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[109th Congress Public Law 171]
[From the U.S. Government Printing Office]

[DOCID: f:publ171.109]

[[Page 3]]

                      DEFICIT REDUCTION ACT OF 2005

[[Page 120 STAT. 4]]

Public Law 109-171
109th Congress

                                 An Act

 
    To provide for reconciliation pursuant to section 202(a) of the 
 concurrent resolution on the budget for fiscal year 2006 (H. Con. Res. 
                95). <<NOTE: Feb. 8, 2006 -  [S. 1932]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Deficit Reduction Act of 
2005. 42 USC 1305 note.>> assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Deficit Reduction Act of 2005''.

SEC. 2. TABLE OF TITLES.

    The table of titles is as follows:

                     TITLE I--AGRICULTURE PROVISIONS

           TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS

       TITLE III--DIGITAL TELEVISION TRANSITION AND PUBLIC SAFETY

                   TITLE IV--TRANSPORTATION PROVISIONS

                            TITLE V--MEDICARE

                      TITLE VI--MEDICAID AND SCHIP

             TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

          TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS

                       TITLE IX--LIHEAP PROVISIONS

                  TITLE X--JUDICIARY RELATED PROVISIONS

   TITLE <<NOTE: Agricultural Reconciliation Act of 2005. 7 USC 7901 
note.>> I--AGRICULTURE PROVISIONS

SECTION 1001. SHORT TITLE.

    This title may be cited as the ``Agricultural Reconciliation Act of 
2005''.

                     Subtitle A--Commodity Programs

SEC. 1101. NATIONAL DAIRY MARKET LOSS PAYMENTS.

    (a) <<NOTE: Effective dates.>> Amount.--Section 1502(c) of the Farm 
Security and Rural Investment Act of 2002 (7 U.S.C. 7982(c)) is amended 
by striking paragraph (3) and inserting the following new paragraph:
            ``(3)(A) during the period beginning on the first day of the 
        month the producers on a dairy farm enter into a contract under 
        this section and ending on September 30, 2005, 45 percent;
            ``(B) during the period beginning on October 1, 2005, and 
        ending on August 31, 2007, 34 percent; and

[[Page 120 STAT. 5]]

            ``(C) during the period beginning on September 1, 2007, 0 
        percent.''.

    (b) Duration.--Section 1502 of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 7982) is amended by striking ``2005'' 
each place it appears in subsections (f) and (g)(1) and inserting 
``2007''.
    (c) Conforming Amendments.--Section 1502 of the Farm Security and 
Rural Investment Act of 2002 (7 U.S.C. 7982) is amended--
            (1) in subsection (g)(1), by striking ``and subsection 
        (h)''; and
            (2) by striking subsection (h).

SEC. 1102. ADVANCE DIRECT PAYMENTS.

    (a) Covered Commodities.--Section 1103(d)(2) of the Farm Security 
and Rural Investment Act of 2002 (7 U.S.C. 7913(d)(2)) is amended in the 
first sentence by striking ``2007 crop years'' and inserting ``2005 crop 
years, up to 40 percent of the direct payment for a covered commodity 
for the 2006 crop year, and up to 22 percent of the direct payment for a 
covered commodity for the 2007 crop year,''.
    (b) Peanuts.--Section 1303(e)(2) of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 7953(e)(2)) is amended in the first 
sentence by striking ``2007 crop years'' and inserting ``2005 crop 
years, up to 40 percent of the direct payment for the 2006 crop year, 
and up to 22 percent of the direct payment for the 2007 crop year,''.

SEC. 1103. COTTON COMPETITIVENESS PROVISIONS.

    (a) Repeal of Authority To Issue Cotton User Marketing 
Certificates.--Section 1207 of the Farm Security and Rural Investment 
Act of 2002 (7 U.S.C. 7937) is amended--
            (1) by striking subsection (a); and
            (2) in subsection (b)(1)--
                    (A) in subparagraph (B), by striking ``, adjusted 
                for the value of any certificate issued under subsection 
                (a),''; and
                    (B) in subparagraph (C), by striking ``, for the 
                value of any certificates issued under subsection (a)''.

    (b) <<NOTE: 7 USC 7937 note.>> Effective Date.--The amendments made 
by this section take effect on August 1, 2006.

                        Subtitle B--Conservation

SEC. 1201. WATERSHED REHABILITATION PROGRAM.

    The <<NOTE: Termination date.>> authority to obligate funds 
previously made available under section 14(h)(1) of the Watershed 
Protection and Flood Prevention Act (16 U.S.C. 1012(h)(1)) for a fiscal 
year and unobligated as of October 1, 2006, is hereby cancelled 
effective on that date.

SEC. 1202. CONSERVATION SECURITY PROGRAM.

    (a) Extension.--Section 1238A(a) of the Food Security Act of 1985 
(16 U.S.C. 3838a(a)) is amended by striking ``2007'' and inserting 
``2011''.
    (b) Funding.--Section 1241(a)(3) of the Food Security Act of 1985 
(16 U.S.C. 3841(a)(3)) is amended by striking ``not more than 
$6,037,000,000'' and all that follows through ``2014.'' and inserting 
the following: ``not more than--

[[Page 120 STAT. 6]]

                    ``(A) $1,954,000,000 for the period of fiscal years 
                2006 through 2010; and
                    ``(B) $5,650,000,000 for the period of fiscal years 
                2006 through 2015.''.

SEC. 1203. ENVIRONMENTAL QUALITY INCENTIVES PROGRAM.

    (a) Extension.--Section 1240B(a)(1) of the Food Security Act of 1985 
(16 U.S.C. 3839aa-2(a)(1)) is amended by striking ``2007'' and inserting 
``2010''.
    (b) Limitation on Payments.--Section 1240G of the Food Security Act 
of 1985 (16 U.S.C. 3839aa-7) is amended by striking ``the period of 
fiscal years 2002 through 2007'' and inserting ``any six-year period''.
    (c) Funding.--Section 1241(a)(6) of the Food Security Act of 1985 
(16 U.S.C. 3841(a)(6)) is amended--
            (1) by striking ``and'' at the end of subparagraph (D); and
            (2) by striking subparagraph (E) and inserting the following 
        new subparagraphs:
                    ``(E) $1,270,000,000 in each of fiscal years 2007 
                through 2009; and
                    ``(F) $1,300,000,000 in fiscal year 2010.''.

                           Subtitle C--Energy

SEC. 1301. RENEWABLE ENERGY SYSTEMS AND ENERGY EFFICIENCY IMPROVEMENTS 
            PROGRAM.

    Section 9006(f) of the Farm Security and Rural Investment Act of 
2002 (7 U.S.C. 8106(f)) is amended by striking ``2007'' and inserting 
``2006 and $3,000,000 for fiscal year 2007''.

                      Subtitle D--Rural Development

SEC. 1401. ENHANCED ACCESS TO BROADBAND TELECOMMUNICATIONS SERVICES IN 
            RURAL AREAS.

    The <<NOTE: Termination date.>> authority to obligate funds 
previously made available under section 601(j)(1) of the Rural 
Electrification Act of 1936 for a fiscal year and unobligated as of 
October 1, 2006, is hereby cancelled effective on that date.

SEC. 1402. VALUE-ADDED AGRICULTURAL PRODUCT MARKET DEVELOPMENT GRANTS.

    The <<NOTE: Termination date.>> authority to obligate funds 
previously made available under section 231(b)(4) of the Agricultural 
Risk Protection Act of 2000 (Public Law 106-224; 7 U.S.C. 1621 note) for 
a fiscal year and unobligated as of October 1, 2006, is hereby cancelled 
effective on that date.

SEC. 1403. RURAL BUSINESS INVESTMENT PROGRAM.

    (a) Termination of Fiscal Year 2007 and Subsequent Funding.--
Subsection (a)(1) of section 384S of the Consolidated Farm and Rural 
Development Act (7 U.S.C. 2009cc-18) is amended by inserting after 
``necessary'' the following: ``through fiscal year 2006''.
    (b) <<NOTE: Termination date.>> Cancellation of Unobligated Prior-
Year Funds.--The authority to obligate funds previously made available 
under such

[[Page 120 STAT. 7]]

section and unobligated as of October 1, 2006, is hereby cancelled 
effective on that date.

SEC. 1404. RURAL BUSINESS STRATEGIC INVESTMENT GRANTS.

    The <<NOTE: Termination date.>> authority to obligate funds 
previously made available under section 385E of the Consolidated Farm 
and Rural Development Act and unobligated as of October 1, 2006, is 
hereby cancelled effective on that date.

SEC. 1405. RURAL FIREFIGHTERS AND EMERGENCY PERSONNEL GRANTS.

    (a) Termination of Fiscal Year 2007 Funding.--Subsection (c) of 
section 6405 of the Farm Security and Rural Investment Act of 2002 (7 
U.S.C. 2655) is amended by striking ``2007'' and inserting ``2006''.
    (b) <<NOTE: Termination date.>> Cancellation of Unobligated Prior-
Year Funds.--The authority to obligate funds previously made available 
under such section for a fiscal year and unobligated as of October 1, 
2006, is hereby cancelled effective on that date.

                          Subtitle E--Research

SEC. 1501. INITIATIVE FOR FUTURE FOOD AND AGRICULTURE SYSTEMS.

    (a) Termination of Fiscal Year 2007, 2008, and 2009 Transfers.--
Subsection (b)(3)(D) of section 401 of the Agricultural Research, 
Extension, and Education Reform Act of 1998 (7 U.S.C. 7621) is amended 
by striking ``2006'' and inserting ``2009''.
    (b) Termination of Multi-Year Availability of Fiscal Year 2006 
Funds.--Paragraph (6) of subsection (f) of such section is amended to 
read as follows:
            ``(6) <<NOTE: Effective dates.>> Availability of funds.--
                    ``(A) Two-year availability.--Except as provided in 
                subparagraph (B), funds for grants under this section 
                shall be available to the Secretary for obligation for a 
                2-year period beginning on the date of the transfer of 
                the funds under subsection (b).
                    ``(B) Exception for fiscal year 2006 transfer.--In 
                the case of the funds required to be transferred by 
                subsection (b)(3)(C), the funds shall be available to 
                the Secretary for obligation for the 1-year period 
                beginning on October 1, 2005.''

           TITLE II--HOUSING AND DEPOSIT INSURANCE PROVISIONS

                    Subtitle A--FHA Asset Disposition

SEC. 2001. <<NOTE: 12 USC 1701z-11 note.>> DEFINITIONS.

    For purposes of this subtitle, the following definitions shall 
apply:
            (1) The term ``affordability requirements'' means any 
        requirements or restrictions imposed by the Secretary, at the 
        time of sale, on a multifamily real property or a multifamily

[[Page 120 STAT. 8]]

        loan, such as use restrictions, rent restrictions, and 
        rehabilitation requirements.
            (2) The term ``discount sale'' means the sale of a 
        multifamily real property in a transaction, such as a negotiated 
        sale, in which the sale price is lower than the property market 
        value and is set outside of a competitive bidding process that 
        has no affordability requirements.
            (3) The term ``discount loan sale'' means the sale of a 
        multifamily loan in a transaction, such as a negotiated sale, in 
        which the sale price is lower than the loan market value and is 
        set outside of a competitive bidding process that has no 
        affordability requirements.
            (4) The term ``loan market value'' means the value of a 
        multifamily loan, without taking into account any affordability 
        requirements.
            (5) The term ``multifamily real property'' means any rental 
        or cooperative housing project of 5 or more units owned by the 
        Secretary that prior to acquisition by the Secretary was 
        security for a loan or loans insured under title II of the 
        National Housing Act.
            (6) The term ``multifamily loan'' means a loan held by the 
        Secretary and secured by a multifamily rental or cooperative 
        housing project of 5 or more units that was formerly insured 
        under title II of the National Housing Act.
            (7) The term ``property market value'' means the value of a 
        multifamily real property for its current use, without taking 
        into account any affordability requirements.
            (8) The term ``Secretary'' means the Secretary of Housing 
        and Urban Development.

SEC. 2002. <<NOTE: 12 USC 1701z-11 note.>> APPROPRIATED FUNDS 
            REQUIREMENT FOR BELOW-MARKET SALES.

    (a) Discount Sales.--Notwithstanding any other provision of law, 
except for affordability requirements for the elderly and disabled 
required by statute, disposition by the Secretary of a multifamily real 
property during fiscal years 2006 through 2010 through a discount sale 
under sections 207(l) or 246 of the National Housing Act (12 U.S.C. 
1713(l), 1715z-11), section 203 of the Housing and Community Development 
Amendments of 1978 (12 U.S.C. 1701z-11), or section 204 of the 
Departments of Veterans Affairs and Housing and Urban Development, and 
Independent Agencies Appropriations Act, 1997 (12 U.S.C. 1715z-11a), 
shall be subject to the availability of appropriations to the extent 
that the property market value exceeds the sale proceeds. If the 
multifamily real property is sold, during such fiscal years, for an 
amount equal to or greater than the property market value then the 
transaction is not subject to the availability of appropriations.
    (b) Discount Loan Sales.--Notwithstanding any other provision of law 
and in accordance with the Federal Credit Reform Act of 1990 (2 U.S.C. 
661 et seq.), a discount loan sale during fiscal years 2006 through 2010 
under section 207(k) of the National Housing Act (12 U.S.C. 1713(k)), 
section 203(k) of the Housing and Community Development Amendments of 
1978 (12 U.S.C. 1701z-11(k)), or section 204(a) of the Departments of 
Veterans Affairs and Housing and Urban Development, and Independent 
Agencies Appropriations Act, 1997 (12 U.S.C. 1715z-11a(a)), shall be 
subject to the availability of appropriations to the extent that

[[Page 120 STAT. 9]]

the loan market value exceeds the sale proceeds. If the multifamily loan 
is sold, during such fiscal years, for an amount equal to or greater 
than the loan market value then the transaction is not subject to the 
availability of appropriations.
    (c) Applicability.--This section shall not apply to any transaction 
that formally commences within one year prior to the enactment of this 
section.

SEC. 2003. UP-FRONT GRANTS.

    (a) 1997 Act.--Section 204(a) of the Departments of Veterans Affairs 
and Housing and Urban Development, and Independent Agencies 
Appropriations Act, 1997 (12 U.S.C. 1715z-11a(a)) is amended by adding 
at the end the following new sentence: ``A grant provided under this 
subsection during fiscal years 2006 through 2010 shall be available only 
to the extent that appropriations are made in advance for such purposes 
and shall not be derived from the General Insurance Fund.''.
    (b) 1978 Act.--Section 203(f)(4) of the Housing and Community 
Development Amendments of 1978 (12 U.S.C. 1701z-11(f)(4)) is amended by 
adding at the end the following new sentence: ``This paragraph shall be 
effective during fiscal years 2006 through 2010 only to the extent that 
such budget authority is made available for use under this paragraph in 
advance in appropriation Acts.''.
    (c) <<NOTE: 12 USC 1701z-11 note.>> Applicability.--The amendments 
made by this section shall not apply to any transaction that formally 
commences within one year prior to the enactment of this section.

Subtitle <<NOTE: Federal Deposit Insurance Reform Act of 2005. Banks and 
banking. 12 USC 1811 note. 12 USC 1821 note.>> B--Deposit Insurance

SEC. 2101. SHORT TITLE.

    This subtitle may be cited as the ``Federal Deposit Insurance Reform 
Act of 2005''.

SEC. 2102. MERGING THE BIF AND SAIF.

    (a) In General.--
            (1) Merger.--The Bank Insurance Fund and the Savings 
        Association Insurance Fund shall be merged into the Deposit 
        Insurance Fund.
            (2) Disposition of assets and liabilities.--All assets and 
        liabilities of the Bank Insurance Fund and the Savings 
        Association Insurance Fund shall be transferred to the Deposit 
        Insurance Fund.
            (3) No separate existence.--The separate existence of the 
        Bank Insurance Fund and the Savings Association Insurance Fund 
        shall cease on the effective date of the merger thereof under 
        this section.

    (b) Repeal of Outdated Merger Provision.--Section 2704 of the 
Deposit Insurance Funds Act of 1996 (12 U.S.C. 1821 note) is repealed.
    (c) Effective Date.--This section shall take effect no later than 
the first day of the first calendar quarter that begins after the end of 
the 90-day period beginning on the date of the enactment of this Act.

SEC. 2103. INCREASE IN DEPOSIT INSURANCE COVERAGE.

    (a) In General.--Section 11(a)(1) of the Federal Deposit Insurance 
Act (12 U.S.C. 1821(a)(1)) is amended--

[[Page 120 STAT. 10]]

            (1) by striking subparagraph (B) and inserting the following 
        new subparagraph:
                    ``(B) Net amount of insured deposit.--The net amount 
                due to any depositor at an insured depository 
                institution shall not exceed the standard maximum 
                deposit insurance amount as determined in accordance 
                with subparagraphs (C), (D), (E) and (F) and paragraph 
                (3).''; and
            (2) by adding at the end the following new subparagraphs:
                    ``(E) Standard maximum deposit insurance amount 
                defined.--For purposes of this Act, the term `standard 
                maximum deposit insurance amount' means $100,000, 
                adjusted as provided under subparagraph (F) after March 
                31, 2010.
                    ``(F) Inflation adjustment.--
                          ``(i) <<NOTE: Deadlines.>> In general.--By 
                      April 1 of 2010, and the 1st day of each 
                      subsequent 5-year period, the Board of Directors 
                      and the National Credit Union Administration Board 
                      shall jointly consider the factors set forth under 
                      clause (v), and, upon determining that an 
                      inflation adjustment is appropriate, shall jointly 
                      prescribe the amount by which the standard maximum 
                      deposit insurance amount and the standard maximum 
                      share insurance amount (as defined in section 
                      207(k) of the Federal Credit Union Act) applicable 
                      to any depositor at an insured depository 
                      institution shall be increased by calculating the 
                      product of--
                                    ``(I) $100,000; and
                                    ``(II) the ratio of the published 
                                annual value of the Personal Consumption 
                                Expenditures Chain-Type Price Index (or 
                                any successor index thereto), published 
                                by the Department of Commerce, for the 
                                calendar year preceding the year in 
                                which the adjustment is calculated under 
                                this clause, to the published annual 
                                value of such index for the calendar 
                                year preceding the date this 
                                subparagraph takes effect under the 
                                Federal Deposit Insurance Reform Act of 
                                2005.
                      The values used in the calculation under subclause 
                      (II) shall be, as of the date of the calculation, 
                      the values most recently published by the 
                      Department of Commerce.
                          ``(ii) Rounding.--If the amount determined 
                      under clause (ii) for any period is not a multiple 
                      of $10,000, the amount so determined shall be 
                      rounded down to the nearest $10,000.
                          ``(iii) Publication and report to the 
                      congress.--Not later than April 5 of any calendar 
                      year in which an adjustment is required to be 
                      calculated under clause (i) to the standard 
                      maximum deposit insurance amount and the standard 
                      maximum share insurance amount under such clause, 
                      the Board of Directors and the National Credit 
                      Union Administration Board shall--
                                    ``(I) <<NOTE: Federal Register, 
                                publication.>> publish in the Federal 
                                Register the standard maximum deposit 
                                insurance amount, the standard maximum 
                                share insurance amount, and the amount 
                                of coverage under paragraph (3)(A)

[[Page 120 STAT. 11]]

                                and section 207(k)(3) of the Federal 
                                Credit Union Act, as so calculated; and
                                    ``(II) jointly submit a report to 
                                the Congress containing the amounts 
                                described in subclause (I).
                          ``(iv) <<NOTE: Effective dates.>> 6-month 
                      implementation period.--Unless an Act of Congress 
                      enacted before July 1 of the calendar year in 
                      which an adjustment is required to be calculated 
                      under clause (i) provides otherwise, the increase 
                      in the standard maximum deposit insurance amount 
                      and the standard maximum share insurance amount 
                      shall take effect on January 1 of the year 
                      immediately succeeding such calendar year.
                          ``(v) Inflation adjustment consideration.--In 
                      making any determination under clause (i) to 
                      increase the standard maximum deposit insurance 
                      amount and the standard maximum share insurance 
                      amount, the Board of Directors and the National 
                      Credit Union Administration Board shall jointly 
                      consider--
                                    ``(I) the overall state of the 
                                Deposit Insurance Fund and the economic 
                                conditions affecting insured depository 
                                institutions;
                                    ``(II) potential problems affecting 
                                insured depository institutions; or
                                    ``(III) whether the increase will 
                                cause the reserve ratio of the fund to 
                                fall below 1.15 percent of estimated 
                                insured deposits.''.

    (b) Coverage for Certain Employee Benefit Plan Deposits.--Section 
11(a)(1)(D) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(a)(1)(D)) is amended to read as follows:
                    ``(D) Coverage for certain employee benefit plan 
                deposits.--
                          ``(i) Pass-through insurance.--The Corporation 
                      shall provide pass-through deposit insurance for 
                      the deposits of any employee benefit plan.
                          ``(ii) Prohibition on acceptance of benefit 
                      plan deposits.--An insured depository institution 
                      that is not well capitalized or adequately 
                      capitalized may not accept employee benefit plan 
                      deposits.
                          ``(iii) Definitions.--For purposes of this 
                      subparagraph, the following definitions shall 
                      apply:
                                    ``(I) Capital standards.--The terms 
                                `well capitalized' and `adequately 
                                capitalized' have the same meanings as 
                                in section 38.
                                    ``(II) Employee benefit plan.--The 
                                term `employee benefit plan' has the 
                                same meaning as in paragraph (5)(B)(ii), 
                                and includes any eligible deferred 
                                compensation plan described in section 
                                457 of the Internal Revenue Code of 
                                1986.
                                    ``(III) Pass-through deposit 
                                insurance.--The term `pass-through 
                                deposit insurance' means, with respect 
                                to an employee benefit plan, deposit 
                                insurance coverage based on the interest 
                                of each participant, in accordance with 
                                regulations issued by the 
                                Corporation.''.

    (c) Increased Amount of Deposit Insurance for Certain Retirement 
Accounts.--Section 11(a)(3)(A) of the Federal Deposit Insurance Act (12 
U.S.C. 1821(a)(3)(A)) is amended by striking

[[Page 120 STAT. 12]]

``$100,000'' and inserting ``$250,000 (which amount shall be subject to 
inflation adjustments as provided in paragraph (1)(F), except that 
$250,000 shall be substituted for $100,000 wherever such term appears in 
such paragraph)''.
    (d) <<NOTE: 12 USC 1821 note.>> Effective Date.--This section and 
the amendments made by this section shall take effect on the date the 
final regulations required under section 9(a)(2) take effect.

SEC. 2104. SETTING ASSESSMENTS AND REPEAL OF SPECIAL RULES RELATING TO 
            MINIMUM ASSESSMENTS AND FREE DEPOSIT INSURANCE.

    (a) Setting Assessments.--Section 7(b)(2) of the Federal Deposit 
Insurance Act (12 U.S.C. 1817(b)(2)) is amended--
            (1) by striking subparagraphs (A) and (B) and inserting the 
        following new subparagraphs:
                    ``(A) In general.--The Board of Directors shall set 
                assessments for insured depository institutions in such 
                amounts as the Board of Directors may determine to be 
                necessary or appropriate, subject to subparagraph (D).
                    ``(B) Factors to be considered.--In setting 
                assessments under subparagraph (A), the Board of 
                Directors shall consider the following factors:
                          ``(i) The estimated operating expenses of the 
                      Deposit Insurance Fund.
                          ``(ii) The estimated case resolution expenses 
                      and income of the Deposit Insurance Fund.
                          ``(iii) The projected effects of the payment 
                      of assessments on the capital and earnings of 
                      insured depository institutions.
                          ``(iv) The risk factors and other factors 
                      taken into account pursuant to paragraph (1) under 
                      the risk-based assessment system, including the 
                      requirement under such paragraph to maintain a 
                      risk-based system.
                          ``(v) Any other factors the Board of Directors 
                      may determine to be appropriate.''; and
            (2) by inserting after subparagraph (C) the following new 
        subparagraph:
                    ``(D) No discrimination based on size.--No insured 
                depository institution shall be barred from the lowest-
                risk category solely because of size.''.

    (b) Assessment Recordkeeping Period Shortened.--Paragraph (5) of 
section 7(b) of the Federal Deposit Insurance Act (12 U.S.C. 1817(b)) is 
amended to read as follows:
            ``(5) Depository institution required to maintain 
        assessment-related records.--Each insured depository institution 
        shall maintain all records that the Corporation may require for 
        verifying the correctness of any assessment on the insured 
        depository institution under this subsection until the later 
        of--
                    ``(A) the end of the 3-year period beginning on the 
                due date of the assessment; or
                    ``(B) in the case of a dispute between the insured 
                depository institution and the Corporation with respect 
                to such assessment, the date of a final determination of 
                any such dispute.''.

[[Page 120 STAT. 13]]

    (c) Increase in Fees for Late Assessment Payments.--Subsection (h) 
of section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828(h)) 
is amended to read as follows:
    ``(h) Penalty for Failure to Timely Pay Assessments.--
            ``(1) In general.--Subject to paragraph (3), any insured 
        depository institution which fails or refuses to pay any 
        assessment shall be subject to a penalty in an amount of not 
        more than 1 percent of the amount of the assessment due for each 
        day that such violation continues.
            ``(2) Exception in case of dispute.--Paragraph (1) shall not 
        apply if--
                    ``(A) the failure to pay an assessment is due to a 
                dispute between the insured depository institution and 
                the Corporation over the amount of such assessment; and
                    ``(B) the insured depository institution deposits 
                security satisfactory to the Corporation for payment 
                upon final determination of the issue.
            ``(3) Special rule for small assessment amounts.--If the 
        amount of the assessment which an insured depository institution 
        fails or refuses to pay is less than $10,000 at the time of such 
        failure or refusal, the amount of any penalty to which such 
        institution is subject under paragraph (1) shall not exceed $100 
        for each day that such violation continues.
            ``(4) Authority to modify or remit penalty.--The 
        Corporation, in the sole discretion of the Corporation, may 
        compromise, modify or remit any penalty which the Corporation 
        may assess or has already assessed under paragraph (1) upon a 
        finding that good cause prevented the timely payment of an 
        assessment.''.

    (d) Statute of Limitations for Assessment Actions.--Subsection (g) 
of section 7 of the Federal Deposit Insurance Act (12 U.S.C. 1817(g)) is 
amended to read as follows:
    ``(g) Assessment Actions.--
            ``(1) In general.--The Corporation, in any court of 
        competent jurisdiction, shall be entitled to recover from any 
        insured depository institution the amount of any unpaid 
        assessment lawfully payable by such insured depository 
        institution.
            ``(2) <<NOTE: Applicability.>> Statute of limitations.--The 
        following provisions shall apply to actions relating to 
        assessments, notwithstanding any other provision in Federal law, 
        or the law of any State:
                    ``(A) Any action by an insured depository 
                institution to recover from the Corporation the overpaid 
                amount of any assessment shall be brought within 3 years 
                after the date the assessment payment was due, subject 
                to the exception in subparagraph (E).
                    ``(B) Any action by the Corporation to recover from 
                an insured depository institution the underpaid amount 
                of any assessment shall be brought within 3 years after 
                the date the assessment payment was due, subject to the 
                exceptions in subparagraphs (C) and (E).
                    ``(C) If an insured depository institution has made 
                a false or fraudulent statement with intent to evade any 
                or all of its assessment, the Corporation shall have 
                until 3 years after the date of discovery of the false 
                or fraudulent statement in which to bring an action to 
                recover the underpaid amount.

[[Page 120 STAT. 14]]

                    ``(D) Except as provided in subparagraph (C), 
                assessment deposit information contained in records no 
                longer required to be maintained pursuant to subsection 
                (b)(4) shall be considered conclusive and not subject to 
                change.
                    ``(E) Any action for the underpaid or overpaid 
                amount of any assessment that became due before the 
                amendment to this subsection under the Federal Deposit 
                Insurance Reform Act of 2005 took effect shall be 
                subject to the statute of limitations for assessments in 
                effect at the time the assessment became due.''.

    (e) <<NOTE: 12 USC 1817 note.>> Effective Date.--This section and 
the amendments made by this section shall take effect on the date that 
the final regulations required under section 9(a)(5) take effect.

SEC. 2105. REPLACEMENT OF FIXED DESIGNATED RESERVE RATIO WITH RESERVE 
            RANGE.

    (a) In General.--Section 7(b)(3) of the Federal Deposit Insurance 
Act (12 U.S.C. 1817(b)(3)) is amended to read as follows:
            ``(3) Designated reserve ratio.--
                    ``(A) Establishment.--
                          ``(i) In general.--Before the beginning of 
                      each calendar year, the Board of Directors shall 
                      designate the reserve ratio applicable with 
                      respect to the Deposit Insurance Fund and publish 
                      the reserve ratio so designated.
                          ``(ii) <<NOTE: Notice.>> Rulemaking 
                      requirement.--Any change to the designated reserve 
                      ratio shall be made by the Board of Directors by 
                      regulation after notice and opportunity for 
                      comment.
                    ``(B) Range.--The reserve ratio designated by the 
                Board of Directors for any year--
                          ``(i) may not exceed 1.5 percent of estimated 
                      insured deposits; and
                          ``(ii) may not be less than 1.15 percent of 
                      estimated insured deposits.
                    ``(C) Factors.--In designating a reserve ratio for 
                any year, the Board of Directors shall--
                          ``(i) take into account the risk of losses to 
                      the Deposit Insurance Fund in such year and future 
                      years, including historic experience and potential 
                      and estimated losses from insured depository 
                      institutions;
                          ``(ii) take into account economic conditions 
                      generally affecting insured depository 
                      institutions so as to allow the designated reserve 
                      ratio to increase during more favorable economic 
                      conditions and to decrease during less favorable 
                      economic conditions, notwithstanding the increased 
                      risks of loss that may exist during such less 
                      favorable conditions, as determined to be 
                      appropriate by the Board of Directors;
                          ``(iii) seek to prevent sharp swings in the 
                      assessment rates for insured depository 
                      institutions; and
                          ``(iv) take into account such other factors as 
                      the Board of Directors may determine to be 
                      appropriate, consistent with the requirements of 
                      this subparagraph.
                    ``(D) Publication of proposed change in ratio.--In 
                soliciting comment on any proposed change in the 
                designated reserve ratio in accordance with subparagraph 
                (A),

[[Page 120 STAT. 15]]

                the Board of Directors shall include in the published 
                proposal a thorough analysis of the data and projections 
                on which the proposal is based.''.

    (b) <<NOTE: 12 USC 1817 note.>> Effective Date.--This section and 
the amendments made by this section shall take effect on the date that 
the final regulations required under section 9(a)(1) take effect.

SEC. 2106. REQUIREMENTS APPLICABLE TO THE RISK-BASED ASSESSMENT SYSTEM.

    Section 7(b)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)(1)) is amended by adding at the end the following new 
subparagraphs:
                    ``(E) Information concerning risk of loss and 
                economic conditions.--
                          ``(i) Sources of information.--For purposes of 
                      determining risk of losses at insured depository 
                      institutions and economic conditions generally 
                      affecting depository institutions, the Corporation 
                      shall collect information, as appropriate, from 
                      all sources the Board of Directors considers 
                      appropriate, such as reports of condition, 
                      inspection reports, and other information from all 
                      Federal banking agencies, any information 
                      available from State bank supervisors, State 
                      insurance and securities regulators, the 
                      Securities and Exchange Commission (including 
                      information described in section 35), the 
                      Secretary of the Treasury, the Commodity Futures 
                      Trading Commission, the Farm Credit 
                      Administration, the Federal Trade Commission, any 
                      Federal reserve bank or Federal home loan bank, 
                      and other regulators of financial institutions, 
                      and any information available from credit rating 
                      entities, and other private economic or business 
                      analysts.
                          ``(ii) Consultation with federal banking 
                      agencies.--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), in assessing 
                                the risk of loss to the Deposit 
                                Insurance Fund with respect to any 
                                insured depository institution, the 
                                Corporation shall consult with the 
                                appropriate Federal banking agency of 
                                such institution.
                                    ``(II) Treatment on aggregate 
                                basis.--In the case of insured 
                                depository institutions that are well 
                                capitalized (as defined in section 38) 
                                and, in the most recent examination, 
                                were found to be well managed, the 
                                consultation under subclause (I) 
                                concerning the assessment of the risk of 
                                loss posed by such institutions may be 
                                made on an aggregate basis.
                          ``(iii) Rule of construction.--No provision of 
                      this paragraph shall be construed as providing any 
                      new authority for the Corporation to require 
                      submission of information by insured depository 
                      institutions to the Corporation.
                    ``(F) Modifications to the risk-based assessment 
                system allowed only after notice and comment.--In 
                revising or modifying the risk-based assessment system 
                at any time after the date of the enactment of the 
                Federal

[[Page 120 STAT. 16]]

                Deposit Insurance Reform Act of 2005, the Board of 
                Directors may implement such revisions or modification 
                in final form only after notice and opportunity for 
                comment.''.

SEC. 2107. REFUNDS, DIVIDENDS, AND CREDITS FROM DEPOSIT INSURANCE FUND.

    (a) In General.--Subsection (e) of section 7 of the Federal Deposit 
Insurance Act (12 U.S.C. 1817(e)) is amended to read as follows:
    ``(e) Refunds, Dividends, and Credits.--
            ``(1) Refunds of overpayments.--In the case of any payment 
        of an assessment by an insured depository institution in excess 
        of the amount due to the Corporation, the Corporation may--
                    ``(A) refund the amount of the excess payment to the 
                insured depository institution; or
                    ``(B) credit such excess amount toward the payment 
                of subsequent assessments until such credit is 
                exhausted.
            ``(2) Dividends from excess amounts in deposit insurance 
        fund.--
                    ``(A) Reserve ratio in excess of 1.5 percent of 
                estimated insured deposits.--If, at the end of a 
                calendar year, the reserve ratio of the Deposit 
                Insurance Fund exceeds 1.5 percent of estimated insured 
                deposits, the Corporation shall declare the amount in 
                the Fund in excess of the amount required to maintain 
                the reserve ratio at 1.5 percent of estimated insured 
                deposits, as dividends to be paid to insured depository 
                institutions.
                    ``(B) Reserve ratio equal to or in excess of 1.35 
                percent of estimated insured deposits and not more than 
                1.5 percent.--If, at the end of a calendar year, the 
                reserve ratio of the Deposit Insurance Fund equals or 
                exceeds 1.35 percent of estimated insured deposits and 
                is not more than 1.5 percent of such deposits, the 
                Corporation shall declare the amount in the Fund that is 
                equal to 50 percent of the amount in excess of the 
                amount required to maintain the reserve ratio at 1.35 
                percent of the estimated insured deposits as dividends 
                to be paid to insured depository institutions.
                    ``(C) Basis for distribution of dividends.--
                          ``(i) In general.--Solely for the purposes of 
                      dividend distribution under this paragraph, the 
                      Corporation shall determine each insured 
                      depository institution's relative contribution to 
                      the Deposit Insurance Fund (or any predecessor 
                      deposit insurance fund) for calculating such 
                      institution's share of any dividend declared under 
                      this paragraph, taking into account the factors 
                      described in clause (ii).
                          ``(ii) Factors for distribution.--In 
                      implementing this paragraph in accordance with 
                      regulations, the Corporation shall take into 
                      account the following factors:
                                    ``(I) The ratio of the assessment 
                                base of an insured depository 
                                institution (including any predecessor) 
                                on December 31, 1996, to the assessment 
                                base of all eligible insured depository 
                                institutions on that date.

