Title 42 — The Public Health and WelfareRelease 119-73
§1396u–5 Special provisions relating to medicare prescription drug benefit
Title 42 › Chapter CHAPTER 7— - SOCIAL SECURITY › Subchapter SUBCHAPTER XIX— - GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS › § 1396u–5
Summary
Requires each State to help run the Medicare drug benefit by giving the federal government the information it needs, deciding who gets low‑income premium and cost‑sharing help, telling the federal government when someone is eligible, and checking if those people also qualify for Medicaid to pay Medicare cost‑sharing. States must accept certain electronic data as a valid application date. The federal government will reimburse the State for these activities. Starting January 2006, each State (and DC) must pay the federal government each month an amount found by multiplying: (1) a per‑person base amount (based on 2003 Medicaid drug spending and managed‑care drug value, adjusted and grown by yearly growth factors), (2) the number of full‑benefit dual eligible people in that month (people who have Part D drug coverage and are eligible for full Medicaid), and (3) a yearly factor that is 90% for 2006, 88 1/3% for 2007, 86 2/3% for 2008, 85% for 2009, 83 1/3% for 2010, 81 2/3% for 2011, 80% for 2012, 78 1/3% for 2013, 76 2/3% for 2014, and 75% after December 2014. Payments go into the Medicare Prescription Drug Account. If a State does not pay, interest accrues and the amount can be taken from other federal Medicaid payments. If a person is eligible for Part D and is a full‑benefit dual eligible, Medicaid will not pay for drugs or cost‑sharing that Part D covers. States may still help pay for non‑Part D drugs or make arrangements with Part D plans. The rule for the 50 States and DC does not apply to other jurisdictions (like Puerto Rico or the territories). Those places can get extra federal money if they submit a plan showing they will use the funds for low‑income Part D help and keep administrative costs at or below 10%. The extra pool is $28,125,000 for the last three quarters of fiscal 2006, $37,500,000 for fiscal 2007, and in later years it rises by the annual percentage increase specified in section 1395w–102(b)(6). The federal government will report to Congress on how this works.
Full Legal Text
Title 42, §1396u–5
The Public Health and Welfare — Source: USLM XML via OLRC
(a)As a condition of its State plan under this subchapter under section 1396a(a)(66) of this title and receipt of any Federal financial assistance under section 1396b(a) of this title subject to subsection (e), a State shall do the following:
(1)The State shall provide the Secretary with information to carry out section 1395w–141(f)(3)(B)(i) of this title.
(2)The State shall—
(A)make determinations of eligibility for premium and cost-sharing subsidies under and in accordance with section 1395w–114 of this title;
(B)inform the Secretary of such determinations in cases in which such eligibility is established; and
(C)otherwise provide the Secretary with such information as may be required to carry out part D, other than subpart 4, of subchapter XVIII (including section 1395w–114 of this title).
(3)As part of making an eligibility determination required under paragraph (2) for an individual, the State shall make a determination of the individual’s eligibility for medical assistance for any medicare cost-sharing described in section 1396d(p)(3) of this title and, if the individual is eligible for any such medicare cost-sharing, offer enrollment to the individual under the State plan (or under a waiver of such plan).
(4)The State shall accept data transmitted under section 1320b–14(c)(3) of this title and act on such data in the same manner and in accordance with the same deadlines as if the data constituted an initiation of an application for benefits under the Medicare Savings Program (as defined for purposes of such section) that had been submitted directly by the applicant. The date of the individual’s application for the low income subsidy program from which the data have been derived shall constitute the date of filing of such application for benefits under the Medicare Savings Program.
(b)The amounts expended by a State in carrying out subsection (a) are expenditures reimbursable under the appropriate paragraph of section 1396b(a) of this title.
(c)(1)(A)Each of the 50 States and the District of Columbia for each month beginning with January 2006 shall provide for payment under this subsection to the Secretary of the product of—
(i)the amount computed under paragraph (2)(A) for the State and month;
(ii)the total number of full-benefit dual eligible individuals (as defined in paragraph (6)) for such State and month; and
(iii)the factor for the month specified in paragraph (5).
