect to a pregnant woman, the 
                        health of the woman or her unborn child) in 
                        serious jeopardy,
                            ``(ii) serious impairment to bodily 
                        functions, or
                            ``(iii) serious dysfunction of any bodily 
                        organ or part.
                    ``(B) Emergency services.--The term `emergency 
                services' means--
                            ``(i) a medical screening examination (as 
                        required under section 1867) that is within the 
                        capability of the emergency department of a 
                        hospital, including ancillary services 
                        routinely available to the emergency 
                        department, to evaluate an emergency medical 
                        condition (as defined in subparagraph (A)), and
                            ``(ii) within the capabilities of the staff 
                        and facilities available at the hospital, such 
                        further medical examination and treatment as 
                        are required under section 1867 to stabilize 
                        the patient.
                    ``(C) Trauma and burn centers.--The provisions of 
                clause (ii) of subparagraph (B) apply to a trauma or 
                burn center, in a hospital, that--
                            ``(i) is designated by the State, a 
                        regional authority of the State, or by the 
                        designee of the State, or
                            ``(ii) is in a State that has not made such 
                        designations and meets medically recognized 
                        national standards.
            ``(3) Application of network restriction permitted in 
        certain cases.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if a managed care entity in relation 
                to benefits provided under this title denies, limits, 
                or otherwise differentiates in benefits or payment for 
                benefits other than emergency services on the basis 
                that the physician or provider of such services is a 
                nonparticipating physician or provider, the entity may 
                deny, limit, or differentiate in coverage or payment 
                for emergency services on such basis.
                    ``(B) Network restrictions not permitted in certain 
                exceptional cases.--The denial or limitation of, or 
                differentiation in, coverage or payment of benefits for 
                emergency services under subparagraph (A) shall not 
                apply in the following cases:
                            ``(i) Circumstances beyond control of 
                        enrollee.--The enrollee is unable to go to a 
                        participating hospital for such services due to 
                        circumstances beyond the control of the 
                        enrollee (as determined consistent with 
                        guidelines and subparagraph (C)).
                            ``(ii) Likelihood of an adverse health 
                        consequence based on layperson's judgment.--A 
                        prudent layperson possessing an average 
                        knowledge of health and medicine could 
                        reasonably believe that, under the 
                        circumstances and consistent with guidelines, 
                        the time required to go to a participating 
                        hospital for such services could result in any 
of the adverse health consequences described in a clause of subsection 
(a)(2)(A).
                            ``(iii) Physician referral.--A 
                        participating physician or other person 
                        authorized by the plan refers the enrollee to 
                        an emergency department of a hospital and does 
                        not specify an emergency department of a 
                        hospital that is a participating hospital with 
                        respect to such services.
                    ``(C) Application of `beyond control' standards.--
                For purposes of applying subparagraph (B)(i), receipt 
                of emergency services from a nonparticipating hospital 
                shall be treated under the guidelines as being `due to 
                circumstances beyond the control of the enrollee' if 
                any of the following conditions are met:
                            ``(i) Unconscious.--The enrollee was 
                        unconscious or in an otherwise altered mental 
                        state at the time of initiation of the 
                        services.
                            ``(ii) Ambulance delivery.--The enrollee 
                        was transported by an ambulance or other 
                        emergency vehicle directed by a person other 
                        than the enrollee to the nonparticipating 
                        hospital in which the services were provided.
                            ``(iii) Natural disaster.--A natural 
                        disaster or civil disturbance prevented the 
                        enrollee from presenting to a participating 
                        hospital for the provision of such services.
                            ``(iv) No good faith effort to inform of 
                        change in participation during a contract 
                        year.--The status of the hospital changed from 
                        a participating hospital to a nonparticipating 
                        hospital with respect to emergency services 
                        during a contract year and the entity failed to 
                        make a good faith effort to notify the enrollee 
                        involved of such change.
                            ``(v) Other conditions.--There were other 
                        factors (such as those identified in 
                        guidelines) that prevented the enrollee from 
                        controlling selection of the hospital in which 
                        the services were provided.
    ``(b) Assuring Coordinated Coverage of Maintenance Care and Post-
Stabilization Care.--
            ``(1) In general.--In the case of an individual who is 
        enrolled with a managed care entity and who has received 
        emergency services pursuant to a screening evaluation conducted 
        (or supervised) by a treating physician at a hospital that is a 
        nonparticipating provider with respect to emergency services, 
        if--
                    ``(A) pursuant to such evaluation, the physician 
                identifies post-stabilization care (as defined in 
                paragraph (3)(B)) that is required by the enrollee,
                    ``(B) the coverage through the entity under this 
                title provides benefits with respect to the care so 
                identified and the coverage requires (but for this 
                subsection) an affirmative prior authorization 
                determination as a condition of coverage of such care, 
                and
                    ``(C) the treating physician (or another individual 
                acting on behalf of such physician) initiates, not 
                later than 30 minutes after the time the treating 
                physician determines that the condition of the enrollee 
                is stabilized, a good faith effort to contact a 
                physician or other person authorized by the entity (by 
                telephone or other means) to obtain an affirmative 
                prior authorization determination with respect to the 
                care,
        then, without regard to terms and conditions specified in 
        paragraph (2) the entity shall cover maintenance care (as 
        defined in paragraph (3)(A)) furnished to the enrollee during 
        the period specified in paragraph (4) and shall cover post-
        stabilization care furnished to the enrollee during the period 
        beginning under paragraph (5) and ending under paragraph (6).
            ``(2) Terms and conditions waived.--The terms and 
        conditions (of coverage) described in this paragraph that are 
        waived under paragraph (1) are as follows:
                    ``(A) The need for any prior authorization 
                determination.
                    ``(B) Any limitation on coverage based on whether 
                or not the physician or provider furnishing the care is 
                a participating physician or provider with respect to 
                such care.
                    ``(C) Any other term or condition of the coverage 
                (other than an exclusion of benefits and other than a 
                requirement relating to medical necessity for coverage 
                of benefits).
            ``(3) Maintenance care and post-stabilization care 
        defined.--In this subsection:
                    ``(A) Maintenance care.--The term `maintenance 
                care' means, with respect to an individual who is 
                stabilized after provision of emergency services, 
medically necessary items and services (other than emergency services) 
that are required by the individual to ensure that the individual 
remains stabilized during the period described in paragraph (4).
                    ``(B) Post-stabilization care.--The term `post-
                stabilization care' means, with respect to an 
                individual who is determined to be stable pursuant to a 
                medical screening examination or who is stabilized 
                after provision of emergency services, medically 
                necessary items and services (other than emergency 
                services and other than maintenance care) that are 
                required by the individual.
            ``(4) Period of required coverage of maintenance care.--The 
        period of required coverage of maintenance care of an 
        individual under this subsection begins at the time of the 
        request (or the initiation of the good faith effort to make the 
        request) under paragraph (1)(C) and ends when--
                    ``(A) the individual is discharged from the 
                hospital;
                    ``(B) a physician (designated by the managed care 
                entity involved) and with privileges at the hospital 
                involved arrives at the emergency department of the 
