
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 23, 2000]
[Document affected by Public Law 106-554 Section 1(a)(6)]
[Document affected by Public Law 106-554 Section 1(a)(6)]
[CITE: 42USC1396u-2]

 
                 TITLE 42--THE PUBLIC HEALTH AND WELFARE
 
                       CHAPTER 7--SOCIAL SECURITY
 
    SUBCHAPTER XIX--GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS
 
Sec. 1396u-2. Provisions relating to managed care


(a) State option to use managed care

     (1) Use of medicaid managed care organizations and primary 
                             care case managers

        (A) In general

            Subject to the succeeding provisions of this section, and 
        notwithstanding paragraph (1), (10)(B), or (23)(A) of section 
        1396a(a) of this title, a State--
                (i) may require an individual who is eligible for 
            medical assistance under the State plan under this 
            subchapter to enroll with a managed care entity 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--
                    (I) the entity and the contract with the State meet 
                the applicable requirements of this section and section 
                1396b(m) of this title or section 1396d(t) of this 
                title, and
                    (II) the requirements described in the succeeding 
                paragraphs of this subsection are met; and

                (ii) may restrict the number of provider agreements with 
            managed care entities under the State plan if such 
            restriction does not substantially impair access to 
            services.

        (B) ``Managed care entity'' defined

            In this section, the term ``managed care entity'' means--
                (i) a medicaid managed care organization, as defined in 
            section 1396b(m)(1)(A) of this title, that provides or 
            arranges for services for enrollees under a contract 
            pursuant to section 1396b(m) of this title; and
                (ii) a primary care case manager, as defined in section 
            1396d(t)(2) of this title.

                          (2) Special rules

        (A) Exemption of certain children with special needs

            A State may not require under paragraph (1) the enrollment 
        in a managed care entity of an individual under 19 years of age 
        who--
                (i) is eligible for supplemental security income under 
            subchapter XVI of this chapter;
                (ii) is described in section 701(a)(1)(D) of this title;
                (iii) is described in section 1396a(e)(3) of this title;
                (iv) is receiving foster care or adoption assistance 
            under part E of subchapter IV of this chapter; or
                (v) is in foster care or otherwise in an out-of-home 
            placement.

        (B) Exemption of medicare beneficiaries

            A State may not require under paragraph (1) the enrollment 
        in a managed care entity of an individual who is a qualified 
        medicare beneficiary (as defined in section 1396d(p)(1) of this 
        title) or an individual otherwise eligible for benefits under 
        subchapter XVIII of this chapter.

        (C) Indian enrollment

            A State may not require under paragraph (1) the enrollment 
        in a managed care entity of an individual who is an Indian (as 
        defined in section 4(c) of the Indian Health Care Improvement 
        Act of 1976 (25 U.S.C. 1603(c)) unless the entity is one of the 
        following (and only if such entity is participating under the 
        plan):
                (i) The Indian Health Service.
                (ii) An Indian health program operated by an Indian 
            tribe or tribal organization pursuant to a contract, grant, 
            cooperative agreement, or compact with the Indian Health 
            Service pursuant to the Indian Self-Determination Act [25 
            U.S.C. 450f et seq.].
                (iii) An urban Indian health program operated by an 
            urban Indian organization pursuant to a grant or contract 
            with the Indian Health Service pursuant to title V of the 
            Indian Health Care Improvement Act [25 U.S.C. 1651 et seq.].

                       (3) Choice of coverage

        (A) In general

            A State must permit an individual to choose a managed care 
        entity from not less than two such entities that meet the 
        applicable requirements of this section, and of section 1396b(m) 
        of this title or section 1396d(t) of this title.

        (B) State option

            At the option of the State, a State shall be considered to 
        meet the requirements of subparagraph (A) in the case of an 
        individual residing in a rural area, if the State requires the 
        individual to enroll with a managed care entity if such entity--
                (i) permits the individual to receive such assistance 
            through not less than two physicians or case managers (to 
            the extent that at least two 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).

        (C) Treatment of certain county-operated health insuring 
                organizations

            A State shall be considered to meet the requirement of 
        subparagraph (A) if--
                (i) the managed care entity in which the individual is 
            enrolled is a health-insuring organization which--
                    (I) first became operational prior to January 1, 
                1986, or
                    (II) is described in section 9517(c)(3) of the 
                Omnibus Budget Reconciliation Act of 1985 (as added by 
                section 4734(2) of the Omnibus Budget Reconciliation Act 
                of 1990), and

                (ii) the individual is given a choice between at least 
            two providers within such entity.