[[Page 120 STAT. 17]]

                                    ``(II) The total amount of 
                                assessments paid on or after January 1, 
                                1997, by an insured depository 
                                institution (including any predecessor) 
                                to the Deposit Insurance Fund (and any 
                                predecessor deposit insurance fund).
                                    ``(III) That portion of assessments 
                                paid by an insured depository 
                                institution (including any predecessor) 
                                that reflects higher levels of risk 
                                assumed by such institution.
                                    ``(IV) Such other factors as the 
                                Corporation may determine to be 
                                appropriate.
                    ``(D) <<NOTE: Regulations.>> Notice and opportunity 
                for comment.--The Corporation shall prescribe by 
                regulation, after notice and opportunity for comment, 
                the method for the calculation, declaration, and payment 
                of dividends under this paragraph.
                    ``(E) Limitation.--The Board of Directors may 
                suspend or limit dividends paid under subparagraph (B), 
                if the Board determines in writing that--
                          ``(i) a significant risk of losses to the 
                      Deposit Insurance Fund exists over the next 1-year 
                      period; and
                          ``(ii) it is likely that such losses will be 
                      sufficiently high as to justify a finding by the 
                      Board that the reserve ratio should temporarily be 
                      allowed--
                                    ``(I) to grow without requiring 
                                dividends under subparagraph (B); or
                                    ``(II) to exceed the maximum amount 
                                established under subsection 
                                (b)(3)(B)(i).
                    ``(F) Considerations.--In making a determination 
                under subparagraph (E), the Board shall consider--
                          ``(i) national and regional conditions and 
                      their impact on insured depository institutions;
                          ``(ii) potential problems affecting insured 
                      depository institutions or a specific group or 
                      type of depository institution;
                          ``(iii) the degree to which the contingent 
                      liability of the Corporation for anticipated 
                      failures of insured institutions adequately 
                      addresses concerns over funding levels in the 
                      Deposit Insurance Fund; and
                          ``(iv) any other factors that the Board 
                      determines are appropriate.
                    ``(G) Review of determination.--
                          ``(i) Annual review.--A determination to 
                      suspend or limit dividends under subparagraph (E) 
                      shall be reviewed by the Board of Directors 
                      annually.
                          ``(ii) Action by board.--Based on each annual 
                      review under clause (i), the Board of Directors 
                      shall either renew or remove a determination to 
                      suspend or limit dividends under subparagraph (E), 
                      or shall make a new determination in accordance 
                      with this paragraph. Unless justified under the 
                      terms of the renewal or new determination, the 
                      Corporation shall be required to provide cash 
                      dividends under subparagraph (A) or (B), as 
                      appropriate.
            ``(3) One-time credit based on total assessment base at 
        year-end 1996.--

[[Page 120 STAT. 18]]

                    ``(A) In general.--Before the end of the 270-day 
                period beginning on the date of the enactment of the 
                Federal Deposit Insurance Reform Act of 2005, the Board 
                of Directors shall, by regulation after notice and 
                opportunity for comment, provide for a credit to each 
                eligible insured depository institution (or a successor 
                insured depository institution), based on the assessment 
                base of the institution on December 31, 1996, as 
                compared to the combined aggregate assessment base of 
                all eligible insured depository institutions, taking 
                into account such factors as the Board of Directors may 
                determine to be appropriate.
                    ``(B) Credit limit.--The aggregate amount of credits 
                available under subparagraph (A) to all eligible insured 
                depository institutions shall equal the amount that the 
                Corporation could collect if the Corporation imposed an 
                assessment of 10.5 basis points on the combined 
                assessment base of the Bank Insurance Fund and the 
                Savings Association Insurance Fund as of December 31, 
                2001.
                    ``(C) Eligible insured depository institution 
                defined.--For purposes of this paragraph, the term 
                `eligible insured depository institution' means any 
                insured depository institution that--
                          ``(i) was in existence on December 31, 1996, 
                      and paid a deposit insurance assessment prior to 
                      that date; or
                          ``(ii) is a successor to any insured 
                      depository institution described in clause (i).
                    ``(D) Application of credits.--
                          ``(i) In general.--Subject to clause (ii), the 
                      amount of a credit to any eligible insured 
                      depository institution under this paragraph shall 
                      be applied by the Corporation, subject to 
                      subsection (b)(3)(E), to the assessments imposed 
                      on such institution under subsection (b) that 
                      become due for assessment periods beginning after 
                      the effective date of regulations prescribed under 
                      subparagraph (A).
                          ``(ii) Temporary restriction on use of 
                      credits.--The amount of a credit to any eligible 
                      insured depository institution under this 
                      paragraph may not be applied to more than 90 
                      percent of the assessments imposed on such 
                      institution under subsection (b) that become due 
                      for assessment periods beginning in fiscal years 
                      2008, 2009, and 2010.
                          ``(iii) Regulations.--The regulations 
                      prescribed under subparagraph (A) shall establish 
                      the qualifications and procedures governing the 
                      application of assessment credits pursuant to 
                      clause (i).
                    ``(E) Limitation on amount of credit for certain 
                depository institutions.--In the case of an insured 
                depository institution that exhibits financial, 
                operational, or compliance weaknesses ranging from 
                moderately severe to unsatisfactory, or is not 
                adequately capitalized (as defined in section 38) at the 
                beginning of an assessment period, the amount of any 
                credit allowed under this paragraph against the 
                assessment on that depository institution for such 
                period may not exceed the amount calculated by applying 
                to that depository institution the average

[[Page 120 STAT. 19]]

                assessment rate on all insured depository institutions 
                for such assessment period.
                    ``(F) Successor defined.--The Corporation shall 
                define the term `successor' for purposes of this 
                paragraph, by regulation, and may consider any factors 
                as the Board may deem appropriate.
            ``(4) Administrative review.--
                    ``(A) In general.--The regulations prescribed under 
                paragraphs (2)(D) and (3) shall include provisions 
                allowing an insured depository institution a reasonable 
                opportunity to challenge administratively the amount of 
                the credit or dividend determined under paragraph (2) or 
                (3) for such institution.
                    ``(B) Administrative review.--Any review under 
                subparagraph (A) of any determination of the Corporation 
                under paragraph (2) or (3) shall be final and not 
                subject to judicial review.''.

    (b) Definition of Reserve Ratio.--Section 3(y) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(y)) (as amended by section 2105(b) 
of this subtitle) is amended by adding at the end the following new 
paragraph:
            ``(3) Reserve ratio.--The term `reserve ratio', when used 
        with regard to the Deposit Insurance Fund other than in 
        connection with a reference to the designated reserve ratio, 
        means the ratio of the net worth of the Deposit Insurance Fund 
        to the value of the aggregate estimated insured deposits.''.

SEC. 2108. DEPOSIT INSURANCE FUND RESTORATION PLANS.

    Section 7(b)(3) of the Federal Deposit Insurance Act (12 U.S.C. 
1817(b)(3)) (as amended by section 2105(a) of this subtitle) is amended 
by adding at the end the following new subparagraph:
                    ``(E) DIF restoration plans.--
                          ``(i) In general.--Whenever--
                                    ``(I) the Corporation projects that 
                                the reserve ratio of the Deposit 
                                Insurance Fund will, within 6 months of 
                                such determination, fall below the 
                                minimum amount specified in subparagraph 
                                (B)(ii) for the designated reserve 
                                ratio; or
                                    ``(II) the reserve ratio of the 
                                Deposit Insurance Fund actually falls 
                                below the minimum amount specified in 
                                subparagraph (B)(ii) for the designated 
                                reserve ratio without any determination 
                                under subclause (I) having been made,
                      the <<NOTE: Deadline.>> Corporation shall 
                      establish and implement a Deposit Insurance Fund 
                      restoration plan within 90 days that meets the 
                      requirements of clause (ii) and such other 
                      conditions as the Corporation determines to be 
                      appropriate.
                          ``(ii) Requirements of restoration plan.--A 
                      Deposit Insurance Fund restoration plan meets the 
                      requirements of this clause if the plan provides 
                      that the reserve ratio of the Fund will meet or 
                      exceed the minimum amount specified in 
                      subparagraph (B)(ii) for the designated reserve 
                      ratio before the end of the 5-year period 
                      beginning upon the implementation of the plan (or 
                      such longer period as the Corporation

[[Page 120 STAT. 20]]

                      may determine to be necessary due to extraordinary 
                      circumstances).
                          ``(iii) Restriction on assessment credits.--As 
                      part of any restoration plan under this 
                      subparagraph, the Corporation may elect to 
                      restrict the application of assessment credits 
                      provided under subsection (e)(3) for any period 
                      that the plan is in effect.
                          ``(iv) Limitation on restriction.--
                      Notwithstanding clause (iii), while any 
                      restoration plan under this subparagraph is in 
                      effect, the Corporation shall apply credits 
                      provided to an insured depository institution 
                      under subsection (e)(3) against any assessment 
                      imposed on the institution for any assessment 
                      period in an amount equal to the lesser of--
                                    ``(I) the amount of the assessment; 
                                or
                                    ``(II) the amount equal to 3 basis 
                                points of the institution's assessment 
                                base.
                          ``(v) <<NOTE: Deadline. Federal Register, 
                      publication.>> Transparency.--Not more than 30 
                      days after the Corporation establishes and 
                      implements a restoration plan under clause (i), 
                      the Corporation shall publish in the Federal 
                      Register a detailed analysis of the factors 
                      considered and the basis for the actions taken 
                      with regard to the plan.''.

SEC. 2109. <<NOTE: 12 USC 1817 note. Deadline.>> REGULATIONS REQUIRED.

    (a) In General.--Not later than 270 days after the date of the 
enactment of this Act, the Board of Directors of the Federal Deposit 
Insurance Corporation shall prescribe final regulations, after notice 
and opportunity for comment--
            (1) designating the reserve ratio for the Deposit Insurance 
        Fund in accordance with section 7(b)(3) of the Federal Deposit 
        Insurance Act (as amended by section 2105 of this subtitle);
            (2) implementing increases in deposit insurance coverage in 
        accordance with the amendments made by section 2103 of this 
        subtitle;
            (3) implementing the dividend requirement under section 
        7(e)(2) of the Federal Deposit Insurance Act (as amended by 
        section 2107 of this subtitle);
            (4) implementing the 1-time assessment credit to certain 
        insured depository institutions in accordance with section 
        7(e)(3) of the Federal Deposit Insurance Act, as amended by 
        section 2107 of this subtitle, including the qualifications and 
        procedures under which the Corporation would apply assessment 
        credits; and
            (5) providing for assessments under section 7(b) of the 
        Federal Deposit Insurance Act, as amended by this subtitle.

    (b) Transition Provisions.--
            (1) Continuation of existing assessment regulations.--No 
        provision of this subtitle or any amendment made by this 
        subtitle shall be construed as affecting the authority of the 
        Corporation to set or collect deposit insurance assessments 
        pursuant to any regulations in effect before the effective date 
        of the final regulations prescribed under subsection (a).
            (2) <<NOTE: Applicability.>> Treatment of dif members under 
        existing regulations.--As of the date of the merger of the Bank 
        Insurance Fund and the Savings Association Insurance Fund 
        pursuant

[[Page 120 STAT. 21]]

        to section 2102, the assessment regulations in effect 
        immediately before the date of the enactment of this Act shall 
        continue to apply to all members of the Deposit Insurance Fund, 
        until such regulations are modified by the Corporation, 
        notwithstanding that such regulations may refer to ``Bank 
        Insurance Fund members'' or ``Savings Association Insurance Fund 
        members''.

  TITLE <<NOTE: Digital Television Transition and Public Safety Act of 
 2005. 47 USC 309 note.>> III--DIGITAL TELEVISION TRANSITION AND PUBLIC 
SAFETY

SEC. 3001. SHORT TITLE; DEFINITION.

    (a) Short Title.--This title may be cited as the ``Digital 
Television Transition and Public Safety Act of 2005''.
    (b) Definition.--As used in this Act, the term ``Assistant 
Secretary'' means the Assistant Secretary for Communications and 
Information of the Department of Commerce.

SEC. 3002. ANALOG SPECTRUM RECOVERY: FIRM DEADLINE.

    (a) Amendments.--Section 309(j)(14) of the Communications Act of 
1934 (47 U.S.C. 309(j)(14)) is amended--
            (1) in subparagraph (A)--
                    (A) by inserting ``full-power'' before ``television 
                broadcast license''; and
                    (B) by striking ``December 31, 2006'' and inserting 
                ``February 17, 2009'';
            (2) by striking subparagraph (B);
            (3) in subparagraph (C)(i)(I), by striking ``or (B)'';
            (4) in subparagraph (D), by striking ``subparagraph (C)(i)'' 
        and inserting ``subparagraph (B)(i)''; and
            (5) by redesignating subparagraphs (C) and (D) as 
        subparagraphs (B) and (C), respectively.

    (b) Terminations of Analog Licenses and Broadcasting.--The Federal 
Communications Commission shall take such actions as are necessary--
            (1) to terminate all licenses for full-power television 
        stations in the analog television service, and to require the 
        cessation of broadcasting by full-power stations in the analog 
        television service, by February 18, 2009; and
            (2) to require by February 18, 2009, that all broadcasting 
        by Class A stations, whether in the analog television service or 
        digital television service, and all broadcasting by full-power 
        stations in the digital television service, occur only on 
        channels between channels 2 and 36, inclusive, or 38 and 51, 
        inclusive (between frequencies 54 and 698 megahertz, inclusive).

    (c) Conforming Amendments.--
            (1) Section 337(e) of the Communications Act of 1934 (47 
        U.S.C. 337(e)) is amended--
                    (A) in paragraph (1)--
                          (i) by striking ``channels 60 to 69'' and 
                      inserting ``channels 52 to 69'';
                          (ii) by striking ``person who'' and inserting 
                      ``full-power television station licensee that'';
                          (iii) by striking ``746 and 806 megahertz'' 
                      and inserting ``698 and 806 megahertz''; and

[[Page 120 STAT. 22]]

                          (iv) by striking ``the date on which the 
                      digital television service transition period 
                      terminates, as determined by the Commission'' and 
                      inserting ``February 17, 2009'';
                    (B) in paragraph (2), by striking ``746 megahertz'' 
                and inserting ``698 megahertz''.

SEC. 3003. AUCTION OF RECOVERED SPECTRUM.

    (a) Deadline for Auction.--Section 309(j) of the Communications Act 
of 1934 (47 U.S.C. 309(j)) is amended--
            (1) by redesignating the second paragraph (15) of such 
        section (as added by section 203(b) of the Commercial Spectrum 
        Enhancement Act (Public Law 108-494; 118 Stat. 3993)), as 
        paragraph (16) of such section; and
            (2) in the first paragraph (15) of such section (as added by 
        section 3(a) of the Auction Reform Act of 2002 (Public Law 107-
        195; 116 Stat. 716)), by adding at the end of subparagraph (C) 
        the following new clauses:
                          ``(v) Additional deadlines for recovered 
                      analog spectrum.--Notwithstanding subparagraph 
                      (B), the Commission shall conduct the auction of 
                      the licenses for recovered analog spectrum by 
                      commencing the bidding not later than January 28, 
                      2008, and shall deposit the proceeds of such 
                      auction in accordance with paragraph (8)(E)(ii) 
                      not later than June 30, 2008.
                          ``(vi) Recovered analog spectrum.--For 
                      purposes of clause (v), the term `recovered analog 
                      spectrum' means the spectrum between channels 52 
                      and 69, inclusive (between frequencies 698 and 806 
                      megahertz, inclusive) reclaimed from analog 
                      television service broadcasting under paragraph 
                      (14), other than--
                                    ``(I) the spectrum required by 
                                section 337 to be made available for 
                                public safety services; and
                                    ``(II) the spectrum auctioned prior 
                                to the date of enactment of the Digital 
                                Television Transition and Public Safety 
                                Act of 2005.''.

    (b) Extension of Auction Authority.--Section 309(j)(11) of such Act 
(47 U.S.C. 309(j)(11)) is amended by striking ``2007'' and inserting 
``2011''.

SEC. 3004. RESERVATION OF AUCTION PROCEEDS.

    Section 309(j)(8) of the Communications Act of 1934 (47 U.S.C. 
309(j)(8)) is amended--
            (1) in subparagraph (A), by striking ``subparagraph (B) or 
        subparagraph (D)'' and inserting ``subparagraphs (B), (D), and 
        (E)'';
            (2) in subparagraph (C)(i), by inserting before the 
        semicolon at the end the following: ``, except as otherwise 
        provided in subparagraph (E)(ii)''; and
            (3) by adding at the end the following new subparagraph:
                    ``(E) Transfer of receipts.--
                          ``(i) Establishment of fund.--There is 
                      established in the Treasury of the United States a 
                      fund to be known as the Digital Television 
                      Transition and Public Safety Fund.
                          ``(ii) Proceeds for funds.--Notwithstanding 
                      subparagraph (A), the proceeds (including deposits 
                      and upfront payments from successful bidders) from 
                      the

[[Page 120 STAT. 23]]

                      use of a competitive bidding system under this 
                      subsection with respect to recovered analog 
                      spectrum shall be deposited in the Digital 
                      Television Transition and Public Safety Fund.
                          ``(iii) Transfer of amount to treasury.--On 
                      September 30, 2009, the Secretary shall transfer 
                      $7,363,000,000 from the Digital Television 
                      Transition and Public Safety Fund to the general 
                      fund of the Treasury.
                          ``(iv) Recovered analog spectrum.--For 
                      purposes of clause (i), the term `recovered analog 
                      spectrum' has the meaning provided in paragraph 
                      (15)(C)(vi).''.

SEC. 3005. DIGITAL-TO-ANALOG CONVERTER BOX PROGRAM.

    (a) Creation of Program.--The Assistant Secretary shall--
            (1) implement and administer a program through which 
        households in the United States may obtain coupons that can be 
        applied toward the purchase of digital-to-analog converter 
        boxes; and
            (2) make payments of not to exceed $990,000,000, in the 
        aggregate, through fiscal year 2009 to carry out that program 
        from the Digital Television Transition and Public Safety Fund 
        established under section 309(j)(8)(E) of the Communications Act 
        of 1934 (47 U.S.C. 309(j)(8)(E)).

    (b) <<NOTE: Effective date.>> Credit.--The Assistant Secretary may 
borrow from the Treasury beginning on October 1, 2006, such sums as may 
be necessary, but not to exceed $1,500,000,000, to implement this 
section. The Assistant Secretary shall reimburse the Treasury, without 
interest, as funds are deposited into the Digital Television Transition 
and Public Safety Fund.

    (c) Program Specifications.--
            (1) Limitations.--
                    (A) Two-per-household maximum.--A household may 
                obtain coupons by making a request as required by the 
                regulations under this section between January 1, 2008, 
                and March 31, 2009, inclusive. The Assistant Secretary 
                shall ensure that each requesting household receives, 
                via the United States Postal Service, no more than two 
                coupons.
                    (B) No combinations of coupons.--Two coupons may not 
                be used in combination toward the purchase of a single 
                digital-to-analog converter box.
                    (C) Duration.--All coupons shall expire 3 months 
                after issuance.
            (2) Distribution of coupons.--The Assistant Secretary shall 
        expend not more than $100,000,000 on administrative expenses and 
        shall ensure that the sum of--
                    (A) all administrative expenses for the program, 
                including not more than $5,000,000 for consumer 
                education concerning the digital television transition 
                and the availability of the digital-to-analog converter 
                box program; and
                    (B) the total maximum value of all the coupons 
                redeemed, and issued but not expired, does not exceed 
                $990,000,000.
            (3) Use of additional amount.--If the Assistant Secretary 
        transmits to the Committee on Energy and Commerce of the House 
        of Representatives and Committee on Commerce,

[[Page 120 STAT. 24]]

        Science, and Transportation of the Senate a statement certifying 
        that the sum permitted to be expended under paragraph (2) will 
        be insufficient to fulfill the requests for coupons from 
        eligible households--
                    (A) <<NOTE: Applicability.>> paragraph (2) shall be 
                applied--
                          (i) by substituting ``$160,000,000'' for 
                      ``$100,000,000''; and
                          (ii) by substituting ``$1,500,000,000'' for 
                      ``$990,000,000'';
                    (B) subsection (a)(2) shall be applied by 
                substituting ``$1,500,000,000'' for ``$990,000,000''; 
                and
                    (C) <<NOTE: Deadline.>> the additional amount 
                permitted to be expended shall be available 60 days 
                after the Assistant Secretary sends such statement.
            (4) Coupon value.--The value of each coupon shall be $40.

    (d) Definition of Digital-to-Analog Converter Box.--For purposes of 
this section, the term ``digital-to-analog converter box'' means a 
stand-alone device that does not contain features or functions except 
those necessary to enable a consumer to convert any channel broadcast in 
the digital television service into a format that the consumer can 
display on television receivers designed to receive and display signals 
only in the analog television service, but may also include a remote 
control device.

SEC. 3006. PUBLIC SAFETY INTEROPERABLE COMMUNICATIONS.

    (a) Creation of Program.--The Assistant Secretary, in consultation 
with the Secretary of the Department of Homeland Security--
            (1) may take such administrative action as is necessary to 
        establish and implement a grant program to assist public safety 
        agencies in the acquisition of, deployment of, or training for 
        the use of interoperable communications systems that utilize, or 
        enable interoperability with communications systems that can 
        utilize, reallocated public safety spectrum for radio 
        communication; and
            (2) shall make payments of not to exceed $1,000,000,000, in 
        the aggregate, through fiscal year 2010 to carry out that 
        program from the Digital Television Transition and Public Safety 
        Fund established under section 309(j)(8)(E) of the 
        Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)).

    (b) <<NOTE: Effective date.>> Credit.--The Assistant Secretary may 
borrow from the Treasury beginning on October 1, 2006, such sums as may 
be necessary, but not to exceed $1,000,000,000, to implement this 
section. The Assistant Secretary shall reimburse the Treasury, without 
interest, as funds are deposited into the Digital Television Transition 
and Public Safety Fund.

    (c) Condition of Grants.--In order to obtain a grant under the grant 
program, a public safety agency shall agree to provide, from non-Federal 
sources, not less than 20 percent of the costs of acquiring and 
deploying the interoperable communications systems funded under the 
grant program.
    (d) Definitions.--For purposes of this section:
            (1) Public safety agency.--The term ``public safety agency'' 
        means any State, local, or tribal government entity, or 
        nongovernmental organization authorized by such entity,

[[Page 120 STAT. 25]]

        whose sole or principal purpose is to protect the safety of 
        life, health, or property.
            (2) Interoperable communications systems.--The term 
        ``interoperable communications systems'' means communications 
        systems which enable public safety agencies to share information 
        amongst local, State, Federal, and tribal public safety agencies 
        in the same area via voice or data signals.
            (3) Reallocated public safety spectrum.--The term 
        ``reallocated public safety spectrum'' means the bands of 
        spectrum located at 764-776 megahertz and 794-806 megahertz, 
        inclusive.

SEC. 3007. <<NOTE: New York. New Jersey.>> NYC 9/11 DIGITAL TRANSITION.

    (a) Funds Available.--From the Digital Television Transition and 
Public Safety Fund established under section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)) the Assistant 
Secretary shall make payments of not to exceed $30,000,000, in the 
aggregate, which shall be available to carry out this section for fiscal 
years 2007 through 2008. <<NOTE: Effective date.>> The Assistant 
Secretary may borrow from the Treasury beginning October 1, 2006, such 
sums as may be necessary not to exceed $30,000,000 to implement and 
administer the program in accordance with this section. The Assistant 
Secretary shall reimburse the Treasury, without interest, as funds are 
deposited into the Digital Television Transition and Public Safety Fund.

    (b) <<NOTE: Grants.>> Use of Funds.--The sums available under 
subsection (a) shall be made available by the Assistant Secretary by 
grant to be used to reimburse the Metropolitan Television Alliance for 
costs incurred in the design and deployment of a temporary digital 
television broadcast system to ensure that, until a permanent facility 
atop the Freedom Tower is constructed, the members of the Metropolitan 
Television Alliance can provide the New York City area with an adequate 
digital television signal as determined by the Federal Communications 
Commission.

    (c) Definitions.--For purposes of this section:
            (1) Metropolitan television alliance.--The term 
        ``Metropolitan Television Alliance'' means the organization 
        formed by New York City television broadcast station licensees 
        to locate new shared facilities as a result of the attacks on 
        September 11, 2001 and the loss of use of shared facilities that 
        housed broadcast equipment.
            (2) New york city area.--The term ``New York City area'' 
        means the five counties comprising New York City and counties of 
        northern New Jersey in immediate proximity to New York City 
        (Bergen, Essex, Union, and Hudson Counties).

SEC. 3008. LOW-POWER TELEVISION AND TRANSLATOR DIGITAL-TO-ANALOG 
            CONVERSION.

    (a) Creation of Program.--The Assistant Secretary shall make 
payments of not to exceed $10,000,000, in the aggregate, during the 
fiscal year 2008 and 2009 period from the Digital Television Transition 
and Public Safety Fund established under section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)) to implement and 
administer a program through which each eligible low-power television 
station may receive compensation toward the cost of the purchase of a 
digital-to-analog conversion device that enables it to convert the 
incoming digital signal of its corresponding full-power television 
station to analog format for

[[Page 120 STAT. 26]]

transmission on the low-power television station's analog channel. 
An <<NOTE: Deadline.>> eligible low-power television station may receive 
such compensation only if it submits a request for such compensation on 
or before February 17, 2009. Priority compensation shall be given to 
eligible low-power television stations in which the license is held by a 
non-profit corporation and eligible low-power television stations that 
serve rural areas of fewer than 10,000 viewers.

    (b) Credit.--The Assistant Secretary may borrow from the Treasury 
beginning October 1, 2006, such sums as may be necessary, but not to 
exceed $10,000,000, to implement this section. The Assistant Secretary 
shall reimburse the Treasury, without interest, as funds are deposited 
into the Digital Television Transition and Public Safety Fund.
    (c) Eligible Stations.--For purposes of this section, the term 
``eligible low-power television station'' means a low-power television 
broadcast station, Class A television station, television translator 
station, or television booster station--
            (1) that is itself broadcasting exclusively in analog 
        format; and
            (2) that has not purchased a digital-to-analog conversion 
        device prior to the date of enactment of the Digital Television 
        Transition and Public Safety Act of 2005.

SEC. 3009. LOW-POWER TELEVISION AND TRANSLATOR UPGRADE PROGRAM.

    (a) Establishment.--The Assistant Secretary shall make payments of 
not to exceed $65,000,000, in the aggregate, during fiscal year 2009 
from the Digital Television Transition and Public Safety Fund 
established under section 309(j)(8)(E) of the Communications Act of 1934 
(47 U.S.C. 309(j)(8)(E)) to implement and administer a program through 
which each licensee of an eligible low-power television station may 
receive reimbursement for equipment to upgrade low-power television 
stations from analog to digital in eligible rural communities, as that 
term is defined in section 610(b)(2) of the Rural Electrification Act of 
1937 (7 U.S.C. 950bb(b)(2)). <<NOTE: Effective date.>> Such 
reimbursements shall be issued to eligible stations no earlier than 
October 1, 2010. Priority reimbursements shall be given to eligible low-
power television stations in which the license is held by a non-profit 
corporation and eligible low-power television stations that serve rural 
areas of fewer than 10,000 viewers.

    (b) Eligible Stations.--For purposes of this section, the term 
``eligible low-power television station'' means a low-power television 
broadcast station, Class A television station, television translator 
station, or television booster station--
            (1) that is itself broadcasting exclusively in analog 
        format; and
            (2) that has not converted from analog to digital operations 
        prior to the date of enactment of the Digital Television 
        Transition and Public Safety Act of 2005.

SEC. 3010. NATIONAL ALERT AND TSUNAMI WARNING PROGRAM.

    The Assistant Secretary shall make payments of not to exceed 
$156,000,000, in the aggregate, during the fiscal year 2007 through 2012 
period from the Digital Television Transition and Public Safety Fund 
established under section 309(j)(8)(E) of the Communications Act of 1934 
(47 U.S.C. 309(j)(8)(E)) to implement a unified national alert system 
capable of alerting the public, on a national, regional,

[[Page 120 STAT. 27]]

or local basis to emergency situations by using a variety of 
communications technologies. The Assistant Secretary shall use 
$50,000,000 of such amounts to implement a tsunami warning and coastal 
vulnerability program.

SEC. 3011. ENHANCE 911.

    The Assistant Secretary shall make payments of not to exceed 
$43,500,000, in the aggregate, from the Digital Television Transition 
and Public Safety Fund established under section 309(j)(8)(E) of the 
Communications Act of 1934 (47 U.S.C. 309(j)(8)(E)) to implement the 
ENHANCE 911 Act of 2004.

SEC. 3012. ESSENTIAL AIR SERVICE PROGRAM.

    (a) In General.--If the amount appropriated to carry out the 
essential air service program under subchapter II of chapter 417 of 
title 49, United States Code, equals or exceeds $110,000,000 for fiscal 
year 2007 or 2008, then the Secretary of Commerce shall make $15,000,000 
available, from the Digital Television Transition and Public Safety Fund 
established by section 309(j)(8)(E) of the Communications Act of 1934 
(47 U.S.C. 309(j)(8)(E)), to the Secretary of Transportation for use in 
carrying out the essential air service program for that fiscal year.
    (b) Application With Other Funds.--Amounts made available under 
subsection (a) for any fiscal year shall be in addition to any amounts--
            (1) appropriated for that fiscal year; or
            (2) derived from fees collected pursuant to section 
        45301(a)(1) of title 49, United States Code, that are made 
        available for obligation and expenditure to carry out the 
        essential air service program for that fiscal year.

    (c) Advances.--The Secretary of Transportation may borrow from the 
Treasury such sums as may be necessary, but not to exceed $30,000,000 on 
a temporary and reimbursable basis to implement subsection (a). The 
Secretary of Transportation shall reimburse the Treasury, without 
interest, as funds are deposited into the Digital Television Transition 
and Public Safety Fund under section 309(j)(8)(E) of the Communications 
Act of 1934 (47 U.S.C. 309(j)(8)(E)) and made available to the Secretary 
under subsection (a).

SEC. 3013. SUPPLEMENTAL LICENSE FEES.

    In addition to any fees assessed under the Communications Act of 
1934 (47 U.S.C. 151 et seq.), the Federal Communications Commission 
shall assess extraordinary fees for licenses in the aggregate amount of 
$10,000,000, which shall be deposited in the Treasury during fiscal year 
2006 as offsetting receipts.

                   TITLE IV--TRANSPORTATION PROVISIONS

SEC. 4001. EXTENSION OF VESSEL TONNAGE DUTIES.

    (a) Extension of Duties.--Section 36 of the Act entitled ``An Act to 
provide revenue, equalize duties and encourage the industries of the 
United States, and for other purposes'', approved August 5, 1909 (36 
Stat. 111; 46 U.S.C. App. 121), is amended--

[[Page 120 STAT. 28]]

            (1) by striking ``9 cents per ton'' and all that follows 
        through ``2002,'' the first place it appears and inserting ``4.5 
        cents per ton, not to exceed in the aggregate 22.5 cents per ton 
        in any one year, for fiscal years 2006 through 2010,''; and
            (2) by striking ``27 cents per ton'' and all that follows 
        through ``2002,'' and inserting ``13.5 cents per ton, not to 
        exceed 67.5 cents per ton per annum, for fiscal years 2006 
        through 2010,''.

    (b) Conforming Amendment.--The Act entitled ``An Act concerning 
tonnage duties on vessels entering otherwise than by sea'', approved 
March 8, 1910 (36 Stat. 234; 46 U.S.C. App. 132), is amended by striking 
``9 cents per ton'' and all that follows through ``and 2 cents'' and 
inserting ``4.5 cents per ton, not to exceed in the aggregate 22.5 cents 
per ton in any one year, for fiscal years 2006 through 2010, and 2 
cents''.

                            TITLE V--MEDICARE

                Subtitle A--Provisions Relating to Part A

SEC. 5001. HOSPITAL QUALITY IMPROVEMENT.

    (a) Submission of Hospital Data.--Section 1886(b)(3)(B) of the 
Social Security Act (42 U.S.C. 1395ww(b)(3)(B)) is amended--
            (1) in clause (i)--
                    (A) in subclause (XIX), by striking ``2007'' and 
                inserting ``2006''; and
                    (B) in subclause (XX), by striking ``for fiscal year 
                2008 and each subsequent fiscal year,'' and inserting 
                ``for each subsequent fiscal year, subject to clause 
                (viii),'';
            (2) in clause (vii)--
                    (A) in subclause (I), by striking ``for each of 
                fiscal years 2005 through 2007'' and inserting ``for 
                fiscal years 2005 and 2006''; and
                    (B) in subclause (II), by striking ``Each'' and 
                inserting ``For fiscal years 2005 and 2006, each''; and
            (3) by adding at the end the following new clauses:
                          ``(viii)(I) For purposes of clause (i) for 
                      fiscal year 2007 and each subsequent fiscal year, 
                      in the case of a subsection (d) hospital that does 
                      not submit, to the Secretary in accordance with 
                      this clause, data required to be submitted on 
                      measures selected under this clause with respect 
                      to such a fiscal year, the applicable percentage 
                      increase under clause (i) for such fiscal year 
                      shall be reduced by 2.0 percentage 
                      points. <<NOTE: Applicability.>> Such reduction 
                      shall apply only with respect to the fiscal year 
                      involved and the Secretary shall not take into 
                      account such reduction in computing the applicable 
                      percentage increase under clause (i) for a 
                      subsequent fiscal year, and the Secretary and the 
                      Medicare Payment Advisory Commission shall carry 
                      out the requirements under section 5001(b) of the 
                      Deficit Reduction Act of 2005.
                          ``(II) Each subsection (d) hospital shall 
                      submit data on measures selected under this clause 
                      to the Secretary in a form and manner, and at a 
                      time, specified by the Secretary for purposes of 
                      this clause.

[[Page 120 STAT. 29]]

                          ``(III) The Secretary shall expand, beyond the 
                      measures specified under clause (vii)(II) and 
                      consistent with the succeeding subclauses, the set 
                      of measures that the Secretary determines to be 
                      appropriate for the measurement of the quality of 
                      care furnished by hospitals in inpatient settings.
                          ``(IV) Effective for payments beginning with 
                      fiscal year 2007, in expanding the number of 
                      measures under subclause (III), the Secretary 
                      shall begin to adopt the baseline set of 
                      performance measures as set forth in the November 
                      2005 report by the Institute of Medicine of the 
                      National Academy of Sciences under section 238(b) 
                      of the Medicare Prescription Drug, Improvement, 
                      and Modernization Act of 2003.
                          ``(V) Effective for payments beginning with 
                      fiscal year 2008, the Secretary shall add other 
                      measures that reflect consensus among affected 
                      parties and, to the extent feasible and 
                      practicable, shall include measures set forth by 
                      one or more national consensus building entities.
                          ``(VI) For purposes of this clause and clause 
                      (vii), the Secretary may replace any measures or 
                      indicators in appropriate cases, such as where all 
                      hospitals are effectively in compliance or the 
                      measures or indicators have been subsequently 
                      shown not to represent the best clinical practice.
                          ``(VII) <<NOTE: Procedures. Public 
                      information.>> The Secretary shall establish 
                      procedures for making data submitted under this 
                      clause available to the public. Such procedures 
                      shall ensure that a hospital has the opportunity 
                      to review the data that are to be made public with 
                      respect to the hospital prior to such data being 
                      made public. <<NOTE: Reports.>> The Secretary 
                      shall report quality measures of process, 
                      structure, outcome, patients' perspectives on 
                      care, efficiency, and costs of care that relate to 
                      services furnished in inpatient settings in 
                      hospitals on the Internet website of the Centers 
                      for Medicare & Medicaid Services.''.

    (b) <<NOTE: 42 USC 1395ww note.>> Plan for Hospital Value Based 
Purchasing Program.--
            (1) In general.--The Secretary of Health and Human Services 
        shall develop a plan to implement a value based purchasing 
        program for payments under the Medicare program for subsection 
        (d) hospitals beginning with fiscal year 2009.
            (2) Details.--Such a plan shall include consideration of the 
        following issues:
                    (A) The on-going development, selection, and 
                modification process for measures of quality and 
                efficiency in hospital inpatient settings.
                    (B) The reporting, collection, and validation of 
                quality data.
                    (C) The structure of value based payment 
                adjustments, including the determination of thresholds 
                or improvements in quality that would substantiate a 
                payment adjustment, the size of such payments, and the 
                sources of funding for the value based payments.
                    (D) The disclosure of information on hospital 
                performance.

[[Page 120 STAT. 30]]

        In developing such a plan, the Secretary shall consult with 
        relevant affected parties and shall consider experience with 
        such demonstrations that are relevant to the value based 
        purchasing program under this subsection.

    (c) Quality Adjustment in DRG Payments for Certain Hospital Acquired 
Infections.--
            (1) In general.--Section 1886(d)(4) of the Social Security 
        Act (42 U.S.C. 1395ww(d)(4)) is amended by adding at the end the 
        following new subparagraph:

    ``(D)(i) For discharges occurring on or after October 1, 2008, the 
diagnosis-related group to be assigned under this paragraph for a 
discharge described in clause (ii) shall be a diagnosis-related group 
that does not result in higher payment based on the presence of a 
secondary diagnosis code described in clause (iv).
    ``(ii) A discharge described in this clause is a discharge which 
meets the following requirements:
            ``(I) The discharge includes a condition identified by a 
        diagnosis code selected under clause (iv) as a secondary 
        diagnosis.
            ``(II) But for clause (i), the discharge would have been 
        classified to a diagnosis-related group that results in a higher 
        payment based on the presence of a secondary diagnosis code 
        selected under clause (iv).
            ``(III) At the time of admission, no code selected under 
        clause (iv) was present.

    ``(iii) <<NOTE: Effective date.>> As part of the information 
required to be reported by a hospital with respect to a discharge of an 
individual in order for payment to be made under this subsection, for 
discharges occurring on or after October 1, 2007, the information shall 
include the secondary diagnosis of the individual at admission.

    ``(iv) <<NOTE: Deadline.>> By not later than October 1, 2007, the 
Secretary shall select diagnosis codes associated with at least two 
conditions, each of which codes meets all of the following requirements 
(as determined by the Secretary):
            ``(I) Cases described by such code have a high cost or high 
        volume, or both, under this title.
            ``(II) The code results in the assignment of a case to a 
        diagnosis-related group that has a higher payment when the code 
        is present as a secondary diagnosis.
            ``(III) The code describes such conditions that could 
        reasonably have been prevented through the application of 
        evidence-based guidelines.

The Secretary may from time to time revise (through addition or deletion 
of codes) the diagnosis codes selected under this clause so long as 
there are diagnosis codes associated with at least two conditions 
selected for discharges occurring during any fiscal year.
    ``(v) In selecting and revising diagnosis codes under clause (iv), 
the Secretary shall consult with the Centers for Disease Control and 
Prevention and other appropriate entities.
    ``(vi) Any change resulting from the application of this 
subparagraph shall not be taken into account in adjusting the weighting 
factors under subparagraph (C)(i) or in applying budget neutrality under 
subparagraph (C)(iii).''.
            (2) No judicial review.--Section 1886(d)(7)(B) of such Act 
        (42 U.S.C. 1395ww(d)(7)(B)) is amended by inserting before the 
        period the following: ``, including the selection and revision 
        of codes under paragraph (4)(D)''.

[[Page 120 STAT. 31]]

SEC. 5002. CLARIFICATION OF DETERMINATION OF MEDICAID PATIENT DAYS FOR 
            DSH COMPUTATION.

    (a) In General.--Section 1886(d)(5)(F)(vi) of the Social Security 
Act (42 U.S.C. 1395ww(d)(5)(F)(vi)) is amended by adding after and below 
subclause (II) the following:
``In determining under subclause (II) the number of the hospital's 
patient days for such period which consist of patients who (for such 
days) were eligible for medical assistance under a State plan approved 
under title XIX, the Secretary may, to the extent and for the period the 
Secretary determines appropriate, include patient days of patients not 
so eligible but who are regarded as such because they receive benefits 
under a demonstration project approved under title XI.''.
    (b) Ratification and Prospective Application of Previous 
Regulations.--
            (1) In general.--Subject to paragraph (2), regulations 
        described in paragraph (3), insofar as such regulations provide 
        for the treatment of individuals eligible for medical assistance 
        under a demonstration project approved under title XI of the 
        Social Security Act under section 1886(d)(5)(F)(vi) of such Act, 
        are hereby ratified, effective as of the date of their 
        respective promulgations.
            (2) No application to closed cost reports.--Paragraph (1) 
        shall not be applied in a manner that requires the reopening of 
        any cost reports which are closed as of the date of the 
        enactment of this Act.
            (3) Regulations described.--For purposes of paragraph (1), 
        the regulations described in this paragraph are as follows:
                    (A) 2000 regulation.--Regulations promulgated on 
                January 20, 2000, at 65 Federal Register 3136 et seq., 
                including the policy in such regulations regarding 
                discharges occurring prior to January 20, 2000.
                    (B) 2003 regulation.--Regulations promulgated on 
                August 1, 2003, at 68 Federal Register 45345 et seq.