                hospital and assumes responsibility with respect to the 
                treatment of the individual; or
                    ``(C) the treating physician and the entity agree 
                to another arrangement with respect to the care of the 
                individual.
            ``(5) When post-stabilization care required to be 
        covered.--
                    ``(A) When treating physician unable to communicate 
                request.--If the treating physician or other individual 
                makes the good faith effort to request authorization 
                under paragraph (1)(C) but is unable to communicate the 
                request directly with an authorized person referred to 
                in such paragraph within 30 minutes after the time of 
                initiating such effort, then post-stabilization care is 
                required to be covered under this subsection beginning 
                at the end of such 30-minute period.
                    ``(B) When able to communicate request, and no 
                timely response.--
                            ``(i) In general.--If the treating 
                        physician or other individual under paragraph 
                        (1)(C) is able to communicate the request 
                        within the 30-minute period described in 
                        subparagraph (A), the post-stabilization care 
                        requested is required to be covered under this 
                        subsection beginning 30 minutes after the time 
                        when the entity receives the request unless a 
                        person authorized by the entity involved 
                        communicates (or makes a good faith effort to 
                        communicate) a denial of the request for the 
                        prior authorization determination within 30 
                        minutes of the time when the entity receives 
                        the request and the treating physician does not 
                        request under clause (ii) to communicate 
                        directly with an authorized physician 
                        concerning the denial.
                            ``(ii) Request for direct physician-to-
                        physician communication concerning denial.--If 
                        a denial of a request is communicated under 
                        clause (i), the treating physician may request 
                        to communicate respecting the denial directly 
                        with a physician who is authorized by the 
                        entity to deny or affirm such a denial.
                    ``(C) When no timely response to request for 
                physician-to-physician communication.--If a request for 
                physician-to-physician communication is made under 
                subparagraph (B)(ii), the post-stabilization care 
                requested is required to be covered under this 
                subsection beginning 30 minutes after the time when the 
                entity receives the request from a treating physician 
                unless a physician, who is authorized by the entity to 
                reverse or affirm the initial denial of the care, 
                communicates (or makes a good faith effort to 
                communicate) directly with the treating physician 
                within such 30-minute period.
                    ``(D) Disagreements over post-stabilization care.--
                If, after a direct physician-to-physician communication 
                under subparagraph (C), the denial of the request for 
                the post-stabilization care is not reversed and the 
                treating physician communicates to the entity involved 
                a disagreement with such decision, the post-
                stabilization care requested is required to be covered 
                under this subsection beginning as follows:
                            ``(i) Delay to allow for prompt arrival of 
                        physician assuming responsibility.--If the 
                        issuer communicates that a physician 
                        (designated by the entity) with privileges at 
                        the hospital involved will arrive promptly (as 
                        determined under guidelines) at the emergency 
                        department of the hospital in order to assume 
                        responsibility with respect to the treatment of 
                        the enrollee involved, the required coverage of 
                        the post-stabilization care begins after the 
                        passage of such time period as would allow the 
                        prompt arrival of such a physician.
                            ``(ii) Other cases.--If the entity does not 
                        so communicate, the required coverage of the 
                        post-stabilization care begins immediately.
            ``(6) No requirement of coverage of post-stabilization care 
        if alternate plan of treatment.--
                    ``(A) In general.--Coverage of post-stabilization 
                care is not required under this subsection with respect 
                to an individual when--
                            ``(i) subject to subparagraph (B), a 
                        physician (designated by the entity involved) 
                        and with privileges at the hospital involved 
                        arrives at the emergency department of the 
                        hospital and assumes responsibility with 
                        respect to the treatment of the individual; or
                            ``(ii) the treating physician and the 
                        entity agree to another arrangement with 
                        respect to the post-stabilization care (such as 
                        an appropriate transfer of the individual 
                        involved to another facility or an appointment 
                        for timely followup treatment for the 
                        individual).
                    ``(B) Special rule where once care initiated.--
                Required coverage of requested post-stabilization care 
                shall not end by reason of subparagraph (A)(i) during 
                an episode of care (as determined by guidelines) if the 
                treating physician initiated such care (consistent with 
                a previous paragraph) before the arrival of a physician 
                described in such subparagraph.
            ``(7) Construction.--Nothing in this subsection shall be 
        construed as--
                    ``(A) preventing a managed care entity from 
                authorizing coverage of maintenance care or post-
                stabilization care in advance or at any time; or
                    ``(B) preventing a treating physician or other 
                individual described in paragraph (1)(C) and such an 
                entity from agreeing to modify any of the time periods 
                specified in paragraphs (5) as it relates to cases 
                involving such persons.
    ``(c) Information on Access to Emergency Services.--A managed care 
entity, to the extent the entity offers health insurance coverage, 
shall provide education to enrollees on--
            ``(1) coverage of emergency services (as defined in 
        subsection (a)(2)(B)) by the entity in accordance with the 
        provisions of this section,
            ``(2) the appropriate use of emergency services, including 
        use of the 911 telephone system or its local equivalent,
            ``(3) any cost sharing applicable to emergency services,
            ``(4) the process and procedures of the plan for obtaining 
        emergency services, and
            ``(5) the locations of--
                    ``(A) emergency departments, and
                    ``(B) other settings,
        in which participating physicians and hospitals provide 
        emergency services and post-stabilization care.
    ``(d) General Definitions.--For purposes of this section:
            ``(1) Cost sharing.--The term `cost sharing' means any 
        deductible, coinsurance amount, copayment or other out-of-
        pocket payment (other than premiums or enrollment fees) that a 
        managed care entity issuer imposes on enrollees with respect to 
        the coverage of benefits.
            ``(2) Good faith effort.--The term `good faith effort' has 
        the meaning given such term in guidelines and requires such 
        appropriate documentation as is specified under such 
        guidelines.
            ``(3) Guidelines.--The term `guidelines' means guidelines 
        established by the Secretary after consultation with an 
        advisory panel that includes individuals representing emergency 
        physicians, managed care entities, including at least one 
        health maintenance organization, hospitals, employers, the 
        States, and consumers.
            ``(4) Prior authorization determination.--The term `prior 
        authorization determination' means, with respect to items and 
        services for which coverage may be provided by a managed care 
        entity, a determination (before the provision of the items and 
        services and as a condition of coverage of the items and 
        services under the coverage) of whether or not such items and 
        services will be covered under the coverage.
            ``(5) Stabilize.--The term `to stabilize' means, with 
        respect to an emergency medical condition, to provide (in 
        complying with section 1867 of the Social Security Act) such 
        medical treatment of the condition as may be necessary to 
        assure, within reasonable medical probability, that no material 
        deterioration of the condition is likely to result from or 
        occur during the transfer of the individual from the facility.
            ``(6) Stabilized.--The term `stabilized' means, with 
        respect to an emergency medical condition, that no material 
        deterioration of the condition is likely, within reasonable 
        medical probability, to result from or occur before an 
        individual can be transferred from the facility, in compliance 
        with the requirements of section 1867 of the Social Security 
        Act.
            ``(7) Treating physician.--The term `treating physician' 
        includes a treating health care professional who is licensed 
        under State law to provide emergency services other than under 
        the supervision of a physician.