      (4) Process for enrollment and termination and change of 
                                 enrollment

        As conditions under paragraph (1)(A)--

        (A) In general

            The State, enrollment broker (if any), and managed care 
        entity shall permit an individual eligible for medical 
        assistance under the State plan under this subchapter who is 
        enrolled with the entity under this subchapter to terminate (or 
        change) such enrollment--
                (i) for cause at any time (consistent with section 
            1396b(m)(2)(A)(vi) of this title), and
                (ii) without cause--
                    (I) during the 90-day period beginning on the date 
                the individual receives notice of such enrollment, and
                    (II) at least every 12 months thereafter.

        (B) Notice of termination rights

            The State shall provide for notice to each such individual 
        of the opportunity to terminate (or change) enrollment under 
        such conditions. Such notice shall be provided at least 60 days 
        before each annual enrollment opportunity described in 
        subparagraph (A)(ii)(II).

        (C) Enrollment priorities

            In carrying out paragraph (1)(A), the State shall establish 
        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.

        (D) Default enrollment process

            In carrying out paragraph (1)(A), the State shall establish 
        a default enrollment process--
                (i) 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 which has not been found to be out of 
            substantial compliance with the applicable requirements of 
            this section and of section 1396b(m) of this title or 
            section 1396d(t) of this title; and
                (ii) that takes into consideration--
                    (I) maintaining existing provider-individual 
                relationships or relationships with providers that have 
                traditionally served beneficiaries under this 
                subchapter; and
                    (II) if maintaining such provider relationships is 
                not possible, the equitable distribution of such 
                individuals among qualified managed care entities 
                available to enroll such individuals, consistent with 
                the enrollment capacities of the entities.

                    (5) Provision of information

        (A) Information in easily understood form

            Each State, enrollment broker, or managed care entity shall 
        provide all enrollment notices and informational and 
        instructional materials relating to such an entity under this 
        subchapter in a manner and form which may be easily understood 
        by enrollees and potential enrollees of the entity who are 
        eligible for medical assistance under the State plan under this 
        subchapter.

        (B) Information to enrollees and potential enrollees

            Each managed care entity that is a medicaid managed care 
        organization shall, upon request, make available to enrollees 
        and potential enrollees in the organization's service area 
        information concerning the following:
            (i) Providers

                The identity, locations, qualifications, and 
            availability of health care providers that participate with 
            the organization.
            (ii) Enrollee rights and responsibilities

                The rights and responsibilities of enrollees.
            (iii) Grievance and appeal procedures

                The procedures available to an enrollee and a health 
            care provider to challenge or appeal the failure of the 
            organization to cover a service.
            (iv) Information on covered items and services

                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. Each managed care entity 
            that is a primary care case manager shall, upon request, 
            make available to enrollees and potential enrollees in the 
            organization's service area the information described in 
            clause (iii).

        (C) Comparative information

            A State that requires individuals to enroll with managed 
        care entities under paragraph (1)(A) shall annually (and upon 
        request) provide, directly or through the managed care entity, 
        to such individuals a list identifying the managed care entities 
        that are (or will be) available and information (presented in a 
        comparative, chart-like form) relating to the following for each 
        such entity offered:
            (i) Benefits and cost-sharing

                The benefits covered and cost-sharing imposed by the 
            entity.
            (ii) Service area

                The service area of the entity.
            (iii) Quality and performance

                To the extent available, quality and performance 
            indicators for the benefits under the entity.

        (D) Information on benefits not covered under managed care 
                arrangement

            A State, directly or through managed care entities, shall, 
        on or before an individual enrolls with such an entity under 
        this subchapter, inform the enrollee in a written and prominent 
        manner of any benefits to which the enrollee may be entitled to 
        under this subchapter 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.

(b) Beneficiary protections

                    (1) Specification of benefits

        Each contract with a managed care entity under section 1396b(m) 
    of this title or under section 1396d(t)(3) of this title shall 
    specify the benefits the provision (or arrangement) for which the 
    entity is responsible.

