Ill STAT. 514 PUBLIC LAW 105-33—AUG. 5, 1997 Reports. Effective date. California. 42 USC 1396r-4 note. allotment for the State (as reported by the State not later than January 1, 1997, on HCFA Form 64, and as approved by the Secretary).". (c) DESCRIPTION OF TARGETING PAYMENTS. —Section 1923(a)(2) (42 U.S.C. 1396r-4(a)(2)) is amended by adding at the end the following: "(D) A State plan under this title shall not be considered to meet the requirements of section 1902(a)(13)(A)(iv) (insofar as it requires payments to hospitals to take into account the situation of hospitals that serve a disproportionate number of low-income patients with special needs), as of October 1, 1998, unless the State has submitted to the Secretary by such date a description of the methodology used by the State to identify and to make payments to disproportionate share hospitals, including children's hospitals, on the basis of the proportion of low-income and medicaid patients served by such hospitals. The State shall provide an annual report to the Secretary describing the disproportionate share payments to each such disproportionate share hospital.". (d) DIRECT PAYMENT BY STATE FOR MANAGED CARE ENROLL- EES.— Section 1923 (42 U.S.C. 1396r-4) is amended by adding at the end the following: "(i) REQUIREMENT FOR DIRECT PAYMENT.— "(1) IN GENERAL. —No payment may be made under section 1903(a)(1) with respect to a payment adjustment made under this section, for services furnished by a hospital on or after October 1, 1997, with respect to individuals eligible for medical assistance under the State plan who are enrolled with a managed care entity (as defined in section 1932(a)(l)(B)) or under any other managed care arrangement unless a payment, equal to the amount of the payment adjustment— "(A) is made directly to the hospital by the State; and "(B) is not used to determine the amount of a prepaid capitation payment under the State plan to the entity or arrsingement with respect to such individuals. "(2) EXCEPTION FOR CURRENT ARRANGEMENTS. — Paragraph (1) shall not apply to a payment adjustment provided pursuant to a payment arrangement in effect on July 1, 1997.". (e) TRANSITION RULE. —Effective July 1, 1997, section 1923(g)(2)(A) of the Social Security Act (42 U.S.C. 1396r-4(g)(2)(A)) shall be applied to the State of California as though— (1) "(or that begins on or after July 1, 1997, and before July 1, 1999)" were inserted in such section after "January 1, 1995,"; and (2) "(or 175 percent in the case of a State fiscal year that begins on or after July 1, 1997, and before July 1, 1999)" were inserted in such section after "200 percent". SEC. 4722. TREATMENT OF STATE TAXES IMPOSED ON CERTAIN HOS- PITALS. (a) EXCEPTION FROM TAX DOES NOT DISQUALIFY AS BROAD- BASED TAX.— Section 1903(w)(3) (42 U.S.C. 1396b(w)(3)) is amended— (1) in subparagraph (B), by striking "and (E)" and inserting "(E), and (F)"; and (2) by adding at the end the following:
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