REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER STATE MEDICAID PROGRAMS.

SEC. 4721. REFORMING DISPROPORTIONATE SHARE PAYMENTS UNDER STATE MEDICAID PROGRAMS. (a) Adjustment of State DSH Allotments.— (1) In general.—Section 1923(f) (42 U.S.C. 1396r–4(f)) is amended to read as follows: “(f) Limitation on Federal Financial Participation.— “(1) In general.—Payment under section 1903(a) shall not be made to a State with respect to any payment adjustment made under this section for hospitals in a State for quarters in a fiscal year in excess of the disproportionate share hospital (in this subsection referred to as ‘DSH’) allotment for the State for the fiscal year, as specified in paragraphs (2) and (3). “(2) State dsh allotments for fiscal years 1998 through 2002.—The DSH allotment for a State for each fiscal year during the period beginning with fiscal year 1998 and ending with fiscal year 2002 is determined in accordance with the following table: State or District DSH Allotment (in millions of dollars) FY 98 FY 99 FY 00 FY 01 FY 02 Alabama 293 269 248 246 246 Alaska 10 10 10 9 9 Arizona 81 81 81 81 81 Arkansas 2 2 2 2 2 California 1,085 1,068 986 931 877 Colorado 93 86 79 74 74 Connecticut 200 194 164 160 160 Delaware 4 4 4 4 4 District of Columbia 23 23 23 23 23 Florida 207 203 197 188 160 Georgia 253 248 241 228 215 Hawaii 0 0 0 0 0 Idaho 1 1 1 1 1 Illinois 203 199 193 182 172 111 STAT. 512 State or District DSH Allotment (in millions of dollars) FY 98 FY 99 FY 00 FY 01 FY 02 Indiana 201 197 191 181 171 Iowa 8 8 8 8 8 Kansas 51 49 42 36 33 Kentucky 137 134 130 123 116 Louisiana 880 795 713 658 631 Maine 103 99 84 84 84 Maryland 72 70 68 64 61 Massachusetts 288 282 273 259 244 Michigan 249 244 237 224 212 Minnesota 16 16 16 16 16 Mississippi 143 141 136 129 122 Missouri 436 423 379 379 379 Montana 0.2 0.2 0.2 0.2 0.2 Nebraska 5 5 5 5 5 Nevada 37 37 37 37 37 New Hampshire 140 136 130 130 130 New Jersey 600 582 515 515 515 New Mexico 5 5 5 5 5 New York 1,512 1,482 1,436 1,361 1,285 North Carolina 278 272 264 250 236 North Dakota 1 1 1 1 1 Ohio 382 374 363 344 325 Oklahoma 16 16 16 16 16 Oregon 20 20 20 20 20 Pennsylvania 529 518 502 476 449 Rhode Island 62 60 58 55 52 South Carolina 313 303 262 262 262 South Dakota 1 1 1 1 1 Tennessee 0 0 0 0 0 Texas 979 950 806 765 765 Utah 3 3 3 3 3 Vermont 18 18 18 18 18 Virginia 70 68 66 63 59 Washington 174 171 166 157 148 West Virginia 64 63 61 58 54 Wisconsin 7 7 7 7 7 Wyoming 0 0 0 0 0. “(3) State dsh allotments for fiscal year 2003 and thereafter.— “(A) In general.—The DSH allotment for any State for fiscal year 2003 and each succeeding fiscal year is equal to the DSH allotment for the State for the preceding fiscal year under paragraph (2) or this paragraph, increased, subject to subparagraph (B), by the percentage change in the consumer price index for all urban consumers (all items; U.S. city average), for the previous fiscal year. “(B) Limitation.—The DSH allotment for a State shall not be increased under subparagraph (A) for a fiscal year to the extent that such an increase would result in the DSH allotment for the year exceeding the greater of— “(i) the DSH allotment for the previous year, or “(ii) 12 percent of the total amount of expenditures under the State plan for medical assistance during the fiscal year. “(4) Definition of state.—In this subsection, the term ‘State’ means the 50 States and the District of Columbia.”. (2) Effective date.—The amendment made by paragraph (1) shall apply to payment adjustments attributable to DSH allotments tor fiscal years beginning with fiscal year 1998.111 STAT. 513 (b) Limitation on Payments to Institutions for Mental Diseases.—Section 1923 of the Social Security Act (42 U.S.C. 1396r–4) is amended by adding at the end the following: “(h) Limitation on Certain State DSH Expenditures.— “(1) In general.—Payment under section 1903(a) shall not be made to a State with respect to any payment adjustments made under this section for quarters in a fiscal year (beginning with fiscal year 1998) to institutions for mental diseases or other mental health facilities, to the extent the aggregate of such adjustments in the fiscal year exceeds the lesser of the following: “(A) 1995 imd dsh payment adjustments.—The total State DSH expenditures that are attributable to fiscal year 1995 for payments to institutions for mental diseases and other mental health facilities (based on reporting data specified by the State on HCFA Form 64 as mental health DSH, and as approved by the Secretary). “(B) Applicable percentage of 1995 total dsh payment allotment.