``SEC. 1944. OTHER BENEFICIARY PROTECTIONS.

    ``(a) Protecting Enrollees Against the Insolvency of Managed Care 
Entities and Against the Failure of the State to Pay Such Entities.--
Each managed care entity shall provide that an individual eligible for 
medical assistance under the State plan under this title who is 
enrolled with the entity may not be held liable--
            ``(1) for the debts of the managed care entity, in the 
        event of the medicaid managed care organization's insolvency;
            ``(2) for services provided to the individual--
                    ``(A) in the event of the medicaid managed care 
                organization failing to receive payment from the State 
                for such services; or
                    ``(B) in the event of a health care provider with a 
                contractual or other arrangement with the medicaid 
                managed care organization failing to receive payment 
                from the State or the managed care entity for such 
                services; or
            ``(3) for the debts of any health care provider with a 
        contractual or other arrangement with the medicaid managed care 
        organization to provide services to the individual, in the 
        event of the insolvency of the health care provider.
    ``(b) Protection of Beneficiaries Against Balance Billing Through 
Subcontractors.--
            ``(1) In general.--Any contract between a managed care 
        entity that has an agreement with a State under this title and 
        another entity under which the entity (or any other entity 
        pursuant to the contract) provides directly or indirectly for 
        the provision of services to beneficiaries under the agreement 
        with the State shall include such provisions as the Secretary 
        may require in order to assure that the entity complies with 
        balance billing limitations and other requirements of this 
        title (such as limitation on withholding of services) as they 
        would apply to the managed care entity if such entity provided 
        such services directly and not through a contract with another 
        entity.
            ``(2) Application of sanctions for violations.--The 
        provisions of section 1128A(b)(2)(B) and 1128B(d)(1) shall 
        apply with respect to entities contracting directly or 
        indirectly with a managed care entity (with a contract with a 
        State under this title) for the provision of services to 
        beneficiaries under such a contract in the same manner as such 
        provisions would apply to the managed care entity if it 
        provided such services directly and not through a contract with 
        another entity.

``SEC. 1945. ASSURING QUALITY CARE.

