The Obama administration defends the health-care overhaul in the wake of projections by the Medicare Chief Actuary, which show that it would raise health costs by $311 billion and would shift 14 million people off of employer-provided insurance – and some of them onto Medicaid.

Creates a state option to cover childless adults though a Medicaid State Plan Amendment.

Creates a state option to provide Medicaid coverage for family planning services to certain low-income individuals through a Medicaid State Plan Amendment up to the highest level of eligibility for pregnant women.

Creates a new option for states to provide CHIP coverage to children of state employees eligible for health benefits if certain conditions are met.

Increase the Medicaid drug rebate percentage for brand name drugs to 23.1% (except the rebate for clotting factors and drugs approved exclusively for pediatric use increases to 17.1%); increase the Medicaid rebate for non-innovator, multiple source drugs to 13% of average manufacturer price; and extend the drug rebate to Medicaid managed care plans.

Require the Secretary of HHS to issue regulations to establish a process for public notice and comment for section 1115 waivers in Medicaid and CHIP.