             (2) Assuring coverage to emergency services

        (A) In general

            Each contract with a medicaid managed care organization 
        under section 1396b(m) of this title and each contract with a 
        primary care case manager under section 1396d(t)(3) of this 
        title shall require the organization or manager--
                (i) to provide coverage for emergency services (as 
            defined in subparagraph (B)) without regard to prior 
            authorization or the emergency care provider's contractual 
            relationship with the organization or manager, and
                (ii) to comply with guidelines established under section 
            1395w-22(d)(2) of this title (respecting coordination of 
            post-stabilization care) in the same manner as such 
            guidelines apply to Medicare+Choice plans offered under part 
            C of subchapter XVIII of this chapter.

        The requirement under clause (ii) shall first apply 30 days 
        after the date of promulgation of the guidelines referred to in 
        such clause.

        (B) ``Emergency services'' defined

            In subparagraph (A)(i), the term ``emergency services'' 
        means, with respect to an individual enrolled with an 
        organization, covered inpatient and outpatient services that--
                (i) are furnished by a provider that is qualified to 
            furnish such services under this subchapter, and
                (ii) are needed to evaluate or stabilize an emergency 
            medical condition (as defined in subparagraph (C)).

        (C) ``Emergency medical condition'' defined

            In subparagraph (B)(ii), 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.

         (3) Protection of enrollee-provider communications

        (A) In general

            Subject to subparagraphs (B) and (C), under a contract under 
        section 1396b(m) of this title a medicaid managed care 
        organization (in relation to an individual enrolled under the 
        contract) shall not prohibit or otherwise restrict a covered 
        health care professional (as defined in subparagraph (D)) from 
        advising such an individual who is a patient of the professional 
        about the health status of the individual or medical care or 
        treatment for the individual's condition or disease, regardless 
        of whether benefits for such care or treatment are provided 
        under the contract, if the professional is acting within the 
        lawful scope of practice.

        (B) Construction

            Subparagraph (A) shall not be construed as requiring a 
        medicaid managed care organization to provide, reimburse for, or 
        provide coverage of, a counseling or referral service if the 
        organization--
                (i) objects to the provision of such service on moral or 
            religious grounds; and
                (ii) in the manner and through the written 
            instrumentalities such organization deems appropriate, makes 
            available information on its policies regarding such service 
            to prospective enrollees before or during enrollment and to 
            enrollees within 90 days after the date that the 
            organization adopts a change in policy regarding such a 
            counseling or referral service.

        Nothing in this subparagraph shall be construed to affect 
        disclosure requirements under State law or under the Employee 
        Retirement Income Security Act of 1974 [29 U.S.C. 1001 et seq.].

        (C) ``Health care professional'' defined

            For purposes of this paragraph, the term ``health care 
        professional'' means a physician (as defined in section 1395x(r) 
        of this title) or other health care professional if coverage for 
        the professional's services is provided under the contract 
        referred to in subparagraph (A) for the services of the 
        professional. Such term includes a podiatrist, optometrist, 
        chiropractor, psychologist, dentist, physician assistant, 
        physical or occupational therapist and therapy assistant, 
        speech-language pathologist, audiologist, registered or licensed 
        practical nurse (including nurse practitioner, clinical nurse 
        specialist, certified registered nurse anesthetist, and 
        certified nurse-midwife), licensed certified social worker, 
        registered respiratory therapist, and certified respiratory 
        therapy technician.

                      (4) Grievance procedures

        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 subchapter, 
    or a provider on behalf of such an enrollee, may challenge the 
    denial of coverage of or payment for such assistance.

         (5) Demonstration of adequate capacity and services

        Each medicaid managed care organization shall provide the State 
    and the Secretary with adequate assurances (in a time and manner 
    determined by the Secretary) that the organization, with respect to 
    a service area, has the capacity to serve the expected enrollment in 
    such service area, including assurances that the organization--
            (A) offers an appropriate range of services and access to 
        preventive and primary care services for the population expected 
        to be enrolled in such service area, and
            (B) maintains a sufficient number, mix, and geographic 
        distribution of providers of services.

       (6) Protecting enrollees against liability for payment

        Each medicaid managed care organization shall provide that an 
    individual eligible for medical assistance under the State plan 
    under this subchapter who is enrolled with the organization may not 
    be held liable--
            (A) for the debts of the organization, in the event of the 
        organization's insolvency,
            (B) for services provided to the individual--
                (i) in the event of the organization failing to receive 
            payment from the State for such services; or
                (ii) in the event of a health care provider with a 
            contractual, referral, or other arrangement with the 
            organization failing to receive payment from the State or 
            the organization for such services, or

            (C) for payments to a provider that furnishes covered 
        services under a contractual, referral, or other arrangement 
        with the organization in excess of the amount that would be owed 
        by the individual if the organization had directly provided the 
        services.

