children whose family income is below 200 percent of the poverty line.

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(d) PROGRAM INTEGRITY.-A State child health plan shall include a description of the procedures to be used by the State

(1) to enforce any determination made by the Secretary under subsection (a) of section 1128G (relating to a significant risk of fraudulent activity with respect to a category of provider or supplier described in such subsection through use of the appropriate procedures described in such subsection);

(2) to carry out any activities as required by the Secretary for purposes of such subsection; and

(3) to enforce any determination made by the Secretary under subsection (b) of section 1128G (relating to disclosure requirements) and to apply any enhanced safeguards, with respect to a provider or supplier described in such subsection, as the Secretary determines necessary under such subsection.

(c) LIMITATION ON CERTAIN PAYMENTS FOR CERTAIN EXPENDITURES.(1) ***

(11) ENHANCED PAYMENTS.-Notwithstanding subsection (b), the enhanced FMAP with respect to payments under subsection (a) for expenditures related to the administration of the payment error rate measurement (PERM) requirements applicable to the State child health plan in accordance with the Improper Payments Information Act of 2002 and parts 431 and 457 of title 42, Code of Federal Regulations (or any related or successor guidance or regulations) shall in no event be less than 90 percent. Clause (vi) of section 1903(u)(1)(D) shall apply

title anect to the application of such requirements under this

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title XIX.

SEC. 2107. STRATEGIC OBJECTIVES AND PERFORMANCE GOALS; PLAN (a) ***

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ADMINISTRATION.

(e) APPLICATION OF CERTAIN GENERAL PROVISIONS.-The following sections of this Act shall apply to States under this title in the same manner as they apply to a State under title XIX:

(1) TITLE XIX PROVISIONS.

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(A) Section 1902(a)(4)(C) (relating to conflict of interest standards) and sections 1902(a)(39) and 1902(a)(78) (relating to exclusion and termination of participation).

(G) Paragraphs (2), (16), [and (17)] (17), and (25) of section 1903(i) (relating to limitations on payment).

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(H) Section 1903(m)(2)(A)(xiv) (relating to application of minimum loss ratios), with respect to comparable contracts under this title.

[(H)] (1) Paragraph (4) of section 1903(v) (relating to optional coverage of categories of lawfully residing immigrant children or pregnant women), but only if the State has elected to apply such paragraph with respect to such category of children or pregnant women under title XIX.

[(I)] (J) Section 1903(w) (relating to limitations on provider taxes and donations).

[(J)] (K) Section 1920A (relating to presumptive eligibility for children).

[(K)] (L) Subsections (a)(2)(C) and (h) of section 1932. [(L)] (M) Section 1942 (relating to authorization to receive data directly relevant to eligibility determinations).

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SEC. 2114. ASSURING QUALITY OF CARE IN HOSPICE CARE.

The provisions of section 1819A shall apply to a hospice program providing hospice care under this title in the same manner such provisions apply to a hospice program providing hospice care under title XVIII.

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BALANCED BUDGET ACT OF 1997

SEC. 4505. IMPLEMENTATION OF RESOURCE-BASED METHODOLOGIES.

[(d) REQUIREMENTS FOR DEVELOPING NEW RESOURCE-BASED PRACTICE EXPENSE RELATIVE VALUE UNITS.

[(1) DEVELOPMENT.-For purposes of section 1848(c)(2)(C)(ii) of the Social Security Act, the Secretary of Health and Human Services shall develop new resource-based relative value units. In developing such units the Secretary shall

[(A) utilize, to the maximum extent practicable, generally accepted cost accounting principles which (i) recognize all staff, equipment, supplies, and expenses, not just those which can be tied to specific procedures, and (ii) use actual data on equipment utilization and other key assumptions;

[(B) consult with organizations representing physicians regarding methodology and data to be used; and

[(C) develop a refinement process to be used during each of the 4 years of the transition period.

[(2) REPORT.-The Secretary shall transmit a report by March 1, 1998, on the development of resource-based relative value units under paragraph (1) to the Committee on Ways and Means and the Committee on Commerce of the House of Representatives and the Committee on Finance of the Senate. The report shall include a presentation of data to be used in developing the value units and an explanation of the methodology.

[(3) NOTICE OF PROPOSED RULEMAKING.-The Secretary shall publish a notice of proposed rulemaking with the new resourcebased relative value units on or before May 1, 1998, and shall allow for a 90-day public comment period.

[(4) ITEMS INCLUDED.-The new proposed rule shall consider the following:

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[(A) Impact projections which compare new proposed payment amounts on data on actual physician practice expenses.

[(B) Impact projections for hospital-based and other specialties, geographic payment localities, and urban versus rural localities.]

SEC. 106. HOSPITAL MEDICARE REPORTS AND CLARIFICATIONS.

(a) CORRECTION OF MID-YEAR RECLASSIFICATION EXPIRATION.Notwithstanding any other provision of law, in the case of a subsection (d) hospital (as defined for purposes of section 1886 of the Social Security Act (42 U.S.C. 1395ww)) with respect to which a reclassification of its wage index for purposes of such section would (but for this subsection) expire on March 31, 2007, such reclassification of such hospital shall be extended through [September 30, 2009] September 30, 2011. The previous sentence shall not be effected in a budget-neutral manner.