    ``(a) External Independent Review of Managed Care Entity 
Activities.--
            ``(1) Review of medicaid managed care organization 
        contract.--
                    ``(A) In general.--Except as provided in paragraph 
                (2), each medicaid managed care organization shall be 
                subject to an annual external independent review of the 
                quality outcomes and timeliness of, and access to, the 
                items and services specified in such organization's 
                contract with the State under section 1941(a)(1)(B). 
                Such review shall specifically evaluate the extent to 
                which the medicaid managed care organization provides 
                such services in a timely manner.
                    ``(B) Contents of review.--An external independent 
                review conducted under this subsection shall include--
                            ``(i) a review of the entity's medical 
                        care, through sampling of medical records or 
                        other appropriate methods, for indications of 
                        quality of care and inappropriate utilization 
                        (including overutilization) and treatment,
                            ``(ii) a review of enrollee inpatient and 
                        ambulatory data, through sampling of medical 
                        records or other appropriate methods, to 
                        determine trends in quality and appropriateness 
                        of care,
                            ``(iii) notification of the entity and the 
                        State when the review under this paragraph 
                        indicates inappropriate care, treatment, or 
                        utilization of services (including 
                        overutilization), and
                            ``(iv) other activities as prescribed by 
                        the Secretary or the State.
                    ``(C) Use of protocols.--An external independent 
                review conducted under this subsection on and after 
                January 1, 1999, shall use protocols that have been 
                developed, tested, and validated by the Secretary and 
                that are at least as rigorous as those used by the 
                National Committee on Quality Assurance as of the date 
                of the enactment of this section.
                    ``(D) Availability of results.--The results of each 
                external independent review conducted under this 
                paragraph shall be available to participating health 
care providers, enrollees, and potential enrollees of the medicaid 
managed care organization, except that the results may not be made 
available in a manner that discloses the identity of any individual 
patient.
            ``(2) Deemed compliance.--
                    ``(A) Medicare organizations.--The requirements of 
                paragraph (1) shall not apply with respect to a 
                medicaid managed care organization if the organization 
                is an eligible organization with a contract in effect 
                under section 1876.
                    ``(B) Private accreditation.--
                            ``(i) In general.--The requirements of 
                        paragraph (1) shall not apply with respect to a 
                        medicaid managed care organization if--
                                    ``(I) the organization is 
                                accredited by an organization meeting 
                                the requirements described in 
                                subparagraph (C)); and
                                    ``(II) the standards and process 
                                under which the organization is 
                                accredited meet such requirements as 
                                are established under clause (ii), 
                                without regard to whether or not the 
                                time requirement of such clause is 
                                satisfied.
                            ``(ii) Standards and process.--Not later 
                        than 180 days after the date of the enactment 
                        of this section, the Secretary shall specify 
                        requirements for the standards and process 
                        under which a medicaid managed care 
                        organization is accredited by an organization 
                        meeting the requirements of subparagraph (B).
                    ``(C) Accrediting organization.--An accrediting 
                organization meets the requirements of this 
                subparagraph if the organization--
                            ``(i) is a private, nonprofit organization;
                            ``(ii) exists for the primary purpose of 
                        accrediting managed care organizations or 
                        health care providers; and
                            ``(iii) is independent of health care 
                        providers or associations of health care 
                        providers.
            ``(3) 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 
        1941(a)(1)(B).
            ``(4) Use of validation surveys.--The Secretary shall 
        conduct surveys each year to validate external reviews of at 
        least 5 percent of the number of managed care entities in the 
        year. In conducting such surveys the Secretary shall use the 
        same protocols as were used in preparing the external reviews. 
        If an external review finds that an individual managed care 
        entity meets applicable requirements, but the Secretary 
        determines that the entity does not meet such requirements, the 
        Secretary's determination as to the entity's noncompliance with 
        such requirements is binding and supersedes that of the 
        previous survey.
    ``(b) Federal Monitoring Responsibilities.--The Secretary shall 
review the external independent reviews conducted pursuant to 
subsection (a) and shall monitor the effectiveness of the State's 
monitoring and followup activities required under section 1942(b)(1). 
If the Secretary determines that a State's monitoring and followup 
activities are not adequate to ensure that the requirements of such 
section are met, the Secretary shall undertake appropriate followup 
activities to ensure that the State improves its monitoring and 
followup activities.
    ``(c) Providing Information on Services.--
            ``(1) Requirements for medicaid managed care 
        organizations.--
                    ``(A) Information to the state.--Each medicaid 
                managed care organization shall provide to the State 
                (at least at such frequency as the Secretary may 
                require), complete and timely information concerning 
                the following:
                            ``(i) The services that the organization 
                        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 
                        organization which are subject to prior 
                        authorization by the organization as a 
                        condition of coverage (in accordance with 
                        subsection (d)).
                            ``(v) The procedures available to an 
                        enrollee and a health care provider to appeal 
                        the failure of the organization to cover a 
                        service.
                            ``(vi) The performance of the organization 
                        in serving individuals eligible for medical 
                        assistance under the State plan under this 
                        title.
                Such information shall be provided in a form consistent 
                with the reporting of similar information by eligible 
                organizations under section 1876.
            ``(2) Requirements for primary care case management 
        providers.--Each primary care case management provider shall--
                    ``(A) provide to the State (at least 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;
                    ``(B) 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;
                    ``(C) 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; and
                    ``(D) provide assurances that such entities and 
                their professional personnel are licensed as required 
                by State law and qualified to provide case management 
                services, through methods such as ongoing monitoring of 
                compliance with applicable requirements and providing 
                information and technical assistance.
            ``(3) Requirements for both medicaid managed care 
        organizations and primary care case management providers.--Each 
        managed care entity shall provide the State with aggregate 
        encounter data for all items and services, including 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.
    ``(d) Conditions for Prior Authorization.--Subject to section 1943, 
a managed care entity 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 provides that 
such decisions are made in a timely manner, depending upon the urgency 
of the situation.
    ``(e) Patient Encounter Data.--Each medicaid managed care 
organization 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) and shall submit such data to the State or the Secretary 
upon request. The medicaid managed care organization shall incorporate 
such information in the maintenance of patient encounter data with 
respect to such health care provider.
    ``(f) Incentives for High Quality Managed Care Entities.--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), managed care entities 
that provide the highest quality care to individuals eligible for 
medical assistance under the State plan under this title who are 
enrolled with such entities. 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.

``SEC. 1946. PROTECTIONS FOR PROVIDERS.