                       (7) Antidiscrimination

        A medicaid managed care organization shall not discriminate with 
    respect to participation, reimbursement, or indemnification as to 
    any provider who is acting within the scope of the provider's 
    license or certification under applicable State law, solely on the 
    basis of such license or certification. This paragraph shall not be 
    construed to prohibit an organization from including providers only 
    to the extent necessary to meet the needs of the organization's 
    enrollees or from establishing any measure designed to maintain 
    quality and control costs consistent with the responsibilities of 
    the organization.

      (8) 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 [42 U.S.C. 300gg-4 et seq.] insofar as such 
    requirements apply and are effective with respect to a health 
    insurance issuer that offers group health insurance coverage.

(c) Quality assurance standards

           (1) Quality assessment and improvement strategy

        (A) In general

            If a State provides for contracts with medicaid managed care 
        organizations under section 1396b(m) of this title, the State 
        shall develop and implement a quality assessment and improvement 
        strategy consistent with this paragraph. Such strategy shall 
        include the following:
            (i) Access standards

                Standards for access to care so that covered services 
            are available within reasonable timeframes and in a manner 
            that ensures continuity of care and adequate primary care 
            and specialized services capacity.
            (ii) Other measures

                Examination of other aspects of care and service 
            directly related to the improvement of quality of care 
            (including grievance procedures and marketing and 
            information standards).
            (iii) Monitoring procedures

                Procedures for monitoring and evaluating the quality and 
            appropriateness of care and services to enrollees that 
            reflect the full spectrum of populations enrolled under the 
            contract and that includes requirements for provision of 
            quality assurance data to the State using the data and 
            information set that the Secretary has specified for use 
            under part C of subchapter XVIII of this chapter or such 
            alternative data as the Secretary approves, in consultation 
            with the State.
            (iv) Periodic review

                Regular, periodic examinations of the scope and content 
            of the strategy.

        (B) Standards

            The strategy developed under subparagraph (A) shall be 
        consistent with standards that the Secretary first establishes 
        within 1 year after August 5, 1997. Such standards shall not 
        preempt any State standards that are more stringent than such 
        standards. Guidelines relating to quality assurance that are 
        applied under section 1396n(b)(1) of this title shall apply 
        under this subsection until the effective date of standards for 
        quality assurance established under this subparagraph.

        (C) Monitoring

            The Secretary shall monitor the development and 
        implementation of strategies under subparagraph (A).

        (D) Consultation

            The Secretary shall conduct activities under subparagraphs 
        (B) and (C) in consultation with the States.

     (2) External independent review of managed care activities

        (A) Review of contracts

            (i) In general

                Each contract under section 1396b(m) of this title with 
            a medicaid managed care organization shall provide for an 
            annual (as appropriate) external independent review 
            conducted by a qualified independent entity of the quality 
            outcomes and timeliness of, and access to, the items and 
            services for which the organization is responsible under the 
            contract. The requirement for such a review shall not apply 
            until after the date that the Secretary establishes the 
            identification method described in clause (ii).
            (ii) Qualifications of reviewer

                The Secretary, in consultation with the States, shall 
            establish a method for the identification of entities that 
            are qualified to conduct reviews under clause (i).
            (iii) Use of protocols

                The Secretary, in coordination with the National 
            Governors' Association, shall contract with an independent 
            quality review organization (such as the National Committee 
            for Quality Assurance) to develop the protocols to be used 
            in external independent reviews conducted under this 
            paragraph on and after January 1, 1999.
            (iv) Availability of results

                The results of each external independent review 
            conducted under this subparagraph shall be available to 
            participating health care providers, enrollees, and 
            potential enrollees of the organization, except that the 
            results may not be made available in a manner that discloses 
            the identity of any individual patient.

        (B) Nonduplication of accreditation

            A State may provide that, in the case of a medicaid managed 
        care organization that is accredited by a private independent 
        entity (such as those described in section 1395w-22(e)(4) of 
        this title) or that has an external review conducted under 
        section 1395w-22(e)(3) of this title, the external review 
        activities conducted under subparagraph (A) with respect to the 
        organization shall not be duplicative of review activities 
        conducted as part of the accreditation process or the external 
        review conducted under such section.