[SEC. 204. MEDICARE MEDICAL HOME DEMONSTRATION PROJECT. [(a) IN GENERAL.-The Secretary of Health and Human Services (in this section referred to as the "Secretary") shall establish under title XVIII of the Social Security Act a medical home demonstration project (in this section referred to as the "project") to redesign the health care delivery system to provide targeted, accessible, contin

uous and coordinated, family-centered care to high-need populations and under which

[(1) care management fees are paid to persons performing services as personal physicians; and

[(2) incentive payments are paid to physicians participating in practices that provide services as a medical home under subsection (d).

For purposes of this subsection, the term "high-need population” means individuals with multiple chronic illnesses that require regular medical monitoring, advising, or treatment.

[(b) DETAILS.—

[(1) DURATION; SCOPE.—Subject to paragraph (3), the project shall operate during a period of three years and shall include urban, rural, and underserved areas in a total of no more than 8 States.

[(2) ENCOURAGING PARTICIPATION OF SMALL PHYSICIAN PRACTICES. The project shall be designed to include the participation of physicians in practices with fewer than three full-time equivalent physicians, as well as physicians in larger practices particularly in rural and underserved areas.

[(3) EXPANSION.-The Secretary may expand the duration and the scope of the project under paragraph (1), to an extent determined appropriate by the Secretary, if the Secretary determines that such expansion will result in any of the following conditions being met:

[(A) The expansion of the project is expected to improve the quality of patient care without increasing spending under the Medicare program (not taking into account amounts available under subsection (g)).

[(B) The expansion of the project is expected to reduce spending under the Medicare program (not taking into account amounts available under subsection (g)) without reducing the quality of patient care.

[(c) PERSONAL PHYSICIAN DEFINED.—

[(1) IN GENERAL.-For purposes of this section, the term "personal physician" means a physician (as defined in section 1861(r)(1) of the Social Security Act (42 U.S.C. 1395x(r)(1)) who

[(A) meets the requirements described in paragraph (2); and

[(B) performs the services described in paragraph (3). Nothing in this paragraph shall be construed as preventing such a physician from being a specialist or subspecialist for an individual requiring ongoing care for a specific chronic condition or multiple chronic conditions (such as severe asthma, complex diabetes, cardiovascular disease, rheumatologic disorder) or for an individual with a prolonged illness.

[(2) REQUIREMENTS.-The requirements described in this paragraph for a personal physician are as follows:

[(A) The physician is a board certified physician who provides first contact and continuous care for individuals under the physician's care.

[(B) The physician has the staff and resources to manage the comprehensive and coordinated health care of each such individual.

[(3) SERVICES PERFORMED.-A personal physician shall perform or provide for the performance of at least the following services:

[(A) Advocates for and provides ongoing support, oversight, and guidance to implement a plan of care that provides an integrated, coherent, cross-discipline plan for ongoing medical care developed in partnership with patients and including all other physicians furnishing care to the patient involved and other appropriate medical personnel or agencies (such as home health agencies).

[(B) Uses evidence-based medicine and clinical decision support tools to guide decision-making at the point-of-care based on patient-specific factors.

[(C) Uses health information technology, that may include remote monitoring and patient registries, to monitor and track the health status of patients and to provide patients with enhanced and convenient access to health care services.

[(D) Encourages patients to engage in the management of their own health through education and support systems.

[(d) MEDICAL HOME DEFINED.-For purposes of this section, the term "medical home" means a physician practice that

[(1) is in charge of targeting beneficiaries for participation in the project; and

[(2) is responsible for

[(A) providing safe and secure technology to promote patient access to personal health information;

[(B) developing a health assessment tool for the individuals targeted; and

[(C) providing training programs for personnel involved in the coordination of care.

[(e) PAYMENT MECHANISMS.

[(1) PERSONAL PHYSICIAN CARE MANAGEMENT FEE.-Under the project, the Secretary shall provide for payment under section 1848 of the Social Security Act (42 U.S.C. 1395w-4) of a care management fee to personal physicians providing care management under the project. Under such section and using the relative value scale update committee (RUC) process under such section, the Secretary shall develop a care management fee code for such payments and a value for such code.

[(2) MEDICAL HOME SHARING IN SAVINGS.-The Secretary shall provide for payment under the project of a medical home based on the payment methodology applied to physician group practices under section 1866A of the Social Security Act (42 U.S.C. 1395cc-1). Under such methodology, 80 percent of the reductions in expenditures under title XVIII of the Social Security Act resulting from participation of individuals that are attributable to the medical home (as reduced by the total care managements fees paid to the medical home under the project) shall be paid to the medical home. The amount of such reductions in expenditures shall be determined by using assumptions with respect to reductions in the occurrence of health complications, hospitalization rates, medical errors, and adverse drug reactions.