SEC. 5003. IMPROVEMENTS TO THE MEDICARE-DEPENDENT HOSPITAL (MDH) 
            PROGRAM.

    (a) 5-Year Extension.--
            (1) Extension of Payment Methodology.--Section 1886(d)(5)(G) 
        of the Social Security Act (42 U.S.C. 1395ww(d)(5)(G)) is 
        amended--
                    (A) in clause (i), by striking ``October 1, 2006'' 
                and inserting ``October 1, 2011''; and
                    (B) in clause (ii)(II)--
                          (i) by striking ``October 1, 2006'' and 
                      inserting ``October 1, 2011''; and
                          (ii) by inserting ``or for discharges in the 
                      fiscal year'' after ``for the cost reporting 
                      period''.
            (2) Conforming amendments.--
                    (A) Extension of target amount.--Section 
                1886(b)(3)(D) of such Act (42 U.S.C. 1395ww(b)(3)(D)) is 
                amended--
                          (i) in the matter preceding clause (i)--
                                    (I) by striking ``beginning'' and 
                                inserting ``occurring''; and
                                    (II) by striking ``October 1, 2006'' 
                                and inserting ``October 1, 2011''; and

[[Page 120 STAT. 32]]

                          (ii) in clause (iv), by striking ``through 
                      fiscal year 2005'' and inserting ``through fiscal 
                      year 2011''.
                    (B) Permitting hospitals to decline 
                reclassification.--Section 13501(e)(2) of the Omnibus 
                Budget Reconciliation Act of 1993 (42 U.S.C. 1395ww 
                note) is amended by striking ``through fiscal year 
                2005'' and inserting ``through fiscal year 2011''.

    (b) Option To Use 2002 as Base Year.--Section 1886(b)(3) of such Act 
(42 U.S.C. 1395ww(b)(3)) is amended--
            (1) in subparagraph (D), by inserting ``subject to 
        subparagraph (K),'' after ``(d)(5)(G)),''; and
            (2) by adding at the end the following new subparagraph:

    ``(K)(i) <<NOTE: Applicability.>> With respect to discharges 
occurring on or after October 1, 2006, in the case of a medicare-
dependent, small rural hospital, for purposes of applying subparagraph 
(D)--
            ``(I) there shall be substituted for the base cost reporting 
        period described in subparagraph (D)(i) the 12-month cost 
        reporting period beginning during fiscal year 2002; and
            ``(II) any reference in such subparagraph to the `first cost 
        reporting period' described in such subparagraph is deemed a 
        reference to the first cost reporting period beginning on or 
        after October 1, 2006.

    ``(ii) <<NOTE: Applicability.>> This subparagraph shall only apply 
to a hospital if the substitution described in clause (i)(I) results in 
an increase in the target amount under subparagraph (D) for the 
hospital.''.

    (c) Enhanced Payment for Amount by Which the Target Exceeds the PPS 
Rate.--Section 1886(d)(5)(G)(ii)(II) of such Act (42 U.S.C. 
1395ww(d)(5)(G)(iv)(II)) is amended by inserting ``(or 75 percent in the 
case of discharges occurring on or after October 1, 2006)'' after ``50 
percent''.
    (d) Enhanced Disproportionate Share Hospital (DSH) Treatment for 
Medicare-Dependent Hospitals.--Section 1886(d)(5)(F)(xiv)(II) of such 
Act (42 U.S.C. 1395ww(d)(5)(F)(xiv)(II)) is amended by inserting ``or, 
in the case of discharges occurring on or after October 1, 2006, as a 
medicare-dependent, small rural hospital under subparagraph (G)(iv)'' 
before the period at the end.

SEC. 5004. REDUCTION IN PAYMENTS TO SKILLED NURSING FACILITIES FOR BAD 
            DEBT.

    (a) In General.--Section 1861(v)(1) of the Social Security Act (42 
U.S.C. 1395x(v)(1)) is amended by adding at the end the following new 
subparagraph:
    ``(V) In determining such reasonable costs for skilled nursing 
facilities with respect to cost reporting periods beginning on or after 
October 1, 2005, the amount of bad debts otherwise treated as allowed 
costs which are attributable to the coinsurance amounts under this title 
for individuals who are entitled to benefits under part A and--
            ``(i) are not described in section 1935(c)(6)(A)(ii) shall 
        be reduced by 30 percent of such amount otherwise allowable; and
            ``(ii) are described in such section shall not be 
        reduced.''.

    (b) Technical Amendment.--Section 1861(v)(1)(T) of such Act (42 
U.S.C. 1395x(v)(1)(T)) is amended by striking ``section 1833(t)(5)(B)'' 
and inserting ``section 1833(t)(8)(B)''.

[[Page 120 STAT. 33]]

SEC. 5005. <<NOTE: 42 USC 1395ww note.>> EXTENDED PHASE-IN OF THE 
            INPATIENT REHABILITATION FACILITY CLASSIFICATION CRITERIA.

    (a) <<NOTE: Applicability.>> In General.--Notwithstanding section 
412.23(b)(2) of title 42, Code of Federal Regulations, the Secretary of 
Health and Human Services shall apply the applicable percent specified 
in subsection (b) in the classification criterion used under the IRF 
regulation (as defined in subsection (c)) to determine whether a 
hospital or unit of a hospital is an inpatient rehabilitation facility 
under the Medicare program under title XVIII of the Social Security Act.

    (b) Applicable Percent.--For purposes of subsection (a), the 
applicable percent specified in this subsection for cost reporting 
periods--
            (1) beginning during the 12-month period beginning on July 
        1, 2006, is 60 percent;
            (2) beginning during the 12-month period beginning on July 
        1, 2007, is 65 percent; and
            (3) beginning on or after July 1, 2008, is 75 percent.

    (c) IRF Regulation.--For purposes of subsection (a), the term ``IRF 
regulation'' means the rule published in the Federal Register on May 7, 
2004, entitled ``Medicare Program; Final Rule; Changes to the Criteria 
for Being Classified as an Inpatient Rehabilitation Facility'' (69 Fed. 
Reg. 25752).

SEC. 5006. DEVELOPMENT OF A STRATEGIC PLAN REGARDING PHYSICIAN 
            INVESTMENT IN SPECIALTY HOSPITALS.

    (a) Development.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this section referred to as the ``Secretary'') shall develop 
        a strategic and implementing plan to address issues described in 
        paragraph (2) regarding physician investment in specialty 
        hospitals (as defined in section 1877(h)(7)(A) of the Social 
        Security Act (42 U.S.C. 1395nn(h)(7)(A)).
            (2) Issues described.--The issues described in this 
        paragraph are the following:
                    (A) Proportionality of investment return.
                    (B) Bona fide investment.
                    (C) Annual disclosure of investment information.
                    (D) The provision by specialty hospitals of--
                          (i) care to patients who are eligible for 
                      medical assistance under a State plan approved 
                      under title XIX of the Social Security Act, 
                      including patients not so eligible but who are 
                      regarded as such because they receive benefits 
                      under a demonstration project approved under title 
                      XI of such Act; and
                          (ii) charity care.
                    (E) Appropriate enforcement.

    (b) Reports.--
            (1) Interim report.--Not later than 3 months after the date 
        of the enactment of this Act, the Secretary shall submit an 
        interim report to the appropriate committees of jurisdiction of 
        Congress on the status of the development of the plan under 
        subsection (a).
            (2) Final report.--Not later than six months after the date 
        of the enactment of this Act, the Secretary shall submit a final 
        report to the appropriate committees of jurisdiction of Congress 
        on the plan developed under subsection (a) together

[[Page 120 STAT. 34]]

        with recommendations for such legislation and administrative 
        actions as the Secretary considers appropriate.

    (c) Continuation of Suspension on Enrollment.--
            (1) <<NOTE: Deadline.>> In general.--Subject to paragraph 
        (2), the Secretary shall continue the suspension on enrollment 
        of new specialty hospitals (as so defined) under title XVIII of 
        the Social Security Act until the earlier of--
                    (A) the date that the Secretary submits the final 
                report under subsection (b)(2); or
                    (B) the date that is six months after the date of 
                the enactment of this Act.
            (2) Extension of suspension.--If the Secretary fails to 
        submit the final report described in subsection (b)(2) by the 
        date required under such subsection, the Secretary shall--
                    (A) extend the suspension on enrollment under 
                paragraph (1) for an additional two months; and
                    (B) provide a certification to the appropriate 
                committees of jurisdiction of Congress of such failure.

    (d) Waiver.--In developing the plan and report required under this 
section, the Secretary may waive such requirements of section 553 of 
title 5, United States Code, as the Secretary determines necessary.
    (e) Funding.--Out of any funds in the Treasury not otherwise 
appropriated, there are appropriated to the Secretary for fiscal year 
2006, $2,000,000 to carry out this section.

SEC. 5007. <<NOTE: 42 USC 1395ww note.>> MEDICARE DEMONSTRATION PROJECTS 
            TO PERMIT GAINSHARING ARRANGEMENTS.

    (a) <<NOTE: Deadlines.>> Establishment.--The Secretary shall 
establish under this section a qualified gainsharing demonstration 
program under which the Secretary shall approve demonstration projects 
by not later than November 1, 2006, to test and evaluate methodologies 
and arrangements between hospitals and physicians designed to govern the 
utilization of inpatient hospital resources and physician work to 
improve the quality and efficiency of care provided to Medicare 
beneficiaries and to develop improved operational and financial hospital 
performance with sharing of remuneration as specified in the project. 
Such projects shall be operational by not later than January 1, 2007.

    (b) Requirements Described.--A demonstration project under this 
section shall meet the following requirements for purposes of 
maintaining or improving quality while achieving cost savings:
            (1) Arrangement for remuneration as share of savings.--The 
        demonstration project shall involve an arrangement between a 
        hospital and a physician under which the hospital provides 
        remuneration to the physician that represents solely a share of 
        the savings incurred directly as a result of collaborative 
        efforts between the hospital and the physician.
            (2) Written plan agreement.--The demonstration project shall 
        be conducted pursuant to a written agreement that--
                    (A) is submitted to the Secretary prior to 
                implementation of the project; and
                    (B) includes a plan outlining how the project will 
                achieve improvements in quality and efficiency.
            (3) Patient notification.--The demonstration project shall 
        include a notification process to inform patients who are

[[Page 120 STAT. 35]]

        treated in a hospital participating in the project of the 
        participation of the hospital in such project.
            (4) Monitoring quality and efficiency of care.--The 
        demonstration project shall provide measures to ensure that the 
        quality and efficiency of care provided to patients who are 
        treated in a hospital participating in the demonstration project 
        is continuously monitored to ensure that such quality and 
        efficiency is maintained or improved.
            (5) Independent review.--The demonstration project shall 
        certify, prior to implementation, that the elements of the 
        demonstration project are reviewed by an organization that is 
        not affiliated with the hospital or the physician participating 
        in the project.
            (6) Referral limitations.--The demonstration project shall 
        not be structured in such a manner as to reward any physician 
        participating in the project on the basis of the volume or value 
        of referrals to the hospital by the physician.

    (c) Waiver of Certain Restrictions.--
            (1) In general.--An incentive payment made by a hospital to 
        a physician under and in accordance with a demonstration project 
        shall not constitute--
                    (A) remuneration for purposes of section 1128B of 
                the Social Security Act (42 U.S.C. 1320a-7b);
                    (B) a payment intended to induce a physician to 
                reduce or limit services to a patient entitled to 
                benefits under Medicare or a State plan approved under 
                title XIX of such Act in violation of section 1128A of 
                such Act (42 U.S.C. 1320a-7a); or
                    (C) a financial relationship for purposes of section 
                1877 of such Act (42 U.S.C. 1395nn).
            (2) Protection for existing arrangements.--In no case shall 
        the failure to comply with the requirements described in 
        paragraph (1) affect a finding made by the Inspector General of 
        the Department of Health and Human Services prior to the date of 
        the enactment of this Act that an arrangement between a hospital 
        and a physician does not violate paragraph (1) or (2) of section 
        1128A(a) of the Social Security Act (42 U.S.C. 1320a-7(a)).

    (d) Program Administration.--
            (1) <<NOTE: Deadline.>> Solicitation of applications.--By 
        not later than 90 days after the date of the enactment of this 
        Act, the Secretary shall solicit applications for approval of a 
        demonstration project, in such form and manner, and at such time 
        specified by the Secretary.
            (2) Number of projects approved.--The Secretary shall 
        approve not more than 6 demonstration projects, at least 2 of 
        which shall be located in a rural area.
            (3) Duration.--The qualified gainsharing demonstration 
        program under this section shall be conducted for the period 
        beginning on January 1, 2007, and ending on December 31, 2009.

    (e) Reports.--
            (1) Initial report.--By not later than December 1, 2006, the 
        Secretary shall submit to Congress a report on the number of 
        demonstration projects that will be conducted under this 
        section.

[[Page 120 STAT. 36]]

            (2) Project update.--By not later than December 1, 2007, the 
        Secretary shall submit to Congress a report on the details of 
        such projects (including the project improvements towards 
        quality and efficiency described in subsection (b)(2)(B)).
            (3) Quality improvement and savings.--By not later than 
        December 1, 2008, the Secretary shall submit to Congress a 
        report on quality improvement and savings achieved as a result 
        of the qualified gainsharing demonstration program established 
        under subsection (a).
            (4) Final report.--By not later than May 1, 2010, the 
        Secretary shall submit to Congress a final report on the 
        information described in paragraph (3).

    (f) Funding.--
            (1) In general.--Out of any funds in the Treasury not 
        otherwise appropriated, there are appropriated to the Secretary 
        for fiscal year 2006 $6,000,000, to carry out this section.
            (2) Availability.--Funds appropriated under paragraph (1) 
        shall remain available for expenditure through fiscal year 2010.

    (g) Definitions.--For purposes of this section:
            (1) Demonstration project.--The term ``demonstration 
        project'' means a project implemented under the qualified 
        gainsharing demonstration program established under subsection 
        (a).
            (2) Hospital.--The term ``hospital'' means a hospital that 
        receives payment under section 1886(d) of the Social Security 
        Act (42 U.S.C. 1395ww(d)), and does not include a critical 
        access hospital (as defined in section 1861(mm) of such Act (42 
        U.S.C. 1395x(mm))).
            (3) Medicare.--The term ``Medicare'' means the programs 
        under title XVIII of the Social Security Act.
            (4) Physician.--The term ``physician'' means, with respect 
        to a demonstration project, a physician described in paragraph 
        (1) or (3) of section 1861(r) of the Social Security Act (42 
        U.S.C. 1395x(r)) who is licensed as such a physician in the area 
        in which the project is located and meets requirements to 
        provide services for which benefits are provided under Medicare. 
        Such term shall be deemed to include a practitioner described in 
        section 1842(e)(18)(C) of such Act (42 U.S.C. 1395u(e)(18)(C)).
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.

SEC. 5008. <<NOTE: 42 USC 1395b-1 note.>> POST-ACUTE CARE PAYMENT REFORM 
            DEMONSTRATION PROGRAM.

    (a) Establishment.--
            (1) <<NOTE: Deadline.>> In general.--By not later than 
        January 1, 2008, the Secretary of Health and Human Services (in 
        this section referred to as the ``Secretary'') shall establish a 
        demonstration program for purposes of understanding costs and 
        outcomes across different post-acute care sites. Under such 
        program, with respect to diagnoses specified by the Secretary, 
        an individual who receives treatment from a provider for such a 
        diagnosis shall receive a single comprehensive assessment on the 
        date of discharge from a subsection (d) hospital (as defined in 
        section 1886(d)(1)(B) of the Social Security Act (42 U.S.C. 
        1395ww(d)(1)(B))) of the needs of the patient and the clinical

[[Page 120 STAT. 37]]

        characteristics of the diagnosis to determine the appropriate 
        placement of such patient in a post-acute care site. The 
        Secretary shall use a standardized patient assessment instrument 
        across all post-acute care sites to measure functional status 
        and other factors during the treatment and at discharge from 
        each provider. Participants in the program shall provide 
        information on the fixed and variable costs for each individual. 
        An additional comprehensive assessment shall be provided at the 
        end of the episode of care.
            (2) Number of sites.--The Secretary shall conduct the 
        demonstration program under this section with sufficient numbers 
        to determine statistically reliable results.
            (3) Duration.--The Secretary shall conduct the demonstration 
        program under this section for a 3-year period.

    (b) Waiver Authority.--The Secretary may waive such requirements of 
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.; 
42 U.S.C. 1395 et seq.) as may be necessary for the purpose of carrying 
out the demonstration program under this section.
    (c) Report.--Not later than 6 months after the completion of the 
demonstration program under this section, the Secretary shall submit to 
Congress a report on such program, that includes the results of the 
program and recommendations for such legislation and administrative 
action as the Secretary determines to be appropriate.
    (d) Funding.--The Secretary shall provide for the transfer from the 
Federal Hospital Insurance Trust Fund established under section 1817 of 
the Social Security Act (42 U.S.C. 1395i), $6,000,000 for the costs of 
carrying out the demonstration program under this section.

                Subtitle B--Provisions Relating to Part B

                      CHAPTER 1--PAYMENT PROVISIONS

SEC. 5101. BENEFICIARY OWNERSHIP OF CERTAIN DURABLE MEDICAL EQUIPMENT 
            (DME).

    (a) DME.--
            (1) In general.--Section 1834(a)(7)(A) of the Social 
        Security Act (42 U.S.C. 1395m(a)(7)(A)) is amended to read as 
        follows:
                    ``(A) <<NOTE: Applicability.>> Payment.--In the case 
                of an item of durable medical equipment not described in 
                paragraphs (2) through (6), the following rules shall 
                apply:
                          ``(i) Rental.--
                                    ``(I) In general.--Except as 
                                provided in clause (iii), payment for 
                                the item shall be made on a monthly 
                                basis for the rental of the item during 
                                the period of medical need (but payments 
                                under this clause may not extend over a 
                                period of continuous use (as determined 
                                by the Secretary) of longer than 13 
                                months).
                                    ``(II) Payment amount.--Subject to 
                                subparagraph (B), the amount recognized 
                                for the item, for each of the first 3 
                                months of such period, is 10 percent of 
                                the purchase price recognized under

[[Page 120 STAT. 38]]

                                paragraph (8) with respect to the item, 
                                and, for each of the remaining months of 
                                such period, is 7.5 percent of such 
                                purchase price.
                          ``(ii) Ownership after rental.--On the first 
                      day that begins after the 13th continuous month 
                      during which payment is made for the rental of an 
                      item under clause (i), the supplier of the item 
                      shall transfer title to the item to the 
                      individual.
                          ``(iii) Purchase agreement option for power-
                      driven wheelchairs.--In the case of a power-driven 
                      wheelchair, at the time the supplier furnishes the 
                      item, the supplier shall offer the individual the 
                      option to purchase the item, and payment for such 
                      item shall be made on a lump-sum basis if the 
                      individual exercises such option.
                          ``(iv) Maintenance and servicing.--After the 
                      supplier transfers title to the item under clause 
                      (ii) or in the case of a power-driven wheelchair 
                      for which a purchase agreement has been entered 
                      into under clause (iii), maintenance and servicing 
                      payments shall, if the Secretary determines such 
                      payments are reasonable and necessary, be made 
                      (for parts and labor not covered by the supplier's 
                      or manufacturer's warranty, as determined by the 
                      Secretary to be appropriate for the particular 
                      type of durable medical equipment), and such 
                      payments shall be in an amount determined to be 
                      appropriate by the Secretary.''.
            (2) <<NOTE: 42 USC 1395m note.>> Effective date.--The 
        amendment made by paragraph (1) shall apply to items furnished 
        for which the first rental month occurs on or after January 1, 
        2006.

    (b) Oxygen Equipment.--
            (1) In general.--Section 1834(a)(5) of such Act (42 U.S.C. 
        1395m(a)(5)) is amended--
                    (A) in subparagraph (A), by striking ``and (E)'' and 
                inserting ``(E), and (F)''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(F) Ownership of Equipment.--
                          ``(i) In general.--Payment for oxygen 
                      equipment (including portable oxygen equipment) 
                      under this paragraph may not extend over a period 
                      of continuous use (as determined by the Secretary) 
                      of longer than 36 months.
                          ``(ii) Ownership.--
                                    ``(I) Transfer of title.--On the 
                                first day that begins after the 36th 
                                continuous month during which payment is 
                                made for the equipment under this 
                                paragraph, the supplier of the equipment 
                                shall transfer title to the equipment to 
                                the individual.
                                    ``(II) Payments for oxygen and 
                                maintenance and servicing.--After the 
                                supplier transfers title to the 
                                equipment under subclause (I)--
                                            ``(aa) payments for oxygen 
                                        shall continue to be made in the 
                                        amount recognized for oxygen 
                                        under paragraph (9) for the 
                                        period of medical need; and

[[Page 120 STAT. 39]]

                                            ``(bb) maintenance and 
                                        servicing payments shall, if the 
                                        Secretary determines such 
                                        payments are reasonable and 
                                        necessary, be made (for parts 
                                        and labor not covered by the 
                                        supplier's or manufacturer's 
                                        warranty, as determined by the 
                                        Secretary to be appropriate for 
                                        the equipment), and such 
                                        payments shall be in an amount 
                                        determined to be appropriate by 
                                        the Secretary.''.
            (2) <<NOTE: 42 USC 1395m note.>> Effective date.--
                    (A) In general.--The amendments made by paragraph 
                (1) shall take effect on January 1, 2006.
                    (B) Application to certain individuals.--In the case 
                of an individual receiving oxygen equipment on December 
                31, 2005, for which payment is made under section 
                1834(a) of the Social Security Act (42 U.S.C. 1395m(a)), 
                the 36-month period described in paragraph (5)(F)(i) of 
                such section, as added by paragraph (1), shall begin on 
                January 1, 2006.

SEC. 5102. ADJUSTMENTS IN PAYMENT FOR IMAGING SERVICES.

    (a) Multiple Procedure Payment Reduction for Imaging Exempted From 
Budget Neutrality.--Section 1848(c)(2)(B) of the Social Security Act (42 
U.S.C. 1395w-4(c)(2)(B)) is amended--
            (1) in clause (ii)(II), by striking ``clause (iv)'' and 
        inserting ``clauses (iv) and (v)'';
            (2) in clause (iv) in the heading, by inserting ``of certain 
        additional expenditures'' after ``Exemption''; and
            (3) by adding at the end the following new clause:
                          ``(v) Exemption of certain reduced 
                      expenditures from budget-neutrality calculation.--
                      The following reduced expenditures, as estimated 
                      by the Secretary, shall not be taken into account 
                      in applying clause (ii)(II):
                                    ``(I) Reduced payment for multiple 
                                imaging procedures.--Effective for fee 
                                schedules established beginning with 
                                2007, reduced expenditures attributable 
                                to the multiple procedure payment 
                                reduction for imaging under the final 
                                rule published by the Secretary in the 
                                Federal Register on November 21, 2005 
                                (42 CFR 405, et al.) insofar as it 
                                relates to the physician fee schedules 
                                for 2006 and 2007.''.

    (b) Reduction in Physician Fee Schedule to OPD Payment Amount for 
Imaging Services.--Section 1848 of such Act (42 U.S.C. 1395w-4) is 
amended--
            (1) in subsection (b), by adding at the end the following 
        new paragraph:
            ``(4) Special rule for imaging services.--
                    ``(A) In general.--In the case of imaging services 
                described in subparagraph (B) furnished on or after 
                January 1, 2007, if--
                          ``(i) the technical component (including the 
                      technical component portion of a global fee) of 
                      the service established for a year under the fee 
                      schedule described in paragraph (1) without 
                      application of the geographic

[[Page 120 STAT. 40]]

                      adjustment factor described in paragraph (1)(C), 
                      exceeds
                          ``(ii) the Medicare OPD fee schedule amount 
                      established under the prospective payment system 
                      for hospital outpatient department services under 
                      paragraph (3)(D) of section 1833(t) for such 
                      service for such year, determined without regard 
                      to geographic adjustment under paragraph (2)(D) of 
                      such section,
                the Secretary shall substitute the amount described in 
                clause (ii), adjusted by the geographic adjustment 
                factor described in paragraph (1)(C), for the fee 
                schedule amount for such technical component for such 
                year.
                    ``(B) Imaging services described.--For purposes of 
                subparagraph (A), imaging services described in this 
                subparagraph are imaging and computer-assisted imaging 
                services, including X-ray, ultrasound (including 
                echocardiography), nuclear medicine (including positron 
                emission tomography), magnetic resonance imaging, 
                computed tomography, and fluoroscopy, but excluding 
                diagnostic and screening mammography.''; and
            (2) in subsection (c)(2)(B)(v), as added by subsection 
        (a)(3), by adding at the end the following new subclause:
                                    ``(II) OPD payment cap for imaging 
                                services.--Effective for fee schedules 
                                established beginning with 2007, reduced 
                                expenditures attributable to subsection 
                                (b)(4).''.

SEC. 5103. LIMITATION ON PAYMENTS FOR PROCEDURES IN AMBULATORY SURGICAL 
            CENTERS.

    Section 1833(i)(2) of the Social Security Act (42 U.S.C. 
1395l(i)(2)) is amended--
            (1) in subparagraph (A), by inserting ``subject to 
        subparagraph (E),'' after ``subparagraph (D),'';
            (2) in subparagraph (D)(ii), by inserting before the period 
        at the end the following: ``and taking into account reduced 
        expenditures that would apply if subparagraph (E) were to 
        continue to apply, as estimated by the Secretary''; and
            (3) by adding at the end the following new subparagraph:

    ``(E) With respect to surgical procedures furnished on or after 
January 1, 2007, and before the effective date of the implementation of 
a revised payment system under subparagraph (D), if--
            ``(i) the standard overhead amount under subparagraph (A) 
        for a facility service for such procedure, without the 
        application of any geographic adjustment, exceeds
            ``(ii) the Medicare OPD fee schedule amount established 
        under the prospective payment system for hospital outpatient 
        department services under paragraph (3)(D) of section 1833(t) 
        for such service for such year, determined without regard to 
        geographic adjustment under paragraph (2)(D) of such section,

the Secretary shall substitute under subparagraph (A) the amount 
described in clause (ii) for the standard overhead amount for such 
service referred to in clause (i).''.

SEC. 5104. UPDATE FOR PHYSICIANS' SERVICES FOR 2006.

    (a) Update for 2006.--Section 1848(d) of the Social Security Act (42 
U.S.C. 1395w-4(d)) is amended--

[[Page 120 STAT. 41]]

            (1) in paragraph (4)(B), in the matter preceding clause (i), 
        by striking ``paragraph (5)'' and inserting ``paragraphs (5) and 
        (6)''; and
            (2) by adding at the end the following new paragraph:
            ``(6) Update for 2006.--The update to the single conversion 
        factor established in paragraph (1)(C) for 2006 shall be 0 
        percent.''.

    (b) <<NOTE: 42 USC 1395w-4 note.>> Not Treated as Change in Law and 
Regulation in Sustainable Growth Rate Determination.--The amendments 
made by subsection (a) shall not be treated as a change in law for 
purposes of applying section 1848(f)(2)(D) of the Social Security Act 
(42 U.S.C. 1395w-4(f)(2)(D)).

    (c) MedPAC Report.--
            (1) In general.--By not later than March 1, 2007, the 
        Medicare Payment Advisory Commission shall submit a report to 
        Congress on mechanisms that could be used to replace the 
        sustainable growth rate system under section 1848(f) of the 
        Social Security Act (42 U.S.C. 1395w-4(f)).
            (2) Requirements.--The report required under paragraph (1) 
        shall--
                    (A) identify and examine alternative methods for 
                assessing volume growth;
                    (B) review options to control the volume of 
                physicians' services under the Medicare program while 
                maintaining access to such services by Medicare 
                beneficiaries;
                    (C) examine the application of volume controls under 
                the Medicare physician fee schedule under section 1848 
                of the Social Security Act (42 U.S.C. 1395w-4);
                    (D) identify levels of application of volume 
                controls, such as group practice, hospital medical 
                staff, type of service, geographic area, and outliers;
                    (E) examine the administrative feasibility of 
                implementing the options reviewed under subparagraph 
                (B), including the availability of data and time lags;
                    (F) examine the extent to which the alternative 
                methods identified and examined under subparagraph (A) 
                should be specified in such section 1848; and
                    (G) identify the appropriate level of discretion for 
                the Secretary of Health and Human Services to change 
                payment rates under the Medicare physician fee schedule 
                or otherwise take steps that affect physician behavior.
        Such report shall include such recommendations on alternative 
        mechanisms to replace the sustainable growth rate system as the 
        Medicare Payment Advisory Commission determines appropriate.
            (3) Funding.--Out of any funds in the Treasury not otherwise 
        appropriated, there are appropriated to the Medicare Payment 
        Advisory Commission $550,000, to carry out this subsection.

SEC. 5105. THREE-YEAR TRANSITION OF HOLD HARMLESS PAYMENTS FOR SMALL 
            RURAL HOSPITALS UNDER THE PROSPECTIVE PAYMENT SYSTEM FOR 
            HOSPITAL OUTPATIENT DEPARTMENT SERVICES.

    Section 1833(t)(7)(D)(i) of the Social Security Act (42 U.S.C. 
1395l(t)(7)(D)(i)) is amended--
            (1) by inserting ``(I)'' before ``In the case''; and

[[Page 120 STAT. 42]]

            (2) by adding at the end the following new subclause:
                          ``(II) In the case of a hospital located in a 
                      rural area and that has not more than 100 beds and 
                      that is not a sole community hospital (as defined 
                      in section 1886(d)(5)(D)(iii)), for covered OPD 
                      services furnished on or after January 1, 2006, 
                      and before January 1, 2009, for which the PPS 
                      amount is less than the pre-BBA amount, the amount 
                      of payment under this subsection shall be 
                      increased by the applicable percentage of the 
                      amount of such difference. For purposes of the 
                      previous sentence, with respect to covered OPD 
                      services furnished during 2006, 2007, or 2008, the 
                      applicable percentage shall be 95 percent, 90 
                      percent, and 85 percent, respectively.''.

SEC. 5106. UPDATE TO THE COMPOSITE RATE COMPONENT OF THE BASIC CASE-MIX 
            ADJUSTED PROSPECTIVE PAYMENT SYSTEM FOR DIALYSIS SERVICES.

    Section 1881(b)(12) of the Social Security Act (42 U.S.C. 
1395rr(b)(12)) is amended--
            (1) in subparagraph (F), in the flush matter at the end, by 
        striking ``Nothing'' and inserting ``Except as provided in 
        subparagraph (G), nothing'';
            (2) by redesignating subparagraph (G) as subparagraph (H); 
        and
            (3) by inserting after subparagraph (F) the following new 
        subparagraph:

    ``(G) The Secretary shall increase the amount of the composite rate 
component of the basic case-mix adjusted system under subparagraph (B) 
for dialysis services furnished on or after January 1, 2006, by 1.6 
percent above the amount of such composite rate component for such 
services furnished on December 31, 2005.''.

SEC. 5107. REVISIONS TO PAYMENTS FOR THERAPY SERVICES.

    (a) Exception to Caps for 2006.--
            (1) In general.--Section 1833(g) of the Social Security Act 
        (42 U.S.C. 1395l(g)) is amended--
                    (A) in each of paragraphs (1) and (3), by striking 
                ``paragraph (4)'' and inserting ``paragraphs (4) and 
                (5)''; and
                    (B) by adding at the end the following new 
                paragraph:

    ``(5) With respect to expenses incurred during 2006 for services, 
the Secretary shall implement a process under which an individual 
enrolled under this part may, upon request of the individual or a person 
on behalf of the individual, obtain an exception from the uniform dollar 
limitation specified in paragraph (2), for services described in 
paragraphs (1) and (3) if the provision of such services is determined 
to be medically necessary. <<NOTE: Deadline.>> Under such process, if 
the Secretary does not make a decision on such a request for an 
exception within 10 business days of the date of the Secretary's receipt 
of the request, the Secretary shall be deemed to have found the services 
to be medically necessary.''.
            (2) <<NOTE: 42 USC 1395l note.>> Timely implementation.--The 
        Secretary of Health and Human Services shall waive such 
        provisions of law and regulation (including those described in 
        section 110(c) of Public Law 108-173) as are necessary to 
        implement the amendments made by paragraph (1) on a timely basis 
        and, notwithstanding any other provision of law, may implement 
        such amendments by

[[Page 120 STAT. 43]]

        program instruction or otherwise. There shall be no 
        administrative or judicial review under section 1869 or section 
        1878 of the Social Security Act (42 U.S.C. 1395ff and 1395oo), 
        or otherwise of the process (including the establishment of the 
        process) under section 1833(g)(5) of such Act, as added by 
        paragraph (1).

    (b) <<NOTE: Deadline. 42 USC 1395l note.>> Implementation of 
Clinically Appropriate Code Edits In Order To Identify and Eliminate 
Improper Payments for Therapy Services.--By not later than July 1, 2006, 
the Secretary of Health and Human Services shall implement clinically 
appropriate code edits with respect to payments under part B of title 
XVIII of the Social Security Act for physical therapy services, 
occupational therapy services, and speech-language pathology services in 
order to identify and eliminate improper payments for such services, 
including edits of clinically illogical combinations of procedure codes 
and other edits to control inappropriate billings.

                        CHAPTER 2--MISCELLANEOUS

SEC. 5111. ACCELERATED IMPLEMENTATION OF INCOME-RELATED REDUCTION IN 
            PART B PREMIUM SUBSIDY.

    Section 1839(i)(3)(B) of the Social Security Act (42 U.S.C. 
1395r(i)(3)(B)) is amended--
            (1) in the heading, by striking ``5-year'' and inserting 
        ``3-year'';
            (2) in the matter preceding clause (i), by striking ``2011'' 
        and inserting ``2009'';
            (3) in clause (i), by striking ``20 percent'' and inserting 
        ``33 percent'';
            (4) in clause (ii), by striking ``40 percent'' and inserting 
        ``67 percent''; and
            (5) by striking clauses (iii) and (iv).

SEC. 5112. MEDICARE COVERAGE OF ULTRASOUND SCREENING FOR ABDOMINAL 
            AORTIC ANEURYSMS.

    (a) In General.--Section 1861 of the Social Security Act (42 U.S.C. 
1395x) is amended--
            (1) in subsection (s)(2)--
                    (A) by striking ``and'' at the end of subparagraph 
                (Y);
                    (B) by adding ``and'' at the end of subparagraph (Z) 
                and moving such subparagraph 2 ems to the left; and
                    (C) by adding at the end the following new 
                subparagraph:
            ``(AA) ultrasound screening for abdominal aortic aneurysm 
        (as defined in subsection (bbb)) for an individual--
                    ``(i) who receives a referral for such an ultrasound 
                screening as a result of an initial preventive physical 
                examination (as defined in section 1861(ww)(1));
                    ``(ii) who has not been previously furnished such an 
                ultrasound screening under this title; and
                    ``(iii) who--
                          ``(I) has a family history of abdominal aortic 
                      aneurysm; or
                          ``(II) manifests risk factors included in a 
                      beneficiary category recommended for screening by 
                      the United States Preventive Services Task Force 
                      regarding abdominal aortic aneurysms;''; and

[[Page 120 STAT. 44]]

            (2) by adding at the end the following new subsection:

          ``Ultrasound Screening for Abdominal Aortic Aneurysm

    ``(bbb) The term `ultrasound screening for abdominal aortic 
aneurysm' means--
            ``(1) a procedure using sound waves (or such other 
        procedures using alternative technologies, of commensurate 
        accuracy and cost, that the Secretary may specify) provided for 
        the early detection of abdominal aortic aneurysm; and
            ``(2) includes a physician's interpretation of the results 
        of the procedure.''.

    (b) Inclusion of Ultrasound Screening for Abdominal Aortic Aneurysm 
in Initial Preventive Physical Examination.--Section 1861(ww)(2) of such 
Act (42 U.S.C. 1395x(ww)(2)) is amended by adding at the end the 
following new subparagraph:
            ``(L) Ultrasound screening for abdominal aortic aneurysm as 
        defined in section 1861(bbb).''.

    (c) Payment for Ultrasound Screening for Abdominal Aortic 
Aneurysm.--Section 1848(j)(3) of such Act (42 U.S.C. 1395w-4(j)(3)) is 
amended by inserting ``(2)(AA),'' after ``(2)(W),''.
    (d) Frequency.--Section 1862(a)(1) of such Act (42 U.S.C. 
1395y(a)(1)) is amended--
            (1) by striking ``and'' at the end of subparagraph (L);
            (2) by striking the semicolon at the end of subparagraph (M) 
        and inserting ``, and''; and
            (3) by adding at the end the following new subparagraph:
            ``(N) in the case of ultrasound screening for abdominal 
        aortic aneurysm which is performed more frequently than is 
        provided for under section 1861(s)(2)(AA);''.

    (e) Non-Application of Part B Deductible.--Section 1833(b) of such 
Act (42 U.S.C. 1395l(b)) is amended in the first sentence--
            (1) by striking ``and'' before ``(6)''; and
            (2) by inserting ``, and (7) such deductible shall not apply 
        with respect to ultrasound screening for abdominal aortic 
        aneurysm (as defined in section 1861(bbb))'' before the period 
        at the end.

    (f) <<NOTE: 42 USC 1395l note.>> Effective Date.--The amendments 
made by this section shall apply to services furnished on or after 
January 1, 2007.

SEC. 5113. IMPROVING PATIENT ACCESS TO, AND UTILIZATION OF, COLORECTAL 
            CANCER SCREENING.

    (a) Non-Application of Deductible for Colorectal Cancer Screening 
Tests.--Section 1833(b) of the Social Security Act (42 U.S.C. 1395l(b)), 
as amended by section 5112(e), is amended in the first sentence--
            (1) by striking ``and'' before ``(7)''; and
            (2) by inserting ``, and (8) such deductible shall not apply 
        with respect to colorectal cancer screening tests (as described 
        in section 1861(pp)(1))'' before the period at the end.

