SEC. 1730A. ACCOUNTABLE CARE ORGANIZATION PILOT PROGRAM.

(a) IN GENERAL.-The Secretary of Health and Human Services shall establish under this section an accountable care program under which a State may apply to the Secretary for approval of an accountable care organization pilot program described in subsection (b) (in this section referred to as a "pilot program") for the application of the accountable care organization concept under title XIX of the Social Security Act.

(b) PILOT PROGRAM DESCRIBED.—

(1) IN GENERAL.-The pilot program described in this subsection is a program that applies one or more of the accountable care organization models described in section 1866E of the Social Security Act, as added by section 1301 of this Act.

(2) LIMITATION.-The pilot program shall operate for a period of not more than 5 years.

(c) ADDITIONAL INCENTIVES.—In the case of the pilot program under this section, the Secretary may

(1) waive the requirements of

(A) section 1902(a)(1) of the Social Security Act (relating to statewideness);

(B) section 1902(a)(10)(B) of such Act (relating to comparability); and

(2) increase the matching percentage for administrative expenditures up to(A) 90 percent (for the first 2 years of the pilot program); and

(B) 75 percent (for the next 3 years).

(d) EVALUATION; REPORT.

(1) EVALUATION.-The Secretary, using the criteria described in section 1866D(f)(1) of the Social Security Act (as inserted by section 1301 of this Act), shall conduct an evaluation of the pilot program under this section.

(2) REPORT.-Not later than 60 days after the date of completion of the evaluation under paragraph (1), the Secretary shall submit to Congress and make available to the public a report on the findings of the evaluation under such paragraph.

Subtitle D-Coverage

SEC. 1731. OPTIONAL MEDICAID COVERAGE OF LOW-INCOME HIV-INFECTED INDIVIDUALS.

(a) IN GENERAL.- Section 1902 of the Social Security Act (42 U.S.C. 1396a), as amended by section 1714(a)(1), is amended

(1) in subsection (a)(10)(A)(ii)—

(A) by striking "or" at the end of subclause (XIX);

(B) by adding "or" at the end of subclause (XX); and

(C) by adding at the end the following:

"(XXI) who are described in subsection (ii) (relating to HIV-infected individuals);"; and

(2) by adding at the end, as amended by sections 1703 and 1714(a), the following:

"(ii) Individuals described in this subsection are individuals not described in subsection (a)(10)(A)(i)—

"(1) who have HIV infection;

"(2) whose income (as determined under the State plan under this title with respect to disabled individuals) does not exceed the maximum amount of income a disabled individual described in subsection (a)(10)(A)(i) may have and obtain medical assistance under the plan; and

"(3) whose resources (as determined under the State plan under this title with respect to disabled individuals) do not exceed the maximum amount of resources a disabled individual described in subsection (a)(10)(A)(i) may have and obtain medical assistance under the plan.".

(b) ENHANCED MATCH.-The first sentence of section 1905(b) of such Act (42 U.S.C. 1396d(b)) is amended by striking "section 1902(a)(10)(A)(ii)(XVIII)" and inserting "subclause (XVIII) or (XXI) of section 1902(a)(10)(A)(ii)”.

(c) CONFORMING AMENDMENTS.-Section 1905(a) of such Act (42 U.S.C. 1396d(a)) is amended, in the matter preceding paragraph (1)—

(1) by striking “or” at the end of clause (xii);

(2) by adding "or" at the end of clause (xiii); and
(3) by inserting after clause (xiii) the following:
"(xiv) individuals described in section 1902(ii),".

(d) EXEMPTION FROM FUNDING LIMITATION FOR TERRITORIES.-Section 1108(g) of the Social Security Act (42 U.S.C. 1308(g)) is amended by adding at the end the following:

“(5) DISREGARDING MEDICAL ASSISTANCE FOR OPTIONAL LOW-INCOME HIV-INFECTED INDIVIDUALS.-The limitations under subsection (f) and the previous provisions of this subsection shall not apply to amounts expended for medical assistance for individuals described in section 1902(ii) who are only eligible for such assistance on the basis of section 1902(a)(10)(A)(ii)(XXI).".

(e) EFFECTIVE DATE; SUNSET.-The amendments made by this section shall apply to expenditures for calendar quarters beginning on or after the date of the enactment of this Act, and before January 1, 2013, without regard to whether or not final regulations to carry out such amendments have been promulgated by such date.

SEC. 1732. EXTENDING TRANSITIONAL MEDICAID ASSISTANCE (TMA).

Sections 1902(e)(1)(B) and 1925(f) of the Social Security Act (42 U.S.C. 1396a(e)(1)(B), 1396r-6(f)), as amended by section 5004(a)(1) of the American Recovery and Reinvestment Act of 2009 (Public Law 111-5), are each amended by striking "December 31, 2010" and inserting "December 31, 2012".