    ``(a) Information to Health Care Providers.--Each medicaid managed 
care organization shall upon request, make the information described in 
section 1945(c)(1)(A) available to participating health care providers.
    ``(b) Timeliness of Payment.--A medicaid managed care organization 
shall make payment to health care providers for items and services 
which are subject to the contract under section 1941(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 entity on a 
timely basis consistent with section 1943 and under the claims payment 
procedures described in section 1902(a)(37)(A), unless the health care 
provider and the managed care entity agree to an alternate payment 
schedule.
    ``(c) Application of Medicare Prohibition of Restrictions on 
Physicians' Advice and Counsel to Enrollees.--A managed care entity 
shall comply with the same prohibitions on any restrictions relating to 
physicians' advice and counsel to individuals as apply to eligible 
organizations under section 1876.
    ``(d) Physician Incentive Plans.--Each medicaid managed care 
organization shall require that any physician incentive plan covering 
physicians who are participating in the medicaid managed care 
organization shall meet the requirements of section 1876(i)(8).
    ``(e) Written Provider Participation Agreements for Certain 
Providers.--Each medicaid managed care organization that enters into a 
written provider participation agreement with a provider described in 
section 1942(h)(2) shall--
            ``(1) include terms and conditions that are no more 
        restrictive than the terms and conditions that the medicaid 
        managed care organization includes in its agreements with other 
        participating providers with respect to--
                    ``(A) the scope of covered services for which 
                payment is made to the provider;
                    ``(B) the assignment of enrollees by the 
                organization to the provider;
                    ``(C) the limitation on financial risk or 
                availability of financial incentives to the provider;
                    ``(D) accessibility of care;
                    ``(E) professional credentialing and 
                recredentialing;
                    ``(F) licensure;
                    ``(G) quality and utilization management;
                    ``(I) confidentiality of patient records;
                    ``(J) grievance procedures; and
                    ``(K) indemnification arrangements between the 
                organizations and providers; and
            ``(2) provide for payment to the provider on a basis that 
        is comparable to the basis on which other providers are paid.
    ``(f) Payments to Federally-Qualified Health Centers.--Each 
medicaid managed care organization that has a contract under this title 
with respect to the provision of services of a federally qualified 
health center shall provide, at the election of such center, that the 
organization shall provide payments to such a center for services 
described in 1905(a)(2)(C) at the rates of payment specified in section 
1902(a)(13)(E).

``SEC. 1947. ASSURING ADEQUACY OF PAYMENTS TO MEDICAID MANAGED CARE 
              ORGANIZATIONS AND ENTITIES.

    (a) Adequate Rates.--As a condition of approval of a State plan 
under this title, a State shall find, determine, and make assurances 
satisfactory to the Secretary that--
            ``(1) the rates it pays medicaid managed care organizations 
        for individuals eligible under the State plan are reasonable 
        and adequate to assure access to services meeting 
        professionally recognized quality standards, taking into 
        account--
                    ``(A) the items and services to which the rate 
                applies,
                    ``(B) the eligible population, and
                    ``(C) the rate the State pays providers for such 
                items and services;
            ``(2) the methodology used to adjust the rate adequately 
        reflects the varying risks associated with individuals actually 
        enrolling in each medicaid managed care organization; and
            ``(3) it will provide for an annual review of the actuarial 
        soundness of rates by an independent actuary selected by the 
        Secretary and for a copy of the actuary's report on each such 
        review to be transmitted to the State and the Secretary and 
        made available to the public.
    ``(b) Annual Reports.--As a condition of approval of a State plan 
under this title, a State shall report to the Secretary, at least 
annually, on the rates the States pays to medicaid managed care 
organizations.

``SEC. 1948. FRAUD AND ABUSE.

