[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 162 Introduced in House (IH)]

113th CONGRESS
  1st Session
                                H. R. 162

To amend section 1932 of the Social Security Act to require independent 
audits and actuarial services under Medicaid managed care programs, and 
                          for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 4, 2013

Mrs. Bachmann introduced the following bill; which was referred to the 
                    Committee on Energy and Commerce

_______________________________________________________________________

                                 A BILL


 
To amend section 1932 of the Social Security Act to require independent 
audits and actuarial services under Medicaid managed care programs, and 
                          for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicaid Integrity Act of 2013''.

SEC. 2. INDEPENDENT AUDIT AND ACTUARY REQUIREMENTS FOR STATE MEDICAID 
              MANAGED CARE PROGRAMS.

    (a) In General.--Section 1932 of the Social Security Act (42 U.S.C. 
1396u-2) is amended by adding at the end the following:
    ``(i) Independent Audit Requirements.--
            ``(1) In general.--As a condition of receiving a payment 
        under section 1903(a) with respect to expenditures under a 
        contract with a managed care entity under section 1903(m), a 
        State, acting through the State agency under the State plan or 
        another State entity, shall, in accordance with this 
        subsection, enter into a contract with an independent auditor 
        to--
                    ``(A) conduct audits of such managed care entity 
                under such contract; and
                    ``(B) report the results of such audits under 
                paragraph (7).
            ``(2) Independent auditor defined.--In this subsection, 
        subject to subparagraph (B), the term `independent auditor' 
        means, with respect to the audit of a managed care entity in a 
        State for a period of time, an auditing entity that--
                    ``(A) had no financial relationship with the 
                managed care entity or an affiliate of such managed 
                care entity for activities occurring during the period 
                for which the audit is conducted;
                    ``(B) has no such financial relationship with the 
                managed care entity or affiliate for the period during 
                which the audit is being conducted; and
                    ``(C) with respect to the initial audits under 
                paragraph (4) of a managed care entity, has not had 
                such a financial relationship with the managed care 
                entity or affiliate during the 2-year period ending on 
                the date the auditing entity and State enter into a 
                contract under paragraph (1).
            ``(3) Standards for audits.--
                    ``(A) In general.--The Secretary shall set uniform 
                standards for the audits required under paragraph (4).
                    ``(B) Requirements for standards.--The standards 
                under subparagraph (A) shall--
                            ``(i) be consistent with Federal Government 
                        auditing standards issued by the Comptroller 
                        General of the United States;
                            ``(ii) specify a uniform reporting format 
                        for the reporting of such audits under 
                        paragraph (7); and
                            ``(iii) require that any report for an 
                        audit required under paragraph (7) include a 
                        certification by a certified public accountant.
            ``(4) Types of audits and information required.--
                    ``(A) In general.--The independent auditor 
                contracting with a State under paragraph (1) shall 
                conduct and complete, for each managed care entity with 
                a contract under section 1903(m) in such State the 
                following:
                            ``(i) A biannual financial audit described 
                        in paragraph (5).
                            ``(ii) A biannual performance-compliance 
                        audit described in paragraph (6).
                    ``(B) Timing of audits.--
                            ``(i) Initial, staggered audits.--For the 
                        purpose of establishing baseline data, with 
                        respect to each managed care entity with a 
                        contract under section 1903(m) with a State, 
                        the State shall complete--
                                    ``(I) an initial audit under 
                                subparagraph (A)(i) not later than 6 
                                months after the date of enactment of 
                                the Medicaid Integrity Act of 2013; and
                                    ``(II) an initial audit under 
                                subparagraph (A)(ii) not later than 18 
                                months after such date.
                        The initial audit of an entity under 
                        subparagraph (A)(ii) shall be completed 
                        approximately 1 year after the initial audit of 
                        the entity under subparagraph (A)(i).
                            ``(ii) Subsequent, staggered audits.--
                        Subsequent audits under each such subparagraph 
                        shall be completed every two years.
                    ``(C) Period covered by audit.--
                            ``(i) In general.--Each audit under this 
                        paragraph shall cover a 2-calendar-year period.
                            ``(ii) Initial financial audit.--The first 
                        biennial financial audit under subparagraph 
                        (A)(i) shall cover the 2-calendar-year period 
                        that ends on the last day of the calendar year 
                        that ends 6 months before the deadline for 
                        completion of such initial audit under 
                        (B)(i)(I).
                            ``(iii) Initial performance-compliance 
                        audit.--The first biennial performance-
                        compliance audit under subparagraph (A)(ii) 
                        shall cover the 2-calendar-year period that 
                        ends on the last day of the calendar year that 