SEC. 1733. REQUIREMENT OF 12-MONTH CONTINUOUS COVERAGE UNDER CERTAIN CHIP PROGRAMS.

(a) IN GENERAL.-Section 2102(b) of the Social Security Act (42 U.S.C. 1397bb(b)) is amended by adding at the end the following new paragraph:

"(6) REQUIREMENT FOR 12-MONTH CONTINUOUS ELIGIBILITY.—In the case of a State child health plan that provides child health assistance under this title through a means other than described in section 2101(a)(2), the plan shall provide for implementation under this title of the 12-month continuous eligibility option described in section 1902(e)(12) for targeted low-income children whose family income is below 200 percent of the poverty line.".

(b) EFFECTIVE DATE.-The amendment made by subsection (a) shall apply to determinations (and redeterminations) of eligibility made on or after January 1, 2010.

SEC. 1734. PREVENTING THE APPLICATION UNDER CHIP OF COVERAGE WAITING PERIODS FOR CERTAIN CHILDREN.

(a) IN GENERAL.-Section 2102(b)(1) of the Social Security Act (42 U.S.C. 1397bb(b)(1)) is amended

(1) in subparagraph (B)—

(A) in clause (iii), by striking "and" at the end;

(B) in clause (iv), by striking the period at the end and inserting “; and”; and

(C) by adding at the end the following new clause:

"(v) may not apply a waiting period (including a waiting period to carry out paragraph (3)(C)) in the case of a child described in subparagraph (C)."; and

(2) by adding at the end the following new subparagraph:

"(C) DESCRIPTION OF CHILDREN NOT SUBJECT TO WAITING PERIOD.—For purposes of this paragraph, a child described in this subparagraph is a child who, on the date an application is submitted for such child for child health assistance under this title, meets any of the following requirements: "(i) INFANTS AND TODDLERS.—The child is under two years of age. "(ii) LOSS OF GROUP HEALTH PLAN COVERAGE.-The child previously had private health insurance coverage through a group health plan or health insurance coverage offered through an employer and lost such coverage due to

(I) termination of an individual's employment;

"(II) a reduction in hours that an individual works for an employer;

"(III) elimination of an individual's retiree health benefits; or “(IV) termination of an individual's group health plan or health insurance coverage offered through an employer.

"(iii) UNAFFORDABLE PRIVATE COVERAGE.

"(I) IN GENERAL.-The family of the child demonstrates that the cost of health insurance coverage (including the cost of premiums, co-payments, deductibles, and other cost sharing) for such family exceeds 10 percent of the income of such family.

"(II) DETERMINATION OF FAMILY INCOME.-For purposes of subclause (I), family income shall be determined in the same manner specified by the State for purposes of determining a child's eligibility for child health assistance under this title.".

(b) EFFECTIVE DATE.-The amendments made by this section shall take effect as of the date that is 90 days after the date of the enactment of this Act.

SEC. 1735. ADULT DAY HEALTH CARE SERVICES.

(a) IN GENERAL.-The Secretary of Health and Human Services shall not—

(1) withhold, suspend, disallow, or otherwise deny Federal financial participation under section 1903(a) of the Social Security Act (42 U.S.C. 1396b(a)) for the provision of adult day health care services, day activity and health services, or adult medical day care services, as defined under a State Medicaid plan approved during or before 1994, during such period if such services are provided consistent with such definition and the requirements of such plan; or

(2) withdraw Federal approval of any such State plan or part thereof regarding the provision of such services (by regulation or otherwise).

(b) EFFECTIVE DATE.-Subsection (a) shall apply with respect to services provided on or after October 1, 2008.

SEC. 1736. MEDICAID COVERAGE FOR CITIZENS OF FREELY ASSOCIATED STATES.

(a) IN GENERAL.-Section 402(b)(2) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1612(b)(2)) is amended by adding at the end the following:

"(G) MEDICAID EXCEPTION FOR CITIZENS OF FREELY ASSOCIATED STATES.— With respect to eligibility for benefits for the designated Federal program defined in paragraph (3)(C) (relating to the Medicaid program), section 401(a) and paragraph (1) shall not apply to any individual who lawfully resides in the United States (including territories and possessions of the United States) in accordance with the Compacts of Free Association between the Government of the United States and the Governments of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau.".

(b) EXCEPTION TO 5-YEAR LIMITED ELIGIBILITY.-Section 403(d) of such Act (8 U.S.C. 1613(d)) is amended

(1) in paragraph (1), by striking "or" at the end;

(2) in paragraph (2), by striking the period at the end and inserting "; or"; and

(3) by adding at the end the following:

“(3) an individual described in section 402(b)(2)(G), but only with respect to the designated Federal program defined in section 402(b)(3)(C).".

