§ Repeals the funding of the Medicaid disproportionate share program through an assessment imposed against certain hospitals and hospital districts.

§ Requires the Texas Department of Health (TDH), subject to the availability of funds, to develop a plan to provide information and training about the requirements of a managed care plan to Medicaid recipients, providers, local health and human services agencies, and others in each service area in which TDH plans to provide medical assistance through a managed care plan. Outlines requirements of the plan.

§ Requires TDH to submit a semiannual report on the effectiveness of the plan to the lieutenant governor, the speaker of the house of representatives, the Senate Health and Human Services Committee, and the House Public Health Committee.

§ Requires TDH to review each organization contracted to provide Medicaid through a managed care plan to determine whether the organization is prepared to meet contractual obligations.

§ Requires the Health and Human Services Commission (HHSC) to evaluate the STAR + PLUS Medicaid managed care long-term care pilot project as part of its routine monitoring responsibilities. Requires the commission to submit a report on the evaluation.

§ Requires each managed care organization with which TDH contracts to submit an implementation plan containing specific elements. Requires status reports on the implementation plan.

§ Requires TDH to conduct a compliance and readiness review of each managed care organization that contracts with the state.

§ Authorizes TDH to delay enrollment of Medicaid recipients in a managed care plan if the review reveals that the managed care organization is not prepared to meet contractual obligations.

§ Requires HHSC, in cooperation with TDH, to take certain actions with regard to Medicaid health care services provided to children with special health care needs. The actions include:

§ monitoring and assessing Medicaid health care services provided to children with special health care needs;

§ adopting specific quality of care standards applicable to health care services provided under managed care plans; and

§ undertaking initiatives to develop, test, and implement optimal methods for delivery of appropriate, comprehensive, and cost-effective health care services under managed care plans.

§ Prohibits HHSC from requiring a child with special health care needs, who receives supplemental security income from the federal government, to enroll in a managed care plan to receive health care services provided under the state Medicaid program.

§ Authorizes HHSC to require children with special health care needs to enroll in a Medicaid managed care plan if it is determined that enrollment will improve the availability of appropriate and comprehensive health care services, and HHSC establishes procedures for exempting a child from required enrollment for good cause.

§ Requires HHSC to prescribe, by rule, qualifications for classifying a child as a "child with special health care needs," including qualifications for children with severe disabilities, medically complex or fragile conditions, and rare, complex, or chronic health care conditions likely to last at least one year and result in limitations of function and activities in comparison with healthy children of the same age.

§ Clarifies that certain health care providers in an area must be included in the Medicaid managed care provider network of the Health and Human Services Commission, each intergovernmental initiative, and each managed care organization for a minimum three-year period.

§ Requires these health care providers to have provided a significant level of care to Medicaid and charity patients during the 12 months preceding the date of implementation.

§ Requires TDH to establish procedures and formulas for allocating federal Medicaid funds to support graduate medical education.

§ Outlines how TDH is to allocate the funds. Requires TDH to consult with the Texas Higher Education Coordinating Board (THECB) before adopting or revising a formula and specifies the formula for teaching hospitals.

§ Requires THECB to administer a program to support graduate medical education programs consistent with Texas' needs for graduate medical education and training of resident physicians in accredited residency programs in appropriate fields and specialties, including primary care specialties.

§ Authorizes THECB to make grants or formula distributions to support appropriate graduate medical education programs and activities for which adequate funds are not otherwise available, or to foster new or expanded graduate medical education programs or activities that will address the state's needs for graduate medical education.

§ Requires THECB to appoint an advisory committee for developing and administering the program, and outlines the membership of the advisory committee.

§ Requires HHSC to develop and implement a system to reimburse providers of services under the state Medicaid program for services performed using telemedicine.

§ Requires HHSC to encourage teaching hospitals, small rural hospitals, federally qualified health centers, and state-owned health care facilities to participate as telemedicine service providers in the health care delivery system.

§ Requires the Texas Tech University Health Sciences Center to contact the Health Care Financing Administration regarding approval of the federal waiver to allow reimbursement for telemedicine services provided under the Medicare program.

§ Outlines provisions regarding the authority of HHSC to administer and operate the Medicaid program.

§ Requires HHSC or an agency operating part of the state Medicaid managed care program to implement the Medicaid managed care program as part of the health care delivery system developed by contracting with managed care organizations in a manner that achieves certain goals.

§ Requires HHSC, in awarding contracts to managed care organizations, to give preference to organizations that have significant participation in the organization's provider network for each health care provider in certain regions, to give extra consideration to organizations that agree to assure continuity of care for a certain period, and to consider the need to use different managed care plans to meet the needs of different populations.

§ Requires HHSC to contract with at least one managed care organization in a region that is licensed under the Texas Health Maintenance Organization Act to provide health care in the region in providing health services through Medicaid managed care to participants in a health care service region.

§ Requires HHSC to review each managed care organization that contracts with HHSC to determine whether the organization is prepared to meet its contractual obligations.

§ Requires HHSC to establish marketing guidelines for managed care organizations that contract with HHSC.

§ Requires HHSC to ensure that managed care organizations develop special disease management programs to address chronic health conditions.

§ Authorizes HHSC, in conjunction with an academic center, to study the treatment of indigent populations to develop special protocols.