        (C) Deemed compliance for medicare managed care organizations

            At the option of a State, the requirements of subparagraph 
        (A) 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 1395mm of this title or 
        a Medicare+
        Choice organization with a contract in effect under part C of 
        subchapter XVIII of this chapter and the organization has had a 
        contract in effect under section 1396b(m) of this title at least 
        during the previous 2-year period.

(d) Protections against fraud and abuse

     (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 entity'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 entity'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 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 No. 12549 or under guidelines 
            implementing such order; or
                (ii) is an affiliate (as defined in such Regulation) of 
            a person described in clause (i).

                    (2) Restrictions on marketing

        (A) Distribution of materials

            (i) In general

                A managed care entity, with respect to activities under 
            this subchapter, 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.

          The requirement of subclause (I) shall not apply with respect 
            to a State until such date as the Secretary specifies in 
            consultation with such State.
            (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.

        (B) Service market

            A managed care entity shall distribute marketing materials 
        to the entire service area of such entity covered under the 
        contract under section 1396b(m) of this title or section 
        1396d(t)(3) of this title.

        (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 information 
        sufficient 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 subchapter.

     (3) 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 1396b(m) of this title 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 subsection (a)(4)(C)(ii) of this 
    section that are at least as effective as the Federal safeguards 
    provided under section 423 of title 41, against conflicts of 
    interest that apply with respect to Federal procurement officials 
    with comparable responsibilities with respect to such contracts.

      (4) 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 subchapter to have a 
    unique identifier in accordance with the system established under 
    section 1320d-2(b) of this title.

(e) Sanctions for noncompliance

     (1) Use of intermediate sanctions by the State to enforce 
                                requirements

        (A) In general

            A State may not enter into or renew a contract under section 
        1396b(m) of this title unless the State has established 
        intermediate sanctions, which may include any of the types 
        described in paragraph (2), other than the termination of a 
        contract with a medicaid managed care organization, which the 
        State may impose against a medicaid managed care organization 
        with such a contract, if the organization--
                (i) fails substantially to provide medically necessary 
            items and services that are required (under law or under 
            such organization's contract with the State) to be provided 
            to an enrollee covered under the contract;
                (ii) imposes premiums or charges on enrollees in excess 
            of the premiums or charges permitted under this subchapter;
                (iii) 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 subchapter, or 
            engaging in any practice that would reasonably be expected 
            to have the effect of denying or discouraging enrollment 
            with the organization by eligible individuals whose medical 
            condition or history indicates a need for substantial future 
            medical services;
                (iv) misrepresents or falsifies information that is 
            furnished--
                    (I) to the Secretary or the State under this 
                subchapter; or
                    (II) to an enrollee, potential enrollee, or a health 
                care provider under such subchapter; or

                (v) fails to comply with the applicable requirements of 
            section 1396b(m)(2)(A)(x) of this title.

        The State may also impose such intermediate sanction against a 
        managed care entity if the State determines that the entity 
        distributed directly or through any agent or independent 
        contractor marketing materials in violation of subsection 
        (d)(2)(A)(i)(II) of this section.

        (B) Rule of construction

            Clause (i) of subparagraph (A) shall not apply to the 
        provision of abortion services, except that a State may impose a 
        sanction on any medicaid managed care organization that has a 
        contract to provide abortion services if the organization does 
        not provide such services as provided for under the contract.

                     (2) Intermediate sanctions

        The sanctions described in this paragraph are as follows:
            (A) Civil money penalties as follows:
                (i) Except as provided in clause (ii), (iii), or (iv), 
            not more than $25,000 for each determination under paragraph 
            (1)(A).
                (ii) With respect to a determination under clause (iii) 
            or (iv)(I) of paragraph (1)(A), not more than $100,000 for 
            each such determination.
                (iii) With respect to a determination under paragraph 
            (1)(A)(ii), 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).
                (iv) Subject to clause (ii), with respect to a 
            determination under paragraph (1)(A)(iii), $15,000 for each 
            individual not enrolled as a result of a practice described 
            in such subsection.