    ``(a) Provisions Applicable to Managed Care Entities.--
            ``(1) Prohibiting affiliations with individuals debarred by 
        Federal agencies.--
                    ``(A) In general.--A managed care entity may not 
                knowingly--
                            ``(i) have a person described in 
                        subparagraph (C) as a director, officer, 
                        partner, or person with beneficial ownership of 
                        more than 5 percent of the organization's 
                        equity; or
                            ``(ii) have an employment, consulting, or 
                        other agreement with a person described in such 
                        subparagraph for the provision of items and 
                        services that are significant and material to 
                        the organization's obligations under its 
                        contract with the State.
                    ``(B) Effect of noncompliance.--If a State finds 
                that a managed care entity is not in compliance with 
                clause (i) or (ii) of subparagraph (A), the State--
                            ``(i) shall notify the Secretary of such 
                        noncompliance;
                            ``(ii) may continue an existing agreement 
                        with the entity 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 
                        entity 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.
                    ``(C) Persons described.--A person is described in 
                this subparagraph if such person--
                            ``(i) is debarred, suspended, or otherwise 
                        excluded from participating in procurement 
                        activities under the Federal acquisition 
                        regulation or from participating in 
                        nonprocurement activities under regulations 
                        issued pursuant to Executive Order 12549; or
                            ``(ii) is an affiliate (within the meaning 
                        of the Federal acquisition regulation) of a 
                        person described in subparagraph (A).
            ``(2) Restrictions on marketing.--
                    ``(A) Distribution of materials.--
                            ``(i) In general.--A managed care entity 
                        may not distribute directly or through any 
                        agent or independent contractor marketing 
                        materials within any State--
                                    ``(I) without the prior approval of 
                                the State; and
                                    ``(II) that contain false or 
                                materially misleading information.
                            ``(ii) Consultation in review of market 
                        materials.--In the process of reviewing and 
                        approving such materials, the State shall 
                        provide for consultation with a medical care 
                        advisory committee.
                            ``(iii) Prohibition.--The State may not 
                        enter into or renew a contract with a managed 
                        care entity for the provision of services to 
                        individuals enrolled under the State plan under 
                        this title if the State determines that the 
                        entity distributed directly or through any 
                        agent or independent contractor marketing 
                        materials in violation of clause (i).
                    ``(B) Service market.--A managed care entity shall 
                distribute marketing materials to the entire service 
                area of such entity.
                    ``(C) Prohibition of tie-ins.--A managed care 
                entity, or any agency of such entity, may not seek to 
                influence an individual's enrollment with the entity in 
                conjunction with the sale of any other insurance.
                    ``(D) Prohibiting marketing fraud.--Each managed 
                care entity shall comply with such procedures and 
                conditions as the Secretary prescribes in order to 
                ensure that, before an individual is enrolled with the 
                entity, the individual is provided accurate oral and 
                written and sufficient information to make an informed 
                decision whether or not to enroll.
                    ``(E) Prohibition of cold call marketing.--Each 
                managed care entity shall not, directly or indirectly, 
                conduct door-to-door, telephonic, or other `cold call' 
                marketing of enrollment under this title.
    ``(b) Provisions Applicable Only to Medicaid Managed Care 
Organizations.--
            ``(1) State conflict-of-interest safeguards in medicaid 
        risk contracting.--A medicaid managed care organization may not 
        enter into a contract with any State under section 
        1941(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 
        organizations or to the default enrollment process described in 
        section 1941(a)(1)(F) 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.
            ``(2) Requiring disclosure of financial information.--In 
        addition to any requirements applicable under section 
        1902(a)(27) or 1902(a)(35), a medicaid managed care 
        organization shall--
                    ``(A) 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 organization has the ability to 
                        bear the risk of potential financial losses and 
                        otherwise has a fiscally sound operation;
                            ``(ii) the organization 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 organization; and
                            ``(iii) the organization 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;
                    ``(B) 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 organization (and of any subcontractor) 
                relating to the information reported pursuant to 
                subparagraph (A) and any information required to be 
                furnished under section paragraphs (27) or (35) of 
                section 1902(a);
                    ``(C) 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 organization 
                and a party in interest (as defined in section 1318(b) 
                of such Act);
                    ``(D) agree to make available to its enrollees upon 
                reasonable request--
                            ``(i) the information reported pursuant to 
                        subparagraph (A); and
                            ``(ii) the information required to be 
                        disclosed under sections 1124 and 1126;
                    ``(E) comply with subsections (a) and (c) of 
                section 1318 of the Public Health Service Act (relating 
                to disclosure of certain financial information) and 
                with the requirement of section 1301(c)(8) of such Act 
                (relating to liability arrangements to protect 
                members); and
                    ``(F) notify the Secretary of loans and other 
                special financial arrangements which are made between 
                the organization and subcontractors, affiliates, and 
                related parties.
        Each State is required to conduct audits on the books and 
        records of at least 1 percent of the number of medicaid managed 
        care organizations operating in the State.
            ``(3) Adequate provision against risk of insolvency.--
                    ``(A) Establishment of standards.--The Secretary 
                shall establish standards, including appropriate equity 
                standards, under which each medicaid managed care 
                organization shall make adequate provision against the 
                risk of insolvency.
                    ``(B) Consideration of other standards.--In 
                establishing the standards described in subparagraph 
                (A), the Secretary shall consider solvency standards 
                applicable to eligible organizations with a risk-
                sharing contract under section 1876.
                    ``(C) Model contract on solvency.--At the earliest 
                practicable time after the date of enactment of this 
                section, the Secretary shall issue guidelines 
                concerning solvency standards for risk contracting 
                entities and subcontractors of such risk contracting 
                entities. Such guidelines shall take into account 
                characteristics that may differ among risk contracting 
                entities including whether such an entity is at risk 
                for inpatient hospital services.
            ``(4) Requiring report on net earnings and additional 
        benefits.--Each medicaid managed care organization shall submit 
        a report to the State and the Secretary not later than 12 
        months after the close of a contract year containing the most 
        recent audited financial statement of the organization's net 
        earnings and consistent with generally accepted accounting 
        principles.
    ``(c) Disclosure of Ownership and Related Information.--Each 
medicaid managed care organization shall provide for disclosure of 
information in accordance with section 1124.
    ``(d) Disclosure of Transaction Information.--
            ``(1) In general.--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) 
        shall 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:
                    ``(A) Any sale or exchange, or leasing of any 
                property between the organization and such a party.
                    ``(B) 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.
                    ``(C) 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.
            ``(2) Each such organization shall make the information 
        reported pursuant to paragraph (1) available to its enrollees 
        upon reasonable request.
    ``(e) Contract Oversight.--
            ``(1) In general.--The Secretary must provide prior review 
        and approval for contracts under this part with a medicaid 
        managed care organization providing for expenditures under this 
        title in excess of $1,000,000.
            ``(2) Inspector general review.--As part of such approval 
        process, the Inspector General in the Department of Health and 
        Human Services, effective October 1, 1997, shall make a 
        determination (to the extent practicable) as to whether persons 
        with an ownership interest (as defined in section 1124(a)(3)) 
        or an officer, director, agent, or managing employee (as 
        defined in section 1126(b)) of the organization are or have 
        been described in subsection (a)(1)(C) based on a ground 
        relating to fraud, theft, embezzlement, breach of fiduciary 
        responsibility, or other financial misconduct or obstruction of 
        an investigation.
    ``(f) Limitation on Availability of FFP for Use of Enrollment 
Brokers.--Amounts expended by a State for the use an enrollment broker 
in marketing managed care entities to eligible individuals under this 
title shall be considered, for purposes of section 1903(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:
            ``(1) 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.
            ``(2) 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.
    ``(g) Use of Unique Physician Identifier for Participating 
Physicians.--Each medicaid managed care organization 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 
1173(b).
    ``(h) Secretarial Recovery of FFP for Capitation Payments for 
Insolvent Managed Care Entities.--The Secretary shall provide for the 
recovery and offset against amount owed a State under section 
1903(a)(1) an amount equal to the amounts paid to the State, for 
medical assistance provided under such section for expenditures for 
capitation payments to a managed care entity that becomes insolvent, 
for services contracted for with, but not provided by, such 
organization.

``SEC. 1949. SANCTIONS FOR NONCOMPLIANCE BY MANAGED CARE ENTITIES.