—The amount of such payment adjustments which are equal to the applicable percentage of the Federal share of payment adjustments made to hospitals in the State under subsection (c) that are attributable to the 1995 DSH allotment for the State for payments to institutions for mental diseases and other mental health facilities (based on reporting data specified by the State on HCFA Form 64 as mental health DSH, and as approved by the Secretary). “(2) Applicable percentage.— “(A) In general.—For purposes of paragraph (1), the applicable percentage with respect to— “(i) each of fiscal years 1998, 1999, and 2000, is the percentage determined under subparagraph (B); or “(ii) a succeeding fiscal year is the lesser of the percentage determined under subparagraph (B) or the following percentage: “(I) For fiscal year 2001, 50 percent. “(II) For fiscal year 2002, 40 percent. “(III) For each succeeding fiscal year, 33 percent. “(B) 1995 percentage.—The percentage determined under this subparagraph is the ratio (determined as a percentage) of— “(i) the Federal share of payment adjustments made to hospitals in the State under subsection (c) that are attributable to the 1995 DSH allotment for the State (as reported by the State not later than January 1, 1997, on HCFA Form 64, and as approved by the Secretary) for payments to institutions for mental diseases and other mental health facilities, to “(ii) the State 1995 DSH spending amount. “(C) State 1995 dsh spending amount.—For purposes of subparagraph (B)(ii), the ‘State 1995 DSH spending amount’, with respect to a State, is the Federal medical assistance percentage (for fiscal year 1995) of the payment adjustments made under subsection (c) under the State plan that are attributable to the fiscal year 1995 DSH 111 STAT. 514allotment for the State (as reported by the State not later than January 1, 1997, on HCFA Form 64, and as approved by the Secretary).”. (c) Description of Targeting Payments.—Section 1923(a)(2) (42 U.S.C. 1396r–4(a)(2)) is amended by adding at the end the following: “(D) A State plan under this title shall not be considered to meet the requirements of section 1902(a)(13)(A)(iv) (insofar as it requires payments to hospitals to take into account the situation of hospitals that serve a disproportionate number of low-income patients with special needs), as of October 1, 1998, unless the State has submitted to the Secretary by such date a description of the methodology used by the State to identify and to make payments to disproportionate share hospitals, including children’s hospitals, on the basis of the proportion of low-income and medicaid patients served by such hospitals. The State shall provide an annual report to the Secretary describing the disproportionate share payments to each such disproportionate share hospital.”. (d) Direct Payment by State for Managed Care Enrollees.—Section 1923 (42 U.S.C. 1396r–4) is amended by adding at the end the following: “(i) Requirement for Direct Payment.— “(1) In general.—No payment may be made under section 1903(a)(1) with respect to a payment adjustment made under this section, for services furnished by a hospital on or after October 1, 1997, with respect to individuals eligible for medical assistance under the State plan who are enrolled with a managed care entity (as defined in section 1932(a)(1)(B)) or under any other managed care arrangement unless a payment, equal to the amount of the payment adjustment— “(A) is made directly to the hospital by the State; and “(B) is not used to determine the amount of a prepaid capitation payment under the State plan to the entity or arrangement with respect to such individuals. “(2) Exception for current arrangements.—Paragraph (1) shall not apply to a payment adjustment provided pursuant to a payment arrangement in effect on July 1, 1997.”. (e) Transition Rule.—Effective July 1, 1997, section 1923(g)(2)(A) of the Social Security Act (42 U.S.C. 1396r–4(g)(2)(A)) shall be applied to the State of California as though— (1) “(or that begins on or after July 1, 1997, and before July 1, 1999)” were inserted in such section after “January 1, 1995,”; and (2) “(or 175 percent in the case of a State fiscal year that begins on or after July 1, 1997, and before July 1, 1999)” were inserted in such section after “200 percent”.