(a)

1. (1) All fees required to be paid to the state pursuant to this article shall be paid in the form of remittances payable to the department.
2. (2) The department shall directly transmit the fee payments to the Treasurer to be deposited in the fund. Notwithstanding Section 16305.7 of the Government Code, any interest and dividends earned on deposits in the fund from the proceeds of the fee assessed pursuant to this article shall be retained in the fund for purposes specified in subdivision (b).

(b)

1. (1) Notwithstanding subdivision (c) of Section 14167.35, subdivision (b) of Section 14168.33, and subdivision (b) of Section 14169.33, all funds from the proceeds of the fee assessed pursuant to this article in the fund, together with any interest and dividends earned on money in the fund, shall continue to be used exclusively to enhance federal financial participation for hospital services under the Medi-Cal program, to provide additional reimbursement to, and to support quality improvement efforts of, hospitals, and to minimize uncompensated care provided by hospitals to uninsured patients, as well as to pay for the state’s administrative costs and to provide funding for children’s health coverage, in the following order of priority:

   1. (A)

      1. (i) To pay for the department’s staffing and administrative costs directly attributable to implementing this article, not to exceed two hundred fifty thousand dollars ($250,000), except as provided in clause (ii), for each subject fiscal quarter, exclusive of any federal matching funds.
      2. (ii) Notwithstanding any other law, during any fiscal quarter for which the department incurs staffing or administrative costs due to the implementation of the federal Medicaid pass-through payment requirements codified in Section 438.6 of Title 42 of the Code of Federal Regulations as of March 20, 2017, or other federal requirements imposed as of the effective date of the act that added this clause, which significantly impact the implementation of this article, to pay for the department’s staffing and administrative costs that are directly attributable to implementing this article, not to exceed five hundred thousand dollars ($500,000) for each subject fiscal quarter, exclusive of any federal matching funds.
   2. (B) To pay for the health care coverage, as described in subdivision (g), except that for the two subject fiscal quarters in the 2013–14 fiscal year, the amount for children’s health care coverage shall be one hundred fifty-five million dollars ($155,000,000) for each subject fiscal quarter, exclusive of any federal matching funds.
   3. (C) To make increased capitation payments to managed health care plans pursuant to this article and Section 14169.82, including the nonfederal share of capitation payments to managed health care plans pursuant to this article and Section 14169.82 for services provided to individuals who meet the eligibility requirements in Section 1902(a)(10)(A)(i)(VIII) of Title XIX of the federal Social Security Act (42 U.S.C. Sec. 1396a(a)(10)(A)(i)(VIII)), and who meet the conditions described in Section 1905(y) of the federal Social Security Act (42 U.S.C. Sec. 1396d(y)).
   4. (D) To make increased payments and direct grants to hospitals pursuant to this article and Section 14169.83, including the nonfederal share of payments to hospitals under this article and Section 14169.83 for services provided to individuals who meet the eligibility requirements in Section 1902(a)(10)(A)(i)(VIII) of Title XIX of the federal Social Security Act (42 U.S.C. Sec. 1396a(a)(10)(A)(i)(VIII)), and who meet the conditions described in Section 1905(y) of the federal Social Security Act (42 U.S.C. Sec. 1396d(y)).
2. (2) Notwithstanding subdivision (c) of Section 14167.35, subdivision (b) of Section 14168.33, and subdivision (b) of Section 14169.33, and notwithstanding Section 13340 of the Government Code, the moneys in the fund shall be continuously appropriated during the first program period only, without regard to fiscal year, for the purposes of this article, Article 5.229 (commencing with Section 14169.31), Article 5.228 (commencing with Section 14169.1), Article 5.227 (commencing with Section 14168.31), former Article 5.226 (commencing with Section 14168.1), former Article 5.22 (commencing with Section 14167.31), and former Article 5.21 (commencing with Section 14167.1).
3. (3) Notwithstanding any other law, for the second program period and subsequent program periods, the moneys in the fund shall be continuously appropriated, without regard to fiscal year, for the purposes of this article and Sections 14169.82 and 14169.83.

(g)

1. (1) For purposes of this subdivision, the following definitions shall apply:

   1. (A) “Actual net benefit” means the net benefit determined by the department for a net benefit period after the conclusion of the net benefit period using payments and grants actually made, and fees actually collected, for the net benefit period.
   2. (B) “Aggregate fees” means the aggregate fees collected from hospitals under this article.
   3. (C) “Aggregate payments” means the aggregate payments and grants made directly or indirectly to hospitals under this article, including payments and grants described in Sections 14169.54, 14169.55, 14169.57, and 14169.58, and subdivision (b) of Section 14169.82.
   4. (D) “Net benefit” means the aggregate payments for a net benefit period minus the aggregate fees for the net benefit period.
   5. (E) “Net benefit period” means a subject fiscal year or portion thereof that is in a program period and begins on or after July 1, 2014.
   6. (F) “Preliminary net benefit” means the net benefit determined by the department for a net benefit period prior to the beginning of that net benefit period using estimated or projected data.
2. (2) The amount of funding provided for children’s health care coverage under subdivision (b) for a net benefit period shall be equal to 24 percent of the net benefit for that net benefit period.
3. (3) The department shall determine the preliminary net benefit for all net benefit periods in the first program period before July 1, 2014. The department shall determine the preliminary net benefit for all net benefit periods in a subsequent program period before the beginning of the program period.
4. (4) The department shall determine the actual net benefit and make the reconciliation described in paragraph (5) for each net benefit period within six months after the date determined by the department pursuant to subdivision (h).
5. (5) For each net benefit period, the department shall reconcile the amount of moneys in the fund used for children’s health coverage based on the preliminary net benefit with the amount of the fund that may be used for children’s health coverage under this subdivision based on the actual net benefit. For each net benefit period, any amounts that were in the fund and used for children’s health coverage in excess of the 24 percent of the actual net benefit shall be returned to the fund, and the amount, if any, by which 24 percent of the actual net benefit exceeds 24 percent of the preliminary net benefit shall be available from the fund to the department for children’s health coverage. The department shall notify the Joint Legislative Budget Committee and the fiscal and appropriate policy committees of the Legislature of the results of the reconciliation for each net benefit period pursuant to this paragraph within five working days of performing the reconciliation.
6. (6) The department shall make all calculations and reconciliations required by this subdivision in consultation with the hospital community using data that the department determines is the best data reasonably available.