                        ends 6 months before the deadline for 
                        completion of such initial audit under 
                        (B)(i)(II).
            ``(5) Biannual financial audit.--A biannual financial audit 
        under paragraph (4)(A)(i), with respect to a managed care 
        entity with a contract under section 1903(m) in a State, is an 
        audit of the finances of the managed care entity relating to 
        such contract. Each such audit shall include an audit of at 
        least the following information:
                    ``(A) Expenses and revenues.--With respect to 
                services provided under such contract, the managed care 
                entity's--
                            ``(i) administrative expenses;
                            ``(ii) revenues, including investment 
                        income; and
                            ``(iii) payments made by the managed care 
                        entity for nonadministrative services.
                    ``(B) Claims and encounter data.--Subject to 
                paragraph (7)(C)--
                            ``(i) claims data related to services 
                        provided by such managed care entity under such 
                        contract; and
                            ``(ii) encounter data that relate to such 
                        services and support such claims.
                    ``(C) Expenditures on patient services.--With 
                respect to services provided under such contract, the 
                managed care entity's payments to health care 
                providers, that have been issued a national provider 
                identifier under title XI, for items and services 
                furnished on behalf of beneficiaries based on the 
                claims and encounter data described in subparagraph 
                (B).
                    ``(D) Provider payment ratio.--
                            ``(i) In general.--The ratio of the 
                        payments to health care providers described in 
                        subparagraph (C) to the aggregate payments to 
                        the managed care entity under the contract.
                            ``(ii) Construction.--The ratio under 
                        clause (i) is not a medical loss ratio and is 
                        not comparable to a medical loss ratio.
                    ``(E) Provider payment rates and methodologies.--
                Subject to paragraph (7)(C)(ii), the managed care 
                entity's payment rates and payment methodology for 
                health care services under such contract, by provider 
                type or service category, including a description of--
                            ``(i) alternative payment arrangements 
                        between the managed care entity and providers; 
                        and
                            ``(ii) payments made by the managed care 
                        entity to providers that are separate from 
                        claims for services provided.
                    ``(F) Identification of administrative vendors.--
                With respect to services provided under such contract, 
                identification of providers and vendors for 
                administrative services under contract with the managed 
                care entity.
                    ``(G) Reserve fund contributions.--Contributions 
                that the managed care entity has made to its reserve 
                fund under such contract.
                    ``(H) Reinsurance.--Data on the amount of 
                reinsurance or transfer of risk that the managed care 
                entity has obtained with respect to the risk assumed by 
                such entity under such contract.
                    ``(I) Charitable contributions and donations.--
                Contributions and donations that the managed care 
                entity has made to government or non-profit entities, 
                the identity of such government or non-profit entities, 
                and the amount of the contributions and donations made 
                to each such entity.
            ``(6) Biannual performance-compliance audit.--A biannual 
        audit under this paragraph (4)(A)(ii), with respect to a 
        managed care entity with a contract under section 1903(m) in a 
        State, is an audit of the performance of such managed care 
        entity under such contract (including with respect to the 
        performance of risk assessment under the contract) and the 
        compliance of such managed care entity, during the period 
        covered by the audit, with--
                    ``(A) the terms of the contract; and
                    ``(B) applicable State and Federal laws, 
                regulations, and guidance, including provisions of such 
                laws, regulations, and guidance related to allowable 
                costs under such contracts.
            ``(7) Reporting and public availability of audit results.--
                    ``(A) Notice and opportunity for comment.--
                            ``(i) In general.--With respect to an audit 
                        of a managed care entity conducted by an 
                        independent auditor under this subsection, such 
                        auditor shall--
                                    ``(I) submit a report on the 
                                results of the audit to the managed 
                                care entity; and
                                    ``(II) provide the managed care 
                                entity with the opportunity to submit 
                                comments on such audit to the auditor 
                                during a 30-day period.
                            ``(ii) Review of comments and revision of 
                        report.--The independent auditor shall review 
                        the comments submitted under clause (i)(II) and 
                        may revise such report based on such comments.
                    ``(B) Public report.--
                            ``(i) In general.--Not later than 45 days 
                        after the end of the 30-day comment period 
                        provided under subparagraph (A)(i)(II), the 
                        independent auditor shall submit to the 
                        Secretary, the State, and the managed care 
                        entity a report containing the results of such 
