SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Keep Children Covered Act of 2006''.

SEC. 2. ELIMINATION OF SCHIP FUNDING SHORTFALLS FOR FISCAL YEAR 2007.

    (a) In General.--Section 2104 of the Social Security Act (42 U.S.C. 
1397dd) is amended--
            (1) in each of subsections (a), (b)(1), and (c)(1), by 
        striking ``subsection (d)'' and inserting ``subsections (d) and 
        (h)''; and
            (2) by adding at the end the following new subsection:
    ``(h) Special Rule for Redistribution of Unspent Fiscal Year 2004 
Allotments and Additional Allotments to Eliminate Fiscal Year 2007 
Funding Shortfalls.--
            ``(1) Special rule for redistribution of fiscal year 2004 
        allotments.--
                    ``(A) In general.--In the case of a State that 
                expends all of its allotment under subsection (b) or 
                (c) of this section for fiscal year 2004 by the end of 
                fiscal year 2006 and is an initial shortfall State 
                described in subparagraph (B), the Secretary shall 
                redistribute to the State under subsection (f) of this 
                section (from the fiscal year 2004 allotments of other 
                States) the following amount:
                            ``(i) State.--In the case of one of the 50 
                        States or the District of Columbia, the amount 
                        specified in subparagraph (C)(i) (less the 
                        total of the amounts under clause (ii)), 
                        multiplied by the ratio of the amount specified 
                        in subparagraph (C)(ii) for the State to the 
                        amount specified in subparagraph (C)(iii).
                            ``(ii) Territory.--In the case of a 
                        commonwealth or territory described in 
                        subsection (c)(3), an amount that bears the 
                        same ratio to 1.05 percent of the amount 
                        specified in subparagraph (C)(i) as the ratio 
                        of the commonwealth's or territory's fiscal 
                        year 2004 allotment under subsection (c) bears 
                        to the total of all such allotments for such 
                        fiscal year under such subsection.
                    ``(B) Initial shortfall state described.--For 
                purposes of subparagraph (A), an initial shortfall 
                State is a State with a State child health plan 
                approved under this title for which the Secretary 
                estimates, on the basis of the most recent data 
                available to the Secretary as of the date of the 
                enactment of this subsection, that the projected 
                Federal expenditures under such plan for such State for 
                fiscal year 2007 will exceed the sum of--
                            ``(i) the amount of the State's allotments 
                        for each of fiscal years 2005 and 2006 that 
                        will not be expended by the end of fiscal year 
                        2006; and
                            ``(ii) the amount of the State's allotment 
                        for fiscal year 2007.
                    ``(C) Amounts used in computing redistributions for 
                fiscal year 2004 allotments.--For purposes of 
                subparagraph (A)(i)--
                            ``(i) the amount specified in this clause 
                        is the total amount of unspent fiscal year 2004 
                        allotments available for redistribution under 
                        subsection (f);
                            ``(ii) the amount specified in this clause 
                        for an initial shortfall State is the amount 
                        the Secretary determines will eliminate the 
                        estimated shortfall described in subparagraph 
                        (B) for the State; and
                            ``(iii) the amount specified in this clause 
                        is the total sum of the amounts specified in 
                        clause (ii) for all initial shortfall States.
            ``(2) Additional allotments to eliminate fiscal year 2007 
        funding shortfalls remaining after redistribution of unspent 
        fiscal year 2004 allotments.--
                    ``(A) In general.--In addition to the allotments 
                provided under subsection (b) and (c) for fiscal year 
                2007, the Secretary shall allot to each remaining 
                shortfall State described in subparagraph (B) such 
                amount as the Secretary determines will eliminate the 
                estimated shortfall described in such subparagraph for 
                the State.
                    ``(B) Remaining shortfall state described.--For 
                purposes of subparagraph (A), a remaining shortfall 
                State is a State (including a commonwealth or territory 
                described in subsection (c)(3)) with a State child 
                health plan approved under this title for which the 
                Secretary estimates, on the basis of the most recent 
                data available to the Secretary as of the date of the 
                enactment of this subsection, that the projected 
                federal expenditures under such plan for such State for 
                fiscal year 2007 will exceed the sum of--
                            ``(i) the amount of the State's allotments 
                        for each of fiscal years 2005 and 2006 that 
                        will not be expended by the end of fiscal year 
                        2006;
                            ``(ii) the amount of the State's allotment 
                        for fiscal year 2007; and
                            ``(iii) the amount, if any, of unspent 
                        allotments for fiscal year 2004 that are to be 
                        redistributed to the State during fiscal year 
                        2007 in accordance with subsection (f) and 
                        paragraph (1).
                    ``(C) 1-year availability; no redistribution of 
                unexpended additional allotments.--Notwithstanding 
                subsections (e) and (f), amounts allotted to a 
                remaining shortfall State pursuant to this paragraph 
                shall only remain available for expenditure by the 
                State through September 30, 2007. Any amounts of such 
                allotments that remain unexpended as of such date shall 
                not be subject to redistribution under subsection (f) 
                and shall revert to the Treasury on October 1, 2007.
                    ``(D) Appropriation; allotment authority.--For the 
                purpose of providing additional allotments to remaining 
                shortfall States under this paragraph there is 
                appropriated, out of any funds in the Treasury not 
                otherwise appropriated, such sums as are necessary for 
                fiscal year 2007.''.
    (b) Extending Authority for Qualifying States to Use Certain Funds 
for Medicaid Expenditures.--Section 2105(g)(1)(A) of the Social 
Security Act (42 U.S.C. 1397ee(g)(1)(A)) is amended by striking ``or 
2005'' and inserting ``2005, or 2006''.
    (c) Effective Date.--The amendments made by this section apply to 
items and services furnished on or after October 1, 2006, without 
regard to whether or not regulations implementing such amendments have 
been issued.
    (d) Period of Effectiveness.--Section 2104(h)(2) of the Social 
Security Act (as added by subsection (a)) shall terminate on September 
30, 2007, and shall be considered to have expired notwithstanding 
section 257 of the Balanced Budget and Emergency Deficit Control Act of 
1985 (2 U.S.C. 907).
Keep Children Covered Act of 2006 - Amends title XXI (State Children's Health Insurance Program) (SCHIP) to: (1) establish a special rule for redistribution of unspent FY2004 allotments; (2) provide for additional allotments to eliminate FY2007 funding shortfalls remaining after redistribution of unspent FY2004 allotments; and (3) extend authority through FY2006 for qualifying states to use certain SCHIP funds for Medicaid expenditures.
A bill to amend title XXI of the Social Security Act to eliminate funding shortfalls for the State Children's Health Insurance Program (SCHIP) for fiscal year 2007.