            (B) The appointment of temporary management--
                (i) to oversee the operation of the medicaid managed 
            care organization upon a finding by the State that there is 
            continued egregious behavior by the organization or there is 
            a substantial risk to the health of enrollees; or
                (ii) to assure the health of the organization's 
            enrollees, if there is a need for temporary management 
            while--
                    (I) there is an orderly termination or 
                reorganization of the organization; or
                    (II) improvements are made to remedy the violations 
                found under paragraph (1),

          except that temporary management under this subparagraph may 
            not be terminated until the State has determined that the 
            medicaid managed care organization has the capability to 
            ensure that the violations shall not recur.

            (C) Permitting individuals enrolled with the managed care 
        entity to terminate enrollment without cause, and notifying such 
        individuals of such right to terminate enrollment.
            (D) Suspension or default of all enrollment of individuals 
        under this subchapter after the date the Secretary or the State 
        notifies the entity of a determination of a violation of any 
        requirement of section 1396b(m) of this title or this section.
            (E) Suspension of payment to the entity under this 
        subchapter 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.

            (3) Treatment of chronic substandard entities

        In the case of a medicaid managed care organization which has 
    repeatedly failed to meet the requirements of section 1396b(m) of 
    this title and this section, the State shall (regardless of what 
    other sanctions are provided) impose the sanctions described in 
    subparagraphs (B) and (C) of paragraph (2).

                 (4) Authority to terminate contract

        (A) In general

            In the case of a managed care entity which has failed to 
        meet the requirements of this part or a contract under section 
        1396b(m) or 1396d(t)(3) of this title, the State shall have the 
        authority to terminate such contract with the entity 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 subchapter other than through a 
        managed care entity).

        (B) Availability of hearing prior to termination of contract

            A State may not terminate a contract with a managed care 
        entity under subparagraph (A) unless the entity is provided with 
        a hearing prior to the termination.

        (C) Notice and right to disenroll in cases of termination 
                hearing

            A State may--
                (i) notify 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
                (ii) in the case of such an entity, permit such 
            enrollees to disenroll immediately with the entity without 
            cause.

      (5) 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 paragraph (2)(B).

(f) Timeliness of payment

    A contract under section 1396b(m) of this title with a medicaid 
managed care organization shall provide that the organization shall make 
payment to health care providers for items and services which are 
subject to the contract and that are furnished to individuals eligible 
for medical assistance under the State plan under this subchapter who 
are enrolled with the organization on a timely basis consistent with the 
claims payment procedures described in section 1396a(a)(37)(A) of this 
title, unless the health care provider and the organization agree to an 
alternate payment schedule.

(Aug. 14, 1935, ch. 531, title XIX, Sec. 1932, as added and amended Pub. 
L. 105-33, title IV, Secs. 4701(a), 4704(a), 4705(a), 4707(a), 4708(c), 
Aug. 5, 1997, 111 Stat. 489, 495, 498, 501, 506; Pub. L. 106-113, div. 
B, Sec. 1000(a)(6) [title VI, Sec. 608(w)], Nov. 29, 1999, 113 Stat. 
1536, 1501A-398.)

                       References in Text

    Part E of subchapter IV of this chapter, referred to in subsec. 
(a)(2)(A)(iv), is classified to section 670 et seq. of this title.
    The Indian Self-Determination Act, referred to in subsec. 
(a)(2)(C)(ii), is title I of Pub. L. 93-638, Jan. 4, 1975, 88 Stat. 
2206, as amended, which is classified principally to part A (Sec. 450f 
et seq.) of subchapter II of chapter 14 of Title 25, Indians. For 
complete classification of this Act to the Code, see Short Title note 
set out under section 450 of Title 25 and Tables.
    The Indian Health Care Improvement Act, referred to in subsec. 
(a)(2)(C)(iii), is Pub. L. 94-437, Sept. 30, 1976, 90 Stat. 1400, as 
amended. Title V of the Act is classified generally to subchapter IV 
(Sec. 1651 et seq.) of chapter 18 of Title 25. For complete 
classification of this Act to the Code, see Short Title note set out 
under section 1601 of Title 25 and Tables.
    Section 9517(c)(3) of the Omnibus Budget Reconciliation Act of 1985, 
referred to in subsec. (a)(3)(C)(i)(II), is section 9517(c)(3) of Pub. 
L. 99-272, which is set out as a note under section 1396b of this title.
    Part C of subchapter XVIII of this chapter, referred to in subsecs. 
(b)(2)(A)(ii) and (c)(1)(A)(iii), (2)(C), is classified to section 
1395w-21 et seq. of this title.
    The Employee Retirement Income Security Act of 1974, referred to in 
subsec. (b)(3)(B), is Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 832, as 
amended, which is classified principally to chapter 18 (Sec. 1001 et 
seq.) of Title 29, Labor. For complete classification of this Act to the 
Code, see Short Title note set out under section 1001 of Title 29 and 
Tables.
    The Public Health Service Act, referred to in subsec. (b)(8), is act 
July 1, 1944, ch. 373, 58 Stat. 682, as amended. Subpart 2 of part A of 
title XXVII of the Act is classified generally to subpart 2 (Sec. 300gg-
4 et seq.) of part A of subchapter XXV of chapter 6A of this title. For 
complete classification of this Act to the Code, see Short Title note 
set out under section 201 of this title and Tables.
    Executive Order No. 12549, referred to in subsec. (d)(1)(C)(i), is 
set out as a note under section 6101 of Title 31, Money and Finance.