(B)Payment under subparagraph (A) shall be made in a manner specified by the Secretary that is similar to the manner in which State payments are made under an agreement entered into under section 1395v of this title, except that all such payments shall be deposited into the Medicare Prescription Drug Account in the Federal Supplementary Medical Insurance Trust Fund.
(C)If a State fails to pay to the Secretary an amount required under subparagraph (A), interest shall accrue on such amount at the rate provided under section 1396b(d)(5) of this title. The amount so owed and applicable interest shall be immediately offset against amounts otherwise payable to the State under section 1396b(a) of this title subject to subsection (e), in accordance with the Federal Claims Collection Act of 1996 11 See References in Text note below. and applicable regulations.
(D)The Secretary shall perform such periodic data matches as may be necessary to identify and compute the number of full-benefit dual eligible individuals for purposes of computing the amount under subparagraph (A).
(2)(A)The amount computed under this paragraph for a State described in paragraph (1) and for a month in a year is equal to—
(i)1⁄12 of the product of—
(I)the base year State medicaid per capita expenditures for covered part D drugs for full-benefit dual eligible individuals (as computed under paragraph (3)); and
(II)a proportion equal to 100 percent minus the Federal medical assistance percentage (as defined in section 1396d(b) of this title) applicable to the State for the fiscal year in which the month occurs; and
(ii)increased for each year (beginning with 2004 up to and including the year involved) by the applicable growth factor specified in paragraph (4) for that year.
(B)The Secretary shall notify each State described in paragraph (1) not later than October 15 before the beginning of each year (beginning with 2006) of the amount computed under subparagraph (A) for the State for that year.
(3)(A)For purposes of paragraph (2)(A), the “base year State medicaid per capita expenditures for covered part D drugs for full-benefit dual eligible individuals” for a State is equal to the weighted average (as weighted under subparagraph (C)) of—
(i)the gross per capita medicaid expenditures for prescription drugs for 2003, determined under subparagraph (B); and
(ii)the estimated actuarial value of prescription drug benefits provided under a capitated managed care plan per full-benefit dual eligible individual for 2003, as determined using such data as the Secretary determines appropriate.
(B)(i)The gross per capita medicaid expenditures for prescription drugs for 2003 under this subparagraph is equal to the expenditures, including dispensing fees, for the State under this subchapter during 2003 for covered outpatient drugs, determined per full-benefit-dual-eligible-individual for such individuals not receiving medical assistance for such drugs through a medicaid managed care plan.
(ii)In determining the amount under clause (i), the Secretary shall—
(I)use data from the Medicaid Statistical Information System (MSIS) and other available data;
(II)exclude expenditures attributable to covered outpatient prescription drugs that are not covered part D drugs (as defined in section 1395w–102(e) of this title, including drugs described in subparagraph (K) of section 1396r–8(d)(2) of this title); and
(III)reduce such expenditures by the product of such portion and the adjustment factor (described in clause (iii)).
(iii)The adjustment factor described in this clause for a State is equal to the ratio for the State for 2003 of—
(I)aggregate payments under agreements under section 1396r–8 of this title; to
(II)the gross expenditures under this subchapter for covered outpatient drugs referred to in clause (i).
(C)The weighted average under subparagraph (A) shall be determined taking into account—
(i)with respect to subparagraph (A)(i), the average number of full-benefit dual eligible individuals in 2003 who are not described in clause (ii); and
(ii)with respect to subparagraph (A)(ii), the average number of full-benefit dual eligible individuals in such year who received in 2003 medical assistance for covered outpatient drugs through a medicaid managed care plan.
(4)The applicable growth factor under this paragraph for—
(A)each of 2004, 2005, and 2006, is the average annual percent change (to that year from the previous year) of the per capita amount of prescription drug expenditures (as determined based on the most recent National Health Expenditure projections for the years involved); and
(B)a succeeding year, is the annual percentage increase specified in section 1395w–102(b)(6) of this title for the year.