    (b) Conforming Amendments.--Paragraphs (2)(C)(ii) and (3)(C)(ii) of 
section 1834(d) of such Act (42 U.S.C. 1395m(d)) are each amended--
            (1) by striking ``deductible and'' in the heading; and
            (2) in subclause (I), by striking ``deductible or'' each 
        place it appears.

    (c) <<NOTE: 42 USC 1395l note.>> Effective Date.--The amendments 
made by this section shall apply to services furnished on or after 
January 1, 2007.

[[Page 120 STAT. 45]]

SEC. 5114. DELIVERY OF SERVICES AT FEDERALLY QUALIFIED HEALTH CENTERS.

    (a) Coverage.--
            (1) In general.--Section 1861(aa)(3) of the Social Security 
        Act (42 U.S.C. 1395x(aa)(3)) is amended--
                    (A) in subparagraph (A), by striking ``, and'' and 
                inserting ``and services described in subsections (qq) 
                and (vv); and'';
                    (B) in subparagraph (B), by striking ``sections 329, 
                330, and 340'' and inserting ``section 330''; and
                    (C) in the flush matter at the end, by inserting 
                ``by the center or by a health care professional under 
                contract with the center'' after ``outpatient of a 
                Federally qualified health center''.
            (2) Consolidated billing.--The first sentence of section 
        1842(b)(6)(F) of such Act (42 U.S.C. 1395u(b)(6)(F)) is 
        amended--
                    (A) by striking ``and (G)'' and inserting ``(G)''; 
                and
                    (B) by inserting before the period at the end the 
                following: ``, and (H) in the case of services described 
                in section 1861(aa)(3) that are furnished by a health 
                care professional under contract with a Federally 
                qualified health center, payment shall be made to the 
                center''.

    (b) Technical Corrections.--Clauses (i) and (ii)(II) of section 
1861(aa)(4)(A) of such Act (42 U.S.C. 1395x(aa)(4)(A)) are each amended 
by striking ``(other than subsection (h))''.
    (c) <<NOTE: 42 USC 1395u note.>> Effective Dates.--The amendments 
made by this section shall apply to services furnished on or after 
January 1, 2006.

SEC. 5115. WAIVER OF PART B LATE ENROLLMENT PENALTY FOR CERTAIN 
            INTERNATIONAL VOLUNTEERS.

    (a) In General.--
            (1) Waiver of penalty.--Section 1839(b) of the Social 
        Security Act (42 U.S.C. 1395r(b)) is amended in the second 
        sentence by inserting the following before the period at the 
        end: ``or months for which the individual can demonstrate that 
        the individual was an individual described in section 
        1837(k)(3)''.
            (2) Special enrollment period.--
                    (A) In general.--Section 1837 of such Act (42 U.S.C. 
                1395p) is amended by adding at the end the following new 
                subsection:

    ``(k)(1) In the case of an individual who--
            ``(A) at the time the individual first satisfies paragraph 
        (1) or (2) of section 1836, is described in paragraph (3), and 
        has elected not to enroll (or to be deemed enrolled) under this 
        section during the individual's initial enrollment period; or
            ``(B) has terminated enrollment under this section during a 
        month in which the individual is described in paragraph (3),

there shall be a special enrollment period described in paragraph (2).
    ``(2) The special enrollment period described in this paragraph is 
the 6-month period beginning on the first day of the month which 
includes the date that the individual is no longer described in 
paragraph (3).

[[Page 120 STAT. 46]]

    ``(3) For purposes of paragraph (1), an individual described in this 
paragraph is an individual who--
            ``(A) is serving as a volunteer outside of the United States 
        through a program--
                    ``(i) that covers at least a 12-month period; and
                    ``(ii) that is sponsored by an organization 
                described in section 501(c)(3) of the Internal Revenue 
                Code of 1986 and exempt from taxation under section 
                501(a) of such Code; and
            ``(B) demonstrates health insurance coverage while serving 
        in the program.''.
                    (B) Coverage period.--Section 1838 of such Act (42 
                U.S.C. 1395q) is amended by adding at the end the 
                following new subsection:

    ``(f) Notwithstanding subsection (a), in the case of an individual 
who enrolls during a special enrollment period pursuant to section 
1837(k), the coverage period shall begin on the first day of the month 
following the month in which the individual so enrolls.''.
    (b) <<NOTE: 42 USC 1395p note.>> Effective Date.--The amendment made 
by subsection (a)(1) shall apply to months beginning with January 2007 
and the amendments made by subsection (a)(2) shall take effect on 
January 1, 2007.

            Subtitle C--Provisions Relating to Parts A and B

SEC. 5201. HOME HEALTH PAYMENTS.

    (a) 2006 Update.--Section 1895(b)(3)(B)(ii) of the Social Security 
Act (42 U.S.C. 1395fff(b)(3)(B)(ii)) is amended--
            (1) in subclause (III), by striking ``each of 2005 and 
        2006'' and inserting ``all of 2005'';
            (2) by striking ``or'' at the end of subclause (III);
            (3) in subclause (IV), by striking ``2007 and'' and by 
        redesignating such subclause as subclause (V); and
            (4) by inserting after subclause (III) the following new 
        subclause:
                                    ``(IV) 2006, 0 percent; and''.

    (b) Applying Rural Add-On Policy for 2006.--Section 421(a) of 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(Public Law 108-173; 117 Stat. 2283) <<NOTE: 42 USC 1395fff note.>> is 
amended by inserting ``and episodes and visits beginning on or after 
January 1, 2006, and before January 1, 2007,'' after ``April 1, 2005,''.

    (c) Home Health Care Quality Improvement.--Section 1895(b)(3)(B) of 
the Social Security Act (42 U.S.C. 1395fff(b)(3)(B)) is amended--
            (1) in clause (ii)(V), as redesignated by subsection (a)(3), 
        by inserting ``subject to clause (v),'' after ``subsequent 
        year,''; and
            (2) by adding at the end the following new clause:
                          ``(v) Adjustment if quality data not 
                      submitted.--
                                    ``(I) Adjustment.--For purposes of 
                                clause (ii)(V), for 2007 and each 
                                subsequent year, in the case of a home 
                                health agency that does not submit data 
                                to the Secretary in accordance with 
                                subclause (II) with respect to such a 
                                year, the home health

[[Page 120 STAT. 47]]

                                market basket percentage increase 
                                applicable under such clause for such 
                                year shall be reduced by 2 percentage 
                                points. <<NOTE: Applicability.>> Such 
                                reduction shall apply only with respect 
                                to the year involved, and the Secretary 
                                shall not take into account such 
                                reduction in computing the prospective 
                                payment amount under this section for a 
                                subsequent year, and the Medicare 
                                Payment Advisory Commission shall carry 
                                out the requirements under section 
                                5201(d) of the Deficit Reduction Act of 
                                2005.
                                    ``(II) Submission of quality data.--
                                For 2007 and each subsequent year, each 
                                home health agency shall submit to the 
                                Secretary such data that the Secretary 
                                determines are appropriate for the 
                                measurement of health care quality. Such 
                                data shall be submitted in a form and 
                                manner, and at a time, specified by the 
                                Secretary for purposes of this clause.
                                    ``(III) <<NOTE: Procedures.>> Public 
                                availability of data submitted.--The 
                                Secretary shall establish procedures for 
                                making data submitted under subclause 
                                (II) available to the public. Such 
                                procedures shall ensure that a home 
                                health agency has the opportunity to 
                                review the data that is to be made 
                                public with respect to the agency prior 
                                to such data being made public.''.

    (d) MedPAC Report on Value Based Purchasing.--
            (1) In general.--Not later than June 1, 2007, the Medicare 
        Payment Advisory Commission shall submit to Congress a report 
        that includes recommendations on a detailed structure of value 
        based payment adjustments for home health services under the 
        Medicare program under title XVIII of the Social Security Act. 
        Such report shall include recommendations concerning the 
        determination of thresholds, the size of such payments, sources 
        of funds, and the relationship of payments for improvement and 
        attainment of quality.
            (2) Funding.--Out of any funds in the Treasury not otherwise 
        appropriated, there are appropriated to the Medicare Payment 
        Advisory Commission $550,000, to carry out this subsection.

SEC. 5202. REVISION OF PERIOD FOR PROVIDING PAYMENT FOR CLAIMS THAT ARE 
            NOT SUBMITTED ELECTRONICALLY.

    (a) Revision.--
            (1) Part a.--Section 1816(c)(3)(B)(ii) of the Social 
        Security Act (42 U.S.C. 1395h(c)(3)(B)(ii)) is amended by 
        striking ``26 days'' and inserting ``28 days''.
            (2) Part b.--Section 1842(c)(3)(B)(ii) of such Act (42 
        U.S.C. 1395u(c)(3)(B)(ii)) is amended by striking ``26 days'' 
        and inserting ``28 days''.

    (b) <<NOTE: 42 USC 1395h note.>> Effective Date.--The amendments 
made by this section shall apply to claims submitted on or after January 
1, 2006.

SEC. 5203. TIMEFRAME FOR PART A AND B PAYMENTS.

    Notwithstanding sections 1816(c) and 1842(c)(2) of the Social 
Security Act or any other provision of law--
            (1) any payment from the Federal Hospital Insurance Trust 
        Fund under section 1817 of the Social Security Act (42 U.S.C.

[[Page 120 STAT. 48]]

        1395i) or from the Federal Supplementary Medical Insurance Trust 
        Fund under section 1841 of such Act (42 U.S.C. 1395t) for claims 
        submitted under part A or B of title XVIII of such Act for items 
        and services furnished under such part A or B, respectively, 
        that would otherwise be payable during the period beginning on 
        September 22, 2006, and ending on September 30, 2006, shall be 
        paid on the first business day of October 2006; and
            (2) no interest or late penalty shall be paid to an entity 
        or individual for any delay in a payment by reason of the 
        application of paragraph (1).

SEC. 5204. MEDICARE INTEGRITY PROGRAM FUNDING.

    Section 1817(k)(4) of the Social Security Act (42 U.S.C. 
1395i(k)(4)) is amended--
            (1) in subparagraph (B), by striking ``The amount'' and 
        inserting ``Subject to subparagraph (C), the amount''; and
            (2) by adding at the end the following new subparagraph:
                    ``(C) Adjustments.--The amount appropriated under 
                subparagraph (A) for a fiscal year is increased as 
                follows:
                          ``(i) For fiscal year 2006, $100,000,000.''.

                Subtitle D--Provisions Relating to Part C

SEC. 5301. PHASE-OUT OF RISK ADJUSTMENT BUDGET NEUTRALITY IN DETERMINING 
            THE AMOUNT OF PAYMENTS TO MEDICARE ADVANTAGE ORGANIZATIONS.

    (a) In General.--Section 1853 of the Social Security Act (42 U.S.C. 
1395w-23) is amended--
            (1) in subsection (j)(1)--
                    (A) in subparagraph (A)--
                          (i) by inserting ``(or, beginning with 2007, 
                      \1/12\ of the applicable amount determined under 
                      subsection (k)(1))'' after ``1853(c)(1)''; and
                          (ii) by inserting ``(for years before 2007)'' 
                      after ``adjusted as appropriate'';
                    (B) in subparagraph (B), by inserting ``(for years 
                before 2007)'' after ``adjusted as appropriate''; and
            (2) by adding at the end the following new subsection:

    ``(k) Determination of Applicable Amount for Purposes of Calculating 
the Benchmark Amounts.--
            ``(1) Applicable amount defined.--For purposes of subsection 
        (j), subject to paragraph (2), the term `applicable amount' 
        means for an area--
                    ``(A) for 2007--
                          ``(i) if such year is not specified under 
                      subsection (c)(1)(D)(ii), an amount equal to the 
                      amount specified in subsection (c)(1)(C) for the 
                      area for 2006--
                                    ``(I) first adjusted by the 
                                rescaling factor for 2006 for the area 
                                (as made available by the Secretary in 
                                the announcement of the rates on April 
                                4, 2005, under subsection (b)(1), but 
                                excluding any national adjustment 
                                factors for coding intensity and risk 
                                adjustment budget neutrality that were 
                                included in such factor); and

[[Page 120 STAT. 49]]

                                    ``(II) then increased by the 
                                national per capita MA growth 
                                percentage, described in subsection 
                                (c)(6) for 2007, but not taking into 
                                account any adjustment under 
                                subparagraph (C) of such subsection for 
                                a year before 2004;
                          ``(ii) if such year is specified under 
                      subsection (c)(1)(D)(ii), an amount equal to the 
                      greater of--
                                    ``(I) the amount determined under 
                                clause (i) for the area for the year; or
                                    ``(II) the amount specified in 
                                subsection (c)(1)(D) for the area for 
                                the year; and
                    ``(B) for a subsequent year--
                          ``(i) if such year is not specified under 
                      subsection (c)(1)(D)(ii), an amount equal to the 
                      amount determined under this paragraph for the 
                      area for the previous year (determined without 
                      regard to paragraph (2)), increased by the 
                      national per capita MA growth percentage, 
                      described in subsection (c)(6) for that succeeding 
                      year, but not taking into account any adjustment 
                      under subparagraph (C) of such subsection for a 
                      year before 2004; and
                          ``(ii) if such year is specified under 
                      subsection (c)(1)(D)(ii), an amount equal to the 
                      greater of--
                                    ``(I) the amount determined under 
                                clause (i) for the area for the year; or
                                    ``(II) the amount specified in 
                                subsection (c)(1)(D) for the area for 
                                the year.
            ``(2) Phase-out of budget neutrality factor.--
                    ``(A) In general.--Except as provided in 
                subparagraph (D), in the case of 2007 through 2010, the 
                applicable amount determined under paragraph (1) shall 
                be multiplied by a factor equal to 1 plus the product 
                of--
                          ``(i) the percent determined under 
                      subparagraph (B) for the year; and
                          ``(ii) the applicable phase-out factor for the 
                      year under subparagraph (C).
                    ``(B) Percent determined.--
                          ``(i) In general.--For purposes of 
                      subparagraph (A)(i), subject to clause (iv), the 
                      percent determined under this subparagraph for a 
                      year is a percent equal to a fraction the 
                      numerator of which is described in clause (ii) and 
                      the denominator of which is described in clause 
                      (iii).
                          ``(ii) Numerator based on difference between 
                      demographic rate and risk rate.--
                                    ``(I) In general.--The numerator 
                                described in this clause is an amount 
                                equal to the amount by which the 
                                demographic rate described in subclause 
                                (II) exceeds the risk rate described in 
                                subclause (III).
                                    ``(II) Demographic rate.--The 
                                demographic rate described in this 
                                subclause is the Secretary's estimate of 
                                the total payments that would have been 
                                made under this part in the year if all 
                                the monthly payment amounts for all MA 
                                plans were equal to \1/12\ of the annual 
                                MA capitation rate

[[Page 120 STAT. 50]]

                                under subsection (c)(1) for the area and 
                                year, adjusted pursuant to subsection 
                                (a)(1)(C).
                                    ``(III) Risk rate.--The risk rate 
                                described in this subclause is the 
                                Secretary's estimate of the total 
                                payments that would have been made under 
                                this part in the year if all the monthly 
                                payment amounts for all MA plans were 
                                equal to the amount described in 
                                subsection (j)(1)(A) (determined as if 
                                this paragraph had not applied) under 
                                subsection (j) for the area and year, 
                                adjusted pursuant to subsection 
                                (a)(1)(C).
                          ``(iii) Denominator based on risk rate.--The 
                      denominator described in this clause is equal to 
                      the total amount estimated for the year under 
                      clause (ii)(III).
                          ``(iv) Requirements.--In estimating the 
                      amounts under the previous clauses, the Secretary 
                      shall--
                                    ``(I) use a complete set of the most 
                                recent and representative Medicare 
                                Advantage risk scores under subsection 
                                (a)(3) that are available from the risk 
                                adjustment model announced for the year;
                                    ``(II) adjust the risk scores to 
                                reflect changes in treatment and coding 
                                practices in the fee-for-service sector;
                                    ``(III) adjust the risk scores for 
                                differences in coding patterns between 
                                Medicare Advantage plans and providers 
                                under the original Medicare fee-for-
                                service program under parts A and B to 
                                the extent that the Secretary has 
                                identified such differences, as required 
                                in subsection (a)(1)(C);
                                    ``(IV) as necessary, adjust the risk 
                                scores for late data submitted by 
                                Medicare Advantage organizations;
                                    ``(V) as necessary, adjust the risk 
                                scores for lagged cohorts; and
                                    ``(VI) as necessary, adjust the risk 
                                scores for changes in enrollment in 
                                Medicare Advantage plans during the 
                                year.
                          ``(v) Authority.--In computing such amounts 
                      the Secretary may take into account the estimated 
                      health risk of enrollees in preferred provider 
                      organization plans (including MA regional plans) 
                      for the year.
                    ``(C) Applicable phase-out factor.--For purposes of 
                subparagraph (A)(ii), the term `applicable phase-out 
                factor' means--
                          ``(i) for 2007, 0.55;
                          ``(ii) for 2008, 0.40;
                          ``(iii) for 2009, 0.25; and
                          ``(iv) for 2010, 0.05.
                    ``(D) Termination of application.--Subparagraph (A) 
                shall not apply in a year if the amount estimated under 
                subparagraph (B)(ii)(III) for the year is equal to or 
                greater than the amount estimated under subparagraph 
                (B)(ii)(II) for the year.
            ``(3) No revision in percent.--

[[Page 120 STAT. 51]]

                    ``(A) In general.--The Secretary may not make any 
                adjustment to the percent determined under paragraph 
                (2)(B) for any year.
                    ``(B) Rule of construction.--Nothing in this 
                subsection shall be construed to limit the authority of 
                the Secretary to make adjustments to the applicable 
                amounts determined under paragraph (1) as appropriate 
                for purposes of updating data or for purposes of 
                adopting an improved risk adjustment methodology.''.

    (b) Refinements to Health Status Adjustment.--Section 1853(a)(1)(C) 
of such Act (42 U.S.C. 1395w-23) is amended--
            (1) by designating the matter after the heading as a clause 
        (i) with the following heading: ``In general.--'' and indenting 
        appropriately; and
            (2) by adding at the end the following:
                          ``(ii) Application during phase-out of budget 
                      neutrality factor.--For 2006 through 2010:
                                    ``(I) In applying the adjustment 
                                under clause (i) for health status to 
                                payment amounts, the Secretary shall 
                                ensure that such adjustment reflects 
                                changes in treatment and coding 
                                practices in the fee-for-service sector 
                                and reflects differences in coding 
                                patterns between Medicare Advantage 
                                plans and providers under part A and B 
                                to the extent that the Secretary has 
                                identified such differences.
                                    ``(II) In order to ensure payment 
                                accuracy, the Secretary shall conduct an 
                                analysis of the differences described in 
                                subclause (I). The Secretary shall 
                                complete such analysis by a date 
                                necessary to ensure that the results of 
                                such analysis are incorporated into the 
                                risk scores only for 2008, 2009, and 
                                2010. In conducting such analysis, the 
                                Secretary shall use data submitted with 
                                respect to 2004 and subsequent years, as 
                                available.''.

SEC. 5302. <<NOTE: 42 USC 1395eee note.>> RURAL PACE PROVIDER GRANT 
            PROGRAM.

    (a) Definitions.--In this section:
            (1) CMS.--The term ``CMS'' means the Centers for Medicare & 
        Medicaid Services.
            (2) PACE program.--The term ``PACE program'' has the meaning 
        given that term in sections 1894(a)(2) and 1934(a)(2) of the 
        Social Security Act (42 U.S.C. 1395eee(a)(2); 1396u-4(a)(2)).
            (3) PACE provider.--The term ``PACE provider'' has the 
        meaning given that term in section 1894(a)(3) or 1934(a)(3) of 
        the Social Security Act (42 U.S.C. 1395eee(a)(3); 1396u-
        4(a)(3)).
            (4) Rural area.--The term ``rural area'' has the meaning 
        given that term in section 1886(d)(2)(D) of the Social Security 
        Act (42 U.S.C. 1395ww(d)(2)(D)).
            (5) Rural pace pilot site.--The term ``rural PACE pilot 
        site'' means a PACE provider that has been approved to provide 
        services in a geographic service area that is, in whole or in 
        part, a rural area, and that has received a site development 
        grant under this section.

[[Page 120 STAT. 52]]

            (6) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.

    (b) Site Development Grants and Technical Assistance Program.--
            (1) Site development grants.--
                    (A) In general.--The Secretary shall establish a 
                process and criteria to award site development grants to 
                qualified PACE providers that have been approved to 
                serve a rural area.
                    (B) Amount per award.--A site development grant 
                awarded under subparagraph (A) to any individual rural 
                PACE pilot site shall not exceed $750,000.
                    (C) Number of awards.--Not more than 15 rural PACE 
                pilot sites shall be awarded a site development grant 
                under subparagraph (A).
                    (D) Use of funds.--Funds made available under a site 
                development grant awarded under subparagraph (A) may be 
                used for the following expenses only to the extent such 
                expenses are incurred in relation to establishing or 
                delivering PACE program services in a rural area:
                          (i) Feasibility analysis and planning.
                          (ii) Interdisciplinary team development.
                          (iii) Development of a provider network, 
                      including contract development.
                          (iv) Development or adaptation of claims 
                      processing systems.
                          (v) Preparation of special education and 
                      outreach efforts required for the PACE program.
                          (vi) Development of expense reporting required 
                      for calculation of outlier payments or 
                      reconciliation processes.
                          (vii) Development of any special quality of 
                      care or patient satisfaction data collection 
                      efforts.
                          (viii) Establishment of a working capital fund 
                      to sustain fixed administrative, facility, or 
                      other fixed costs until the provider reaches 
                      sufficient enrollment size.
                          (ix) Startup and development costs incurred 
                      prior to the approval of the rural PACE pilot 
                      site's PACE provider application by CMS.
                          (x) Any other efforts determined by the rural 
                      PACE pilot site to be critical to its successful 
                      startup, as approved by the Secretary.
                    (E) Appropriation.--
                          (i) In general.--Out of funds in the Treasury 
                      not otherwise appropriated, there are appropriated 
                      to the Secretary to carry out this subsection for 
                      fiscal year 2006, $7,500,000.
                          (ii) Availability.--Funds appropriated under 
                      clause (i) shall remain available for expenditure 
                      through fiscal year 2008.
            (2) Technical assistance program.--The Secretary shall 
        establish a technical assistance program to provide--
                    (A) outreach and education to State agencies and 
                provider organizations interested in establishing PACE 
                programs in rural areas; and

[[Page 120 STAT. 53]]

                    (B) technical assistance necessary to support rural 
                PACE pilot sites.

    (c) Cost Outlier Protection for Rural PACE Pilot Sites.--
            (1) Establishment of fund for reimbursement of outlier 
        costs.--Notwithstanding any other provision of law, the 
        Secretary shall establish an outlier fund to reimburse rural 
        PACE pilot sites for recognized outlier costs (as defined in 
        paragraph (3)) incurred for eligible outlier participants (as 
        defined in paragraph (2)) in an amount, subject to paragraph 
        (4), equal to 80 percent of the amount by which the recognized 
        outlier costs exceeds $50,000.
            (2) Eligible outlier participant.--For purposes of this 
        subsection, the term ``eligible outlier participant'' means a 
        PACE program eligible individual (as defined in sections 
        1894(a)(5) and 1934(a)(5) of the Social Security Act (42 U.S.C. 
        1395eee(a)(5); 1396u-4(a)(5))) who resides in a rural area and 
        with respect to whom the rural PACE pilot site incurs more than 
        $50,000 in recognized costs in a 12-month period.
            (3) Recognized outlier costs defined.--
                    (A) In general.--For purposes of this subsection, 
                the term ``recognized outlier costs'' means, with 
                respect to services furnished to an eligible outlier 
                participant by a rural PACE pilot site, the least of the 
                following (as documented by the site to the satisfaction 
                of the Secretary) for the provision of inpatient and 
                related physician and ancillary services for the 
                eligible outlier participant in a given 12-month period:
                          (i) If the services are provided under a 
                      contract between the pilot site and the provider, 
                      the payment rate specified under the contract.
                          (ii) The payment rate established under the 
                      original Medicare fee-for-service program for such 
                      service.
                          (iii) The amount actually paid for the 
                      services by the pilot site.
                    (B) Inclusion in only one period.--Recognized 
                outlier costs may not be included in more than one 12-
                month period.
            (3) Outlier expense payment.--
                    (A) Payment for outlier costs.--Subject to 
                subparagraph (B), in the case of a rural PACE pilot site 
                that has incurred outlier costs for an eligible outlier 
                participant, the rural PACE pilot site shall receive an 
                outlier expense payment equal to 80 percent of such 
                costs that exceed $50,000.
            (4) Limitations.--
                    (A) Costs incurred per eligible outlier 
                participant.--The total amount of outlier expense 
                payments made under this subsection to a rural PACE 
                pilot site with respect to an eligible outlier 
                participant for any 12-month period shall not exceed 
                $100,000 for the 12-month period used to calculate the 
                payment.
                    (B) Costs incurred per provider.--No rural PACE 
                pilot site may receive more than $500,000 in total 
                outlier expense payments in a 12-month period.
                    (C) Limitation of outlier cost reimbursement 
                period.--A rural PACE pilot site shall only receive 
                outlier

[[Page 120 STAT. 54]]

                expense payments under this subsection with respect to 
                costs incurred during the first 3 years of the site's 
                operation.
            (5) Requirement to access risk reserves prior to payment.--A 
        rural PACE pilot site shall access and exhaust any risk reserves 
        held or arranged for the provider (other than revenue or 
        reserves maintained to satisfy the requirements of section 
        460.80(c) of title 42, Code of Federal Regulations) and any 
        working capital established through a site development grant 
        awarded under subsection (b)(1), prior to receiving any payment 
        from the outlier fund.
            (6) Application.--In order to receive an outlier expense 
        payment under this subsection with respect to an eligible 
        outlier participant, a rural PACE pilot site shall submit an 
        application containing--
                    (A) documentation of the costs incurred with respect 
                to the participant;
                    (B) <<NOTE: Certification.>> a certification that 
                the site has complied with the requirements under 
                paragraph (4); and
                    (C) such additional information as the Secretary may 
                require.
            (7) Appropriation.--
                    (A) In general.--Out of funds in the Treasury not 
                otherwise appropriated, there are appropriated to the 
                Secretary to carry out this subsection for fiscal year 
                2006, $10,000,000.
                    (B) Availability.--Funds appropriated under 
                subparagraph (A) shall remain available for expenditure 
                through fiscal year 2010.

    (d) <<NOTE: Deadline. Reports.>> Evaluation of PACE Providers 
Serving Rural Service Areas.--Not later than 60 months after the date of 
enactment of this Act, the Secretary shall submit a report to Congress 
containing an evaluation of the experience of rural PACE pilot sites.

    (e) Amounts in Addition to Payments Under Social Security Act.--Any 
amounts paid under the authority of this section to a PACE provider 
shall be in addition to payments made to the provider under section 1894 
or 1934 of the Social Security Act (42 U.S.C. 1395eee; 1396u-4).

                      TITLE VI--MEDICAID AND SCHIP

                          Subtitle A--Medicaid

                CHAPTER 1--PAYMENT FOR PRESCRIPTION DRUGS

SEC. 6001. FEDERAL UPPER PAYMENT LIMIT FOR MULTIPLE SOURCE DRUGS AND 
            OTHER DRUG PAYMENT PROVISIONS.

    (a) Modification of Federal Upper Payment Limit for Multiple Source 
Drugs; Definition of Multiple Source Drugs.--Section 1927 of the Social 
Security Act (42 U.S.C. 1396r-8) is amended--
            (1) in subsection (e)(4)--
                    (A) by striking ``The Secretary'' and inserting 
                ``Subject to paragraph (5), the Secretary''; and
                    (B) by inserting ``(or, effective January 1, 2007, 
                two or more)'' after ``three or more'';

[[Page 120 STAT. 55]]

            (2) by adding at the end of subsection (e) the following new 
        paragraph:
            ``(5) <<NOTE: Effective date.>> Use of amp in upper payment 
        limits.--Effective January 1, 2007, in applying the Federal 
        upper reimbursement limit under paragraph (4) and section 
        447.332(b) of title 42 of the Code of Federal Regulations, the 
        Secretary shall substitute 250 percent of the average 
        manufacturer price (as computed without regard to customary 
        prompt pay discounts extended to wholesalers) for 150 percent of 
        the published price.'';
            (3) in subsection (k)(7)(A)(i), in the matter preceding 
        subclause (I), by striking ``are 2 or more drug products'' and 
        inserting ``at least 1 other drug product''; and
            (4) in subclauses (I), (II), and (III) of subsection 
        (k)(7)(A)(i), by striking ``are'' and inserting ``is'' each 
        place it appears.

    (b) Disclosure of Price Information to States and the Public.--
Subsection (b)(3) of such section <<NOTE: 42 USC 1396r-8.>> is amended--
            (1) in subparagraph (A)--
                    (A) in clause (i), by inserting ``month of a'' after 
                ``last day of each''; and
                    (B) <<NOTE: Effective date.>> by adding at the end 
                the following: ``Beginning July 1, 2006, the Secretary 
                shall provide on a monthly basis to States under 
                subparagraph (D)(iv) the most recently reported average 
                manufacturer prices for single source drugs and for 
                multiple source drugs and shall, on at least a quarterly 
                basis, update the information posted on the website 
                under subparagraph (D)(v).''; and
            (2) in subparagraph (D)--
                    (A) by striking ``and'' at the end of clause (ii);
                    (B) by striking the period at the end of clause 
                (iii) and inserting a comma; and
                    (C) by inserting after clause (iii) the following 
                new clauses:
                          ``(iv) to States to carry out this title, and
                          ``(v) to the Secretary to disclose (through a 
                      website accessible to the public) average 
                      manufacturer prices.''.

    (c) Definition of Average Manufacturer Price.--
            (1) Exclusion of customary prompt pay discounts extended to 
        wholesalers.--Subsection (k)(1) of such section is amended--
                    (A) by striking ``The term'' and inserting the 
                following:
                    ``(A) In general.--Subject to subparagraph (B), the 
                term'';
                    (B) by striking ``, after deducting customary prompt 
                pay discounts''; and
                    (C) by adding at the end the following:
                    ``(B) Exclusion of customary prompt pay discounts 
                extended to wholesalers.--The average manufacturer price 
                for a covered outpatient drug shall be determined 
                without regard to customary prompt pay discounts 
                extended to wholesalers.''.
            (2) Manufacturer reporting of prompt pay discounts.--
        Subsection (b)(3)(A)(i) of such section is amended by inserting 
        ``, customary prompt pay discounts extended to wholesalers,'' 
        after ``(k)(1))''.
            (3) <<NOTE: 42 USC 1396r-8 note.>> Requirement to promulgate 
        regulation.--

[[Page 120 STAT. 56]]

                    (A) <<NOTE: Deadline.>> Inspector general 
                recommendations.--Not later than June 1, 2006, the 
                Inspector General of the Department of Health and Human 
                Services shall--
                          (i) review the requirements for, and manner in 
                      which, average manufacturer prices are determined 
                      under section 1927 of the Social Security Act, as 
                      amended by this section; and
                          (ii) shall submit to the Secretary of Health 
                      and Human Services and Congress such 
                      recommendations for changes in such requirements 
                      or manner as the Inspector General determines to 
                      be appropriate.
                    (B) <<NOTE: Regulations.>> Deadline for 
                promulgation.--Not later than July 1, 2007, the 
                Secretary of Health and Human Services shall promulgate 
                a regulation that clarifies the requirements for, and 
                manner in which, average manufacturer prices are 
                determined under section 1927 of the Social Security 
                Act, taking into consideration the recommendations 
                submitted to the Secretary in accordance with 
                subparagraph (A)(ii).

    (d) Exclusion of Sales at a Nominal Price From Determination of Best 
Price.--
            (1) Manufacturer reporting of sales.--Subsection 
        (b)(3)(A)(iii) of such section <<NOTE: 42 USC 1396r-8.>> is 
        amended by inserting before the period at the end the following: 
        ``, and, for calendar quarters beginning on or after January 1, 
        2007 and only with respect to the information described in 
        subclause (III), for covered outpatient drugs''.
            (2) Limitation on sales at a nominal price.--Subsection 
        (c)(1) of such section is amended by adding at the end the 
        following new subparagraph:
                    ``(D) Limitation on sales at a nominal price.--
                          ``(i) In general.--For purposes of 
                      subparagraph (C)(ii)(III) and subsection 
                      (b)(3)(A)(iii)(III), only sales by a manufacturer 
                      of covered outpatient drugs at nominal prices to 
                      the following shall be considered to be sales at a 
                      nominal price or merely nominal in amount:
                                    ``(I) A covered entity described in 
                                section 340B(a)(4) of the Public Health 
                                Service Act.
                                    ``(II) An intermediate care facility 
                                for the mentally retarded.
                                    ``(III) A State-owned or operated 
                                nursing facility.
                                    ``(IV) Any other facility or entity 
                                that the Secretary determines is a 
                                safety net provider to which sales of 
                                such drugs at a nominal price would be 
                                appropriate based on the factors 
                                described in clause (ii).
                          ``(ii) Factors.--The factors described in this 
                      clause with respect to a facility or entity are 
                      the following:
                                    ``(I) The type of facility or 
                                entity.
                                    ``(II) The services provided by the 
                                facility or entity.
                                    ``(III) The patient population 
                                served by the facility or entity.

[[Page 120 STAT. 57]]

                                    ``(IV) The number of other 
                                facilities or entities eligible to 
                                purchase at nominal prices in the same 
                                service area.
                          ``(iii) Nonapplication.--Clause (i) shall not 
                      apply with respect to sales by a manufacturer at a 
                      nominal price of covered outpatient drugs pursuant 
                      to a master agreement under section 8126 of title 
                      38, United States Code.''.

    (e) Retail Survey Prices; State Payment and Utilization Rates; and 
Performance Rankings.--Such section is further amended by inserting 
after subsection (e) the following new subsection:
    ``(f) Survey of Retail Prices; State Payment and Utilization Rates; 
and Performance Rankings.--
            ``(1) Survey of retail prices.--
                    ``(A) Use of vendor.--The Secretary may contract 
                services for--
                          ``(i) the determination on a monthly basis of 
                      retail survey prices for covered outpatient drugs 
                      that represent a nationwide average of consumer 
                      purchase prices for such drugs, net of all 
                      discounts and rebates (to the extent any 
                      information with respect to such discounts and 
                      rebates is available); and
                          ``(ii) the notification of the Secretary when 
                      a drug product that is therapeutically and 
                      pharmaceutically equivalent and bioequivalent 
                      becomes generally available.
                    ``(B) <<NOTE: Deadline.>> Secretary response to 
                notification of availability of multiple source 
                products.--If contractor notifies the Secretary under 
                subparagraph (A)(ii) that a drug product described in 
                such subparagraph has become generally available, the 
                Secretary shall make a determination, within 7 days 
                after receiving such notification, as to whether the 
                product is now described in subsection (e)(4).
                    ``(C) <<NOTE: Contracts.>> Use of competitive 
                bidding.--In contracting for such services, the 
                Secretary shall competitively bid for an outside vendor 
                that has a demonstrated history in--
                          ``(i) surveying and determining, on a 
                      representative nationwide basis, retail prices for 
                      ingredient costs of prescription drugs;
                          ``(ii) working with retail pharmacies, 
                      commercial payers, and States in obtaining and 
                      disseminating such price information; and
                          ``(iii) collecting and reporting such price 
                      information on at least a monthly basis.
                In contracting for such services, the Secretary may 
                waive such provisions of the Federal Acquisition 
                Regulation as are necessary for the efficient 
                implementation of this subsection, other than provisions 
                relating to confidentiality of information and such 
                other provisions as the Secretary determines 
                appropriate.
                    ``(D) Additional provisions.--A contract with a 
                vendor under this paragraph shall include such terms and 
                conditions as the Secretary shall specify, including the 
                following:

[[Page 120 STAT. 58]]

                          ``(i) The vendor must monitor the marketplace 
                      and report to the Secretary each time there is a 
                      new covered outpatient drug generally available.
                          ``(ii) The vendor must update the Secretary no 
                      less often than monthly on the retail survey 
                      prices for covered outpatient drugs.
                          ``(iii) The contract shall be effective for a 
                      term of 2 years.
                    ``(E) Availability of information to states.--
                Information on retail survey prices obtained under this 
                paragraph, including applicable information on single 
                source drugs, shall be provided to States on at least a 
                monthly basis. The Secretary shall devise and implement 
                a means for providing access to each State agency 
                designated under section 1902(a)(5) with responsibility 
                for the administration or supervision of the 
                administration of the State plan under this title of the 
                retail survey price determined under this paragraph.
            ``(2) Annual state report.--Each State shall annually report 
        to the Secretary information on--
                    ``(A) the payment rates under the State plan under 
                this title for covered outpatient drugs;
                    ``(B) the dispensing fees paid under such plan for 
                such drugs; and
                    ``(C) utilization rates for noninnovator multiple 
                source drugs under such plan.
            ``(3) Annual state performance rankings.--
                    ``(A) Comparative analysis.--The Secretary annually 
                shall compare, for the 50 most widely prescribed drugs 
                identified by the Secretary, the national retail sales 
                price data (collected under paragraph (1)) for such 
                drugs with data on prices under this title for each such 
                drug for each State.
                    ``(B) Availability of information.--The Secretary 
                shall submit to Congress and the States full information 
                regarding the annual rankings made under subparagraph 
                (A).
            ``(4) Appropriation.--Out of any funds in the Treasury not 
        otherwise appropriated, there is appropriated to the Secretary 
        of Health and Human Services $5,000,000 for each of fiscal years 
        2006 through 2010 to carry out this subsection.''.

    (f) Miscellaneous Amendments.--
            (1) In general.--Sections 1927(g)(1)(B)(i)(II) and 
        1861(t)(2)(B)(ii)(I) of such Act <<NOTE: 42 USC 1396r-8, 
        1395x.>> are each amended by inserting ``(or its successor 
        publications)'' after ``United States Pharmacopoeia-Drug 
        Information''.
            (2) Paperwork reduction.--The last sentence of section 
        1927(g)(2)(A)(ii) of such Act (42 U.S.C. 1396r-8(g)(2)(A)(ii)) 
        is amended by inserting before the period at the end the 
        following: ``, or to require verification of the offer to 
        provide consultation or a refusal of such offer''.
            (3) <<NOTE: 42 USC 1396r-8 note.>> Effective date.--The 
        amendments made by this subsection shall take effect on the date 
        of the enactment of this Act.