                        audit (including, in the case of an annual 
                        financial audit under paragraph (4)(A)(i), the 
                        information described in paragraph (5)(D)), any 
                        comments received under subparagraph 
                        (A)(i)(II), and an executive summary of the 
                        audit report. The Secretary for good cause may 
                        extend by not more than 30 days the deadline 
                        for submitting a report under the previous 
                        sentence.
                            ``(ii) Posting on public web site.--Subject 
                        to subparagraph (C), not later than 30 days 
                        after the date that the State receives a report 
                        under clause (i), the State shall post such 
                        report (including the executive summary of the 
                        report) on a Web site maintained by the State 
                        in connection with administration of this title 
                        and available to the public.
                    ``(C) Privacy and confidentiality protection.--
                            ``(i) Patient protections.--Nothing in this 
                        subsection shall be construed as modifying the 
                        application of the HIPAA privacy regulations 
                        (as defined in section 1180(b)(3)).
                            ``(ii) Protection of certain proprietary 
                        information.--Nothing in this subsection shall 
                        be construed as authorizing the public 
                        disclosure of the payment rates that a managed 
                        care entity uses to pay any health care 
                        provider or the methodology that the managed 
                        care entity uses to develop such rates.
                            ``(iii) Protection of encounter data.--
                        Subject to clause (i), an independent auditor, 
                        when submitting a report under subparagraph 
                        (A), may submit encounter data to a State. An 
                        independent auditor, or a State, shall not 
                        submit to the Federal Government any encounter 
                        data that are collected for purposes of the 
                        audits under this subsection.
                    ``(D) Withholding of payment for failure to 
                report.--
                            ``(i) In general.--If a report required 
                        under this paragraph is not submitted to the 
                        Secretary as required under subparagraph (B)(i) 
                        by an independent auditor with respect to a 
                        managed care entity in a State, the Secretary 
                        shall withhold, by the withholding percentage 
                        under clause (ii), the payment to the State 
                        under section 1903(a) for expenditures under a 
                        contract under section 1903(m) for the managed 
                        care entity for the period during which the 
                        report is due but not submitted.
                            ``(ii) Withholding percentage.--The 
                        withholding percentage specified in this clause 
                        is--
                                    ``(I) 5 percentage points; plus
                                    ``(II) if the failure to report 
                                continued beyond 30 days after the date 
                                on which such report was due under 
                                subparagraph (B)(i), 5 additional 
                                percentage points for each subsequent 
                                30-day period until such report is 
                                submitted.
                            ``(iii) Restoration of payment.--Any 
                        amounts withheld under this subparagraph due to 
                        the failure to submit a report shall be paid to 
                        a State not later than 10 days after the date 
                        such report is submitted.
            ``(8) Response to deficiencies.--
                    ``(A) Report.--If a report submitted under 
                paragraph (7) indicates a deficiency with respect to 
                the financial reporting, performance, or compliance (as 
                applicable) with respect to a managed care entity with 
                a contract under section 1903(m) with a State, not 
                later than 30 days after the date of submission of such 
                report the State shall submit to the Secretary (and 
                post on the Web site referred to in paragraph 
                (7)(B)(ii)) documentation of any action that the State 
                has taken or intends to take in response to a reported 
                deficiency. Such documentation shall include 
                documentation of any of the following:
                            ``(i) Adjustments to the terms of new or 
                        renewed contracts with such managed care 
                        entity.
                            ``(ii) A corrective action plan entered 
                        into by the managed care entity with such 
                        State.
                            ``(iii) Any intermediate sanction under 
                        subsection (e) against the managed care entity.
                            ``(iv) Termination of the contract with the 
                        managed care entity.
                    ``(B) OIG report to congress.--The Secretary, 
                acting through the Inspector General in the Department 
                of Health and Human Services, shall annually submit to 
                Congress and make available to the public a report on 
                the audits conducted under this subsection and the 
                responses of States to reports of deficiencies in such 
                audits. Such report shall contain such recommendations 
                for changes in law or regulation as may be appropriate 
                to ensure the prudent expenditure of funds for items 
                and services furnished through managed care entities.
            ``(9) Access to information required under contract; 
        sanctions for misrepresentation or falsification of records.--