(5)The factor under this paragraph for a month—
(A)in 2006 is 90 percent;
(B)in 2007 is 88⅓ percent;
(C)in 2008 is 86⅔ percent;
(D)in 2009 is 85 percent;
(E)in 2010 is 83⅓ percent;
(F)in 2011 is 81⅔ percent;
(G)in 2012 is 80 percent;
(H)in 2013 is 78⅓ percent;
(I)in 2014 is 76⅔ percent; or
(J)after December 2014, is 75 percent.
(6)(A)For purposes of this section, the term “full-benefit dual eligible individual” means for a State for a month an individual who—
(i)has coverage for the month for covered part D drugs under a prescription drug plan under part D of subchapter XVIII, or under an MA–PD plan under part C of such subchapter; and
(ii)is determined eligible by the State for medical assistance for full benefits under this subchapter for such month under section 1396a(a)(10)(A) or 1396a(a)(10)(C) of this title, by reason of section 1396a(f) of this title, or under any other category of eligibility for medical assistance for full benefits under this subchapter, as determined by the Secretary.
(B)In applying subparagraph (A) in the case of an individual determined to be eligible by the State for medical assistance under section 1396a(a)(10)(C) of this title or by reason of section 1396a(f) of this title, the individual shall be treated as meeting the requirement of subparagraph (A)(ii) for any month if such medical assistance is provided for in any part of the month.
(d)(1)In the case of a part D eligible individual (as defined in section 1395w–101(a)(3)(A) of this title) who is described in subsection (c)(6)(A)(ii), notwithstanding any other provision of this subchapter, medical assistance is not available under this subchapter for such drugs (or for any cost-sharing respecting such drugs), and the rules under this subchapter relating to the provision of medical assistance for such drugs shall not apply. The provision of benefits with respect to such drugs shall not be considered as the provision of care or services under the plan under this subchapter. No payment may be made under section 1396b(a) of this title for prescribed drugs for which medical assistance is not available pursuant to this paragraph.
(2)In the case of medical assistance under this subchapter with respect to a covered outpatient drug (other than a covered part D drug) furnished to an individual who is enrolled in a prescription drug plan under part D of subchapter XVIII or an MA–PD plan under part C of such subchapter, the State may elect to provide such medical assistance in the manner otherwise provided in the case of individuals who are not full-benefit dual eligible individuals or through an arrangement with such plan.
(e)(1)In the case of a State, other than the 50 States and the District of Columbia—
(A)the previous provisions of this section shall not apply to residents of such State; and
(B)subject to paragraph (4), if the State establishes and submits to the Secretary a plan described in paragraph (2) (for providing medical assistance with respect to the provision of prescription drugs to part D eligible individuals), the amount otherwise determined under section 1308(f) of this title (as increased under section 1308(g) of this title) for the State shall be increased by the amount for the fiscal period specified in paragraph (3).
(2)The Secretary shall determine that a plan is described in this paragraph if the plan—
(A)provides medical assistance with respect to the provision of covered part D drugs (as defined in section 1395w–102(e) of this title) to low-income part D eligible individuals;
(B)provides assurances that additional amounts received by the State that are attributable to the operation of this subsection shall be used only for such assistance and related administrative expenses and that no more than 10 percent of the amount specified in paragraph (3)(A) for the State for any fiscal period shall be used for such administrative expenses; and
(C)meets such other criteria as the Secretary may establish.
(3)(A)The amount specified in this paragraph for a State for a year is equal to the product of—
(i)the aggregate amount specified in subparagraph (B); and
(ii)the ratio (as estimated by the Secretary) of—
(I)the number of individuals who are entitled to benefits under part A 1 or enrolled under part B 1 and who reside in the State (as determined by the Secretary based on the most recent available data before the beginning of the year); to
(II)the sum of such numbers for all States that submit a plan described in paragraph (2).