    ``(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 a managed care entity, which the State 
may impose against a managed care entity with a contract under section 
1941(a)(1)(B) if the entity--
            ``(1) fails substantially to provide medically necessary 
        items and services that are required (under law or under such 
        entity's contract with the State) to be provided to an enrollee 
        covered under the contract;
            ``(2) imposes premiums or charges on enrollees in excess of 
        the premiums or charges 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 this part, or engaging in any practice 
        that would reasonably be expected to have the effect of denying 
        or discouraging enrollment with the entity 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 this 
                part; 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) or this part.
    ``(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 medicaid-only managed care entity upon a 
        finding by the State that there was continued egregious 
        behavior by the plan and to assure the health of the entity's 
        enrollees, if there is a need for temporary management while--
                    ``(A) there is an orderly termination or 
                reorganization of the managed care entity; 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 
                managed care entity has the capability to ensure that 
                the violations shall not recur.
            ``(3) Permitting individuals enrolled with the managed care 
        entity to terminate enrollment without cause, and notifying 
        such individuals of such right to terminate enrollment.
            ``(4) Suspension of default or all enrollment of 
        individuals under this title after the date the Secretary or 
        the State notifies the entity of a determination of a violation 
        of any requirement of this part.
            ``(5) Suspension of payment to the entity under this title 
        for individuals enrolled after the date the Secretary or State 
        notifies the entity of such a determination and until the 
        Secretary or State is satisfied that the basis for such 
        determination has been corrected and is not likely to recur.
    ``(c) Treatment of Chronic Substandard Entities.--In the case of a 
managed care entity which has repeatedly failed to meet the 
requirements of sections 1942 through 1946, 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 a managed 
care entity which has failed to meet the requirements of this part, the 
State shall have the authority to terminate its contract with such 
entity under section 1941(a)(1)(B) and to enroll such entity's 
enrollees with other managed care entities (or to permit such enrollees 
to receive medical assistance under the State plan under this title 
other than through a managed care entity).
    ``(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 
        managed care entity with a contract under section 1941(a)(1)(B) 
fails to meet any of the requirements of this part.
            ``(2) Denial of payments to the state.--The Secretary may 
        deny payments to the State for medical assistance furnished 
        under the contract under section 1941(a)(1)(B) for individuals 
        enrolled after the date the Secretary notifies a managed care 
        entity 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 Managed Care Entities.--
            ``(1) Availability of hearing prior to termination of 
        contract.--A State may not terminate a contract with a managed 
        care entity under section 1941(a)(1)(B) unless the entity is 
        provided with a hearing prior to the termination.
            ``(2) Notice to enrollees of termination hearing.--A State 
        shall notify all individuals enrolled with a managed care 
        entity which is the subject of a hearing to terminate the 
        entity's contract with the State of the hearing and that the 
        enrollees may immediately disenroll with the entity without 
        cause.
            ``(3) Other protections for managed care entities against 
        sanctions imposed by state.--Before imposing any sanction 
        against a managed care entity other than termination of the 
        entity's contract, the State shall provide the entity with 
        notice and such other due process protections as the State may 
        provide, except that a State may not provide a managed care 
        entity with a pre-termination 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.

``SEC. 1950. DEFINITIONS; MISCELLANEOUS PROVISIONS.

    ``(a) Definitions.--For purposes of this title:
            ``(1) Managed care entity.--The term `managed care entity' 
        means--
                    ``(A) a medicaid managed care organization; or
                    ``(B) a primary care case management provider.
            ``(2) Medicaid managed care organization.--The term 
        `medicaid managed care organization' means a health maintenance 
        organization, an eligible organization with a contract under 
        section 1876, a provider sponsored network or any other 
        organization which is organized under the laws of a State, has 
        made adequate provision (as determined under standards 
        established for purposes of eligible organizations under 
        section 1876 and through its capitalization or otherwise) 
        against the risk of insolvency, and 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 1941(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 
                        1941(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.''.

SEC. 3. STUDIES AND REPORTS.

    (a) Report on Public Health Services.--
            (1) In general.--Not later than January 1, 1998, the 
        Secretary of Health and Human Services (in this section 
        referred to as the ``Secretary'') shall report to the Committee 
        on Finance of the Senate and the Committee on Commerce of the 
        House of Representatives on the effect of managed care entities 
        (as defined in section 1950(a)(1) of the Social Security Act) 
        on the delivery of and payment for the services traditionally 
        provided through providers described in section 
        1941(a)(2)(B)(i) of such Act.
            (2) Contents of report.--The report referred to in 
        subsection (a) shall include--
                    (A) information on the extent to which enrollees 
                with eligible managed care entities seek services at 
                local health departments, public hospitals, and other 
                facilities that provide care without regard to a 
                patient's ability to pay;
                    (B) information on the extent to which the 
                facilities described in such subsection provide 
                services to enrollees with eligible managed care 
                entities without receiving payment;
                    (C) information on the effectiveness of systems 
                implemented by facilities described in such subsection 
                for educating such enrollees on services that are 
                available through eligible managed care entities with 
                which such enrollees are enrolled;
                    (D) to the extent possible, identification of the 
                types of services most frequently sought by such 
                enrollees at such facilities; and
                    (E) recommendations about how to ensure the timely 
                delivery of the services traditionally provided through 
                providers described in section 1941(a)(2)(B)(i) of the 
                Social Security Act to enrollees of managed care 
                entities and how to ensure that local health 
                departments, public hospitals, and other facilities are 
                adequately compensated for the provision of such 
                services to such enrollees.
    (b) Report on Payments to Hospitals.--
            (1) In general.--Not later than October 1 of each year, 
        beginning with October 1, 1998, the Secretary and the 
        Comptroller General shall analyze and submit a report to the 
        Committee on Finance of the Senate and the Committee on 
        Commerce of the House of Representatives on rates paid for 
        hospital services under managed care entities under contracts 
        under section 1941(a)(1)(B) of the Social Security Act.
            (2) Contents of report.--The information in the report 
        described in paragraph (1) shall--
                    (A) be organized by State, type of hospital, type 
                of service, and
                    (B) include a comparison of rates paid for hospital 
                services under managed care entities with rates paid 
                for hospital services furnished to individuals who are 
                entitled to benefits under a State plan under title XIX 
                of the Social Security Act and are not enrolled with 
                such entities.
    (c) Reports by States.--Each State shall transmit to the Secretary, 
at such time and in such manner as the Secretary determines 
appropriate, the information on hospital rates submitted to such State 
under section 1947(b)(2) of such Act.
    (d) Independent Study and Report on Quality Assurance and 
Accreditation Standards.--The Institute of Medicine of the National 
Academy of Sciences shall conduct a study and analysis of the quality 
assurance programs and accreditation standards applicable to managed 
care entities operating in the private sector or to such entities that 
operate under contracts under the medicare program under title XVIII of 
the Social Security Act to determine if such programs and standards 
include consideration of the accessibility and quality of the health 
care items and services delivered under such contracts to low-income 
individuals.