    (g) <<NOTE: 42 USC 1396r-8 note.>> Effective Date.--Except as 
otherwise provided, the amendments made by this section shall take 
effect on January 1, 2007,

[[Page 120 STAT. 59]]

without regard to whether or not final regulations to carry out such 
amendments have been promulgated by such date.

SEC. 6002. COLLECTION AND SUBMISSION OF UTILIZATION DATA FOR CERTAIN 
            PHYSICIAN ADMINISTERED DRUGS.

    (a) In General.--Section 1927(a) of the Social Security Act (42 
U.S.C. 1396r-8(a)) is amended by adding at the end the following new 
paragraph:
            ``(7) Requirement for submission of utilization data for 
        certain physician administered drugs.--
                    ``(A) Single source drugs.--In order for payment to 
                be available under section 1903(a) for a covered 
                outpatient drug that is a single source drug that is 
                physician administered under this title (as determined 
                by the Secretary), and that is administered on or after 
                January 1, 2006, the State shall provide for the 
                collection and submission of such utilization data and 
                coding (such as J-codes and National Drug Code numbers) 
                for each such drug as the Secretary may specify as 
                necessary to identify the manufacturer of the drug in 
                order to secure rebates under this section for drugs 
                administered for which payment is made under this title.
                    ``(B) Multiple source drugs.--
                          
                      ``(i) <<NOTE: Deadline. Publication.>> Identificati
                      on of most frequently physician administered 
                      multiple source drugs.--Not later than January 1, 
                      2007, the Secretary shall publish a list of the 20 
                      physician administered multiple source drugs that 
                      the Secretary determines have the highest dollar 
                      volume of physician administered drugs dispensed 
                      under this title. The Secretary may modify such 
                      list from year to year to reflect changes in such 
                      volume.
                          ``(ii) Requirement.--In order for payment to 
                      be available under section 1903(a) for a covered 
                      outpatient drug that is a multiple source drug 
                      that is physician administered (as determined by 
                      the Secretary), that is on the list published 
                      under clause (i), and that is administered on or 
                      after January 1, 2008, the State shall provide for 
                      the submission of such utilization data and coding 
                      (such as J-codes and National Drug Code numbers) 
                      for each such drug as the Secretary may specify as 
                      necessary to identify the manufacturer of the drug 
                      in order to secure rebates under this section.
                    ``(C) <<NOTE: Deadline.>> Use of ndc codes.--Not 
                later than January 1, 2007, the information shall be 
                submitted under subparagraphs (A) and (B)(ii) using 
                National Drug Code codes unless the Secretary specifies 
                that an alternative coding system should be used.
                    ``(D) Hardship waiver.--The Secretary may delay the 
                application of subparagraph (A) or (B)(ii), or both, in 
                the case of a State to prevent hardship to States which 
                require additional time to implement the reporting 
                system required under the respective subparagraph.''.

    (b) Limitation on Payment.--Section 1903(i)(10) of such Act (42 
U.S.C. 1396b(i)(10)), is amended--
            (1) by striking ``and'' at the end of subparagraph (A);

[[Page 120 STAT. 60]]

            (2) by striking ``or'' at the end of subparagraph (B) and 
        inserting ``and''; and
            (3) by adding at the end the following new subparagraph:
                    ``(C) with respect to covered outpatient drugs 
                described in section 1927(a)(7), unless information 
                respecting utilization data and coding on such drugs 
                that is required to be submitted under such section is 
                submitted in accordance with such section; or''.

SEC. 6003. IMPROVED REGULATION OF DRUGS SOLD UNDER A NEW DRUG 
            APPLICATION APPROVED UNDER SECTION 505(c) OF THE FEDERAL 
            FOOD, DRUG, AND COSMETIC ACT.

    (a) Inclusion With Other Reported Average Manufacturer and Best 
Prices.--Section 1927(b)(3)(A) of the Social Security Act (42 U.S.C. 
1396r-8(b)(3)(A)) is amended--
            (1) by striking clause (i) and inserting the following:
                          ``(i) <<NOTE: Deadline.>> not later than 30 
                      days after the last day of each rebate period 
                      under the agreement--
                                    ``(I) on the average manufacturer 
                                price (as defined in subsection (k)(1)) 
                                for covered outpatient drugs for the 
                                rebate period under the agreement 
                                (including for all such drugs that are 
                                sold under a new drug application 
                                approved under section 505(c) of the 
                                Federal Food, Drug, and Cosmetic Act); 
                                and
                                    ``(II) for single source drugs and 
                                innovator multiple source drugs 
                                (including all such drugs that are sold 
                                under a new drug application approved 
                                under section 505(c) of the Federal 
                                Food, Drug, and Cosmetic Act), on the 
                                manufacturer's best price (as defined in 
                                subsection (c)(1)(C)) for such drugs for 
                                the rebate period under the 
                                agreement;''; and
            (2) in clause (ii), by inserting ``(including for such drugs 
        that are sold under a new drug application approved under 
        section 505(c) of the Federal Food, Drug, and Cosmetic Act)'' 
        after ``drugs''.

    (b) Conforming Amendments.--Section 1927 of such Act (42 U.S.C. 
1396r-8) is amended--
            (1) in subsection (c)(1)(C)--
                    (A) in clause (i), in the matter preceding subclause 
                (I), by inserting after ``or innovator multiple source 
                drug of a manufacturer'' the following: ``(including the 
                lowest price available to any entity for any such drug 
                of a manufacturer that is sold under a new drug 
                application approved under section 505(c) of the Federal 
                Food, Drug, and Cosmetic Act)''; and
                    (B) in clause (ii)--
                          (i) in subclause (II), by striking ``and'' at 
                      the end;
                          (ii) in subclause (III), by striking the 
                      period at the end and inserting ``; and''; and
                          (iii) by adding at the end the following:
                                    ``(IV) in the case of a manufacturer 
                                that approves, allows, or otherwise 
                                permits any other drug of the 
                                manufacturer to be sold under a new drug 
                                application approved under section 
                                505(c) of the Federal Food, Drug, and 
                                Cosmetic Act, shall

[[Page 120 STAT. 61]]

                                be inclusive of the lowest price for 
                                such authorized drug available from the 
                                manufacturer during the rebate period to 
                                any manufacturer, wholesaler, retailer, 
                                provider, health maintenance 
                                organization, nonprofit entity, or 
                                governmental entity within the United 
                                States, excluding those prices described 
                                in subclauses (I) through (IV) of clause 
                                (i).''; and
            (2) in subsection (k), as amended by section 6001(c)(1), by 
        adding at the end the following:
                    ``(C) Inclusion of section 505(c) drugs.--In the 
                case of a manufacturer that approves, allows, or 
                otherwise permits any drug of the manufacturer to be 
                sold under a new drug application approved under section 
                505(c) of the Federal Food, Drug, and Cosmetic Act, such 
                term shall be inclusive of the average price paid for 
                such drug by wholesalers for drugs distributed to the 
                retail pharmacy class of trade.''.

    (c) <<NOTE: 42 USC 1396r-8 note.>> Effective Date.--The amendments 
made by this section take effect on January 1, 2007.

SEC. 6004. CHILDREN'S HOSPITAL PARTICIPATION IN SECTION 340B DRUG 
            DISCOUNT PROGRAM.

    (a) In General.--Section 1927(a)(5)(B) of the Social Security Act 
(42 U.S.C. 1396r-8(a)(5)(B)) is amended by inserting before the period 
at the end the following: ``and a children's hospital described in 
section 1886(d)(1)(B)(iii) which meets the requirements of clauses (i) 
and (iii) of section 340B(b)(4)(L) of the Public Health Service Act and 
which would meet the requirements of clause (ii) of such section if that 
clause were applied by taking into account the percentage of care 
provided by the hospital to patients eligible for medical assistance 
under a State plan under this title''.
    (b) <<NOTE: 42 USC 1396r-8 note.>> Effective Date.--The amendment 
made by subsection (a) shall apply to drugs purchased on or after the 
date of the enactment of this Act.

                CHAPTER 2--LONG-TERM CARE UNDER MEDICAID

              Subchapter A--Reform of Asset Transfer Rules

SEC. 6011. LENGTHENING LOOK-BACK PERIOD; CHANGE IN BEGINNING DATE FOR 
            PERIOD OF INELIGIBILITY.

    (a) Lengthening Look-Back Period for All Disposals to 5 Years.--
Section 1917(c)(1)(B)(i) of the Social Security Act (42 U.S.C. 
1396p(c)(1)(B)(i)) is amended by inserting ``or in the case of any other 
disposal of assets made on or after the date of the enactment of the 
Deficit Reduction Act of 2005'' before ``, 60 months''.
    (b) Change in Beginning Date for Period of Ineligibility.--Section 
1917(c)(1)(D) of such Act (42 U.S.C. 1396p(c)(1)(D)) is amended--
            (1) by striking ``(D) The date'' and inserting ``(D)(i) In 
        the case of a transfer of asset made before the date of the 
        enactment of the Deficit Reduction Act of 2005, the date''; and
            (2) by adding at the end the following new clause:

    ``(ii) In the case of a transfer of asset made on or after the date 
of the enactment of the Deficit Reduction Act of 2005, the date 
specified in this subparagraph is the first day of a month

[[Page 120 STAT. 62]]

during or after which assets have been transferred for less than fair 
market value, or the date on which the individual is eligible for 
medical assistance under the State plan and would otherwise be receiving 
institutional level care described in subparagraph (C) based on an 
approved application for such care but for the application of the 
penalty period, whichever is later, and which does not occur during any 
other period of ineligibility under this subsection.''.
    (c) <<NOTE: 42 USC 1396p note.>> Effective Date.--The amendments 
made by this section shall apply to transfers made on or after the date 
of the enactment of this Act.

    (d) <<NOTE: 42 USC 1396p note.>> Availability of Hardship Waivers.--
Each State shall provide for a hardship waiver process in accordance 
with section 1917(c)(2)(D) of the Social Security Act (42 U.S.C. 
1396p(c)(2)(D))--
            (1) under which an undue hardship exists when application of 
        the transfer of assets provision would deprive the individual--
                    (A) of medical care such that the individual's 
                health or life would be endangered; or
                    (B) of food, clothing, shelter, or other necessities 
                of life; and
            (2) which provides for--
                    (A) notice to recipients that an undue hardship 
                exception exists;
                    (B) a timely process for determining whether an 
                undue hardship waiver will be granted; and
                    (C) a process under which an adverse determination 
                can be appealed.

    (e) Additional Provisions on Hardship Waivers.--
            (1) Application by facility.--Section 1917(c)(2) of the 
        Social Security Act (42 U.S.C. 1396p(c)(2)) is amended--
                    (A) by striking the semicolon at the end of 
                subparagraph (D) and inserting a period; and
                    (B) by adding after and below such subparagraph the 
                following:
        ``The procedures established under subparagraph (D) shall permit 
        the facility in which the institutionalized individual is 
        residing to file an undue hardship waiver application on behalf 
        of the individual with the consent of the individual or the 
        personal representative of the individual.''.
            (2) Authority to make bed hold payments for hardship 
        applicants.--Such section is further amended by adding at the 
        end the following: ``While an application for an undue hardship 
        waiver is pending under subparagraph (D) in the case of an 
        individual who is a resident of a nursing facility, if the 
        application meets such criteria as the Secretary specifies, the 
        State may provide for payments for nursing facility services in 
        order to hold the bed for the individual at the facility, but 
        not in excess of payments for 30 days.''.

SEC. 6012. DISCLOSURE AND TREATMENT OF ANNUITIES.

    (a) In General.--Section 1917 of the Social Security Act (42 U.S.C. 
1396p) is amended by redesignating subsection (e) as subsection (f) and 
by inserting after subsection (d) the following new subsection:
    ``(e)(1) In order to meet the requirements of this section for 
purposes of section 1902(a)(18), a State shall require, as a condition

[[Page 120 STAT. 63]]

for the provision of medical assistance for services described in 
subsection (c)(1)(C)(i) (relating to long-term care services) for an 
individual, the application of the individual for such assistance 
(including any recertification of eligibility for such assistance) shall 
disclose a description of any interest the individual or community 
spouse has in an annuity (or similar financial instrument, as may be 
specified by the Secretary), regardless of whether the annuity is 
irrevocable or is treated as an asset. Such application or 
recertification form shall include a statement that under paragraph (2) 
the State becomes a remainder beneficiary under such an annuity or 
similar financial instrument by virtue of the provision of such medical 
assistance.
    ``(2)(A) <<NOTE: Notification.>> In the case of disclosure 
concerning an annuity under subsection (c)(1)(F), the State shall notify 
the issuer of the annuity of the right of the State under such 
subsection as a preferred remainder beneficiary in the annuity for 
medical assistance furnished to the individual. Nothing in this 
paragraph shall be construed as preventing such an issuer from notifying 
persons with any other remainder interest of the State's remainder 
interest under such subsection.

    ``(B) In the case of such an issuer receiving notice under 
subparagraph (A), the State may require the issuer to notify the State 
when there is a change in the amount of income or principal being 
withdrawn from the amount that was being withdrawn at the time of the 
most recent disclosure described in paragraph (1). A State shall take 
such information into account in determining the amount of the State's 
obligations for medical assistance or in the individual's eligibility 
for such assistance.
    ``(3) The Secretary may provide guidance to States on categories of 
transactions that may be treated as a transfer of asset for less than 
fair market value.
    ``(4) Nothing in this subsection shall be construed as preventing a 
State from denying eligibility for medical assistance for an individual 
based on the income or resources derived from an annuity described in 
paragraph (1).''.
    (b) Requirement for State To Be Named as a Remainder Beneficiary.--
Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), is amended by 
adding at the end the following:
    ``(F) For purposes of this paragraph, the purchase of an annuity 
shall be treated as the disposal of an asset for less than fair market 
value unless--
            ``(i) the State is named as the remainder beneficiary in the 
        first position for at least the total amount of medical 
        assistance paid on behalf of the annuitant under this title; or
            ``(ii) the State is named as such a beneficiary in the 
        second position after the community spouse or minor or disabled 
        child and is named in the first position if such spouse or a 
        representative of such child disposes of any such remainder for 
        less than fair market value.''.

    (c) Inclusion of Transfers To Purchase Balloon Annuities.--Section 
1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by subsection 
(b), is amended by adding at the end the following:
    ``(G) For purposes of this paragraph with respect to a transfer of 
assets, the term `assets' includes an annuity purchased by or on behalf 
of an annuitant who has applied for medical assistance

[[Page 120 STAT. 64]]

with respect to nursing facility services or other long-term care 
services under this title unless--
            ``(i) the annuity is--
                    ``(I) an annuity described in subsection (b) or (q) 
                of section 408 of the Internal Revenue Code of 1986; or
                    ``(II) purchased with proceeds from--
                          ``(aa) an account or trust described in 
                      subsection (a), (c), or (p) of section 408 of such 
                      Code;
                          ``(bb) a simplified employee pension (within 
                      the meaning of section 408(k) of such Code); or
                          ``(cc) a Roth IRA described in section 408A of 
                      such Code; or
            ``(ii) the annuity--
                    ``(I) is irrevocable and nonassignable;
                    ``(II) is actuarially sound (as determined in 
                accordance with actuarial publications of the Office of 
                the Chief Actuary of the Social Security 
                Administration); and
                    ``(III) provides for payments in equal amounts 
                during the term of the annuity, with no deferral and no 
                balloon payments made.''.

    (d) <<NOTE: 42 USC 1396p note.>> Effective Date.--The amendments 
made by this section shall apply to transactions (including the purchase 
of an annuity) occurring on or after the date of the enactment of this 
Act.

SEC. 6013. APPLICATION OF ``INCOME-FIRST'' RULE IN APPLYING COMMUNITY 
            SPOUSE'S INCOME BEFORE ASSETS IN PROVIDING SUPPORT OF 
            COMMUNITY SPOUSE.

    (a) In General.--Section 1924(d) of the Social Security Act (42 
U.S.C. 1396r-5(d)) is amended by adding at the end the following new 
subparagraph:
            ``(6) Application of `income first' rule to revision of 
        community spouse resource allowance.--For purposes of this 
        subsection and subsections (c) and (e), a State must consider 
        that all income of the institutionalized spouse that could be 
        made available to a community spouse, in accordance with the 
        calculation of the community spouse monthly income allowance 
        under this subsection, has been made available before the State 
        allocates to the community spouse an amount of resources 
        adequate to provide the difference between the minimum monthly 
        maintenance needs allowance and all income available to the 
        community spouse.''.

    (b) <<NOTE: 42 USC 1396r-5 note.>> Effective Date.--The amendment 
made by subsection (a) shall apply to transfers and allocations made on 
or after the date of the enactment of this Act by individuals who become 
institutionalized spouses on or after such date.

SEC. 6014. DISQUALIFICATION FOR LONG-TERM CARE ASSISTANCE FOR 
            INDIVIDUALS WITH SUBSTANTIAL HOME EQUITY.

    (a) In General.--Section 1917 of the Social Security Act, as amended 
by section 6012(a), is further amended by redesignating subsection (f) 
as subsection (g) and by inserting after subsection (e) the following 
new subsection:
    ``(f)(1)(A) Notwithstanding any other provision of this title, 
subject to subparagraphs (B) and (C) of this paragraph and paragraph 
(2), in determining eligibility of an individual for medical assistance 
with respect to nursing facility services or other long-term care 
services, the individual shall not be eligible for such assistance

[[Page 120 STAT. 65]]

if the individual's equity interest in the individual's home exceeds 
$500,000.
    ``(B) A State may elect, without regard to the requirements of 
section 1902(a)(1) (relating to statewideness) and section 
1902(a)(10)(B) (relating to comparability), to apply subparagraph (A) by 
substituting for `$500,000', an amount that exceeds such amount, but 
does not exceed $750,000.
    ``(C) The dollar amounts specified in this paragraph shall be 
increased, beginning with 2011, from year to year based on the 
percentage increase in the consumer price index for all urban consumers 
(all items; United States city average), rounded to the nearest $1,000.
    ``(2) Paragraph (1) shall not apply with respect to an individual 
if--
            ``(A) the spouse of such individual, or
            ``(B) such individual's child who is under age 21, or (with 
        respect to States eligible to participate in the State program 
        established under title XVI) is blind or permanently and totally 
        disabled, or (with respect to States which are not eligible to 
        participate in such program) is blind or disabled as defined in 
        section 1614,

is lawfully residing in the individual's home.
    ``(3) Nothing in this subsection shall be construed as preventing an 
individual from using a reverse mortgage or home equity loan to reduce 
the individual's total equity interest in the home.
    ``(4) <<NOTE: Procedures.>> The Secretary shall establish a process 
whereby paragraph (1) is waived in the case of a demonstrated 
hardship.''.

    (b) <<NOTE: 42 USC 1396p note.>> Effective Date.--The amendment made 
by subsection (a) shall apply to individuals who are determined eligible 
for medical assistance with respect to nursing facility services or 
other long-term care services based on an application filed on or after 
January 1, 2006.

SEC. 6015. ENFORCEABILITY OF CONTINUING CARE RETIREMENT COMMUNITIES 
            (CCRC) AND LIFE CARE COMMUNITY ADMISSION CONTRACTS.

    (a) Admission Policies of Nursing Facilities.--Section 1919(c)(5) of 
the Social Security Act (42 U.S.C. 1396r(c)(5)) is amended--
            (1) in subparagraph (A)(i)(II), by inserting ``subject to 
        clause (v),'' after ``(II)''; and
            (2) by adding at the end of subparagraph (B) the following 
        new clause:
                          ``(v) Treatment of continuing care retirement 
                      communities admission contracts.--Notwithstanding 
                      subclause (II) of subparagraph (A)(i), subject to 
                      subsections (c) and (d) of section 1924, contracts 
                      for admission to a State licensed, registered, 
                      certified, or equivalent continuing care 
                      retirement community or life care community, 
                      including services in a nursing facility that is 
                      part of such community, may require residents to 
                      spend on their care resources declared for the 
                      purposes of admission before applying for medical 
                      assistance.''.

    (b) Treatment of Entrance Fees.--Section 1917 of such Act (42 U.S.C. 
1396p), as amended by sections 6012(a) and 6014(a),

[[Page 120 STAT. 66]]

is amended by redesignating subsection (g) as subsection (h) and by 
inserting after subsection (f) the following new subsection:
    ``(g) Treatment of Entrance Fees of Individuals Residing in 
Continuing Care Retirement Communities.--
            ``(1) <<NOTE: Applicability.>> In general.--For purposes of 
        determining an individual's eligibility for, or amount of, 
        benefits under a State plan under this title, the rules 
        specified in paragraph (2) shall apply to individuals residing 
        in continuing care retirement communities or life care 
        communities that collect an entrance fee on admission from such 
        individuals.
            ``(2) Treatment of entrance fee.--For purposes of this 
        subsection, an individual's entrance fee in a continuing care 
        retirement community or life care community shall be considered 
        a resource available to the individual to the extent that--
                    ``(A) the individual has the ability to use the 
                entrance fee, or the contract provides that the entrance 
                fee may be used, to pay for care should other resources 
                or income of the individual be insufficient to pay for 
                such care;
                    ``(B) the individual is eligible for a refund of any 
                remaining entrance fee when the individual dies or 
                terminates the continuing care retirement community or 
                life care community contract and leaves the community; 
                and
                    ``(C) the entrance fee does not confer an ownership 
                interest in the continuing care retirement community or 
                life care community.''.

SEC. 6016. ADDITIONAL REFORMS OF MEDICAID ASSET TRANSFER RULES.

    (a) Requirement To Impose Partial Months of Ineligibility.--Section 
1917(c)(1)(E) of the Social Security Act (42 U.S.C. 1396p(c)(1)(E)) is 
amended by adding at the end the following:
    ``(iv) A State shall not round down, or otherwise disregard any 
fractional period of ineligibility determined under clause (i) or (ii) 
with respect to the disposal of assets.''.
    (b) Authority for States To Accumulate Multiple Transfers Into One 
Penalty Period.--Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), 
as amended by subsections (b) and (c) of section 6012, is amended by 
adding at the end the following:
    ``(H) Notwithstanding the preceding provisions of this paragraph, in 
the case of an individual (or individual's spouse) who makes multiple 
fractional transfers of assets in more than 1 month for less than fair 
market value on or after the applicable look-back date specified in 
subparagraph (B), a State may determine the period of ineligibility 
applicable to such individual under this paragraph by--
            ``(i) treating the total, cumulative uncompensated value of 
        all assets transferred by the individual (or individual's 
        spouse) during all months on or after the look-back date 
        specified in subparagraph (B) as 1 transfer for purposes of 
        clause (i) or (ii) (as the case may be) of subparagraph (E); and
            ``(ii) beginning such period on the earliest date which 
        would apply under subparagraph (D) to any of such transfers.''.

    (c) Inclusion of Transfer of Certain Notes and Loans Assets.--
Section 1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by 
subsection (b), is amended by adding at the end the following:

[[Page 120 STAT. 67]]

    ``(I) For purposes of this paragraph with respect to a transfer of 
assets, the term `assets' includes funds used to purchase a promissory 
note, loan, or mortgage unless such note, loan, or mortgage--
            ``(i) has a repayment term that is actuarially sound (as 
        determined in accordance with actuarial publications of the 
        Office of the Chief Actuary of the Social Security 
        Administration);
            ``(ii) provides for payments to be made in equal amounts 
        during the term of the loan, with no deferral and no balloon 
        payments made; and
            ``(iii) prohibits the cancellation of the balance upon the 
        death of the lender.

In the case of a promissory note, loan, or mortgage that does not 
satisfy the requirements of clauses (i) through (iii), the value of such 
note, loan, or mortgage shall be the outstanding balance due as of the 
date of the individual's application for medical assistance for services 
described in subparagraph (C).''.
    (d) Inclusion of Transfers To Purchase Life Estates.--Section 
1917(c)(1) of such Act (42 U.S.C. 1396p(c)(1)), as amended by subsection 
(c), is amended by adding at the end the following:
    ``(J) For purposes of this paragraph with respect to a transfer of 
assets, the term `assets' includes the purchase of a life estate 
interest in another individual's home unless the purchaser resides in 
the home for a period of at least 1 year after the date of the 
purchase.''.
    (e) <<NOTE: 42 USC 1396p note.>> Effective Dates.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to payments 
        under title XIX of the Social Security Act (42 U.S.C. 1396 et 
        seq.) for calendar quarters beginning on or after the date of 
        enactment of this Act, without regard to whether or not final 
        regulations to carry out such amendments have been promulgated 
        by such date.
            (2) Exceptions.--The amendments made by this section shall 
        not apply--
                    (A) to medical assistance provided for services 
                furnished before the date of enactment;
                    (B) with respect to assets disposed of on or before 
                the date of enactment of this Act; or
                    (C) with respect to trusts established on or before 
                the date of enactment of this Act.
            (3) Extension of effective date for state law amendment.--In 
        the case of a State plan under title XIX of the Social Security 
        Act (42 U.S.C. 1396 et seq.) which the Secretary of Health and 
        Human Services determines requires State legislation in order 
        for the plan to meet the additional requirements imposed by the 
        amendments made by a provision of this section, the State plan 
        shall not be regarded as failing to comply with the requirements 
        of such title solely on the basis of its failure to meet these 
        additional requirements before the first day of the first 
        calendar quarter beginning after the close of the first regular 
        session of the State legislature that begins after the date of 
        the enactment of this Act. For purposes of the previous 
        sentence, in the case of a State that has a 2-year legislative 
        session, each year of the session is considered to be a separate 
        regular session of the State legislature.

[[Page 120 STAT. 68]]

 Subchapter <<NOTE: 42 USC 1396p note.>> B--Expanded Access to Certain 
Benefits

SEC. 6021. EXPANSION OF STATE LONG-TERM CARE PARTNERSHIP PROGRAM.

    (a) Expansion Authority.--
            (1) In general.--Section 1917(b) of the Social Security Act 
        (42 U.S.C. 1396p(b)) is amended--
                    (A) in paragraph (1)(C)--
                          (i) in clause (ii), by inserting ``and which 
                      satisfies clause (iv), or which has a State plan 
                      amendment that provides for a qualified State 
                      long-term care insurance partnership (as defined 
                      in clause (iii))'' after ``1993,''; and
                          (ii) by adding at the end the following new 
                      clauses:
            ``(iii) For purposes of this paragraph, the term `qualified 
        State long-term care insurance partnership' means an approved 
        State plan amendment under this title that provides for the 
        disregard of any assets or resources in an amount equal to the 
        insurance benefit payments that are made to or on behalf of an 
        individual who is a beneficiary under a long-term care insurance 
        policy if the following requirements are met:
                    ``(I) The policy covers an insured who was a 
                resident of such State when coverage first became 
                effective under the policy.
                    ``(II) The policy is a qualified long-term care 
                insurance policy (as defined in section 7702B(b) of the 
                Internal Revenue Code of 1986) issued not earlier than 
                the effective date of the State plan amendment.
                    ``(III) The policy meets the model regulations and 
                the requirements of the model Act specified in paragraph 
                (5).
                    ``(IV) If the policy is sold to an individual who--
                          ``(aa) has not attained age 61 as of the date 
                      of purchase, the policy provides compound annual 
                      inflation protection;
                          ``(bb) has attained age 61 but has not 
                      attained age 76 as of such date, the policy 
                      provides some level of inflation protection; and
                          ``(cc) has attained age 76 as of such date, 
                      the policy may (but is not required to) provide 
                      some level of inflation protection.
                    ``(V) The State Medicaid agency under section 
                1902(a)(5) provides information and technical assistance 
                to the State insurance department on the insurance 
                department's role of assuring that any individual who 
                sells a long-term care insurance policy under the 
                partnership receives training and demonstrates evidence 
                of an understanding of such policies and how they relate 
                to other public and private coverage of long-term care.
                    ``(VI) <<NOTE: Reports. Notification.>> The issuer 
                of the policy provides regular reports to the Secretary, 
                in accordance with regulations of the Secretary, that 
                include notification regarding when benefits provided 
                under the policy have been paid and the amount of such 
                benefits paid, notification regarding when the policy 
                otherwise terminates, and such other information as the 
                Secretary determines may be appropriate to the 
                administration of such partnerships.

[[Page 120 STAT. 69]]

                    ``(VII) The State does not impose any requirement 
                affecting the terms or benefits of such a policy unless 
                the State imposes such requirement on long-term care 
                insurance policies without regard to whether the policy 
                is covered under the partnership or is offered in 
                connection with such a partnership.
        In <<NOTE: Applicability.>> the case of a long-term care 
        insurance policy which is exchanged for another such policy, 
        subclause (I) shall be applied based on the coverage of the 
        first such policy that was exchanged. For purposes of this 
        clause and paragraph (5), the term `long-term care insurance 
        policy' includes a certificate issued under a group insurance 
        contract.
            ``(iv) With respect to a State which had a State plan 
        amendment approved as of May 14, 1993, such a State satisfies 
        this clause for purposes of clause (ii) if the Secretary 
        determines that the State plan amendment provides for consumer 
        protection standards which are no less stringent than the 
        consumer protection standards which applied under such State 
        plan amendment as of December 31, 2005.
            ``(v) The regulations of the Secretary required under clause 
        (iii)(VI) shall be promulgated after consultation with the 
        National Association of Insurance Commissioners, issuers of 
        long-term care insurance policies, States with experience with 
        long-term care insurance partnership plans, other States, and 
        representatives of consumers of long-term care insurance 
        policies, and shall specify the type and format of the data and 
        information to be reported and the frequency with which such 
        reports are to be made. <<NOTE: Records.>> The Secretary, as 
        appropriate, shall provide copies of the reports provided in 
        accordance with that clause to the State involved.
            ``(vi) The Secretary, in consultation with other appropriate 
        Federal agencies, issuers of long-term care insurance, the 
        National Association of Insurance Commissioners, State insurance 
        commissioners, States with experience with long-term care 
        insurance partnership plans, other States, and representatives 
        of consumers of long-term care insurance policies, shall develop 
        recommendations for Congress to authorize and fund a uniform 
        minimum data set to be reported electronically by all issuers of 
        long-term care insurance policies under qualified State long-
        term care insurance partnerships to a secure, centralized 
        electronic query and report-generating mechanism that the State, 
        the Secretary, and other Federal agencies can access.''; and
                    (B) by adding at the end the following:

    ``(5)(A) For purposes of clause (iii)(III), the model regulations 
and the requirements of the model Act specified in this paragraph are:
            ``(i) In the case of the model regulation, the following 
        requirements:
                    ``(I) Section 6A (relating to guaranteed renewal or 
                noncancellability), other than paragraph (5) thereof, 
                and the requirements of section 6B of the model Act 
                relating to such section 6A.
                    ``(II) Section 6B (relating to prohibitions on 
                limitations and exclusions) other than paragraph (7) 
                thereof.
                    ``(III) Section 6C (relating to extension of 
                benefits).
                    ``(IV) Section 6D (relating to continuation or 
                conversion of coverage).

[[Page 120 STAT. 70]]

                    ``(V) Section 6E (relating to discontinuance and 
                replacement of policies).
                    ``(VI) Section 7 (relating to unintentional lapse).
                    ``(VII) Section 8 (relating to disclosure), other 
                than sections 8F, 8G, 8H, and 8I thereof.
                    ``(VIII) Section 9 (relating to required disclosure 
                of rating practices to consumer).
                    ``(IX) Section 11 (relating to prohibitions against 
                post-claims underwriting).
                    ``(X) Section 12 (relating to minimum standards).
                    ``(XI) Section 14 (relating to application forms and 
                replacement coverage).
                    ``(XII) Section 15 (relating to reporting 
                requirements).
                    ``(XIII) Section 22 (relating to filing requirements 
                for marketing).
                    ``(XIV) Section 23 (relating to standards for 
                marketing), including inaccurate completion of medical 
                histories, other than paragraphs (1), (6), and (9) of 
                section 23C.
                    ``(XV) Section 24 (relating to suitability).
                    ``(XVI) Section 25 (relating to prohibition against 
                preexisting conditions and probationary periods in 
                replacement policies or certificates).
                    ``(XVII) The provisions of section 26 relating to 
                contingent nonforfeiture benefits, if the policyholder 
                declines the offer of a nonforfeiture provision 
                described in paragraph (4).
                    ``(XVIII) Section 29 (relating to standard format 
                outline of coverage).
                    ``(XIX) Section 30 (relating to requirement to 
                deliver shopper's guide).
            ``(ii) In the case of the model Act, the following:
                    ``(I) Section 6C (relating to preexisting 
                conditions).
                    ``(II) Section 6D (relating to prior 
                hospitalization).
                    ``(III) The provisions of section 8 relating to 
                contingent nonforfeiture benefits.
                    ``(IV) Section 6F (relating to right to return).
                    ``(V) Section 6G (relating to outline of coverage).
                    ``(VI) Section 6H (relating to requirements for 
                certificates under group plans).
                    ``(VII) Section 6J (relating to policy summary).
                    ``(VIII) Section 6K (relating to monthly reports on 
                accelerated death benefits).
                    ``(IX) Section 7 (relating to incontestability 
                period).

    ``(B) For purposes of this paragraph and paragraph (1)(C)--
            ``(i) the terms `model regulation' and `model Act' mean the 
        long-term care insurance model regulation, and the long-term 
        care insurance model Act, respectively, promulgated by the 
        National Association of Insurance Commissioners (as adopted as 
        of October 2000);
            ``(ii) any provision of the model regulation or model Act 
        listed under subparagraph (A) shall be treated as including any 
        other provision of such regulation or Act necessary to implement 
        the provision; and
            ``(iii) with respect to a long-term care insurance policy 
        issued in a State, the policy shall be deemed to meet applicable 
        requirements of the model regulation or the model Act if the 
        State plan amendment under paragraph (1)(C)(iii) provides that

[[Page 120 STAT. 71]]

        the State insurance commissioner for the State certifies (in a 
        manner satisfactory to the Secretary) that the policy meets such 
        requirements.

    ``(C) <<NOTE: Deadline.>> Not later than 12 months after the 
National Association of Insurance Commissioners issues a revision, 
update, or other modification of a model regulation or model Act 
provision specified in subparagraph (A), or of any provision of such 
regulation or Act that is substantively related to a provision specified 
in such subparagraph, the Secretary shall review the changes made to the 
provision, determine whether incorporating such changes into the 
corresponding provision specified in such subparagraph would improve 
qualified State long-term care insurance partnerships, and if so, shall 
incorporate the changes into such provision.''.
            (2) State reporting requirements.--Nothing in clauses 
        (iii)(VI) and (v) of section 1917(b)(1)(C) of the Social 
        Security Act (as added by paragraph (1)) shall be construed as 
        prohibiting a State from requiring an issuer of a long-term care 
        insurance policy sold in the State (regardless of whether the 
        policy is issued under a qualified State long-term care 
        insurance partnership under section 1917(b)(1)(C)(iii) of such 
        Act) to require the issuer to report information or data to the 
        State that is in addition to the information or data required 
        under such clauses.
            (3) Effective date.--A State plan amendment that provides 
        for a qualified State long-term care insurance partnership under 
        the amendments made by paragraph (1) may provide that such 
        amendment is effective for long-term care insurance policies 
        issued on or after a date, specified in the amendment, that is 
        not earlier than the first day of the first calendar quarter in 
        which the plan amendment was submitted to the Secretary of 
        Health and Human Services.

    (b) Standards for Reciprocal Recognition Among Partnership States.--
In <<NOTE: Deadline.>> order to permit portability in long-term care 
insurance policies purchased under State long-term care insurance 
partnerships, the Secretary of Health and Human Services shall develop, 
not later than January 1, 2007, and in consultation with the National 
Association of Insurance Commissioners, issuers of long-term care 
insurance policies, States with experience with long-term care insurance 
partnership plans, other States, and representatives of consumers of 
long-term care insurance policies, standards for uniform reciprocal 
recognition of such policies among States with qualified State long-term 
care insurance partnerships under which--
            (1) benefits paid under such policies will be treated the 
        same by all such States; and
            (2) States with such partnerships shall be subject to such 
        standards unless the State notifies the Secretary in writing of 
        the State's election to be exempt from such standards.

    (c) Annual Reports to Congress.--
            (1) In general.--The Secretary of Health and Human Services 
        shall annually report to Congress on the long-term care 
        insurance partnerships established in accordance with section 
        1917(b)(1)(C)(ii) of the Social Security Act (42 U.S.C. 
        1396p(b)(1)(C)(ii)) (as amended by subsection (a)(1)). Such 
        reports shall include analyses of the extent to which such 
        partnerships expand or limit access of individuals to long-term 
        care and the impact of such partnerships on Federal

[[Page 120 STAT. 72]]

        and State expenditures under the Medicare and Medicaid programs. 
        Nothing in this section shall be construed as requiring the 
        Secretary to conduct an independent review of each long-term 
        care insurance policy offered under or in connection with such a 
        partnership.
            (2) Appropriation.--Out of any funds in the Treasury not 
        otherwise appropriated, there is appropriated to the Secretary 
        of Health and Human Services, $1,000,000 for the period of 
        fiscal years 2006 through 2010 to carry out paragraph (1).

    (d) National Clearinghouse for Long-Term Care Information.--
            (1) Establishment.--The Secretary of Health and Human 
        Services shall establish a National Clearinghouse for Long-Term 
        Care Information. The Clearinghouse may be established through a 
        contract or interagency agreement.
            (2) Duties.--
                    (A) In general.--The National Clearinghouse for 
                Long-Term Care Information shall--
                          (i) educate consumers with respect to the 
                      availability and limitations of coverage for long-
                      term care under the Medicaid program and provide 
                      contact information for obtaining State-specific 
                      information on long-term care coverage, including 
                      eligibility and estate recovery requirements under 
                      State Medicaid programs;
                          (ii) provide objective information to assist 
                      consumers with the decisionmaking process for 
                      determining whether to purchase long-term care 
                      insurance or to pursue other private market 
                      alternatives for purchasing long-term care and 
                      provide contact information for additional 
                      objective resources on planning for long-term care 
                      needs; and
                          (iii) maintain a list of States with State 
                      long-term care insurance partnerships under the 
                      Medicaid program that provide reciprocal 
                      recognition of long-term care insurance policies 
                      issued under such partnerships.
                    (B) Requirement.--In providing information to 
                consumers on long-term care in accordance with this 
                subsection, the National Clearinghouse for Long-Term 
                Care Information shall not advocate in favor of a 
                specific long-term care insurance provider or a specific 
                long-term care insurance policy.
            (3) Appropriation.--Out of any funds in the Treasury not 
        otherwise appropriated, there is appropriated to carry out this 
        subsection, $3,000,000 for each of fiscal years 2006 through 
        2010.