(c) DEFINITION OF QUALIFIED ALIEN.-Section 431(b) of such Act (8 U.S.C. 1641(b)) is amended

(1) in paragraph (6), by striking "; or" at the end and inserting a comma; (2) in paragraph (7), by striking the period at the end and inserting ", or"; and

(3) by adding at the end the following:

"(8) an individual who lawfully resides in the United States (including territories and possessions of the United States) in accordance with a Compact of Free Association referred to in section 402(b)(2)(G), but only with respect to the designated Federal program defined in section 402(b)(3)(C) (relating to the Medicaid program).".

SEC. 1737. CONTINUING REQUIREMENT OF MEDICAID COVERAGE OF NONEMERGENCY TRANSPORTATION TO MEDICALLY NECESSARY SERVICES.

(a) REQUIREMENT.-Section 1902(a)(10) of the Social Security Act (42 U.S.C. 1396a(a)(10)) is amended

(1) in subparagraph (A), in the matter preceding clause (i), by striking “and (21)" and inserting ", (21), and (28)"; and

(2) in subparagraph (C)(iv), by striking "and (17)" and inserting ", (17), and (28)".

(b) DESCRIPTION OF SERVICES.-Section 1905(a) of such Act (42 U.S.C. 1395d(a)), as amended by sections 1713(a)(1) and 1724(a)(1), is amended

(1) in paragraph (29), by striking "and" at the end;

(2) by redesignating paragraph (30) as pararaph (31) and by striking the comma at the end and inserting a semicolon; and

(3) by inserting after paragraph (29) the following new paragraph:

"(30) nonemergency transportation to medically necessary services, consistent with the requirement of section 431.53 of title 42, Code of Federal Regulations, as in effect as of June 1, 2008; and".

(c) EFFECTIVE DATE.-The amendments made by this section shall take effect on the date of the enactment of this Act and shall apply to transportation on or after such date.

SEC. 1738. STATE OPTION TO DISREGARD CERTAIN INCOME IN PROVIDING CONTINUED MEDICAID COVERAGE FOR CERTAIN INDIVIDUALS WITH EXTREMELY HIGH PRESCRIPTION COSTS.

Section 1902(e) of the Social Security Act (42 U.S.C. 1396b(e)), as amended by section 203(a) of the Children's Health Insurance Program Reauthorization Act of 2009 (Public Law 111-3), is amended by adding at the end the following new paragraph:

"(14)(A) At the option of the State, in the case of an individual with extremely high prescription drug costs described in subparagraph (B) who has been determined (without the application of this paragraph) to be eligible for medical assistance under this title, the State may, in redetermining the individual's eligibility for medical assistance under this title, disregard any family income of the individual to the extent such income is less than an amount that is specified by the State and does not exceed the amount specified in subparagraph (C), or, if greater, income equal to the cost of the orphan drugs described in subparagraph (B)(iii).

"(B) An individual with extremely high prescription drug costs described in this subparagraph for a 12-month period is an individual—

"(i) who is covered under health insurance or a health benefits plan that has a maximum lifetime limit of not less than $1,000,000 which includes all prescription drug coverage;

"(ii) who has exhausted all available prescription drug coverage under the plan as of the beginning of such period;

"(iii) who incurs (or is reasonably expected to incur) on an annual basis during the period costs for orphan drugs in excess of the amount specified in subparagraph (C) for the period; and

"(iv) whose annual family income (determined without regard to this paragraph) as of the beginning of the period does not exceed 75 percent of the amount incurred for such drugs (as described in clause (iii)).

"(C) The amount specified in this subparagraph for a 12-month period beginning

in

"(i) 2009 or 2010, is $200,000; or

"(ii) a subsequent year, is the amount specified in clause (i) (or this subparagraph) for the previous year increased by the annual rate of increase in the medical care component of the consumer price index (U.S. city average) for the 12-month period ending in August of the previous year.

Any amount computed under clause (ii) that is not a multiple of $1,000 shall be rounded to the nearest multiple of $1,000.

"(D) In applying this paragraph, amounts incurred for prescription drugs for cosmetic purposes shall not be taken into account.

"(E) With respect to an individual described in subparagraph (A), notwithstanding section 1916, the State plan

"(i) shall provide for the application of cost-sharing that is at least nominal as determined under section 1916; and

"(ii) may provide, consistent with section 1916A, for such additional cost-sharing as does not exceed a maximum level of cost-sharing that is specified by the Secretary and is adjusted by the Secretary on an annual basis.

"(F) A State electing the option under this paragraph shall provide for a determination on an individual's application for continued medical assistance under this title within 30 days of the date the application if filed with the State.

"(G) In this paragraph:

"(i) The term orphan drugs' means prescription drugs designated under section 526 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360bb) as a drug for a rare disease or condition.

