[Congressional Record Volume 143, Number 80 (Tuesday, June 10, 1997)]
[Senate]
[Pages S5445-S5455]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CHAFEE (for himself, Mr. Breaux, Mr. Kerrey, and Mr. 
        Conrad):
  S. 864. A bill to amend title XIX of the Social Security Act to 
improve the provision of managed care under the Medicaid Program; to 
the Committee on Finance.


                 The Medicaid Managed Care Act of 1997

  Mr. CHAFEE. Mr. President, I am pleased today to introduce The 
Medicaid Managed Care Act of 1997. This legislation meets two very 
important objectives in the Medicaid Program. First, it gives States 
the additional flexibility they need to administer the Medicaid Program 
by allowing them to enroll Medicaid beneficiaries into managed care 
Programs. Second, the bill sets Federal standards for managed care to 
ensure that Medicaid patients receive the same quality of care as those 
patients who are enrolled in private managed care plans.
  Under our legislation, States could require Medicaid patients to 
enroll in managed care plans without going through the lengthy and 
cumbersome process of applying to the Secretary of Health and Human 
Services for a waiver of current Medicaid regulations. In exchange for 
this important flexibility, States will have to meet a set of minimum 
Federal standards to ensure that Medicaid patients continue to receive 
quality care.
  For example, States would be required to offer patients a choice of 
at least two health plans. Plans would be required to meet certain 
standards of access to care, quality, and solvency. These standards are 
especially important given recent problems in States that have set up 
Medicaid managed care programs under the waiver process. In some 
instances, plans have failed to contract with enough providers to serve 
the Medicaid population. Some have been permitted to operate under 
standards that are lower than commercial insurers are required to meet, 
and others have used fraudulent marketing practices to entice Medicaid 
patients to sign up with their plans. These actions have resulted in 
patients being denied medically necessary services, and have resulted 
in States and the Federal Government paying for care that was never 
given.
  Considering these abuses, why should we allow Medicaid managed care 
at all? Because managed care, if implemented correctly, can vastly 
improve the quality of health care provided to low-income families. In 
today's fee-for-service program, patients face myriad problems. Some 
are forced to get care in hospital emergency rooms because they cannot 
find a private physician willing or able to accept Medicaid's low 
payment rates. Those who do have access to providers often must wait 
for hours in clinics which are overcrowded and understaffed. And, 
sadly, they often do not have access to primary and preventive care 
services which would have prevented them from becoming ill to begin 
with.
  Medicaid managed care, if done well, provides regular prenatal care 
to assure that children are born healthy. These plans provide coverage 
for check-ups and immunizations to prevent serious illnesses. And they 
give patients a medical home--a provider they know they can go to if 
they are sick, or a number to call if they have questions.
  Medicaid managed care also has the potential of benefiting our 
overall health care system by providing access to primary care 
providers rather than forcing patients to make costly and unnecessary 
visits to hospital emergency rooms. It gives providers the opportunity 
to catch and treat, or prevent, costly health problems.
  Mr. President, we have worked very hard to ensure that this 
legislation strikes an appropriate balance between the needs of 
Medicaid beneficiaries and the managed care companies. I want to thank 
Senators Breaux and Kerrey who helped craft this legislation and are 
original cosponsors. I also want to thank the many advocacy 
organizations for their input and support. And I also want to thank 
some of the managed care organizations who worked with us. I am 
especially pleased that some of these organizations, such as the HMO 
Group which is an alliance of health maintenance organizations have 
endorsed this legislation. Their support is critical to the success of 
Medicaid managed care.
  I ask unanimous consent that the text of the legislation be included 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 864

       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.''

[[Page S5446]]

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

[[Page S5447]]

     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--

[[Page S5448]]

       ``(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

[[Page S5449]]

     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

[[Page S5450]]

     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 are 
     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).

[[Page S5451]]

       ``(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

[[Page S5452]]

     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 a 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.--

[[Page S5453]]

       ``(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.--

[[Page S5454]]

       ``(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.--

[[Page S5455]]

     (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.
                                 ______