       CHAPTER 3--ELIMINATING FRAUD, WASTE, AND ABUSE IN MEDICAID

SEC. 6031. ENCOURAGING THE ENACTMENT OF STATE FALSE CLAIMS ACTS.

    (a) <<NOTE: 42 USC 1396h.>> In General.--Title XIX of the Social 
Security Act (42 U.S.C. 1396 et seq.) is amended by inserting after 
section 1908A the following:

[[Page 120 STAT. 73]]

   ``state false claims act requirements for increased state share of 
                               recoveries

    ``Sec. 1909. (a) In General.--Notwithstanding section 1905(b), if a 
State has in effect a law relating to false or fraudulent claims that 
meets the requirements of subsection (b), the Federal medical assistance 
percentage with respect to any amounts recovered under a State action 
brought under such law, shall be decreased by 10 percentage points.
    ``(b) Requirements.--For purposes of subsection (a), the 
requirements of this subsection are that the Inspector General of the 
Department of Health and Human Services, in consultation with the 
Attorney General, determines that the State has in effect a law that 
meets the following requirements:
            ``(1) The law establishes liability to the State for false 
        or fraudulent claims described in section 3729 of title 31, 
        United States Code, with respect to any expenditure described in 
        section 1903(a).
            ``(2) The law contains provisions that are at least as 
        effective in rewarding and facilitating qui tam actions for 
        false or fraudulent claims as those described in sections 3730 
        through 3732 of title 31, United States Code.
            ``(3) The law contains a requirement for filing an action 
        under seal for 60 days with review by the State Attorney 
        General.
            ``(4) The law contains a civil penalty that is not less than 
        the amount of the civil penalty authorized under section 3729 of 
        title 31, United States Code.

    ``(c) Deemed Compliance.--A State that, as of January 1, 2007, has a 
law in effect that meets the requirements of subsection (b) shall be 
deemed to be in compliance with such requirements for so long as the law 
continues to meet such requirements.
    ``(d) No Preclusion of Broader Laws.--Nothing in this section shall 
be construed as prohibiting a State that has in effect a law that 
establishes liability to the State for false or fraudulent claims 
described in section 3729 of title 31, United States Code, with respect 
to programs in addition to the State program under this title, or with 
respect to expenditures in addition to expenditures described in section 
1903(a), from being considered to be in compliance with the requirements 
of subsection (a) so long as the law meets such requirements.''.
    (b) <<NOTE: 42 USC 1396h note.>> Effective Date.--Except as provided 
in section 6035(e), the amendments made by this section take effect on 
January 1, 2007.

SEC. 6032. EMPLOYEE EDUCATION ABOUT FALSE CLAIMS RECOVERY.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)) is amended--
            (1) in paragraph (66), by striking ``and'' at the end;
            (2) in paragraph (67) by striking the period at the end and 
        inserting ``; and''; and
            (3) by inserting after paragraph (67) the following:
            ``(68) provide that any entity that receives or makes annual 
        payments under the State plan of at least $5,000,000, as a 
        condition of receiving such payments, shall--
                    ``(A) <<NOTE: Procedures.>> establish written 
                policies for all employees of the entity (including 
                management), and of any contractor or agent of the 
                entity, that provide detailed information about

[[Page 120 STAT. 74]]

                the False Claims Act established under sections 3729 
                through 3733 of title 31, United States Code, 
                administrative remedies for false claims and statements 
                established under chapter 38 of title 31, United States 
                Code, any State laws pertaining to civil or criminal 
                penalties for false claims and statements, and 
                whistleblower protections under such laws, with respect 
                to the role of such laws in preventing and detecting 
                fraud, waste, and abuse in Federal health care programs 
                (as defined in section 1128B(f));
                    ``(B) include as part of such written policies, 
                detailed provisions regarding the entity's policies and 
                procedures for detecting and preventing fraud, waste, 
                and abuse; and
                    ``(C) include in any employee handbook for the 
                entity, a specific discussion of the laws described in 
                subparagraph (A), the rights of employees to be 
                protected as whistleblowers, and the entity's policies 
                and procedures for detecting and preventing fraud, 
                waste, and abuse.''.

    (b) <<NOTE: 42 USC 1396a note.>> Effective Date.--Except as provided 
in section 6035(e), the amendments made by subsection (a) take effect on 
January 1, 2007.

SEC. 6033. PROHIBITION ON RESTOCKING AND DOUBLE BILLING OF PRESCRIPTION 
            DRUGS.

    (a) In General.--Section 1903(i)(10) of the Social Security Act (42 
U.S.C. 1396b(i)), as amended by section 6002(b), is amended--
            (1) in subparagraph (B), by striking ``and'' at the end;
            (2) in subparagraph (C), by striking ``; or'' at the end and 
        inserting ``, and''; and
            (3) by adding at the end the following:
            ``(D) with respect to any amount expended for reimbursement 
        to a pharmacy under this title for the ingredient cost of a 
        covered outpatient drug for which the pharmacy has already 
        received payment under this title (other than with respect to a 
        reasonable restocking fee for such drug); or''.

    (b) <<NOTE: 42 USC 1396b note.>> Effective Date.--The amendments 
made by subsection (a) take effect on the first day of the first fiscal 
year quarter that begins after the date of enactment of this Act.

SEC. 6034. MEDICAID INTEGRITY PROGRAM.

    (a) Establishment of Medicaid Integrity Program.--Title XIX of the 
Social Security Act (42 U.S.C. 1396 et seq.) is amended--
            (1) by redesignating section 1936 <<NOTE: 42 USC 1396v.>> as 
        section 1937; and
            (2) by inserting after section 1935 the following:

                      ``medicaid integrity program

    ``Sec. 1936. <<NOTE: Contracts. 42 USC 1396u-6.>> (a) In General.--
There is hereby established the Medicaid Integrity Program (in this 
section referred to as the `Program') under which the Secretary shall 
promote the integrity of the program under this title by entering into 
contracts in accordance with this section with eligible entities to 
carry out the activities described in subsection (b).

    ``(b) Activities Described.--Activities described in this subsection 
are as follows:
            ``(1) Review of the actions of individuals or entities 
        furnishing items or services (whether on a fee-for-service, 
        risk, or other basis) for which payment may be made under a 
        State

[[Page 120 STAT. 75]]

        plan approved under this title (or under any waiver of such plan 
        approved under section 1115) to determine whether fraud, waste, 
        or abuse has occurred, is likely to occur, or whether such 
        actions have any potential for resulting in an expenditure of 
        funds under this title in a manner which is not intended under 
        the provisions of this title.
            ``(2) Audit of claims for payment for items or services 
        furnished, or administrative services rendered, under a State 
        plan under this title, including--
                    ``(A) cost reports;
                    ``(B) consulting contracts; and
                    ``(C) risk contracts under section 1903(m).
            ``(3) Identification of overpayments to individuals or 
        entities receiving Federal funds under this title.
            ``(4) Education of providers of services, managed care 
        entities, beneficiaries, and other individuals with respect to 
        payment integrity and quality of care.

    ``(c) Eligible Entity and Contracting Requirements.--
            ``(1) In general.--An entity is eligible to enter into a 
        contract under the Program to carry out any of the activities 
        described in subsection (b) if the entity satisfies the 
        requirements of paragraphs (2) and (3).
            ``(2) Eligibility requirements.--The requirements of this 
        paragraph are the following:
                    ``(A) The entity has demonstrated capability to 
                carry out the activities described in subsection (b).
                    ``(B) In carrying out such activities, the entity 
                agrees to cooperate with the Inspector General of the 
                Department of Health and Human Services, the Attorney 
                General, and other law enforcement agencies, as 
                appropriate, in the investigation and deterrence of 
                fraud and abuse in relation to this title and in other 
                cases arising out of such activities.
                    ``(C) The entity complies with such conflict of 
                interest standards as are generally applicable to 
                Federal acquisition and procurement.
                    ``(D) The entity meets such other requirements as 
                the Secretary may impose.
            ``(3) <<NOTE: Regulations.>> Contracting requirements.--The 
        entity has contracted with the Secretary in accordance with such 
        procedures as the Secretary shall by regulation establish, 
        except that such procedures shall include the following:
                    ``(A) Procedures for identifying, evaluating, and 
                resolving organizational conflicts of interest that are 
                generally applicable to Federal acquisition and 
                procurement.
                    ``(B) Competitive procedures to be used--
                          ``(i) when entering into new contracts under 
                      this section;
                          ``(ii) when entering into contracts that may 
                      result in the elimination of responsibilities 
                      under section 202(b) of the Health Insurance 
                      Portability and Accountability Act of 1996; and
                          ``(iii) at any other time considered 
                      appropriate by the Secretary.
                    ``(C) Procedures under which a contract under this 
                section may be renewed without regard to any provision 
                of law requiring competition if the contractor has met 
                or

[[Page 120 STAT. 76]]

                exceeded the performance requirements established in the 
                current contract.
        The Secretary may enter into such contracts without regard to 
        final rules having been promulgated.
            ``(4) <<NOTE: Regulations.>> Limitation on contractor 
        liability.--The Secretary shall by regulation provide for the 
        limitation of a contractor's liability for actions taken to 
        carry out a contract under the Program, and such regulation 
        shall, to the extent the Secretary finds appropriate, employ the 
        same or comparable standards and other substantive and 
        procedural provisions as are contained in section 1157.

    ``(d) Comprehensive Plan for Program Integrity.--
            ``(1) 5-year plan.--With respect to the 5-fiscal year period 
        beginning with fiscal year 2006, and each such 5-fiscal year 
        period that begins thereafter, the Secretary shall establish a 
        comprehensive plan for ensuring the integrity of the program 
        established under this title by combatting fraud, waste, and 
        abuse.
            ``(2) Consultation.--Each 5-fiscal year plan established 
        under paragraph (1) shall be developed by the Secretary in 
        consultation with the Attorney General, the Director of the 
        Federal Bureau of Investigation, the Comptroller General of the 
        United States, the Inspector General of the Department of Health 
        and Human Services, and State officials with responsibility for 
        controlling provider fraud and abuse under State plans under 
        this title.

    ``(e) Appropriation.--
            ``(1) In general.--Out of any money in the Treasury of the 
        United States not otherwise appropriated, there are appropriated 
        to carry out the Medicaid Integrity Program under this section, 
        without further appropriation--
                    ``(A) for fiscal year 2006, $5,000,000;
                    ``(B) for each of fiscal years 2007 and 2008, 
                $50,000,000; and
                    ``(C) for each fiscal year thereafter, $75,000,000.
            ``(2) Availability.--Amounts appropriated pursuant to 
        paragraph (1) shall remain available until expended.
            ``(3) Increase in cms staffing devoted to protecting 
        medicaid program integrity.--From the amounts appropriated under 
        paragraph (1), the Secretary shall increase by 100 the number of 
        full-time equivalent employees whose duties consist solely of 
        protecting the integrity of the Medicaid program established 
        under this section by providing effective support and assistance 
        to States to combat provider fraud and abuse.
            ``(4) Annual report.--Not later than 180 days after the end 
        of each fiscal year (beginning with fiscal year 2006), the 
        Secretary shall submit a report to Congress which identifies--
                    ``(A) the use of funds appropriated pursuant to 
                paragraph (1); and
                    ``(B) the effectiveness of the use of such funds.''.

    (b) State Requirement To Cooperate With Integrity Program Efforts.--
Section 1902(a) of such Act (42 U.S.C. 1396a(a)), as amended by section 
6033(a), is amended--
            (1) in paragraph (67), by striking ``and'' at the end;
            (2) in paragraph (68), by striking the period at the end and 
        inserting ``; and''; and

[[Page 120 STAT. 77]]

            (3) by inserting after paragraph (68), the following:
            ``(69) provide that the State must comply with any 
        requirements determined by the Secretary to be necessary for 
        carrying out the Medicaid Integrity Program established under 
        section 1936.''.

    (c) Increased Funding for Medicaid Fraud and Abuse Control 
Activities.--
            (1) In general.--Out of any money in the Treasury of the 
        United States not otherwise appropriated, there are appropriated 
        to the Office of the Inspector General of the Department of 
        Health and Human Services, without further appropriation, 
        $25,000,000 for each of fiscal years 2006 through 2010, for 
        activities of such Office with respect to the Medicaid program 
        under title XIX of the Social Security Act (42 U.S.C. 1396 et 
        seq.).
            (2) Availability; amounts in addition to other amounts 
        appropriated for such activities.--Amounts appropriated pursuant 
        to paragraph (1) shall--
                    (A) remain available until expended; and
                    (B) be in addition to any other amounts appropriated 
                or made available to the Office of the Inspector General 
                of the Department of Health and Human Services for 
                activities of such Office with respect to the Medicaid 
                program.
            (3) Annual report.--Not later than 180 days after the end of 
        each fiscal year (beginning with fiscal year 2006), the 
        Inspector General of the Department of Health and Human Services 
        shall submit a report to Congress which identifies--
                    (A) the use of funds appropriated pursuant to 
                paragraph (1); and
                    (B) the effectiveness of the use of such funds.

    (d) National Expansion of the Medicare-Medicaid (Medi-Medi) Data 
Match Pilot Program.--
            (1) Requirement of the medicare integrity program.--Section 
        1893 of the Social Security Act (42 U.S.C. 1395ddd) is amended--
                    (A) in subsection (b), by adding at the end the 
                following:
            ``(6) The Medicare-Medicaid Data Match Program in accordance 
        with subsection (g).''; and
                    (B) by adding at the end the following:

    ``(g) Medicare-Medicaid Data Match Program.--
            ``(1) Expansion of program.--
                    ``(A) <<NOTE: Contracts.>> In general.--The 
                Secretary shall enter into contracts with eligible 
                entities for the purpose of ensuring that, beginning 
                with 2006, the Medicare-Medicaid Data Match Program 
                (commonly referred to as the `Medi-Medi Program') is 
                conducted with respect to the program established under 
                this title and State Medicaid programs under title XIX 
                for the purpose of--
                          ``(i) identifying program vulnerabilities in 
                      the program established under this title and the 
                      Medicaid program established under title XIX 
                      through the use of computer algorithms to look for 
                      payment anomalies (including billing or billing 
                      patterns identified with respect to service, time, 
                      or patient that appear to be suspect or otherwise 
                      implausible);
                          ``(ii) working with States, the Attorney 
                      General, and the Inspector General of the 
                      Department of Health

[[Page 120 STAT. 78]]

                      and Human Services to coordinate appropriate 
                      actions to protect the Federal and State share of 
                      expenditures under the Medicaid program under 
                      title XIX, as well as the program established 
                      under this title; and
                          ``(iii) increasing the effectiveness and 
                      efficiency of both such programs through cost 
                      avoidance, savings, and recoupments of fraudulent, 
                      wasteful, or abusive expenditures.
                    ``(B) Reporting requirements.--The Secretary shall 
                make available in a timely manner any data and 
                statistical information collected by the Medi-Medi 
                Program to the Attorney General, the Director of the 
                Federal Bureau of Investigation, the Inspector General 
                of the Department of Health and Human Services, and the 
                States (including a Medicaid fraud and abuse control 
                unit described in section 
                1903(q)). <<NOTE: Deadline.>> Such information shall be 
                disseminated no less frequently than quarterly.
            ``(2) Limited waiver authority.--The Secretary shall waive 
        only such requirements of this section and of titles XI and XIX 
        as are necessary to carry out paragraph (1).''.
            (2) Funding.--Section 1817(k)(4) of such Act (42 U.S.C. 
        1395i(k)(4)), as amended by section 5204 of this Act, is 
        amended--
                    (A) in subparagraph (A), by striking ``subparagraph 
                (B)'' and inserting ``subparagraphs (B), (C), and (D)''; 
                and
                    (B) by adding at the end the following:
                    ``(D) Expansion of the medicare-medicaid data match 
                program.--The amount appropriated under subparagraph (A) 
                for a fiscal year is further increased as follows for 
                purposes of carrying out section 1893(b)(6) for the 
                respective fiscal year:
                          ``(i) $12,000,000 for fiscal year 2006.
                          ``(ii) $24,000,000 for fiscal year 2007.
                          ``(iii) $36,000,000 for fiscal year 2008.
                          ``(iv) $48,000,000 for fiscal year 2009.
                          ``(v) $60,000,000 for fiscal year 2010 and 
                      each fiscal year thereafter.''.

    (e) <<NOTE: 42 USC 1396a note.>> Delayed Effective Date for 
Chapter.--Except as otherwise provided in this chapter, in the case of a 
State plan under title XIX of the Social Security Act which the 
Secretary determines requires State legislation in order for the plan to 
meet the additional requirements imposed by the amendments made by a 
provision of this chapter, the State plan shall not be regarded as 
failing to comply with the requirements of such Act solely on the basis 
of its failure to meet these additional requirements before the first 
day of the first calendar quarter beginning after the close of the first 
regular session of the State legislature that begins after the date of 
enactment of this Act. For purposes of the previous sentence, in the 
case of a State that has a 2-year legislative session, each year of the 
session shall be considered to be a separate regular session of the 
State legislature.

SEC. 6035. ENHANCING THIRD PARTY IDENTIFICATION AND PAYMENT.

    (a) Clarification of Third Parties Legally Responsible for Payment 
of a Claim for a Health Care Item or Service.--Section 1902(a)(25) of 
the Social Security Act (42 U.S.C. 1396a(a)(25)) is amended--

[[Page 120 STAT. 79]]

            (1) in subparagraph (A), in the matter preceding clause 
        (i)--
                    (A) by inserting ``, self-insured plans'' after 
                ``health insurers''; and
                    (B) by striking ``and health maintenance 
                organizations'' and inserting ``managed care 
                organizations, pharmacy benefit managers, or other 
                parties that are, by statute, contract, or agreement, 
                legally responsible for payment of a claim for a health 
                care item or service''; and
            (2) in subparagraph (G)--
                    (A) by inserting ``a self-insured plan,'' after 
                ``1974,''; and
                    (B) by striking ``and a health maintenance 
                organization'' and inserting ``a managed care 
                organization, a pharmacy benefit manager, or other party 
                that is, by statute, contract, or agreement, legally 
                responsible for payment of a claim for a health care 
                item or service''.

     (b) Requirement for Third Parties To Provide the State With 
Coverage Eligibility and Claims Data.--Section 1902(a)(25) of such Act 
(42 U.S.C. 1396a(a)(25)) is amended--
            (1) in subparagraph (G), by striking ``and'' at the end;
            (2) in subparagraph (H), by adding ``and'' after the 
        semicolon at the end; and
            (3) by inserting after subparagraph (H), the following:
                    ``(I) that the State shall provide assurances 
                satisfactory to the Secretary that the State has in 
                effect laws requiring health insurers, including self-
                insured plans, group health plans (as defined in section 
                607(1) of the Employee Retirement Income Security Act of 
                1974), service benefit plans, managed care 
                organizations, pharmacy benefit managers, or other 
                parties that are, by statute, contract, or agreement, 
                legally responsible for payment of a claim for a health 
                care item or service, as a condition of doing business 
                in the State, to--
                          ``(i) provide, with respect to individuals who 
                      are eligible for, or are provided, medical 
                      assistance under the State plan, upon the request 
                      of the State, information to determine during what 
                      period the individual or their spouses or their 
                      dependents may be (or may have been) covered by a 
                      health insurer and the nature of the coverage that 
                      is or was provided by the health insurer 
                      (including the name, address, and identifying 
                      number of the plan) in a manner prescribed by the 
                      Secretary;
                          ``(ii) accept the State's right of recovery 
                      and the assignment to the State of any right of an 
                      individual or other entity to payment from the 
                      party for an item or service for which payment has 
                      been made under the State plan;
                          ``(iii) respond to any inquiry by the State 
                      regarding a claim for payment for any health care 
                      item or service that is submitted not later than 3 
                      years after the date of the provision of such 
                      health care item or service; and
                          ``(iv) agree not to deny a claim submitted by 
                      the State solely on the basis of the date of 
                      submission of the claim, the type or format of the 
                      claim form,

[[Page 120 STAT. 80]]

                      or a failure to present proper documentation at 
                      the point-of-sale that is the basis of the claim, 
                      if--
                                    ``(I) the claim is submitted by the 
                                State within the 3-year period beginning 
                                on the date on which the item or service 
                                was furnished; and
                                    ``(II) any action by the State to 
                                enforce its rights with respect to such 
                                claim is commenced within 6 years of the 
                                State's submission of such claim;''.

    (c) <<NOTE: 42 USC 1396a note.>> Effective Date.--Except as provided 
in section 6035(e), the amendments made by this section take effect on 
January 1, 2006.

SEC. 6036. IMPROVED ENFORCEMENT OF DOCUMENTATION REQUIREMENTS.

    (a) In General.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b) is amended--
            (1) in subsection (i), as amended by section 104 of Public 
        Law 109-91--
                    (A) by striking ``or'' at the end of paragraph (20);
                    (B) by striking the period at the end of paragraph 
                (21) and inserting ``; or''; and
                    (C) by inserting after paragraph (21) the following 
                new paragraph:
            ``(22) with respect to amounts expended for medical 
        assistance for an individual who declares under section 
        1137(d)(1)(A) to be a citizen or national of the United States 
        for purposes of establishing eligibility for benefits under this 
        title, unless the requirement of subsection (x) is met.''; and
            (2) by adding at the end the following new subsection:

    ``(x)(1) For purposes of subsection (i)(23), the requirement of this 
subsection is, with respect to an individual declaring to be a citizen 
or national of the United States, that, subject to paragraph (2), there 
is presented satisfactory documentary evidence of citizenship or 
nationality (as defined in paragraph (3)) of the individual.
    ``(2) The requirement of paragraph (1) shall not apply to an alien 
who is eligible for medical assistance under this title--
            ``(A) and is entitled to or enrolled for benefits under any 
        part of title XVIII;
            ``(B) on the basis of receiving supplemental security income 
        benefits under title XVI; or
            ``(C) on such other basis as the Secretary may specify under 
        which satisfactory documentary evidence of citizenship or 
        nationality had been previously presented.

    ``(3)(A) For purposes of this subsection, the term `satisfactory 
documentary evidence of citizenship or nationality' means--
            ``(i) any document described in subparagraph (B); or
            ``(ii) a document described in subparagraph (C) and a 
        document described in subparagraph (D).

    ``(B) The following are documents described in this subparagraph:
            ``(i) A United States passport.
            ``(ii) Form N-550 or N-570 (Certificate of Naturalization).
            ``(iii) Form N-560 or N-561 (Certificate of United States 
        Citizenship).
            ``(iv) A valid State-issued driver's license or other 
        identity document described in section 274A(b)(1)(D) of the 
        Immigration

[[Page 120 STAT. 81]]

        and Nationality Act, but only if the State issuing the license 
        or such document requires proof of United States citizenship 
        before issuance of such license or document or obtains a social 
        security number from the applicant and verifies before 
        certification that such number is valid and assigned to the 
        applicant who is a citizen.
            ``(v) Such other document as the Secretary may specify, by 
        regulation, that provides proof of United States citizenship or 
        nationality and that provides a reliable means of documentation 
        of personal identity.

    ``(C) The following are documents described in this subparagraph:
            ``(i) A certificate of birth in the United States.
            ``(ii) Form FS-545 or Form DS-1350 (Certification of Birth 
        Abroad).
            ``(iii) Form I-97 (United States Citizen Identification 
        Card).
            ``(iv) Form FS-240 (Report of Birth Abroad of a Citizen of 
        the United States).
            ``(v) Such other document (not described in subparagraph 
        (B)(iv)) as the Secretary may specify that provides proof of 
        United States citizenship or nationality.

    ``(D) The following are documents described in this subparagraph:
            ``(i) Any identity document described in section 
        274A(b)(1)(D) of the Immigration and Nationality Act.
            ``(ii) Any other documentation of personal identity of such 
        other type as the Secretary finds, by regulation, provides a 
        reliable means of identification.

    ``(E) A reference in this paragraph to a form includes a reference 
to any successor form.''.
    (b) <<NOTE: 42 USC 1396b note.>> Effective Date.--The amendments 
made by subsection (a) shall apply to determinations of initial 
eligibility for medical assistance made on or after July 1, 2006, and to 
redeterminations of eligibility made on or after such date in the case 
of individuals for whom the requirement of section 1903(z) of the Social 
Security Act, as added by such amendments, was not previously met.

    (c) <<NOTE: 42 USC 1396b note.>> Implementation Requirement.--As 
soon as practicable after the date of enactment of this Act, the 
Secretary of Health and Human Services shall establish an outreach 
program that is designed to educate individuals who are likely to be 
affected by the requirements of subsections (i)(23) and (x) of section 
1903 of the Social Security Act (as added by subsection (a)) about such 
requirements and how they may be satisfied.

           CHAPTER 4--FLEXIBILITY IN COST SHARING AND BENEFITS

SEC. 6041. STATE OPTION FOR ALTERNATIVE MEDICAID PREMIUMS AND COST 
            SHARING.

    (a) In General.--Title XIX of the Social Security Act is amended by 
inserting after section 1916 the following new section:

        ``state option for alternative premiums and cost sharing

    ``Sec. 1916A. <<NOTE: 42 USC 1396o-1.>> (a) State Flexibility.--
            ``(1) In general.--Notwithstanding sections 1916 and 
        1902(a)(10)(B), a State, at its option and through a State plan

[[Page 120 STAT. 82]]

        amendment, may impose premiums and cost sharing for any group of 
        individuals (as specified by the State) and for any type of 
        services (other than drugs for which cost sharing may be imposed 
        under subsection (c)), and may vary such premiums and cost 
        sharing among such groups or types, consistent with the 
        limitations established under this section. Nothing in this 
        section shall be construed as superseding (or preventing the 
        application of) section 1916(g).
            ``(2) Definitions.--In this section:
                    ``(A) Premium.--The term `premium' includes any 
                enrollment fee or similar charge.
                    ``(B) Cost sharing.--The term `cost sharing' 
                includes any deduction, copayment, or similar charge.

    ``(b) Limitations on Exercise of Authority.--
            ``(1) Individuals with family income between 100 and 150 
        percent of the poverty line.--In the case of an individual whose 
        family income exceeds 100 percent, but does not exceed 150 
        percent, of the poverty line applicable to a family of the size 
        involved, subject to subsections (c)(2) and (e)(2)(A)--
                    ``(A) no premium may be imposed under the plan; and
                    ``(B) with respect to cost sharing--
                          ``(i) the cost sharing imposed under 
                      subsection (a) with respect to any item or service 
                      may not exceed 10 percent of the cost of such item 
                      or service; and
                          ``(ii) the total aggregate amount of cost 
                      sharing imposed under this section (including any 
                      cost sharing imposed under subsection (c) or (e)) 
                      for all individuals in the family may not exceed 5 
                      percent of the family income of the family 
                      involved, as applied on a quarterly or monthly 
                      basis (as specified by the State).
            ``(2) Individuals with family income above 150 percent of 
        the poverty line.--In the case of an individual whose family 
        income exceeds 150 percent of the poverty line applicable to a 
        family of the size involved, subject to subsections (c)(2) and 
        (e)(2)(A)--
                    ``(A) the total aggregate amount of premiums and 
                cost sharing imposed under this section (including any 
                cost sharing imposed under subsection (c) or (e)) for 
                all individuals in the family may not exceed 5 percent 
                of the family income of the family involved, as applied 
                on a quarterly or monthly basis (as specified by the 
                State); and
                    ``(B) with respect to cost sharing, the cost sharing 
                imposed with respect to any item or service under 
                subsection (a) may not exceed 20 percent of the cost of 
                such item or service.
            ``(3) Additional limitations.--
                    ``(A) Premiums.--No premiums shall be imposed under 
                this section with respect to the following:
                          ``(i) Individuals under 18 years of age that 
                      are required to be provided medical assistance 
                      under section 1902(a)(10)(A)(i), and including 
                      individuals with respect to whom aid or assistance 
                      is made available under part B of title IV to 
                      children in foster care and individuals with 
                      respect to whom adoption or foster care assistance 
                      is made available under part E of such title, 
                      without regard to age.

[[Page 120 STAT. 83]]

                          ``(ii) Pregnant women.
                          ``(iii) Any terminally ill individual who is 
                      receiving hospice care (as defined in section 
                      1905(o)).
                          ``(iv) Any individual who is an inpatient in a 
                      hospital, nursing facility, intermediate care 
                      facility for the mentally retarded, or other 
                      medical institution, if such individual is 
                      required, as a condition of receiving services in 
                      such institution under the State plan, to spend 
                      for costs of medical care all but a minimal amount 
                      of the individual's income required for personal 
                      needs.
                          ``(v) Women who are receiving medical 
                      assistance by virtue of the application of 
                      sections 1902(a)(10)(A)(ii)(XVIII) and 1902(aa).
                    ``(B) Cost sharing.--Subject to the succeeding 
                provisions of this section, no cost sharing shall be 
                imposed under subsection (a) with respect to the 
                following:
                          ``(i) Services furnished to individuals under 
                      18 years of age that are required to be provided 
                      medical assistance under section 
                      1902(a)(10)(A)(i), and including services 
                      furnished to individuals with respect to whom aid 
                      or assistance is made available under part B of 
                      title IV to children in foster care and 
                      individuals with respect to whom adoption or 
                      foster care assistance is made available under 
                      part E of such title, without regard to age.
                          ``(ii) Preventive services (such as well baby 
                      and well child care and immunizations) provided to 
                      children under 18 years of age regardless of 
                      family income.
                          ``(iii) Services furnished to pregnant women, 
                      if such services relate to the pregnancy or to any 
                      other medical condition which may complicate the 
                      pregnancy.
                          ``(iv) Services furnished to a terminally ill 
                      individual who is receiving hospice care (as 
                      defined in section 1905(o)).
                          ``(v) Services furnished to any individual who 
                      is an inpatient in a hospital, nursing facility, 
                      intermediate care facility for the mentally 
                      retarded, or other medical institution, if such 
                      individual is required, as a condition of 
                      receiving services in such institution under the 
                      State plan, to spend for costs of medical care all 
                      but a minimal amount of the individual's income 
                      required for personal needs.
                          ``(vi) Emergency services (as defined by the 
                      Secretary for purposes of section 1916(a)(2)(D)).
                          ``(vii) Family planning services and supplies 
                      described in section 1905(a)(4)(C).
                          ``(viii) Services furnished to women who are 
                      receiving medical assistance by virtue of the 
                      application of sections 1902(a)(10)(A)(ii)(XVIII) 
                      and 1902(aa).
                    ``(C) Construction.--Nothing in this paragraph shall 
                be construed as preventing a State from exempting 
                additional classes of individuals from premiums under 
                this section or from exempting additional individuals or 
                services from cost sharing under subsection (a).
            ``(4) Determinations of family income.--In applying this 
        subsection, family income shall be determined in a manner

[[Page 120 STAT. 84]]

        specified by the State for purposes of this subsection, 
        including the use of such disregards as the State may provide. 
        Family income shall be determined for such period and at such 
        periodicity as the State may provide under this title.
            ``(5) Poverty line defined.--For purposes of this section, 
        the term `poverty line' has the meaning given such term in 
        section 673(2) of the Community Services Block Grant Act (42 
        U.S.C. 9902(2)), including any revision required by such 
        section.
            ``(6) Construction.--Nothing in this section shall be 
        construed--
                    ``(A) as preventing a State from further limiting 
                the premiums and cost sharing imposed under this section 
                beyond the limitations provided under this section;
                    ``(B) as affecting the authority of the Secretary 
                through waiver to modify limitations on premiums and 
                cost sharing under this section; or
                    ``(C) as affecting any such waiver of requirements 
                in effect under this title before the date of the 
                enactment of this section with regard to the imposition 
                of premiums and cost sharing.

    ``(d) Enforceability of Premiums and Other Cost Sharing.--
            ``(1) Premiums.--Notwithstanding section 1916(c)(3) and 
        section 1902(a)(10)(B), a State may, at its option, condition 
        the provision of medical assistance for an individual upon 
        prepayment of a premium authorized to be imposed under this 
        section, or may terminate eligibility for such medical 
        assistance on the basis of failure to pay such a premium but 
        shall not terminate eligibility of an individual for medical 
        assistance under this title on the basis of failure to pay any 
        such premium until such failure continues for a period of not 
        less than 60 days. A State may apply the previous sentence for 
        some or all groups of beneficiaries as specified by the State 
        and may waive payment of any such premium in any case where the 
        State determines that requiring such payment would create an 
        undue hardship.
            ``(2) Cost sharing.--Notwithstanding section 1916(e) or any 
        other provision of law, a State may permit a provider 
        participating under the State plan to require, as a condition 
        for the provision of care, items, or services to an individual 
        entitled to medical assistance under this title for such care, 
        items, or services, the payment of any cost sharing authorized 
        to be imposed under this section with respect to such care, 
        items, or services. Nothing in this paragraph shall be construed 
        as preventing a provider from reducing or waiving the 
        application of such cost sharing on a case-by-case basis.''.

    (b) Indexing Nominal Cost Sharing and Conforming Amendment.--Section 
1916 of such Act (42 U.S.C. 1396o) is amended--
            (1) in subsection (f), by inserting ``and section 1916A'' 
        after ``(b)(3)''; and
            (2) by adding at the end the following new subsection:

    ``(h) In applying this section and subsections (c) and (e) of 
section 1916A, with respect to cost sharing that is `nominal' in amount, 
the Secretary shall increase such `nominal' amounts for each year 
(beginning with 2006) by the annual percentage increase

[[Page 120 STAT. 85]]

in the medical care component of the consumer price index for all urban 
consumers (U.S. city average) as rounded up in an appropriate manner.''.
    (c) <<NOTE: 42 USC 1396o note.>> Effective Date.--The amendments 
made by this section shall apply to cost sharing imposed for items and 
services furnished on or after March 31, 2006.

SEC. 6042. SPECIAL RULES FOR COST SHARING FOR PRESCRIPTION DRUGS.

    (a) In General.--Section 1916A of the Social Security Act, as 
inserted by section 6041(a), is amended by inserting after subsection 
(b) the following new subsection:
    ``(c) Special Rules for Cost Sharing for Prescription Drugs.--
            ``(1) In general.--In order to encourage beneficiaries to 
        use drugs (in this subsection referred to as `preferred drugs') 
        identified by the State as the least (or less) costly effective 
        prescription drugs within a class of drugs (as defined by the 
        State), with respect to one or more groups of beneficiaries 
        specified by the State, subject to paragraph (2), the State 
        may--
                    ``(A) provide cost sharing (instead of the level of 
                cost sharing otherwise permitted under section 1916, but 
                subject to paragraphs (2) and (3)) with respect to drugs 
                that are not preferred drugs within a class; and
                    ``(B) waive or reduce the cost sharing otherwise 
                applicable for preferred drugs within such class and 
                shall not apply any such cost sharing for such preferred 
                drugs for individuals for whom cost sharing may not 
                otherwise be imposed under subsection (b)(3)(B).
            ``(2) Limitations.--
                    ``(A) By income group.--In no case may the cost 
                sharing under paragraph (1)(A) with respect to a non-
                preferred drug exceed--
                          ``(i) in the case of an individual whose 
                      family income does not exceed 150 percent of the 
                      poverty line applicable to a family of the size 
                      involved, the amount of nominal cost sharing (as 
                      otherwise determined under section 1916); or
                          ``(ii) in the case of an individual whose 
                      family income exceeds 150 percent of the poverty 
                      line applicable to a family of the size involved, 
                      20 percent of the cost of the drug.
                    ``(B) Limitation to nominal for exempt 
                populations.--In the case of an individual who is 
                otherwise not subject to cost sharing due to the 
                application of subsection (b)(3)(B), any cost sharing 
                under paragraph (1)(A) with respect to a non-preferred 
                drug may not exceed a nominal amount (as otherwise 
                determined under section 1916).
                    ``(C) Continued application of aggregate cap.--In 
                addition to the limitations imposed under subparagraphs 
                (A) and (B), any cost sharing under paragraph (1)(A) 
                continues to be subject to the aggregate cap on cost 
                sharing applied under paragraph (1) or (2) of subsection 
                (b), as the case may be.
            ``(3) Waiver.--In carrying out paragraph (1), a State shall 
        provide for the application of cost sharing levels applicable

[[Page 120 STAT. 86]]

        to a preferred drug in the case of a drug that is not a 
        preferred drug if the prescribing physician determines that the 
        preferred drug for treatment of the same condition either would 
        not be as effective for the individual or would have adverse 
        effects for the individual or both.
            ``(4) Exclusion authority.--Nothing in this subsection shall 
        be construed as preventing a State from excluding specified 
        drugs or classes of drugs from the application of paragraph 
        (1).''.

    (b) <<NOTE: 42 USC 1396o-1 note.>> Effective Date.--The amendment 
made by subsection (a) shall apply to cost sharing imposed for items and 
services furnished on or after March 31, 2006.

SEC. 6043. EMERGENCY ROOM COPAYMENTS FOR NON-EMERGENCY CARE.