SEC. 4. CONFORMING AMENDMENTS.

    (a) Repeal of Current Requirements.--
            (1) In general.--Except as provided in paragraph (2), 
        section 1903(m) (42 U.S.C. 1396b(m)) is repealed on the date of 
        the enactment of this Act.
            (2) 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--
                    (A) the day after the date of the expiration of the 
                contract; or
                    (B) the date which is 1 year after the date of the 
                enactment of this Act.
    (b) Federal Financial Participation.--
            (1) Clarification of application of ffp denial rules to 
        payments made pursuant to managed care entities.--Section 
        1903(i) (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 a managed care 
        entity (as defined in section 1950(a)(1)) in the same manner as 
        such paragraphs apply to items or services furnished and 
        amounts expended directly by the State.''.
            (2) FFP for external quality review organizations.--Section 
        1903(a)(3)(C) (42 U.S.C. 1396b(a)(3)(C)) is amended--
                    (A) by inserting ``(i)'' after ``(C)'', and
                    (B) by adding at the end the following new clause:
                    ``(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 of 
                managed care entities (as defined in section 
                1950(a)(1)) by external quality review organizations, 
                but only if such organizations conduct such reviews 
                under protocols approved by the Secretary and only in 
                the case of such organizations that meet standards 
                established by the Secretary relating to the 
                independence of such organizations from agencies 
                responsible for the administration of this title or 
                eligible managed care entities; and''.
    (c) Exclusion of Certain Individuals and Entities From 
Participation in Program.--Section 1128(b)(6)(C) (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 
        ``a managed care entity, as defined in section 1950(a)(1),''; 
        and
            (2) in clause (ii), by inserting ``section 1115 or'' after 
        ``approved under''.
    (d) State Plan Requirements.--Section 1902 (42 U.S.C. 1396a) is 
amended--
            (1) in subsection (a)(30)(C), by striking ``section 
        1903(m)'' and inserting ``section 1941(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)'' and inserting ``or with a managed care entity, 
        as defined in section 1950(a)(1);
            (4) in subsection (p)(2)--
                    (A) by striking ``a health maintenance organization 
                (as defined in section 1903(m))'' and inserting ``a 
                managed care entity, as defined in section 
                1950(a)(1),'';
                    (B) by striking ``an organization'' and inserting 
                ``an entity''; and
                    (C) by striking ``any organization'' and inserting 
                ``any entity''; and
            (5) in subsection (w)(1), by striking ``sections 
        1903(m)(1)(A) and'' and inserting ``section''.
    (e) Payment to States.--Section 1903(w)(7)(A)(viii) (42 U.S.C. 
1396b(w)(7)(A)(viii)) is amended to read as follows:
                            ``(viii) Services of a managed care entity 
                        with a contract under section 1941(a)(1)(B).''.
    (f) Use of Enrollment Fees and Other Charges.--Section 1916 (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 ``a managed care entity, as defined in section 
1950(a)(1),'' each place it appears.
    (g) Extension of Eligibility for Medical Assistance.--Section 
1925(b)(4)(D)(iv) (42 U.S.C. 1396r-6(b)(4)(D)(iv)) is amended to read 
as follows:
                            ``(iv) Enrollment with managed care 
                        entity.--Enrollment of the caretaker relative 
                        and dependent children with a managed care 
                        entity, as defined in section 1950(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 a managed care entity in 
                        accordance with part B.''.
    (h) Payment for Covered Outpatient Drugs.--Section 1927(j)(1) (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 organizations, as defined in section 
1950(a)(2),''.
    (i) Application of Sanctions for Balanced Billing Through 
Subcontractors.--(1) Section 1128A(b)(2)(B) (42 U.S.C. 1320a-7a(b)) is 
amended by inserting ``, including section 1944(b)'' after ``title 
XIX''.
    (2) Section 1128B(d)(1) (42 U.S.C. 1320a-7b(d)(1)) is amended by 
inserting ``or, in the case of an individual enrolled with a managed 
care entity under part B of title XIX, the applicable rates established 
by the entity under the agreement with the State agency under such 
part'' after ``established by the State''.
    (j) Repeal of Certain Restrictions on Obstetrical and Pediatric 
Providers.--Section 1903(i) (42 U.S.C. 1396b(i)) is amended by striking 
paragraph (12).
    (k) 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 part B)''.
    (l) Conforming Amendment for Disclosure Requirements for Managed 
Care Entities.--Section 1124(a)(2)(A) (42 U.S.C. 1320a-3(a)(2)(A)) is 
amended by inserting ``managed care entity under title XIX,'' after 
``renal dialysis facility,''.
    (m) Elimination of Regulatory Payment Cap.--The Secretary of Health 
and Human Services may not, under the authority of section 
1902(a)(30)(A) of the Social Security Act or any other provision of 
title XIX of such Act, impose a limit by regulation on the amount of 
the capitation payments that a State may make to qualified entities 
under such title, and section 447.361 of title 42, Code of Federal 
Regulations (relating to upper limits of payment: risk contracts), is 
hereby nullified.
    (n) Continuation of Eligibility.--Section 1902(e) (42 U.S.C. 
1396a(e)) is amended by striking paragraph (2) and inserting the 
following:
    ``(2) For provision providing for extended liability in the case of 
certain beneficiaries enrolled with managed care entities, see section 
1941(c).''.
    (o) Conforming Amendments to Freedom-of-Choice Provisions.--Section 
1902(a)(23) (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 1941,''; and
            (2) in subparagraph (B), by striking ``a health maintenance 
        organization, or a'' and inserting ``or with a managed care 
        entity, as defined in section 1950(a)(1), or''.

SEC. 5. 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, 1997; 
        or
            (2) in the case of assistance furnished under a contract 
        described in section 4(a)(2), 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 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 part B of title XIX 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.
                                 <all>