(B)The aggregate amount specified in this subparagraph for—
(i)the last 3 quarters of fiscal year 2006, is equal to $28,125,000;
(ii)fiscal year 2007, is equal to $37,500,000; or
(iii)a subsequent year, is equal to the aggregate amount specified in this subparagraph for the previous year increased by annual percentage increase specified in section 1395w–102(b)(6) of this title for the year involved.
(4)Notwithstanding paragraph (1)(B), in the case that Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, or American Samoa establishes and submits to the Secretary a plan described in paragraph (2) with respect to any of fiscal years 2020 through 2021, the amount specified for such a year in paragraph (3) for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, or American Samoa, as the case may be, shall be taken into account in applying, as applicable, subparagraph (A)(ii), (B)(ii), (C)(ii), (D)(ii), or (E)(ii) of section 1308(g)(2) of this title for such year.
(5)The Secretary shall submit to Congress a report on the application of this subsection and may include in the report such recommendations as the Secretary deems appropriate.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
No act with the title Federal Claims Collection Act of 1996, referred to in subsec. (c)(1)(C), has been enacted. However, Pub. L. 89–508, July 19, 1966, 80 Stat. 308, was known as the Federal Claims Collection Act of 1966. section 2, 3, and 5 of Pub. L. 89–508, which enacted section 951, 952, and 954, respectively, of former Title 31, Money and Finance, were repealed by Pub. L. 97–258, § 5(b), Sept. 13, 1982, 96 Stat. 877, the first section of which enacted Title 31, Money and Finance. For disposition of sections of former Title 31 into revised Title 31, see Table preceding section 101 of Title 31. For complete classification of Pub. L. 89–508 to the Code, see Tables. Parts A and B, referred to in subsec. (e)(3)(A)(ii)(I), probably means parts A and B of subchapter XVIII of this chapter. This subchapter does not contain parts.
Prior Provisions
A prior section 1935 of act Aug. 14, 1935, was renumbered section 1939 and is classified to section 1396v of this title.
Amendments
2019—Subsec. (e)(1)(B). Pub. L. 116–94, § 202(b)(1), substituted “subject to paragraph (4), if the State” for “if the State”. Subsec. (e)(4), (5). Pub. L. 116–94, § 202(b)(2), (3), added par. (4) and redesignated former par. (4) as (5). 2008—Subsec. (a). Pub. L. 110–275 amended heading to include reference to medicare cost-sharing and added par. (4). 2005—Subsec. (c)(3)(B)(ii)(II). Pub. L. 109–91 inserted “, including drugs described in subparagraph (K) of section 1396r–8(d)(2) of this title” after “section 1395w–102(e) of this title”. 2003—Subsec. (a). Pub. L. 108–173, § 103(d)(1)(A), inserted “subject to subsection (e)” after “section 1396b(a) of this title” in introductory provisions. Subsec. (c). Pub. L. 108–173, § 103(b), added subsec. (c). Subsec. (c)(1)(C). Pub. L. 108–173, § 103(d)(1)(B), which directed the amendment of subsec. (c)(1) by inserting “subject to subsection (e)” after “section 1396b(a)(1) of this title”, was executed by making the insertion after “section 1396b(a) of this title” in subpar. (C) to reflect the probable intent of Congress. Subsec. (d). Pub. L. 108–173, § 103(c), added subsec. (d). Subsec. (e). Pub. L. 108–173, § 103(d)(1)(C), added subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date
of 2008 AmendmentAmendment by Pub. L. 110–275 effective Jan. 1, 2010, see section 113(c) of Pub. L. 110–275, set out as a note under section 1320b–14 of this title.
Effective Date
of 2005 AmendmentAmendment by Pub. L. 109–91 applicable to drugs dispensed on or after Jan. 1, 2006, see section 104(d) of Pub. L. 109–91, set out as a note under section 1396b of this title.
Reference
Citations & Metadata
Citation
42 U.S.C. § 1396u–5
Title 42 — The Public Health and Welfare
Last Updated
Apr 6, 2026
Release point: 119-73