                    ``(A) Access.--If a State enters into or renews a 
                contract under section 1903(m) after the date of the 
                enactment of the Medicaid Integrity Act of 2013, such 
                contract shall provide that the managed care entity, as 
                a condition of receiving payment under such contract, 
                shall provide the independent auditor with access to 
                all information necessary for purposes of the audits 
                under paragraph (4).
                    ``(B) Sanctions for misrepresentation or 
                falsification.--The misrepresentation or falsification 
                of information that is furnished for purposes of such 
                an audit shall be subject to a civil monetary penalty 
                under subparagraph (B)(i) of section 1903(m)(5) in the 
                same manner as a misrepresentation or falsification 
                described in subparagraph (A)(iv)(I) of such section.
            ``(10) Application to waiver states.--In the case of any 
        State which is providing medical assistance to its residents 
        under a waiver granted under section 1115, the Secretary shall 
        require the State to meet the requirements of this subsection 
        and subsection (j) in the same manner as the State would be 
        required to meet such requirement if the State had in effect a 
        plan approved under this title.
            ``(11) Reducing duplicate audits.--Notwithstanding any 
        other provision of this title, insofar as the Secretary 
        determines that the performance of an audit under this 
        subsection duplicates the performance of an audit required 
        under another provision of this title, the completion of the 
        audit under this subsection shall satisfy such requirement.
            ``(12) Reservation of state powers.--Nothing in this 
        subsection shall be construed to limit the power of a State, 
        including the power of a State to pursue civil and criminal 
        penalties under State law against any individual or entity that 
        misuses, or engages in fraud or abuse related to, the funds 
        provided to a State under this title.
            ``(13) Construction.--Nothing in this subsection shall be 
        construed to prevent the Secretary from taking any action, 
        including disallowances of payment, with respect to violations 
        of this title related to a contract with a managed care entity.
            ``(14) Definitions.--
                    ``(A) Affiliate of the managed care entity.--For 
                purposes of this subsection and subsection (j), the 
                term `affiliate of the managed care entity' means an 
                entity that, to a significant extent, is associated or 
                affiliated with, or has control of or is controlled by, 
                the managed care entity or that is related to such 
                managed care entity by common ownership. For purposes 
                of this definition--
                            ``(i) common ownership exists if an 
                        individual or individuals possess significant 
                        ownership or equity in the managed care entity 
                        and the affiliate of the managed care entity; 
                        and
                            ``(ii) control exists if an entity has the 
                        power, directly or indirectly, to significantly 
                        influence or direct the actions or policies of 
                        another entity.
                    ``(B) Contract year.--For purposes of this 
                subsection, the term `contract year' means, with 
                respect to a managed care entity and a State, the 12-
                month period that begins on the effective date of a 
                contract under section 1903(m) between the managed care 
                entity and the State, and each subsequent 12-month 
                period while such contract is effective.''.
    (b) Independent Actuary.--Section 1932 of the Social Security Act 
(42 U.S.C. 1396u-2), as amended by section 2, is further amended by 
adding at the end the following:
    ``(j) Independent Actuary.--As a condition of receiving a payment 
under section 1903(a) with respect to expenditures under a contract 
between a State and a managed care entity under section 1903(m), a 
State may not enter into an agreement with an entity (referred to in 
this subsection as an `actuary') to provide actuarial services related 
to the State's administration of such contract unless the following 
requirements are met:
            ``(1) No actuarial services or financial relationship for 
        contract period.--The actuary has not provided actuarial 
        services to the managed care entity for, or otherwise had any 
        financial relationship with the managed care entity during, any 
        period of the contract (between such managed care entity and 
        the State) with respect to which the actuarial services under 
        the agreement (between the actuary and the State) are to be 
        provided.
            ``(2) No financial relationship during term of agreement 
        with state.--The actuary agrees not to have such a financial 
        relationship with the managed care entity or affiliate during 
        any part of the period of the agreement (between the State and 
        the actuary).
            ``(3) Special rule for first contract year.--For the first 
        contract year in which this subsection applies, the actuary has 
        not had such a financial relationship with the managed care 
        entity or affiliate during the 2-year period ending on the date 
        the actuary and State enter into an agreement subject to this 
        subsection.''.
    (c) Transitional Financial Incentives to States.--Section 
1903(a)(3) of the Social Security Act (42 U.S.C. 1396b(a)(3)) is 
amended by inserting after subparagraph (F) the following:
                    ``(G) 75 percent of so much of the sums expended as 
                are attributable to expenditures for the first 3 
                biannual financial audits conducted under section 
                1932(i)(4)(A)(i) after the date of enactment of the 
                Medicaid Integrity Act of 2013, and for the first 2 
                biannual performance-compliance audits conducted under 
                section 1932(i)(4)(A)(ii) after such date; plus''.
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