,i #aacth ,,congress #ast ,session ,h4 ,r4 #afb ,,in ,,the ,,house ,,of ,,representatives ,january #d1 #bjac ,mrs4 ,bachmann introduced the following bill2 which was referred to the ,committee on ,energy and ,commerce ,a ,,bill ,to amend section #aicb of the ,social ,security ,act to require independent audits and actuarial services under ,medicaid managed care programs1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,medicaid ,integrity ,act of #bjac4 #b4 ,independent audit and actuary requirements for ,state ,medicaid managed care programs 7a7 ,in general ,section #aicb of the ,social ,security ,act 7#db ,u4,s4,c4 #acifu-#b7 is amended by adding at the end the following3 7i7 ,independent audit requirements 7#a7 ,in general ,as a condition of receiving a payment under section #aijc7;a7 with respect to expenditures under a contract with a managed care entity under section #aijc7m71 a ,state1 acting through the ,state agency under the ,state plan or another ,state entity1 shall1 in accordance with this subsection1 enter into a contract with an independent auditor to-- 7,a7 conduct audits of such managed care entity under such contract2 and 7,b7 report the results of such audits under paragraph 7#g74 7#b7 ,independent auditor defined ,in this subsection1 subject to subparagraph 7,b71 the term independent auditor means1 with respect to the audit of a managed care entity in a ,state for a period of time1 an auditing entity that-- 7,a7 had no financial relationship with the managed care entity or an affiliate of such managed care entity for activities occurring during the period for which the audit is conducted2 7,b7 has no such financial relationship with the managed care entity or affiliate for the period during which the audit is being conducted2 and 7,c7 with respect to the initial audits under paragraph 7#d7 of a managed care entity1 has not had such a financial relationship with the managed care entity or affiliate during the #b-year period ending on the date the auditing entity and ,state enter into a contract under paragraph 7#a74 7#c7 ,standards for audits 7,a7 ,in general ,the ,secretary shall set uniform standards for the audits required under paragraph 7#d74 7,b7 ,requirements for standards ,the standards under subparagraph 7,a7 shall-- 7i7 be consistent with ,federal ,government auditing standards issued by the ,comptroller ,general of the ,united ,states2 7ii7 specify a uniform reporting format for the reporting of such audits under paragraph 7#g72 and 7iii7 require that any report for an audit required under paragraph 7#g7 include a certification by a certified public accountant4 7#d7 ,types of audits and information required 7,a7 ,in general ,the independent auditor contracting with a ,state under paragraph 7#a7 shall conduct and complete1 for each managed care entity with a contract under section #aijc7m7 in such ,state the following3 7i7 ,a biannual financial audit described in paragraph 7#e74 7ii7 ,a biannual performance-compliance audit described in paragraph 7#f74 7,b7 ,timing of audits 7i7 ,initial1 staggered audits ,for the purpose of establishing baseline data1 with respect to each managed care entity with a contract under section #aijc7m7 with a ,state1 the ,state shall complete-- 7,i7 an initial audit under subparagraph 7,a77i7 not later than #f months after the date of enactment of the ,medicaid ,integrity ,act of #bjac2 and 7,,ii7 an initial audit under subparagraph 7,a77ii7 not later than #ah months after such date4 ,the initial audit of an entity under subparagraph 7,a77ii7 shall be completed approximately #a year after the initial audit of the entity under subparagraph 7,a77i74 7ii7 ,subsequent1 staggered audits ,subsequent audits under each such subparagraph shall be completed every two years4 7,c7 ,period covered by audit 7i7 ,in general ,each audit under this paragraph shall cover a #b-;calendar-year period4 7ii7 ,initial financial audit ,the first biennial financial audit under subparagraph 7,a77i7 shall cover the #b-;calendar-year period that ends on the last day of the calendar year that ends #f months before the deadline for completion of such initial audit under 7,b77i77,i74 7iii7 ,initial performance-compliance audit ,the first biennial performance-compliance audit under subparagraph 7,a77ii7 shall cover the #b-;calendar-year period that ends on the last day of the calendar year that ends #f months before the deadline for completion of such initial audit under 7,b77i77,,ii74 7#e7 ,biannual financial audit ,a biannual financial audit under paragraph 7#d77;,a77i71 with respect to a managed care entity with a contract under