    (a) In General.--Section 1916A of the Social Security Act, as 
inserted by section 6041 and as amended by section 6042, is further 
amended by adding at the end the following new subsection:
    ``(e) State Option for Permitting Hospitals To Impose Cost Sharing 
for Non-Emergency Care Furnished in an Emergency Department.--
            ``(1) In general.--Notwithstanding section 1916 and section 
        1902(a)(1) or the previous provisions of this section, but 
        subject to the limitations of paragraph (2), a State may, by 
        amendment to its State plan under this title, permit a hospital 
        to impose cost sharing for non-emergency services furnished to 
        an individual (within one or more groups of individuals 
        specified by the State) in the hospital emergency department 
        under this subsection if the following conditions are met:
                    ``(A) Access to non-emergency room provider.--The 
                individual has actually available and accessible (as 
                such terms are applied by the Secretary under section 
                1916(b)(3)) an alternate non-emergency services provider 
                with respect to such services.
                    ``(B) Notice.--The hospital must inform the 
                beneficiary after receiving an appropriate medical 
                screening examination under section 1867 and after a 
                determination has been made that the individual does not 
                have an emergency medical condition, but before 
                providing the non-emergency services, of the following:
                          ``(i) The hospital may require the payment of 
                      the State specified cost sharing before the 
                      service can be provided.
                          ``(ii) The name and location of an alternate 
                      non-emergency services provider (described in 
                      subparagraph (A)) that is actually available and 
                      accessible (as described in such subparagraph).
                          ``(iii) The fact that such alternate provider 
                      can provide the services without the imposition of 
                      cost sharing described in clause (i).
                          ``(iv) The hospital provides a referral to 
                      coordinate scheduling of this treatment.
                Nothing in this subsection shall be construed as 
                preventing a State from applying (or waiving) cost 
                sharing otherwise permissible under this section to 
                services described in clause (iii).
            ``(2) Limitations.--

[[Page 120 STAT. 87]]

                    ``(A) For poorest beneficiaries.--In the case of an 
                individual described in subsection (b)(1), the cost 
                sharing imposed under this subsection may not exceed 
                twice the amount determined to be nominal under section 
                1916, subject to the percent of income limitation 
                otherwise applicable under subsection (b)(1).
                    ``(B) Application to exempt populations.--In the 
                case of an individual who is otherwise not subject to 
                cost sharing under subsection (b)(3), a State may impose 
                cost sharing under paragraph (1) for care in an amount 
                that does not exceed a nominal amount (as otherwise 
                determined under section 1916) so long as no cost 
                sharing is imposed to receive such care through an 
                outpatient department or other alternative health care 
                provider in the geographic area of the hospital 
                emergency department involved.
                    ``(C) Continued application of aggregate cap; 
                relation to other cost sharing.--In addition to the 
                limitations imposed under subparagraphs (A) and (B), any 
                cost sharing under paragraph (1) is subject to the 
                aggregate cap on cost sharing applied under paragraph 
                (1) or (2) of subsection (b), as the case may be. Cost 
                sharing imposed for services under this subsection shall 
                be instead of any cost sharing that may be imposed for 
                such services under subsection (a).
            ``(3) Construction.--Nothing in this section shall be 
        construed--
                    ``(A) to limit a hospital's obligations with respect 
                to screening and stabilizing treatment of an emergency 
                medical condition under section 1867; or
                    ``(B) to modify any obligations under either State 
                or Federal standards relating to the application of a 
                prudent-layperson standard with respect to payment or 
                coverage of emergency services by any managed care 
                organization.
            ``(4) Definitions.--For purposes of this subsection:
                    ``(A) Non-emergency services.--The term `non-
                emergency services' means any care or services furnished 
                in an emergency department of a hospital that the 
                physician determines do not constitute an appropriate 
                medical screening examination or stabilizing examination 
                and treatment required to be provided by the hospital 
                under section 1867.
                    ``(B) Alternate non-emergency services provider.--
                The term `alternative non-emergency services provider' 
                means, with respect to non-emergency services for the 
                diagnosis or treatment of a condition, a health care 
                provider, such as a physician's office, health care 
                clinic, community health center, hospital outpatient 
                department, or similar health care provider, that can 
                provide clinically appropriate services for the 
                diagnosis or treatment of a condition contemporaneously 
                with the provision of the non-emergency services that 
                would be provided in an emergency department of a 
                hospital for the diagnosis or treatment of a condition, 
                and that is participating in the program under this 
                title.''.

[[Page 120 STAT. 88]]

    (b) Grant Funds for Establishment of Alternate Non-Emergency 
Services Providers.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b), as amended by section 6037(a)(2), is amended by adding at the 
end the following new subsection:
    ``(y) Payments for Establishment of Alternate Non-Emergency Services 
Providers.--
            ``(1) Payments.--In addition to the payments otherwise 
        provided under subsection (a), subject to paragraph (2), the 
        Secretary shall provide for payments to States under such 
        subsection for the establishment of alternate non-emergency 
        service providers (as defined in section 1916A(e)(5)(B)), or 
        networks of such providers.
            ``(2) Limitation.--The total amount of payments under this 
        subsection shall not exceed $50,000,000 during the 4-year period 
        beginning with 2006. This subsection constitutes budget 
        authority in advance of appropriations Acts and represents the 
        obligation of the Secretary to provide for the payment of 
        amounts provided under this subsection.
            ``(3) Preference.--In providing for payments to States under 
        this subsection, the Secretary shall provide preference to 
        States that establish, or provide for, alternate non-emergency 
        services providers or networks of such providers that--
                    ``(A) serve rural or underserved areas where 
                beneficiaries under this title may not have regular 
                access to providers of primary care services; or
                    ``(B) are in partnership with local community 
                hospitals.
            ``(4) Form and manner of payment.--Payment to a State under 
        this subsection shall be made only upon the filing of such 
        application in such form and in such manner as the Secretary 
        shall specify. Payment to a State under this subsection shall be 
        made in the same manner as other payments under section 
        1903(a).''.

    (c) <<NOTE: 42 USC 1396b note.>> Effective Date.--The amendments 
made by this section shall apply to non-emergency services furnished on 
or after January 1, 2007.

SEC. 6044. USE OF BENCHMARK BENEFIT PACKAGES.

    (a) In General.--Title XIX of the Social Security Act, as amended by 
section 6035, is amended by redesignating section 1937 as section 
1938 <<NOTE: 42 USC 1396v.>> and by inserting after section 1936 the 
following new section:

                 ``state flexibility in benefit packages

    ``Sec. 1937. <<NOTE: 42 USC 1396u-7.>> (a) State Option of Providing 
Benchmark Benefits.--
            ``(1) Authority.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this title, a State, at its option as a 
                State plan amendment, may provide for medical assistance 
                under this title to individuals within one or more 
                groups of individuals specified by the State through 
                enrollment in coverage that provides--
                          ``(i) benchmark coverage described in 
                      subsection (b)(1) or benchmark equivalent coverage 
                      described in subsection (b)(2); and
                          ``(ii) for any child under 19 years of age who 
                      is covered under the State plan under section

[[Page 120 STAT. 89]]

                      1902(a)(10)(A), wrap-around benefits to the 
                      benchmark coverage or benchmark equivalent 
                      coverage consisting of early and periodic 
                      screening, diagnostic, and treatment services 
                      defined in section 1905(r).
                    ``(B) Limitation.--The State may only exercise the 
                option under subparagraph (A) for an individual eligible 
                under an eligibility category that had been established 
                under the State plan on or before the date of the 
                enactment of this section.
                    ``(C) Option of wrap-around benefits.--In the case 
                of coverage described in subparagraph (A), a State, at 
                its option, may provide such wrap-around or additional 
                benefits as the State may specify.
                    ``(D) Treatment as medical assistance.--Payment of 
                premiums for such coverage under this subsection shall 
                be treated as payment of other insurance premiums 
                described in the third sentence of section 1905(a).
            ``(2) Application.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a State may require that a full-
                benefit eligible individual (as defined in subparagraph 
                (C)) within a group obtain benefits under this title 
                through enrollment in coverage described in paragraph 
                (1)(A). A State may apply the previous sentence to 
                individuals within 1 or more groups of such individuals.
                    ``(B) Limitation on application.--A State may not 
                require under subparagraph (A) an individual to obtain 
                benefits through enrollment described in paragraph 
                (1)(A) if the individual is within one of the following 
                categories of individuals:
                          ``(i) Mandatory pregnant women.--The 
                      individual is a pregnant woman who is required to 
                      be covered under the State plan under section 
                      1902(a)(10)(A)(i).
                          ``(ii) Blind or disabled individuals.--The 
                      individual qualifies for medical assistance under 
                      the State plan on the basis of being blind or 
                      disabled (or being treated as being blind or 
                      disabled) without regard to whether the individual 
                      is eligible for supplemental security income 
                      benefits under title XVI on the basis of being 
                      blind or disabled and including an individual who 
                      is eligible for medical assistance on the basis of 
                      section 1902(e)(3).
                          ``(iii) Dual eligibles.--The individual is 
                      entitled to benefits under any part of title 
                      XVIII.
                          ``(iv) Terminally ill hospice patients.--The 
                      individual is terminally ill and is receiving 
                      benefits for hospice care under this title.
                          ``(v) Eligible on basis of 
                      institutionalization.--The individual is an 
                      inpatient in a hospital, nursing facility, 
                      intermediate care facility for the mentally 
                      retarded, or other medical institution, and is 
                      required, as a condition of receiving services in 
                      such institution under the State plan, to spend 
                      for costs of medical care all but a minimal amount 
                      of the individual's income required for personal 
                      needs.

[[Page 120 STAT. 90]]

                          ``(vi) Medically frail and special medical 
                      needs individuals.--The individual is medically 
                      frail or otherwise an individual with special 
                      medical needs (as identified in accordance with 
                      regulations of the Secretary).
                          ``(vii) Beneficiaries qualifying for long-term 
                      care services.--The individual qualifies based on 
                      medical condition for medical assistance for long-
                      term care services described in section 
                      1917(c)(1)(C).
                          ``(viii) Children in foster care receiving 
                      child welfare services and children receiving 
                      foster care or adoption assistance.--The 
                      individual is an individual with respect to whom 
                      aid or assistance is made available under part B 
                      of title IV to children in foster care and 
                      individuals with respect to whom adoption or 
                      foster care assistance is made available under 
                      part E of such title, without regard to age.
                          ``(ix) TANF and section 1931 parents.--The 
                      individual qualifies for medical assistance on the 
                      basis of eligibility to receive assistance under a 
                      State plan funded under part A of title IV (as in 
                      effect on or after the welfare reform effective 
                      date defined in section 1931(i)).
                          ``(x) Women in the breast or cervical cancer 
                      program.--The individual is a woman who is 
                      receiving medical assistance by virtue of the 
                      application of sections 1902(a)(10)(A)(ii)(XVIII) 
                      and 1902(aa).
                          ``(xi) Limited services beneficiaries.--The 
                      individual--
                                    ``(I) qualifies for medical 
                                assistance on the basis of section 
                                1902(a)(10)(A)(ii)(XII); or
                                    ``(II) is not a qualified alien (as 
                                defined in section 431 of the Personal 
                                Responsibility and Work Opportunity 
                                Reconciliation Act of 1996) and receives 
                                care and services necessary for the 
                                treatment of an emergency medical 
                                condition in accordance with section 
                                1903(v).
                    ``(C) Full-benefit eligible individuals.--
                          ``(i) In general.--For purposes of this 
                      paragraph, subject to clause (ii), the term `full-
                      benefit eligible individual' means for a State for 
                      a month an individual who is determined eligible 
                      by the State for medical assistance for all 
                      services defined in section 1905(a) which are 
                      covered under the State plan under this title for 
                      such month under section 1902(a)(10)(A) or under 
                      any other category of eligibility for medical 
                      assistance for all such services under this title, 
                      as determined by the Secretary.
                          ``(ii) Exclusion of medically needy and spend-
                      down populations.--Such term shall not include an 
                      individual determined to be eligible by the State 
                      for medical assistance under section 
                      1902(a)(10)(C) or by reason of section 1902(f) or 
                      otherwise eligible based on a reduction of income 
                      based on costs incurred for medical or other 
                      remedial care.

    ``(b) Benchmark Benefit Packages.--

[[Page 120 STAT. 91]]

            ``(1) In general.--For purposes of subsection (a)(1), each 
        of the following coverages shall be considered to be benchmark 
        coverage:
                    ``(A) FEHBP-equivalent health insurance coverage.--
                The standard Blue Cross/Blue Shield preferred provider 
                option service benefit plan, described in and offered 
                under section 8903(1) of title 5, United States Code.
                    ``(B) State employee coverage.--A health benefits 
                coverage plan that is offered and generally available to 
                State employees in the State involved.
                    ``(C) Coverage offered through hmo.--The health 
                insurance coverage plan that--
                          ``(i) is offered by a health maintenance 
                      organization (as defined in section 2791(b)(3) of 
                      the Public Health Service Act), and
                          ``(ii) has the largest insured commercial, 
                      non-medicaid enrollment of covered lives of such 
                      coverage plans offered by such a health 
                      maintenance organization in the State involved.
                    ``(D) Secretary-approved coverage.--Any other health 
                benefits coverage that the Secretary determines, upon 
                application by a State, provides appropriate coverage 
                for the population proposed to be provided such 
                coverage.
            ``(2) Benchmark-equivalent coverage.--For purposes of 
        subsection (a)(1), coverage that meets the following requirement 
        shall be considered to be benchmark-equivalent coverage:
                    ``(A) Inclusion of basic services.--The coverage 
                includes benefits for items and services within each of 
                the following categories of basic services:
                          ``(i) Inpatient and outpatient hospital 
                      services.
                          ``(ii) Physicians' surgical and medical 
                      services.
                          ``(iii) Laboratory and x-ray services.
                          ``(iv) Well-baby and well-child care, 
                      including age-appropriate immunizations.
                          ``(v) Other appropriate preventive services, 
                      as designated by the Secretary.
                    ``(B) Aggregate actuarial value equivalent to 
                benchmark package.--The coverage has an aggregate 
                actuarial value that is at least actuarially equivalent 
                to one of the benchmark benefit packages described in 
                paragraph (1).
                    ``(C) Substantial actuarial value for additional 
                services included in benchmark package.--With respect to 
                each of the following categories of additional services 
                for which coverage is provided under the benchmark 
                benefit package used under subparagraph (B), the 
                coverage has an actuarial value that is equal to at 
                least 75 percent of the actuarial value of the coverage 
                of that category of services in such package:
                          ``(i) Coverage of prescription drugs.
                          ``(ii) Mental health services.
                          ``(iii) Vision services.
                          ``(iv) Hearing services.
            ``(3) Determination of actuarial value.--The actuarial value 
        of coverage of benchmark benefit packages shall be set forth in 
        an actuarial opinion in an actuarial report that has been 
        prepared--

[[Page 120 STAT. 92]]

                    ``(A) by an individual who is a member of the 
                American Academy of Actuaries;
                    ``(B) using generally accepted actuarial principles 
                and methodologies;
                    ``(C) using a standardized set of utilization and 
                price factors;
                    ``(D) using a standardized population that is 
                representative of the population involved;
                    ``(E) applying the same principles and factors in 
                comparing the value of different coverage (or categories 
                of services);
                    ``(F) without taking into account any differences in 
                coverage based on the method of delivery or means of 
                cost control or utilization used; and
                    ``(G) taking into account the ability of a State to 
                reduce benefits by taking into account the increase in 
                actuarial value of benefits coverage offered under this 
                title that results from the limitations on cost sharing 
                under such coverage.
        The actuary preparing the opinion shall select and specify in 
        the memorandum the standardized set and population to be used 
        under subparagraphs (C) and (D).
            ``(4) Coverage of rural health clinic and fqhc services.--
        Notwithstanding the previous provisions of this section, a State 
        may not provide for medical assistance through enrollment of an 
        individual with benchmark coverage or benchmark equivalent 
        coverage under this section unless--
                    ``(A) the individual has access, through such 
                coverage or otherwise, to services described in 
                subparagraphs (B) and (C) of section 1905(a)(2); and
                    ``(B) payment for such services is made in 
                accordance with the requirements of section 1902(bb).''.

    (b) <<NOTE: 42 USC 1396u-7 note.>> Effective Date.--The amendment 
made by subsection (a) takes effect on March 31, 2006.

                CHAPTER 5--STATE FINANCING UNDER MEDICAID

SEC. 6051. MANAGED CARE ORGANIZATION PROVIDER TAX REFORM.

    (a) In General.--Section 1903(w)(7)(A)(viii) of the Social Security 
Act (42 U.S.C. 1396b(w)(7)(A)(viii)) is amended to read as follows:
                    ``(viii) Services of managed care organizations 
                (including health maintenance organizations, preferred 
                provider organizations, and such other similar 
                organizations as the Secretary may specify by 
                regulation).''.

    (b) <<NOTE: 42 USC 1396b note.>> Effective Date.--
            (1) In general.--Subject to paragraph (2), the amendment 
        made by subsection (a) shall be effective as of the date of the 
        enactment of this Act.
            (2) Delay in effective date.--
                    (A) In general.--Subject to subparagraph (B), in the 
                case of a State specified in subparagraph (B), the 
                amendment made by subsection (a) shall be effective as 
                of October 1, 2009.
                    (B) Specified states.--For purposes of subparagraph 
                (A), the States specified in this subparagraph are 
                States that have enacted a law providing for a tax on 
                the services

[[Page 120 STAT. 93]]

                of a Medicaid managed care organization with a contract 
                under section 1903(m) of the Social Security Act as of 
                December 8, 2005.

    (c) Clarification Regarding Non-Regulation of Transfers.--
            (1) In general.--Nothing in section 1903(w) of the Social 
        Security Act (42 U.S.C. 1396b(w)) shall be construed by the 
        Secretary of Health and Human Services as prohibiting a State's 
        use of funds as the non-Federal share of expenditures under 
        title XIX of such Act where such funds are transferred from or 
        certified by a publicly-owned regional medical center located in 
        another State and described in paragraph (2), so long as the 
        Secretary determines that such use of funds is proper and in the 
        interest of the program under title XIX.
            (2) Center described.--A center described in this paragraph 
        is a publicly-owned regional medical center that--
                    (A) provides level 1 trauma and burn care services;
                    (B) provides level 3 neonatal care services;
                    (C) is obligated to serve all patients, regardless 
                of State of origin;
                    (D) is located within a Standard Metropolitan 
                Statistical Area (SMSA) that includes at least 3 States, 
                including the States described in paragraph (1);
                    (E) serves as a tertiary care provider for patients 
                residing within a 125-mile radius; and
                    (F) meets the criteria for a disproportionate share 
                hospital under section 1923 of such Act in at least one 
                State other than the one in which the center is located.
            (3) Effective period.--This subsection shall apply through 
        December 31, 2006.

SEC. 6052. REFORMS OF CASE MANAGEMENT AND TARGETED CASE MANAGEMENT.

    (a) In General.--Section 1915(g) of the Social Security Act (42 
U.S.C. 1396n(g)(2)) is amended by striking paragraph (2) and inserting 
the following:
    ``(2) For purposes of this subsection:
            ``(A)(i) The term `case management services' means services 
        which will assist individuals eligible under the plan in gaining 
        access to needed medical, social, educational, and other 
        services.
            ``(ii) Such term includes the following:
                    ``(I) Assessment of an eligible individual to 
                determine service needs, including activities that focus 
                on needs identification, to determine the need for any 
                medical, educational, social, or other services. Such 
                assessment activities include the following:
                          ``(aa) Taking client history.
                          ``(bb) Identifying the needs of the 
                      individual, and completing related documentation.
                          ``(cc) Gathering information from other 
                      sources such as family members, medical providers, 
                      social workers, and educators, if necessary, to 
                      form a complete assessment of the eligible 
                      individual.
                    ``(II) Development of a specific care plan based on 
                the information collected through an assessment, that 
                specifies

[[Page 120 STAT. 94]]

                the goals and actions to address the medical, social, 
                educational, and other services needed by the eligible 
                individual, including activities such as ensuring the 
                active participation of the eligible individual and 
                working with the individual (or the individual's 
                authorized health care decision maker) and others to 
                develop such goals and identify a course of action to 
                respond to the assessed needs of the eligible 
                individual.
                    ``(III) Referral and related activities to help an 
                individual obtain needed services, including activities 
                that help link eligible individuals with medical, 
                social, educational providers or other programs and 
                services that are capable of providing needed services, 
                such as making referrals to providers for needed 
                services and scheduling appointments for the individual.
                    ``(IV) Monitoring and followup activities, including 
                activities and contacts that are necessary to ensure the 
                care plan is effectively implemented and adequately 
                addressing the needs of the eligible individual, and 
                which may be with the individual, family members, 
                providers, or other entities and conducted as frequently 
                as necessary to help determine such matters as--
                          ``(aa) whether services are being furnished in 
                      accordance with an individual's care plan;
                          ``(bb) whether the services in the care plan 
                      are adequate; and
                          ``(cc) whether there are changes in the needs 
                      or status of the eligible individual, and if so, 
                      making necessary adjustments in the care plan and 
                      service arrangements with providers.
            ``(iii) Such term does not include the direct delivery of an 
        underlying medical, educational, social, or other service to 
        which an eligible individual has been referred, including, with 
        respect to the direct delivery of foster care services, services 
        such as (but not limited to) the following:
                    ``(I) Research gathering and completion of 
                documentation required by the foster care program.
                    ``(II) Assessing adoption placements.
                    ``(III) Recruiting or interviewing potential foster 
                care parents.
                    ``(IV) Serving legal papers.
                    ``(V) Home investigations.
                    ``(VI) Providing transportation.
                    ``(VII) Administering foster care subsidies.
                    ``(VIII) Making placement arrangements.
            ``(B) The term `targeted case management services' are case 
        management services that are furnished without regard to the 
        requirements of section 1902(a)(1) and section 1902(a)(10)(B) to 
        specific classes of individuals or to individuals who reside in 
        specified areas.

    ``(3) With respect to contacts with individuals who are not eligible 
for medical assistance under the State plan or, in the case of targeted 
case management services, individuals who are eligible for such 
assistance but are not part of the target population specified in the 
State plan, such contacts--

[[Page 120 STAT. 95]]

            ``(A) are considered an allowable case management activity, 
        when the purpose of the contact is directly related to the 
        management of the eligible individual's care; and
            ``(B) are not considered an allowable case management 
        activity if such contacts relate directly to the identification 
        and management of the noneligible or nontargeted individual's 
        needs and care.

    ``(4)(A) In accordance with section 1902(a)(25), Federal financial 
participation only is available under this title for case management 
services or targeted case management services if there are no other 
third parties liable to pay for such services, including as 
reimbursement under a medical, social, educational, or other program.
    ``(B) A State shall allocate the costs of any part of such services 
which are reimbursable under another federally funded program in 
accordance with OMB Circular A-87 (or any related or successor guidance 
or regulations regarding allocation of costs among federally funded 
programs) under an approved cost allocation program.
    ``(5) Nothing in this subsection shall be construed as affecting the 
application of rules with respect to third party liability under 
programs, or activities carried out under title XXVI of the Public 
Health Service Act or by the Indian Health Service.''.
    (b) <<NOTE: 42 USC 1396n note.>> Regulations.--The Secretary shall 
promulgate regulations to carry out the amendment made by subsection (a) 
which may be effective and final immediately on an interim basis as of 
the date of publication of the interim final regulation. <<NOTE: Public 
comment.>> If the Secretary provides for an interim final regulation, 
the Secretary shall provide for a period of public comments on such 
regulation after the date of publication. The Secretary may change or 
revise such regulation after completion of the period of public comment.

    (c) <<NOTE: 42 USC 1396n note.>> Effective Date.--The amendment made 
by subsection (a) shall take effect on January 1, 2006.

SEC. 6053. ADDITIONAL FMAP ADJUSTMENTS.

    (a) Hold Harmless for Certain Decrease.--Notwithstanding the first 
sentence of section 1905(b) of the Social Security Act (42 U.S.C. 
1396d(b)), if, for purposes of titles XIX and XXI of the Social Security 
Act (42 U.S.C. 1396 et seq., 1397aa et seq.), the Federal medical 
assistance percentage determined for the State specified in section 
4725(a) of Public Law 105-33 for fiscal year 2006 or fiscal year 2007 is 
less than the Federal medical assistance percentage determined for such 
State for fiscal year 2005, the Federal medical assistance percentage 
determined for such State for fiscal year 2005 shall be substituted for 
the Federal medical assistance percentage otherwise determined for such 
State for fiscal year 2006 or fiscal year 2007, as the case may be.
    (b) Hold Harmless for Katrina Impact.--Notwithstanding any other 
provision of law, for purposes of titles XIX and XXI of the Social 
Security Act, the Secretary of Health and Human Services, in computing 
the Federal medical assistance percentage under section 1905(b) of such 
Act (42 U.S.C. 1396d(b)) for any year after 2006 for a State that the 
Secretary determines has a significant number of evacuees who were 
evacuated to, and live in, the State as a result of Hurricane Katrina as 
of October 1, 2005, shall disregard such evacuees (and income 
attributable to such evacuees) from such computation.

[[Page 120 STAT. 96]]

SEC. 6054. DSH ALLOTMENT FOR THE DISTRICT OF COLUMBIA.

    (a) In General.--For purposes of determining the DSH allotment for 
the District of Columbia under section 1923 of the Social Security Act 
(42 U.S.C. 1396r-4) for fiscal year 2006 and each subsequent fiscal 
year, the table in subsection (f)(2) of such section is amended under 
each of the columns for fiscal year 2000, fiscal year 2001, and fiscal 
year 2002, in the entry for the District of Columbia by striking ``32'' 
and inserting ``49''.
    (b) <<NOTE: 42 USC 1396r-4 note.>> Effective Date.--The amendments 
made by subsection (a) shall take effect as if enacted on October 1, 
2005, and shall only apply to disproportionate share hospital adjustment 
expenditures applicable to fiscal year 2006 and subsequent fiscal years 
made on or after that date.

SEC. 6055. INCREASE IN MEDICAID PAYMENTS TO INSULAR AREAS.

    Section 1108(g) of the Social Security Act (42 U.S.C. 1308(g)) is 
amended--
            (1) in paragraph (2), by inserting ``and subject to 
        paragraph (3)'' after ``subsection (f)''; and
            (2) by adding at the end the following new paragraph:
            ``(3) Fiscal years 2006 and 2007 for certain insular 
        areas.--The amounts otherwise determined under this subsection 
        for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana 
        Islands, and American Samoa for fiscal year 2006 and fiscal year 
        2007 shall be increased by the following amounts:
                    ``(A) For Puerto Rico, $12,000,000 for fiscal year 
                2006 and $12,000,000 for fiscal year 2007.
                    ``(B) For the Virgin Islands, $2,500,000 for fiscal 
                year 2006 and $5,000,000 for fiscal year 2007.
                    ``(C) For Guam, $2,500,000 for fiscal year 2006 and 
                $5,000,000 for fiscal year 2007.
                    ``(D) For the Northern Mariana Islands, $1,000,000 
                for fiscal year 2006 and $2,000,000 for fiscal year 
                2007.
                    ``(E) For American Samoa, $2,000,000 for fiscal year 
                2006 and $4,000,000 for fiscal year 2007.
        Such amounts shall not be taken into account in applying 
        paragraph (2) for fiscal year 2007 but shall be taken into 
        account in applying such paragraph for fiscal year 2008 and 
        subsequent fiscal years.''.

                       CHAPTER 6--OTHER PROVISIONS

   Subchapter A--Family Opportunity <<NOTE: Family Opportunity Act of 
2005. 42 USC 1305 note.>> Act

SEC. 6061. SHORT TITLE OF SUBCHAPTER.

    This subchapter may be cited as the ``Family Opportunity Act of 
2005'' or the ``Dylan Lee James Act''.

SEC. 6062. OPPORTUNITY FOR FAMILIES OF DISABLED CHILDREN TO PURCHASE 
            MEDICAID COVERAGE FOR SUCH CHILDREN.

    (a) State Option To Allow Families of Disabled Children To Purchase 
Medicaid Coverage for Such Children.--
            (1) In general.--Section 1902 of the Social Security Act (42 
        U.S.C. 1396a) is amended--
                    (A) in subsection (a)(10)(A)(ii)--
                          (i) by striking ``or'' at the end of subclause 
                      (XVII);

[[Page 120 STAT. 97]]

                          (ii) by adding ``or'' at the end of subclause 
                      (XVIII); and
                          (iii) by adding at the end the following new 
                      subclause:
                                    ``(XIX) who are disabled children 
                                described in subsection (cc)(1);''; and
                    (B) by adding at the end the following new 
                subsection:

    ``(cc)(1) Individuals described in this paragraph are individuals--
            ``(A) who are children who have not attained 19 years of age 
        and are born--
                    ``(i) on or after January 1, 2001 (or, at the option 
                of a State, on or after an earlier date), in the case of 
                the second, third, and fourth quarters of fiscal year 
                2007;
                    ``(ii) on or after October 1, 1995 (or, at the 
                option of a State, on or after an earlier date), in the 
                case of each quarter of fiscal year 2008; and
                    ``(iii) after October 1, 1989, in the case of each 
                quarter of fiscal year 2009 and each quarter of any 
                fiscal year thereafter;
            ``(B) who would be considered disabled under section 
        1614(a)(3)(C) (as determined under title XVI for children but 
        without regard to any income or asset eligibility requirements 
        that apply under such title with respect to children); and
            ``(C) whose family income does not exceed such income level 
        as the State establishes and does not exceed--
                    ``(i) 300 percent of the poverty line (as defined in 
                section 2110(c)(5)) applicable to a family of the size 
                involved; or
                    ``(ii) such higher percent of such poverty line as a 
                State may establish, except that--
                          ``(I) any medical assistance provided to an 
                      individual whose family income exceeds 300 percent 
                      of such poverty line may only be provided with 
                      State funds; and
                          ``(II) no Federal financial participation 
                      shall be provided under section 1903(a) for any 
                      medical assistance provided to such an 
                      individual.''.
            (2) Interaction with employer-sponsored family coverage.--
        Section 1902(cc) of such Act (42 U.S.C. 1396a(cc)), as added by 
        paragraph (1)(B), is amended by adding at the end the following 
        new paragraph:

    ``(2)(A) If an employer of a parent of an individual described in 
paragraph (1) offers family coverage under a group health plan (as 
defined in section 2791(a) of the Public Health Service Act), the State 
shall--
            ``(i) notwithstanding section 1906, require such parent to 
        apply for, enroll in, and pay premiums for such coverage as a 
        condition of such parent's child being or remaining eligible for 
        medical assistance under subsection (a)(10)(A)(ii)(XIX) if the 
        parent is determined eligible for such coverage and the employer 
        contributes at least 50 percent of the total cost of annual 
        premiums for such coverage; and
            ``(ii) if such coverage is obtained--
                    ``(I) subject to paragraph (2) of section 1916(h), 
                reduce the premium imposed by the State under that 
                section in

[[Page 120 STAT. 98]]

                an amount that reasonably reflects the premium 
                contribution made by the parent for private coverage on 
                behalf of a child with a disability; and
                    ``(II) treat such coverage as a third party 
                liability under subsection (a)(25).

    ``(B) In the case of a parent to which subparagraph (A) applies, a 
State, notwithstanding section 1906 but subject to paragraph (1)(C)(ii), 
may provide for payment of any portion of the annual premium for such 
family coverage that the parent is required to pay. Any payments made by 
the State under this subparagraph shall be considered, for purposes of 
section 1903(a), to be payments for medical assistance.''.
    (b) State Option To Impose Income-Related Premiums.--Section 1916 of 
such Act (42 U.S.C. 1396o) is amended--
            (1) in subsection (a), by striking ``subsection (g)'' and 
        inserting ``subsections (g) and (i)''; and
            (2) by adding at the end, as amended by section 6041(b)(2), 
        the following new subsection:

    ``(i)(1) With respect to disabled children provided medical 
assistance under section 1902(a)(10)(A)(ii)(XIX), subject to paragraph 
(2), a State may (in a uniform manner for such children) require the 
families of such children to pay monthly premiums set on a sliding scale 
based on family income.
    ``(2) A premium requirement imposed under paragraph (1) may only 
apply to the extent that--
            ``(A) in the case of a disabled child described in that 
        paragraph whose family income--
                    ``(i) does not exceed 200 percent of the poverty 
                line, the aggregate amount of such premium and any 
                premium that the parent is required to pay for family 
                coverage under section 1902(cc)(2)(A)(i) and other cost-
                sharing charges do not exceed 5 percent of the family's 
                income; and
                    ``(ii) exceeds 200, but does not exceed 300, percent 
                of the poverty line, the aggregate amount of such 
                premium and any premium that the parent is required to 
                pay for family coverage under section 1902(cc)(2)(A)(i) 
                and other cost-sharing charges do not exceed 7.5 percent 
                of the family's income; and
            ``(B) the requirement is imposed consistent with section 
        1902(cc)(2)(A)(ii)(I).

    ``(3) A State shall not require prepayment of a premium imposed 
pursuant to paragraph (1) and shall not terminate eligibility of a child 
under section 1902(a)(10)(A)(ii)(XIX) for medical assistance under this 
title on the basis of failure to pay any such premium until such failure 
continues for a period of at least 60 days from the date on which the 
premium became past due. The State may waive payment of any such premium 
in any case where the State determines that requiring such payment would 
create an undue hardship.''.
    (c) Conforming Amendments.--(1) Section 1903(f)(4) of such Act (42 
U.S.C. 1396b(f)(4)) is amended in the matter preceding subparagraph (A), 
by inserting ``1902(a)(10)(A)(ii)(XIX),'' after 
``1902(a)(10)(A)(ii)(XVIII),''.
    (2) Section 1905(u)(2)(B) of such Act (42 U.S.C. 1396d(u)(2)(B)) is 
amended by adding at the end the following sentence: ``Such

[[Page 120 STAT. 99]]

term excludes any child eligible for medical assistance only by reason 
of section 1902(a)(10)(A)(ii)(XIX).''.
    (d) <<NOTE: 42 USC 1396a note.>> Effective Date.--The amendments 
made by this section shall apply to medical assistance for items and 
services furnished on or after January 1, 2007.

SEC. 6063. <<NOTE: 42 USC 1396a note.>> DEMONSTRATION PROJECTS REGARDING 
            HOME AND COMMUNITY-BASED ALTERNATIVES TO PSYCHIATRIC 
            RESIDENTIAL TREATMENT FACILITIES FOR CHILDREN.

    (a) In General.--The Secretary is authorized to conduct, during each 
of fiscal years 2007 through 2011, demonstration projects (each in the 
section referred to as a ``demonstration project'') in accordance with 
this section under which up to 10 States (as defined for purposes of 
title XIX of the Social Security Act) are awarded grants, on a 
competitive basis, to test the effectiveness in improving or maintaining 
a child's functional level and cost-effectiveness of providing coverage 
of home and community-based alternatives to psychiatric residential 
treatment for children enrolled in the Medicaid program under title XIX 
of such Act.
    (b) Application of Terms and Conditions.--
            (1) In general.--Subject to the provisions of this section, 
        for the purposes of the demonstration projects, and only with 
        respect to children enrolled under such demonstration projects, 
        a psychiatric residential treatment facility (as defined in 
        section 483.352 of title 42 of the Code of Federal Regulations) 
        shall be deemed to be a facility specified in section 1915(c) of 
        the Social Security Act (42 U.S.C. 1396n(c)), and to be included 
        in each reference in such section 1915(c) to hospitals, nursing 
        facilities, and intermediate care facilities for the mentally 
        retarded.
            (2) State option to assure continuity of medicaid 
        coverage.--Upon the termination of a demonstration project under 
        this section, the State that conducted the project may elect, 
        only with respect to a child who is enrolled in such project on 
        the termination date, to continue to provide medical assistance 
        for coverage of home and community-based alternatives to 
        psychiatric residential treatment for the child in accordance 
        with section 1915(c) of the Social Security Act (42 U.S.C. 
        1396n(c)), as modified through the application of paragraph (1). 
        Expenditures incurred for providing such medical assistance 
        shall be treated as a home and community-based waiver program 
        under section 1915(c) of the Social Security Act (42 U.S.C. 
        1396n(c)) for purposes of payment under section 1903 of such Act 
        (42 U.S.C. 1396b).

    (c) Terms of Demonstration Projects.--
            (1) In general.--Except as otherwise provided in this 
        section, a demonstration project shall be subject to the same 
        terms and conditions as apply to a waiver under section 1915(c) 
        of the Social Security Act (42 U.S.C. 1396n(c)), including the 
        waiver of certain requirements under the first sentence of 
        paragraph (3) of such section but not applying the second 
        sentence of such paragraph.
            (2) Budget neutrality.--In conducting the demonstration 
        projects under this section, the Secretary shall ensure that the 
        aggregate payments made by the Secretary under title XIX of the 
        Social Security Act (42 U.S.C. 1396 et seq.) do not exceed the 
        amount which the Secretary estimates would

[[Page 120 STAT. 100]]

        have been paid under that title if the demonstration projects 
        under this section had not been implemented.
            (3) Evaluation.--The application for a demonstration project 
        shall include an assurance to provide for such interim and final 
        evaluations of the demonstration project by independent third 
        parties, and for such interim and final reports to the 
        Secretary, as the Secretary may require.

    (d) Payments to States; Limitations to Scope and Funding.--
            (1) In general.--Subject to paragraph (2), a demonstration 
        project approved by the Secretary under this section shall be 
        treated as a home and community-based waiver program under 
        section 1915(c) of the Social Security Act (42 U.S.C. 1396n(c)) 
        for purposes of payment under section 1903 of such Act (42 
        U.S.C. 1396b).
            (2) Limitation.--In no case may the amount of payments made 
        by the Secretary under this section for State demonstration 
        projects for a fiscal year exceed the amount available under 
        subsection (f)(2)(A) for such fiscal year.

    (e) Secretary's Evaluation and Report.--The Secretary shall conduct 
an interim and final evaluation of State demonstration projects under 
this section and shall report to the President and Congress the 
conclusions of such evaluations within 12 months of completing such 
evaluations.
    (f) Funding.--
            (1) In general.--For the purpose of carrying out this 
        section, there are appropriated, from amounts in the Treasury 
        not otherwise appropriated, for fiscal years 2007 through 2011, 
        a total of $218,000,000, of which--
                    (A) the amount specified in paragraph (2) shall be 
                available for each of fiscal years 2007 through 2011; 
                and
                    (B) a total of $1,000,000 shall be available to the 
                Secretary for the evaluations and report under 
                subsection (e).
            (2) Fiscal year limit.--
                    (A) In general.--For purposes of paragraph (1), the 
                amount specified in this paragraph for a fiscal year is 
                the amount specified in subparagraph (B) for the fiscal 
                year plus the difference, if any, between the total 
                amount available under this paragraph for prior fiscal 
                years and the total amount previously expended under 
                paragraph (1)(A) for such prior fiscal years.
                    (B) Fiscal year amounts.--The amount specified in 
                this subparagraph for--
                          (i) fiscal year 2007 is $21,000,000;
                          (ii) fiscal year 2008 is $37,000,000;
                          (iii) fiscal year 2009 is $49,000,000;
                          (iv) fiscal year 2010 is $53,000,000; and
                          (v) fiscal year 2011 is $57,000,000.