                            Prior Provisions

    A prior section 1932 of act Aug. 14, 1935, was renumbered section 
1935 and is classified to section 1396v of this title.


                               Amendments

    1999--Subsec. (c)(2)(C). Pub. L. 106-113, Sec. 1000(a)(6) [title VI, 
Sec. 608(w)(1)], inserted ``part'' before ``C of subchapter XVIII''.
    Subsec. (d)(1)(C)(ii). Pub. L. 106-113, Sec. 1000(a)(6) [title VI, 
Sec. 608(w)(2)(A)], substituted ``Regulation'' for ``Act''.
    Subsec. (d)(2)(B). Pub. L. 106-113, Sec. 1000(a)(6) [title VI, 
Sec. 608(w)(2)(B)], substituted ``1396d(t)(3) of this title'' for 
``1396b(t)(3) of this title''.
    1997--Subsec. (b). Pub. L. 105-33, Sec. 4704(a), added subsec. (b).
    Subsec. (c). Pub. L. 105-33, Sec. 4705(a), added subsec. (c).
    Subsecs. (d), (e). Pub. L. 105-33, Sec. 4707(a), added subsecs. (d) 
and (e).
    Subsec. (f). Pub. L. 105-33, Sec. 4708(c), added subsec. (f).


                             Effective Date

    Section effective Aug. 5, 1997, and applicable to contracts entered 
into or renewed on or after Oct. 1, 1997, except that, subject to 
provisions relating to extension of effective date for State law 
amendments, and to nonapplication to waivers, subsec. (c)(1) effective 
Jan. 1, 1999, and subsec. (e) applicable to contracts entered into or 
renewed on or after Apr. 1, 1998, see section 4710(a), (b)(3), (5) of 
Pub. L. 105-33, set out as an Effective Date of 1997 Amendment note 
under section 1396b of this title.


                           Studies and Reports

    Section 4705(c) of Pub. L. 105-33 provided that:
    ``(1) GAO study and report on quality assurance and accreditation 
standards.--
        ``(A) Study.--The Comptroller General of the United States 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 (42 U.S.C. 1395 et seq.). Such study shall 
    determine--
            ``(i) 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; and
            ``(ii) the appropriateness of applying such programs and 
        standards to medicaid managed care organizations under section 
        1932(c) of such Act [subsec. (c) of this section].
        ``(B) Report.--The Comptroller General shall submit a report to 
    the Committee on Commerce of the House of Representatives and the 
    Committee on Finance of the Senate on the study conducted under 
    subparagraph (A).
    ``(2) Study and report on services provided to individuals with 
special health care needs.--
        ``(A) Study.--The Secretary of Health and Human Services, in 
    consultation with States, managed care organizations, the National 
    Academy of State Health Policy, representatives of beneficiaries 
    with special health care needs, experts in specialized health care, 
    and others, shall conduct a study concerning safeguards (if any) 
    that may be needed to ensure that the health care needs of 
    individuals with special health care needs and chronic conditions 
    who are enrolled with medicaid managed care organizations are 
    adequately met.
        ``(B) Report.--Not later than 2 years after the date of the 
    enactment of this Act [Aug. 5, 1997], the Secretary shall submit to 
    Committees described in paragraph (1)(B) a report on such study.''

                  Section Referred to in Other Sections

    This section is referred to in sections 1320a-3, 1395eee, 1396a, 
1396b, 1396d, 1396r-4, 1396u-4 of this title.