section #aijc7m7 in a ,state1 is an audit of the finances of the managed care entity relating to such contract4 ,each such audit shall include an audit of at least the following information3 7,a7 ,expenses and revenues ,with respect to services provided under such contract1 the managed care entity's-- 7i7 administrative expenses2 7ii7 revenues1 including investment income2 and 7iii7 payments made by the managed care entity for nonadministrative services4 7,b7 ,claims and encounter data ,subject to paragraph 7#g77;,c7-- 7i7 claims data related to services provided by such managed care entity under such contract2 and 7ii7 encounter data that relate to such services and support such claims4 7,c7 ,expenditures on patient services ,with respect to services provided under such contract1 the managed care entity's payments to health care providers1 that have been issued a national provider identifier under title ,,xi1 for items and services furnished on behalf of beneficiaries based on the claims and encounter data described in subparagraph 7,b74 7,d7 ,provider payment ratio 7i7 ,in general ,the ratio of the payments to health care providers described in subparagraph 7,c7 to the aggregate payments to the managed care entity under the contract4 7ii7 ,construction ,the ratio under clause 7i7 is not a medical loss ratio and is not comparable to a medical loss ratio4 7,e7 ,provider payment rates and methodologies ,subject to paragraph 7#g77;,c77ii71 the managed care entity's payment rates and payment methodology for health care services under such contract1 by provider type or service category1 including a description of-- 7i7 alternative payment arrangements between the managed care entity and providers2 and 7ii7 payments made by the managed care entity to providers that are separate from claims for services provided4 7,f7 ,identification of administrative vendors ,with respect to services provided under such contract1 identification of providers and vendors for administrative services under contract with the managed care entity4 7,g7 ,reserve fund contributions ,contributions that the managed care entity has made to its reserve fund under such contract4 7,h7 ,reinsurance ,data on the amount of reinsurance or transfer of risk that the managed care entity has obtained with respect to the risk assumed by such entity under such contract4 7,i7 ,charitable contributions and donations ,contributions and donations that the managed care entity has made to government or non-profit entities1 the identity of such government or non-profit entities1 and the amount of the contributions and donations made to each such entity4 7#f7 ,biannual performance-compliance audit ,a biannual audit under this paragraph 7#d77;,a77ii71 with respect to a managed care entity with a contract under section #aijc7m7 in a ,state1 is an audit of the performance of such managed care entity under such contract 7including with respect to the performance of risk assessment under the contract7 and the compliance of such managed care entity1 during the period covered by the audit1 with-- 7,a7 the terms of the contract2 and 7,b7 applicable ,state and ,federal laws1 regulations1 and guidance1 including provisions of such laws1 regulations1 and guidance related to allowable costs under such contracts4 7#g7 ,reporting and public availability of audit results 7,a7 ,notice and opportunity for comment 7i7 ,in general ,with respect to an audit of a managed care entity conducted by an independent auditor under this subsection1 such auditor shall-- 7,i7 submit a report on the results of the audit to the managed care entity2 and 7,,ii7 provide the managed care entity with the opportunity to submit comments on such audit to the auditor during a #cj-;day period4 7ii7 ,review of comments and revision of report ,the independent auditor shall review the comments submitted under clause 7i77,,ii7 and may revise such report based on such comments4 7,b7 ,public report 7i7 ,in general ,not later than #de days after the end of the #cj-;day comment period provided under subparagraph 7,a77i77,,ii71 the independent auditor shall submit to the ,secretary1 the ,state1 and the managed care entity a report containing the results of such audit 7including1 in the case of an annual financial audit under paragraph 7#d77;,a77i71 the information described in paragraph 7#e77;,d771 any comments received under subparagraph 7,a77i77,,ii71 and an executive summary of the audit report4 ,the ,secretary for good cause may extend by not more than #cj days the deadline for submitting a report under the previous sentence4 7ii7 ,posting on public web site ,subject to subparagraph 7,c71 not later than #cj days after the date that the ,state receives a report under clause 7i71 the ,state shall post such report 7including the executive summary of the report7 on a ,web site maintained by the ,state in connection with administration of this title and available to the public4 7,c7 ,privacy and confidentiality protection 7i7 ,patient protections ,nothing in this subsection shall be construed as modifying the application of the ,,hipaa privacy regulations 7as defined in section #aahj7;b77#c774 7ii7 ,protection of certain proprietary information ,nothing in this subsection shall be construed as authorizing the public disclosure of the payment rates that a managed care entity uses to pay any health care provider or the methodology that the managed care entity uses to develop such rates4 7iii7 ,protection of encounter data ,subject to clause 7i71 an independent auditor1 when submitting a report under subparagraph 7,a71 may submit encounter data to a ,state4 ,an independent auditor1 or a ,state1 shall not submit to the ,federal ,government any encounter data that are collected for purposes of the audits under this subsection4 7,d7 ,withholding of payment for failure to report 7i7 ,in general ,if a report required under this paragraph is not submitted to the ,secretary as required under subparagraph 7,b77i7 by an independent auditor with respect to a managed care entity in a ,state1 the ,secretary shall withhold1 by the withholding percentage under clause 7ii71 the payment to the ,state under section #aijc7;a7 for expenditures under a contract under section #aijc7m7 for the managed care entity for the period during which the report is due but not submitted4 7ii7 ,withholding percentage ,the withholding percentage specified in this clause is-- 7,i7 #e percentage points2 plus 7,,ii7 if the failure to report continued beyond #cj days after the date on which such report was due under subparagraph 7,b77i71 #e additional percentage points for each subsequent #cj-;day period until such report is submitted4 7iii7 ,restoration of payment ,any amounts withheld under this subparagraph due to the failure to submit a report shall be paid to a ,state not later than #aj days after the date such report is submitted4 7#h7 ,response to deficiencies 7,a7 ,report ,if a report submitted under paragraph 7#g7 indicates a deficiency with respect to the financial reporting1 performance1 or compliance 7as applicable7 with respect to a managed care entity with a contract under section #aijc7m7 with a ,state1 not later than #cj days after the date of submission of such report the ,state shall submit to the ,secretary 7and post on the ,web site referred to in paragraph 7#g77;,b77ii77 documentation of any action that the ,state has taken or intends to take in response to a reported deficiency4 ,such documentation shall include documentation of any of the following3 7i7 ,adjustments to the terms of new or renewed contracts with such managed care entity4 7ii7 ,a corrective action plan entered into by the managed care entity with such ,state4 7iii7 ,any intermediate sanction under subsection 7e7 against the managed care entity4 7iv7 ,termination of the contract with the managed care entity4 7,b7 ,,oig report to ,congress ,the ,secretary1 acting through the ,inspector ,general in the ,department of ,health and ,human ,services1 shall annually submit to ,congress and make available to the public a report on the audits conducted under this subsection and the responses of ,states to reports of deficiencies in such audits4 ,such report shall contain such recommendations for changes in law or regulation as may be appropriate to ensure the prudent expenditure of funds for items and services furnished through managed care entities4 7#i7 ,access to information required under contract2 sanctions for misrepresentation or falsification of records 7,a7 ,access ,if a ,state enters into or renews a contract under section #aijc7m7 after the date of the enactment of the ,medicaid ,integrity ,act of #bjac1 such contract shall provide that the managed care entity1 as a condition of receiving payment under such contract1 shall provide the independent auditor with access to all information necessary for purposes of the audits under paragraph 7#d74 7,b7 ,sanctions for misrepresentation or falsification ,the misrepresentation or falsification of information that is furnished for purposes of such an audit shall be subject to a civil monetary penalty under subparagraph 7,b77i7 of section #aijc7m77#e7 in the same manner as a misrepresentation or falsification described in subparagraph 