"(ii) The term 'health benefits plan' includes coverage under a plan offered under a State high risk pool.".

Subtitle E-Financing

SEC. 1741. PAYMENTS TO PHARMACISTS.

(a) PHARMACY REIMBURSEMENT LIMITS.—

(1) IN GENERAL.-Section 1927(e) of the Social Security Act (42 U.S.C. 1396r8(e)) is amended

(A) by striking paragraph (5) and inserting the following:

"(5) USE OF AMP IN UPPER PAYMENT LIMITS.-The Secretary shall calculate the Federal upper reimbursement limit established under paragraph (4) as 130 percent of the weighted average (determined on the basis of manufacturer utilization) of monthly average manufacturer prices."

(2) DEFINITION OF AMP.-Section 1927(k)(1)(B) of such Act (42 U.S.C. 1396r8(k)(1)(B)) is amended

(B) in the heading, by striking “EXTENDED TO WHOLESALERS" and inserting "AND OTHER PAYMENTS"; and

(C) by striking "regard to" and all that follows through the period and inserting the following: "regard to

"(i) customary prompt pay discounts extended to wholesalers;
"(ii) bona fide service fees paid by manufacturers;

"(iii) reimbursement by manufacturers for recalled, damaged, expired, or otherwise unsalable returned goods, including reimbursement for the cost of the goods and any reimbursement of costs associated with return goods handling and processing, reverse logistics, and drug destruction;

"(iv) sales directly to, or rebates, discounts, or other price concessions provided to, pharmacy benefit managers, managed care organizations, health maintenance organizations, insurers, mail order pharmacies that are not open to all members of the public, or long term care providers, provided that these rebates, discounts, or price concessions are not passed through to retail pharmacies;

"(v) sales directly to, or rebates, discounts, or other price concessions provided to, hospitals, clinics, and physicians, unless the drug is an inhalation, infusion, or injectable drug, or unless the Secretary determines, as allowed for in Agency administrative procedures, that it is necessary to include such sales, rebates, discounts, and price concessions in order to obtain an accurate AMP for the drug. Such a determination shall not be subject to judicial review; or

"(vi) rebates, discounts, and other price concessions required to be provided under agreements under subsections (f) and (g) of section 1860D-2(f).".

(3) MANUFACTURER REPORTING REQUIREMENTS.-Section 1927(b)(3)(A) of such Act (42 U.S.C. 1396r-8(b)(3)(A)) is amended

(A) in clause (ii), by striking “and” at the end;

(B) by striking the period at the end of clause (iii) and inserting “; and”; and

(C) by inserting after clause (iii) the following new clause:

"(iv) not later than 30 days after the last day of each month of a rebate period under the agreement, on the manufacturer's total number of units that are used to calculate the monthly average manufacturer price for each covered outpatient drug.".

(4) AUTHORITY TO PROMULGATE REGULATION.-The Secretary of Health and Human Services may promulgate regulations to clarify the requirements for upper payment limits and for the determination of the average manufacturer price in an expedited manner. Such regulations may become effective on an interim final basis, pending opportunity for public comment.

(5) PHARMACY REIMBURSEMENTS THROUGH DECEMBER 31, 2010.-The specific upper limit under section 447.332 of title 42, Code of Federal Regulations (as in effect on December 31, 2006) applicable to payments made by a State for multiple source drugs under a State Medicaid plan shall continue to apply through December 31, 2010, for purposes of the availability of Federal financial participation for such payments.

(b) DISCLOSURE OF PRICE INFORMATION TO THE PUBLIC.-Section 1927(b)(3) of such Act (42 U.S.C. 1396r-8(b)(3)) is amended

(1) in subparagraph (A)—

(A) in clause (i), in the matter preceding subclause (I), by inserting "month of a" after "each"; and

(B) in the last sentence, by striking "and shall," and all that follows up to the period; and

(2) in subparagraph (D)(v), by inserting "weighted" before "average manufacturer prices".

SEC. 1742. PRESCRIPTION DRUG REBATES.

(a) ADDITIONAL REBATE FOR NEW FORMULATIONS OF EXISTING DRUGS.

(1) IN GENERAL.-Section 1927(c)(2) of the Social Security Act (42 U.S.C. 1396r-8(c)(2)) is amended by adding at the end the following new subparagraph:

"(C) TREATMENT OF NEW FORMULATIONS.—In the case of a drug that is a line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form, the rebate obligation with respect to such drug under this section shall be the amount computed under this section for such new drug or, if greater, the product of—

"(i) the average manufacturer price of the line extension of a single source drug or an innovator multiple source drug that is an oral solid dosage form;

"(ii) the highest additional rebate (calculated as a percentage of average manufacturer price) under this section for any strength of the original single source drug or innovator multiple source drug; and