7,a77iv77,i7 of such section4 7#aj7 ,application to waiver ,states ,in the case of any ,state which is providing medical assistance to its residents under a waiver granted under section #aaae1 the ,secretary shall require the ,state to meet the requirements of this subsection and subsection 7j7 in the same manner as the ,state would be required to meet such requirement if the ,state had in effect a plan approved under this title4 7#aa7 ,reducing duplicate audits ,notwithstanding any other provision of this title1 insofar as the ,secretary determines that the performance of an audit under this subsection duplicates the performance of an audit required under another provision of this title1 the completion of the audit under this subsection shall satisfy such requirement4 7#ab7 ,reservation of ,state powers ,nothing in this subsection shall be construed to limit the power of a ,state1 including the power of a ,state to pursue civil and criminal penalties under ,state law against any individual or entity that misuses1 or engages in fraud or abuse related to1 the funds provided to a ,state under this title4 7#ac7 ,construction ,nothing in this subsection shall be construed to prevent the ,secretary from taking any action1 including disallowances of payment1 with respect to violations of this title related to a contract with a managed care entity4 7#ad7 ,definitions 7,a7 ,affiliate of the managed care entity ,for purposes of this subsection and subsection 7j71 the term affiliate of the managed care entity means an entity that1 to a significant extent1 is associated or affiliated with1 or has control of or is controlled by1 the managed care entity or that is related to such managed care entity by common ownership4 ,for purposes of this definition-- 7i7 common ownership exists if an individual or individuals possess significant ownership or equity in the managed care entity and the affiliate of the managed care entity2 and 7ii7 control exists if an entity has the power1 directly or indirectly1 to significantly influence or direct the actions or policies of another entity4 7,b7 ,contract year ,for purposes of this subsection1 the term contract year means1 with respect to a managed care entity and a ,state1 the #ab-month period that begins on the effective date of a contract under section #aijc7m7 between the managed care entity and the ,state1 and each subsequent #ab-month period while such contract is effective4 4 7b7 ,independent actuary ,section #aicb of the ,social ,security ,act 7#db ,u4,s4,c4 #acifu-#b71 as amended by section #b1 is further amended by adding at the end the following3 7j7 ,independent actuary ,as a condition of receiving a payment under section #aijc7;a7 with respect to expenditures under a contract between a ,state and a managed care entity under section #aijc7m71 a ,state may not enter into an agreement with an entity 7referred to in this subsection as an actuary7 to provide actuarial services related to the ,state's administration of such contract unless the following requirements are met3 7#a7 ,no actuarial services or financial relationship for contract period ,the actuary has not provided actuarial services to the managed care entity for1 or otherwise had any financial relationship with the managed care entity during1 any period of the contract 7between such managed care entity and the ,state7 with respect to which the actuarial services under the agreement 7between the actuary and the ,state7 are to be provided4 7#b7 ,no financial relationship during term of agreement with ,state ,the actuary agrees not to have such a financial relationship with the managed care entity or affiliate during any part of the period of the agreement 7between the ,state and the actuary74 7#c7 ,special rule for first contract year ,for the first contract year in which this subsection applies1 the actuary has not had such a financial relationship with the managed care entity or affiliate during the #b-year period ending on the date the actuary and ,state enter into an agreement subject to this subsection4 4 7c7 ,transitional financial incentives to ,states ,section #aijc7;a77#c7 of the ,social ,security ,act 7#db ,u4,s4,c4 #acif;b7a77#c77 is amended by inserting after subparagraph 7,f7 the following3 7,g7 #ge percent of so much of the sums expended as are attributable to expenditures for the first #c biannual financial audits conducted under section #aicb7;i77#d77;,a77i7 after the date of enactment of the ,medicaid ,integrity ,act of #bjac1 and for the first #b biannual performance-compliance audits conducted under section #aicb7;i77#d77;,a77ii7 after such date2 plus 4