SEC. 6064. DEVELOPMENT AND SUPPORT OF FAMILY-TO-FAMILY HEALTH 
            INFORMATION CENTERS.

    Section 501 of the Social Security Act (42 U.S.C. 701) is amended by 
adding at the end the following new subsection:
    ``(c)(1)(A) <<NOTE: Grants. Contracts.>> For the purpose of enabling 
the Secretary (through grants, contracts, or otherwise) to provide for 
special projects of regional and national significance for the 
development and support

[[Page 120 STAT. 101]]

of family-to-family health information centers described in paragraph 
(2), there is appropriated to the Secretary, out of any money in the 
Treasury not otherwise appropriated--
            ``(i) $3,000,000 for fiscal year 2007;
            ``(ii) $4,000,000 for fiscal year 2008; and
            ``(iii) $5,000,000 for fiscal year 2009.

    ``(B) Funds appropriated or authorized to be appropriated under 
subparagraph (A) shall--
            ``(i) be in addition to amounts appropriated under 
        subsection (a) and retained under section 502(a)(1) for the 
        purpose of carrying out activities described in subsection 
        (a)(2); and
            ``(ii) remain available until expended.

    ``(2) The family-to-family health information centers described in 
this paragraph are centers that--
            ``(A) assist families of children with disabilities or 
        special health care needs to make informed choices about health 
        care in order to promote good treatment decisions, cost-
        effectiveness, and improved health outcomes for such children;
            ``(B) provide information regarding the health care needs 
        of, and resources available for, such children;
            ``(C) identify successful health delivery models for such 
        children;
            ``(D) develop with representatives of health care providers, 
        managed care organizations, health care purchasers, and 
        appropriate State agencies, a model for collaboration between 
        families of such children and health professionals;
            ``(E) provide training and guidance regarding caring for 
        such children;
            ``(F) conduct outreach activities to the families of such 
        children, health professionals, schools, and other appropriate 
        entities and individuals; and
            ``(G) are staffed--
                    ``(i) by such families who have expertise in Federal 
                and State public and private health care systems; and
                    ``(ii) by health professionals.

    ``(3) The Secretary shall develop family-to-family health 
information centers described in paragraph (2) in accordance with the 
following:
            ``(A) With respect to fiscal year 2007, such centers shall 
        be developed in not less than 25 States.
            ``(B) With respect to fiscal year 2008, such centers shall 
        be developed in not less than 40 States.
            ``(C) With respect to fiscal year 2009 and each fiscal year 
        thereafter, such centers shall be developed in all States.

    ``(4) <<NOTE: Applicability.>> The provisions of this title that are 
applicable to the funds made available to the Secretary under section 
502(a)(1) apply in the same manner to funds made available to the 
Secretary under paragraph (1)(A).

    ``(5) For purposes of this subsection, the term `State' means each 
of the 50 States and the District of Columbia.''.

SEC. 6065. RESTORATION OF MEDICAID ELIGIBILITY FOR CERTAIN SSI 
            BENEFICIARIES.

    (a) In General.--Section 1902(a)(10)(A)(i)(II) of the Social 
Security Act (42 U.S.C. 1396a(a)(10)(A)(i)(II)) is amended--
            (1) by inserting ``(aa)'' after ``(II)'';
            (2) by striking ``) and'' and inserting ``and'';

[[Page 120 STAT. 102]]

            (3) by striking ``section or who are'' and inserting 
        ``section), (bb) who are''; and
            (4) by inserting before the comma at the end the following: 
        ``, or (cc) who are under 21 years of age and with respect to 
        whom supplemental security income benefits would be paid under 
        title XVI if subparagraphs (A) and (B) of section 1611(c)(7) 
        were applied without regard to the phrase `the first day of the 
        month following' ''.

    (b) <<NOTE: 42 USC 1396a note.>> Effective Date.--The amendments 
made by subsection (a) shall apply to medical assistance for items and 
services furnished on or after the date that is 1 year after the date of 
enactment of this Act.

    Subchapter B--Money Follows the Person Rebalancing Demonstration

SEC. 6071. <<NOTE: Grants. 42 USC 1396a note.>> MONEY FOLLOWS THE PERSON 
            REBALANCING DEMONSTRATION.

    (a) Program Purpose and Authority.--The Secretary is authorized to 
award, on a competitive basis, grants to States in accordance with this 
section for demonstration projects (each in this section referred to as 
an ``MFP demonstration project'') designed to achieve the following 
objectives with respect to institutional and home and community-based 
long-term care services under State Medicaid programs:
            (1) Rebalancing.--Increase the use of home and community-
        based, rather than institutional, long-term care services.
            (2) Money follows the person.--Eliminate barriers or 
        mechanisms, whether in the State law, the State Medicaid plan, 
        the State budget, or otherwise, that prevent or restrict the 
        flexible use of Medicaid funds to enable Medicaid-eligible 
        individuals to receive support for appropriate and necessary 
        long-term services in the settings of their choice.
            (3) Continuity of service.--Increase the ability of the 
        State Medicaid program to assure continued provision of home and 
        community-based long-term care services to eligible individuals 
        who choose to transition from an institutional to a community 
        setting.
            (4) Quality assurance and quality improvement.--Ensure that 
        procedures are in place (at least comparable to those required 
        under the qualified HCB program) to provide quality assurance 
        for eligible individuals receiving Medicaid home and community-
        based long-term care services and to provide for continuous 
        quality improvement in such services.

    (b) Definitions.--For purposes of this section:
            (1) Home and community-based long-term care services.--The 
        term ``home and community-based long-term care services'' means, 
        with respect to a State Medicaid program, home and community-
        based services (including home health and personal care 
        services) that are provided under the State's qualified HCB 
        program or that could be provided under such a program but are 
        otherwise provided under the Medicaid program.
            (2) Eligible individual.--The term ``eligible individual'' 
        means, with respect to an MFP demonstration project of a State, 
        an individual in the State--

[[Page 120 STAT. 103]]

                    (A) who, immediately before beginning participation 
                in the MFP demonstration project--
                          (i) resides (and has resided, for a period of 
                      not less than 6 months or for such longer minimum 
                      period, not to exceed 2 years, as may be specified 
                      by the State) in an inpatient facility;
                          (ii) is receiving Medicaid benefits for 
                      inpatient services furnished by such inpatient 
                      facility; and
                          (iii) with respect to whom a determination has 
                      been made that, but for the provision of home and 
                      community-based long-term care services, the 
                      individual would continue to require the level of 
                      care provided in an inpatient facility and, in any 
                      case in which the State applies a more stringent 
                      level of care standard as a result of implementing 
                      the State plan option permitted under section 
                      1915(i) of the Social Security Act, the individual 
                      must continue to require at least the level of 
                      care which had resulted in admission to the 
                      institution; and
                    (B) who resides in a qualified residence beginning 
                on the initial date of participation in the 
                demonstration project.
            (3) Inpatient facility.--The term ``inpatient facility'' 
        means a hospital, nursing facility, or intermediate care 
        facility for the mentally retarded. Such term includes an 
        institution for mental diseases, but only, with respect to a 
        State, to the extent medical assistance is available under the 
        State Medicaid plan for services provided by such institution.
            (4) Medicaid.--The term ``Medicaid'' means, with respect to 
        a State, the State program under title XIX of the Social 
        Security Act (including any waiver or demonstration under such 
        title or under section 1115 of such Act relating to such title).
            (5) Qualified hcb program.--The term ``qualified HCB 
        program'' means a program providing home and community-based 
        long-term care services operating under Medicaid, whether or not 
        operating under waiver authority.
            (6) Qualified residence.--The term ``qualified residence'' 
        means, with respect to an eligible individual--
                    (A) a home owned or leased by the individual or the 
                individual's family member;
                    (B) an apartment with an individual lease, with 
                lockable access and egress, and which includes living, 
                sleeping, bathing, and cooking areas over which the 
                individual or the individual's family has domain and 
                control; and
                    (C) a residence, in a community-based residential 
                setting, in which no more than 4 unrelated individuals 
                reside.
            (7) Qualified expenditures.--The term ``qualified 
        expenditures'' means expenditures by the State under its MFP 
        demonstration project for home and community-based long-term 
        care services for an eligible individual participating in the 
        MFP demonstration project, but only with respect to services 
        furnished during the 12-month period beginning on the date the 
        individual is discharged from an inpatient facility referred to 
        in paragraph (2)(A)(i).
            (8) Self-directed services.--The term ``self-directed'' 
        means, with respect to home and community-based long-term

[[Page 120 STAT. 104]]

        care services for an eligible individual, such services for the 
        individual which are planned and purchased under the direction 
        and control of such individual or the individual's authorized 
        representative (as defined by the Secretary), including the 
        amount, duration, scope, provider, and location of such 
        services, under the State Medicaid program consistent with the 
        following requirements:
                    (A) Assessment.--There is an assessment of the 
                needs, capabilities, and preferences of the individual 
                with respect to such services.
                    (B) Service plan.--Based on such assessment, there 
                is developed jointly with such individual or the 
                individual's authorized representative a plan for such 
                services for such individual that is approved by the 
                State and that--
                          (i) specifies those services, if any, which 
                      the individual or the individual's authorized 
                      representative would be responsible for directing;
                          (ii) identifies the methods by which the 
                      individual or the individual's authorized 
                      representative or an agency designated by an 
                      individual or representative will select, manage, 
                      and dismiss providers of such services;
                          (iii) specifies the role of family members and 
                      others whose participation is sought by the 
                      individual or the individual's authorized 
                      representative with respect to such services;
                          (iv) is developed through a person-centered 
                      process that--
                                    (I) is directed by the individual or 
                                the individual's authorized 
                                representative;
                                    (II) builds upon the individual's 
                                capacity to engage in activities that 
                                promote community life and that respects 
                                the individual's preferences, choices, 
                                and abilities; and
                                    (III) involves families, friends, 
                                and professionals as desired or required 
                                by the individual or the individual's 
                                authorized representative;
                          (v) includes appropriate risk management 
                      techniques that recognize the roles and sharing of 
                      responsibilities in obtaining services in a self-
                      directed manner and assure the appropriateness of 
                      such plan based upon the resources and 
                      capabilities of the individual or the individual's 
                      authorized representative; and
                          (vi) may include an individualized budget 
                      which identifies the dollar value of the services 
                      and supports under the control and direction of 
                      the individual or the individual's authorized 
                      representative.
                    (C) Budget process.--With respect to individualized 
                budgets described in subparagraph (B)(vi), the State 
                application under subsection (c)--
                          (i) describes the method for calculating the 
                      dollar values in such budgets based on reliable 
                      costs and service utilization;
                          (ii) defines a process for making adjustments 
                      in such dollar values to reflect changes in 
                      individual assessments and service plans; and

[[Page 120 STAT. 105]]

                          (iii) provides a procedure to evaluate 
                      expenditures under such budgets.
            (9) State.--The term ``State'' has the meaning given such 
        term for purposes of title XIX of the Social Security Act.

    (c) State Application.--A State seeking approval of an MFP 
demonstration project shall submit to the Secretary, at such time and in 
such format as the Secretary requires, an application meeting the 
following requirements and containing such additional information, 
provisions, and assurances, as the Secretary may require:
            (1) Assurance of a public development process.--The 
        application contains an assurance that the State has engaged, 
        and will continue to engage, in a public process for the design, 
        development, and evaluation of the MFP demonstration project 
        that allows for input from eligible individuals, the families of 
        such individuals, authorized representatives of such 
        individuals, providers, and other interested parties.
            (2) Operation in connection with qualified hcb program to 
        assure continuity of services.--The State will conduct the MFP 
        demonstration project for eligible individuals in conjunction 
        with the operation of a qualified HCB program that is in 
        operation (or approved) in the State for such individuals in a 
        manner that assures continuity of Medicaid coverage for such 
        individuals so long as such individuals continue to be eligible 
        for medical assistance.
            (3) Demonstration project period.--The application shall 
        specify the period of the MFP demonstration project, which shall 
        include at least 2 consecutive fiscal years in the 5-fiscal-year 
        period beginning with fiscal year 2007.
            (4) Service area.--The application shall specify the service 
        area or areas of the MFP demonstration project, which may be a 
        statewide area or 1 or more geographic areas of the State.
            (5) Targeted groups and numbers of individuals served.--The 
        application shall specify--
                    (A) the target groups of eligible individuals to be 
                assisted to transition from an inpatient facility to a 
                qualified residence during each fiscal year of the MFP 
                demonstration project;
                    (B) the projected numbers of eligible individuals in 
                each targeted group of eligible individuals to be so 
                assisted during each such year; and
                    (C) the estimated total annual qualified 
                expenditures for each fiscal year of the MFP 
                demonstration project.
            (6) Individual choice, continuity of care.--The application 
        shall contain assurances that--
                    (A) each eligible individual or the individual's 
                authorized representative will be provided the 
                opportunity to make an informed choice regarding whether 
                to participate in the MFP demonstration project;
                    (B) each eligible individual or the individual's 
                authorized representative will choose the qualified 
                residence in which the individual will reside and the 
                setting in which the individual will receive home and 
                community-based long-term care services;
                    (C) the State will continue to make available, so 
                long as the State operates its qualified HCB program 
                consistent with applicable requirements, home and 
                community-based

[[Page 120 STAT. 106]]

                long-term care services to each individual who completes 
                participation in the MFP demonstration project for as 
                long as the individual remains eligible for medical 
                assistance for such services under such qualified HCB 
                program (including meeting a requirement relating to 
                requiring a level of care provided in an inpatient 
                facility and continuing to require such services, and, 
                if the State applies a more stringent level of care 
                standard as a result of implementing the State plan 
                option permitted under section 1915(i) of the Social 
                Security Act, meeting the requirement for at least the 
                level of care which had resulted in the individual's 
                admission to the institution).
            (7) Rebalancing.--The application shall--
                    (A) provide such information as the Secretary may 
                require concerning the dollar amounts of State Medicaid 
                expenditures for the fiscal year, immediately preceding 
                the first fiscal year of the State's MFP demonstration 
                project, for long-term care services and the percentage 
                of such expenditures that were for institutional long-
                term care services or were for home and community-based 
                long-term care services;
                    (B)(i) specify the methods to be used by the State 
                to increase, for each fiscal year during the MFP 
                demonstration project, the dollar amount of such total 
                expenditures for home and community-based long-term care 
                services and the percentage of such total expenditures 
                for long-term care services that are for home and 
                community-based long-term care services; and
                    (ii) describe the extent to which the MFP 
                demonstration project will contribute to accomplishment 
                of objectives described in subsection (a).
            (8) Money follows the person.--The application shall 
        describe the methods to be used by the State to eliminate any 
        legal, budgetary, or other barriers to flexibility in the 
        availability of Medicaid funds to pay for long-term care 
        services for eligible individuals participating in the project 
        in the appropriate settings of their choice, including costs to 
        transition from an institutional setting to a qualified 
        residence.
            (9) Maintenance of effort and cost-effectiveness.--The 
        application shall contain or be accompanied by such information 
        and assurances as may be required to satisfy the Secretary 
        that--
                    (A) total expenditures under the State Medicaid 
                program for home and community-based long-term care 
                services will not be less for any fiscal year during the 
                MFP demonstration project than for the greater of such 
                expenditures for--
                          (i) fiscal year 2005; or
                          (ii) any succeeding fiscal year before the 
                      first year of the MFP demonstration project; and
                    (B) in the case of a qualified HCB program operating 
                under a waiver under subsection (c) or (d) of section 
                1915 of the Social Security Act (42 U.S.C. 1396n), but 
                for the amount awarded under a grant under this section, 
                the State program would continue to meet the cost-
                effectiveness

[[Page 120 STAT. 107]]

                requirements of subsection (c)(2)(D) of such section or 
                comparable requirements under subsection (d)(5) of such 
                section, respectively.
            (10) Waiver requests.--The application shall contain or be 
        accompanied by requests for any modification or adjustment of 
        waivers of Medicaid requirements described in subsection (d)(3), 
        including adjustments to the maximum numbers of individuals 
        included and package of benefits, including one-time 
        transitional services, provided.
            (11) Quality assurance and quality improvement.--The 
        application shall include--
                    (A) a plan satisfactory to the Secretary for quality 
                assurance and quality improvement for home and 
                community-based long-term care services under the State 
                Medicaid program, including a plan to assure the health 
                and welfare of individuals participating in the MFP 
                demonstration project; and
                    (B) an assurance that the State will cooperate in 
                carrying out activities under subsection (f) to develop 
                and implement continuous quality assurance and quality 
                improvement systems for home and community-based long-
                term care services.
            (12) Optional program for self-directed services.--If the 
        State elects to provide for any home and community-based long-
        term care services as self-directed services (as defined in 
        subsection (b)(8)) under the MFP demonstration project, the 
        application shall provide the following:
                    (A) Meeting requirements.--A description of how the 
                project will meet the applicable requirements of such 
                subsection for the provision of self-directed services.
                    (B) Voluntary election.--A description of how 
                eligible individuals will be provided with the 
                opportunity to make an informed election to receive 
                self-directed services under the project and after the 
                end of the project.
                    (C) State support in service plan development.--
                Satisfactory assurances that the State will provide 
                support to eligible individuals who self-direct in 
                developing and implementing their service plans.
                    (D) Oversight of receipt of services.--Satisfactory 
                assurances that the State will provide oversight of 
                eligible individual's receipt of such self-directed 
                services, including steps to assure the quality of 
                services provided and that the provision of such 
                services are consistent with the service plan under such 
                subsection.
        Nothing in this section shall be construed as requiring a State 
        to make an election under the project to provide for home and 
        community-based long-term care services as self-directed 
        services, or as requiring an individual to elect to receive 
        self-directed services under the project.
            (13) Reports and evaluation.--The application shall provide 
        that--
                    (A) the State will furnish to the Secretary such 
                reports concerning the MFP demonstration project, on 
                such timetable, in such uniform format, and containing 
                such information as the Secretary may require, as will 
                allow for reliable comparisons of MFP demonstration 
                projects across States; and

[[Page 120 STAT. 108]]

                    (B) the State will participate in and cooperate with 
                the evaluation of the MFP demonstration project.

    (d) Secretary's Award of Competitive Grants.--
            (1) In general.--The Secretary shall award grants under this 
        section on a competitive basis to States selected from among 
        those with applications meeting the requirements of subsection 
        (c), in accordance with the provisions of this subsection.
            (2) Selection and modification of state applications.--In 
        selecting State applications for the awarding of such a grant, 
        the Secretary--
                    (A) shall take into consideration the manner in 
                which, and extent to which, the State proposes to 
                achieve the objectives specified in subsection (a);
                    (B) shall seek to achieve an appropriate national 
                balance in the numbers of eligible individuals, within 
                different target groups of eligible individuals, who are 
                assisted to transition to qualified residences under MFP 
                demonstration projects, and in the geographic 
                distribution of States operating MFP demonstration 
                projects;
                    (C) shall give preference to State applications 
                proposing--
                          (i) to provide transition assistance to 
                      eligible individuals within multiple target 
                      groups; and
                          (ii) to provide eligible individuals with the 
                      opportunity to receive home and community-based 
                      long-term care services as self-directed services, 
                      as defined in subsection (b)(8); and
                    (D) shall take such objectives into consideration in 
                setting the annual amounts of State grant awards under 
                this section.
            (3) Waiver authority.--The Secretary is authorized to waive 
        the following provisions of title XIX of the Social Security 
        Act, to the extent necessary to enable a State initiative to 
        meet the requirements and accomplish the purposes of this 
        section:
                    (A) Statewideness.--Section 1902(a)(1), in order to 
                permit implementation of a State initiative in a 
                selected area or areas of the State.
                    (B) Comparability.--Section 1902(a)(10)(B), in order 
                to permit a State initiative to assist a selected 
                category or categories of individuals described in 
                subsection (b)(2)(A).
                    (C) Income and resources eligibility.--Section 
                1902(a)(10)(C)(i)(III), in order to permit a State to 
                apply institutional eligibility rules to individuals 
                transitioning to community-based care.
                    (D) Provider agreements.--Section 1902(a)(27), in 
                order to permit a State to implement self-directed 
                services in a cost-effective manner.
            (4) Conditional approval of outyear grant.--In awarding 
        grants under this section, the Secretary shall condition the 
        grant for the second and any subsequent fiscal years of the 
        grant period on the following:
                    (A) Numerical benchmarks.--The State must 
                demonstrate to the satisfaction of the Secretary that it 
                is meeting numerical benchmarks specified in the grant 
                agreement for--

[[Page 120 STAT. 109]]

                          (i) increasing State Medicaid support for home 
                      and community-based long-term care services under 
                      subsection (c)(5); and
                          (ii) numbers of eligible individuals assisted 
                      to transition to qualified residences.
                    (B) Quality of care.--The State must demonstrate to 
                the satisfaction of the Secretary that it is meeting the 
                requirements under subsection (c)(11) to assure the 
                health and welfare of MFP demonstration project 
                participants.

    (e) Payments to States; Carryover of Unused Grant Amounts.--
            (1) Payments.--For each calendar quarter in a fiscal year 
        during the period a State is awarded a grant under subsection 
        (d), the Secretary shall pay to the State from its grant award 
        for such fiscal year an amount equal to the lesser of--
                    (A) the MFP-enhanced FMAP (as defined in paragraph 
                (5)) of the amount of qualified expenditures made during 
                such quarter; or
                    (B) the total amount remaining in such grant award 
                for such fiscal year (taking into account the 
                application of paragraph (2)).
            (2) Carryover of unused amounts.--Any portion of a State 
        grant award for a fiscal year under this section remaining at 
        the end of such fiscal year shall remain available to the State 
        for the next 4 fiscal years, subject to paragraph (3).
            (3) Reawarding of certain unused amounts.--In the case of a 
        State that the Secretary determines pursuant to subsection 
        (d)(4) has failed to meet the conditions for continuation of a 
        MFP demonstration project under this section in a succeeding 
        year or years, the Secretary shall rescind the grant awards for 
        such succeeding year or years, together with any unspent portion 
        of an award for prior years, and shall add such amounts to the 
        appropriation for the immediately succeeding fiscal year for 
        grants under this section.
            (4) Preventing duplication of payment.--The payment under a 
        MFP demonstration project with respect to qualified expenditures 
        shall be in lieu of any payment with respect to such 
        expenditures that could otherwise be paid under Medicaid, 
        including under section 1903(a) of the Social Security Act. 
        Nothing in the previous sentence shall be construed as 
        preventing the payment under Medicaid for such expenditures in a 
        grant year after amounts available to pay for such expenditures 
        under the MFP demonstration project have been exhausted.
            (5) MFP-enhanced fmap.--For purposes of paragraph (1)(A), 
        the ``MFP-enhanced FMAP'', for a State for a fiscal year, is 
        equal to the Federal medical assistance percentage (as defined 
        in the first sentence of section 1905(b)) for the State 
        increased by a number of percentage points equal to 50 percent 
        of the number of percentage points by which (A) such Federal 
        medical assistance percentage for the State, is less than (B) 
        100 percent; but in no case shall the MFP-enhanced FMAP for a 
        State exceed 90 percent.

    (f) Quality Assurance and Improvement; Technical Assistance; 
Oversight.--

[[Page 120 STAT. 110]]

            (1) <<NOTE: Contracts.>> In general.--The Secretary, either 
        directly or by grant or contract, shall provide for technical 
        assistance to, and oversight of, States for purposes of 
        upgrading quality assurance and quality improvement systems 
        under Medicaid home and community-based waivers, including--
                    (A) dissemination of information on promising 
                practices;
                    (B) guidance on system design elements addressing 
                the unique needs of participating beneficiaries;
                    (C) ongoing consultation on quality, including 
                assistance in developing necessary tools, resources, and 
                monitoring systems; and
                    (D) guidance on remedying programmatic and systemic 
                problems.
            (2) Funding.--From the amounts appropriated under subsection 
        (h)(1) for the portion of fiscal year 2007 that begins on 
        January 1, 2007, and ends on September 30, 2007, and for fiscal 
        year 2008, not more than $2,400,000 shall be available to the 
        Secretary to carry out this subsection during the period that 
        begins on January 1, 2007, and ends on September 30, 2011.

    (g) Research and Evaluation.--
            (1) <<NOTE: Contracts.>> In general.--The Secretary, 
        directly or through grant or contract, shall provide for 
        research on, and a national evaluation of, the program under 
        this section, including assistance to the Secretary in preparing 
        the final report required under paragraph (2). The evaluation 
        shall include an analysis of projected and actual savings 
        related to the transition of individuals to qualified residences 
        in each State conducting an MFP demonstration project.
            (2) Final report.--The Secretary shall make a final report 
        to the President and Congress, not later than September 30, 
        2011, reflecting the evaluation described in paragraph (1) and 
        providing findings and conclusions on the conduct and 
        effectiveness of MFP demonstration projects.
            (3) Funding.--From the amounts appropriated under subsection 
        (h)(1) for each of fiscal years 2008 through 2011, not more than 
        $1,100,000 per year shall be available to the Secretary to carry 
        out this subsection.

    (h) Appropriations.--
            (1) In general.--There are appropriated, from any funds in 
        the Treasury not otherwise appropriated, for grants to carry out 
        this section--
                    (A) $250,000,000 for the portion of fiscal year 2007 
                beginning on January 1, 2007, and ending on September 
                30, 2007;
                    (B) $300,000,000 for fiscal year 2008;
                    (C) $350,000,000 for fiscal year 2009;
                    (D) $400,000,000 for fiscal year 2010; and
                    (E) $450,000,000 for fiscal year 2011.
            (2) Availability.--Amounts made available under paragraph 
        (1) for a fiscal year shall remain available for the awarding of 
        grants to States by not later than September 30, 2011.

[[Page 120 STAT. 111]]

                       Subchapter C--Miscellaneous

SEC. 6081. MEDICAID TRANSFORMATION GRANTS.

    (a) In General.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b), as amended by sections 6037(a)(2) and 6043(b), is amended by 
adding at the end the following new subsection:
    ``(z) Medicaid Transformation Payments.--
            ``(1) In general.--In addition to the payments provided 
        under subsection (a), subject to paragraph (4), the Secretary 
        shall provide for payments to States for the adoption of 
        innovative methods to improve the effectiveness and efficiency 
        in providing medical assistance under this title.
            ``(2) Permissible uses of funds.--The following are examples 
        of innovative methods for which funds provided under this 
        subsection may be used:
                    ``(A) Methods for reducing patient error rates 
                through the implementation and use of electronic health 
                records, electronic clinical decision support tools, or 
                e-prescribing programs.
                    ``(B) Methods for improving rates of collection from 
                estates of amounts owed under this title.
                    ``(C) Methods for reducing waste, fraud, and abuse 
                under the program under this title, such as reducing 
                improper payment rates as measured by annual payment 
                error rate measurement (PERM) project rates.
                    ``(D) Implementation of a medication risk management 
                program as part of a drug use review program under 
                section 1927(g).
                    ``(E) Methods in reducing, in clinically appropriate 
                ways, expenditures under this title for covered 
                outpatient drugs, particularly in the categories of 
                greatest drug utilization, by increasing the utilization 
                of generic drugs through the use of education programs 
                and other incentives to promote greater use of generic 
                drugs.
                    ``(F) Methods for improving access to primary and 
                specialty physician care for the uninsured using 
                integrated university-based hospital and clinic systems.
            ``(3) Application; terms and conditions.--
                    ``(A) In general.--No payments shall be made to a 
                State under this subsection unless the State applies to 
                the Secretary for such payments in a form, manner, and 
                time specified by the Secretary.
                    ``(B) Terms and conditions.--Such payments are made 
                under such terms and conditions consistent with this 
                subsection as the Secretary prescribes.
                    ``(C) Annual report.--Payment to a State under this 
                subsection is conditioned on the State submitting to the 
                Secretary an annual report on the programs supported by 
                such payment. Such report shall include information on--
                          ``(i) the specific uses of such payment;
                          ``(ii) an assessment of quality improvements 
                      and clinical outcomes under such programs; and
                          ``(iii) estimates of cost savings resulting 
                      from such programs.
            ``(4) Funding.--

[[Page 120 STAT. 112]]

                    ``(A) Limitation on funds.--The total amount of 
                payments under this subsection shall be equal to, and 
                shall not exceed--
                          ``(i) $75,000,000 for fiscal year 2007; and
                          ``(ii) $75,000,000 for fiscal year 2008.
                This subsection constitutes budget authority in advance 
                of appropriations Acts and represents the obligation of 
                the Secretary to provide for the payment of amounts 
                provided under this subsection.
                    ``(B) Allocation of funds.--The Secretary shall 
                specify a method for allocating the funds made available 
                under this subsection among States. Such method shall 
                provide preference for States that design programs that 
                target health providers that treat significant numbers 
                of Medicaid beneficiaries. Such method shall provide 
                that not less than 25 percent of such funds shall be 
                allocated among States the population of which (as 
                determined according to data collected by the United 
                States Census Bureau) as of July 1, 2004, was more than 
                105 percent of the population of the respective State 
                (as so determined) as of April 1, 2000.
                    ``(C) Form and manner of payment.--Payment to a 
                State under this subsection shall be made in the same 
                manner as other payments under section 1903(a). There is 
                no requirement for State matching funds to receive 
                payments under this subsection.
            ``(5) Medication risk management program.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `medication risk management program' means a 
                program for targeted beneficiaries that ensures that 
                covered outpatient drugs are appropriately used to 
                optimize therapeutic outcomes through improved 
                medication use and to reduce the risk of adverse events.
                    ``(B) Elements.--Such program may include the 
                following elements:
                          ``(i) The use of established principles and 
                      standards for drug utilization review and best 
                      practices to analyze prescription drug claims of 
                      targeted beneficiaries and identify outlier 
                      physicians.
                          ``(ii) On an ongoing basis provide outlier 
                      physicians--
                                    ``(I) a comprehensive pharmacy 
                                claims history for each targeted 
                                beneficiary under their care;
                                    ``(II) information regarding the 
                                frequency and cost of relapses and 
                                hospitalizations of targeted 
                                beneficiaries under the physician's 
                                care; and
                                    ``(III) applicable best practice 
                                guidelines and empirical references.
                          ``(iii) Monitor outlier physician's 
                      prescribing, such as failure to refill, dosage 
                      strengths, and provide incentives and information 
                      to encourage the adoption of best clinical 
                      practices.
                    ``(C) Targeted beneficiaries.--For purposes of this 
                paragraph, the term `targeted beneficiaries' means 
                Medicaid eligible beneficiaries who are identified as 
                having high prescription drug costs and medical costs, 
                such as

[[Page 120 STAT. 113]]

                individuals with behavioral disorders or multiple 
                chronic diseases who are taking multiple medications.''.

SEC. 6082. HEALTH OPPORTUNITY ACCOUNTS.

    Title XIX of the Social Security Act, as amended by sections 6035 
and 6044, is amended--
            (1) by redesignating section 1938 <<NOTE: 42 USC 1396v.>> as 
        section 1939; and
            (2) by inserting after section 1937 the following new 
        section:

                      ``health opportunity accounts

    ``Sec. 1938. <<NOTE: 42 USC 1396u-8.>> (a) Authority.--
            ``(1) In general.--Notwithstanding any other provision of 
        this title, the Secretary shall establish a demonstration 
        program under which States may provide under their State plans 
        under this title (including such a plan operating under a 
        statewide waiver under section 1115) in accordance with this 
        section for the provision of alternative benefits consistent 
        with subsection (c) for eligible population groups in one or 
        more geographic areas of the State specified by the State. An 
        amendment under the previous sentence is referred to in this 
        section as a `State demonstration program'.
            ``(2) Initial demonstration.--
                    ``(A) <<NOTE: Effective date.>> In general.--The 
                demonstration program under this section shall begin on 
                January 1, 2007. During the first 5 years of such 
                program, the Secretary shall not approve more than 10 
                States to conduct demonstration programs under this 
                section, with each State demonstration program covering 
                1 or more geographic areas specified by the State. After 
                such 5-year period--
                          ``(i) unless the Secretary finds, taking into 
                      account cost-effectiveness, quality of care, and 
                      other criteria that the Secretary specifies, that 
                      a State demonstration program previously 
                      implemented has been unsuccessful, such a 
                      demonstration program may be extended or made 
                      permanent in the State; and
                          ``(ii) unless the Secretary finds, taking into 
                      account cost-effectiveness, quality of care, and 
                      other criteria that the Secretary specifies, that 
                      all State demonstration programs previously 
                      implemented were unsuccessful, other States may 
                      implement State demonstration programs.
                    ``(B) GAO report.--
                          ``(i) In general.--Not later than 3 months 
                      after the end of the 5-year period described in 
                      subparagraph (A), the Comptroller General of the 
                      United States shall submit a report to Congress 
                      evaluating the demonstration programs conducted 
                      under this section during such period.
                          ``(ii) Appropriation.--Out of any funds in the 
                      Treasury not otherwise appropriated, there is 
                      appropriated to the Comptroller General of the 
                      United States, $550,000 for the period of fiscal 
                      years 2007 through 2010 to carry out clause (i).
            ``(3) Approval.--The Secretary shall not approve a State 
        demonstration program under paragraph (1) unless the program 
        includes the following:

[[Page 120 STAT. 114]]

                    ``(A) Creating patient awareness of the high cost of 
                medical care.
                    ``(B) Providing incentives to patients to seek 
                preventive care services.
                    ``(C) Reducing inappropriate use of health care 
                services.
                    ``(D) Enabling patients to take responsibility for 
                health outcomes.
                    ``(E) Providing enrollment counselors and ongoing 
                education activities.
                    ``(F) Providing transactions involving health 
                opportunity accounts to be conducted electronically and 
                without cash.
                    ``(G) Providing access to negotiated provider 
                payment rates consistent with this section.
        Nothing in this section shall be construed as preventing a State 
        demonstration program from providing incentives for patients 
        obtaining appropriate preventive care (as defined for purposes 
        of section 223(c)(2)(C) of the Internal Revenue Code of 1986), 
        such as additional account contributions for an individual 
        demonstrating healthy prevention practices.
            ``(4) No requirement for statewideness.--Nothing in this 
        section or any other provision of law shall be construed to 
        require that a State must provide for the implementation of a 
        State demonstration program on a Statewide basis.

    ``(b) Eligible Population Groups.--
            ``(1) In general.--A State demonstration program under this 
        section shall specify the eligible population groups consistent 
        with paragraphs (2) and (3).
            ``(2) Eligibility limitations during initial demonstration 
        period.--During the initial 5 years of the demonstration program 
        under this section, a State demonstration program shall not 
        apply to any of the following individuals:
                    ``(A) Individuals who are 65 years of age or older.
                    ``(B) Individuals who are disabled, regardless of 
                whether or not their eligibility for medical assistance 
                under this title is based on such disability.
                    ``(C) Individuals who are eligible for medical 
                assistance under this title only because they are (or 
                were within the previous 60 days) pregnant.
                    ``(D) Individuals who have been eligible for medical 
                assistance for a continuous period of less than 3 
                months.
            ``(3) Additional limitations.--A State demonstration program 
        shall not apply to any individual within a category of 
        individuals described in section 1937(a)(2)(B).
            ``(4) Limitations.--
                    ``(A) State option.--This subsection shall not be 
                construed as preventing a State from further limiting 
                eligibility.
                    ``(B) On enrollees in medicaid managed care 
                organizations.--Insofar as the State provides for 
                eligibility of individuals who are enrolled in Medicaid 
                managed care organizations, such individuals may 
                participate in the State demonstration program only if 
                the State provides assurances satisfactory to the 
                Secretary that the following conditions are met with 
                respect to any such organization:
                          ``(i) In no case may the number of such 
                      individuals enrolled in the organization who 
                      participate in the

[[Page 120 STAT. 115]]

                      program exceed 5 percent of the total number of 
                      individuals enrolled in such organization.
                          ``(ii) The proportion of enrollees in the 
                      organization who so participate is not 
                      significantly disproportionate to the proportion 
                      of such enrollees in other such organizations who 
                      participate.
                          ``(iii) The State has provided for an 
                      appropriate adjustment in the per capita payments 
                      to the organization to account for such 
                      participation, taking into account differences in 
                      the likely use of health services between 
                      enrollees who so participate and enrollees who do 
                      not so participate.
            ``(5) Voluntary participation.--An eligible individual shall 
        be enrolled in a State demonstration program only if the 
        individual voluntarily enrolls. Except in such hardship cases as 
        the Secretary shall specify, such an enrollment shall be 
        effective for a period of 12 months, but may be extended for 
        additional periods of 12 months each with the consent of the 
        individual.
            ``(6) 1-year moratorium for reenrollment.--An eligible 
        individual who, for any reason, is disenrolled from a State 
        demonstration program conducted under this section shall not be 
        permitted to reenroll in such program before the end of the 1-
        year period that begins on the effective date of such 
        disenrollment.

    ``(c) Alternative Benefits.--
            ``(1) In general.--The alternative benefits provided under 
        this section shall consist, consistent with this subsection, of 
        at least--
                    ``(A) coverage for medical expenses in a year for 
                items and services for which benefits are otherwise 
                provided under this title after an annual deductible 
                described in paragraph (2) has been met; and
                    ``(B) contribution into a health opportunity 
                account.
        Nothing in subparagraph (A) shall be construed as preventing a 
        State from providing for coverage of preventive care (referred 
        to in subsection (a)(3)) within the alternative benefits without 
        regard to the annual deductible.
            ``(2) Annual deductible.--The amount of the annual 
        deductible described in paragraph (1)(A) shall be at least 100 
        percent, but no more than 110 percent, of the annualized amount 
        of contributions to the health opportunity account under 
        subsection (d)(2)(A)(i), determined without regard to any 
        limitation described in subsection (d)(2)(C)(i)(II).
            ``(3) Access to negotiated provider payment rates.--
                    ``(A) Fee-for-service enrollees.--In the case of an 
                individual who is participating in a State demonstration 
                program and who is not enrolled with a Medicaid managed 
                care organization, the State shall provide that the 
                individual may obtain demonstration program Medicaid 
                services from--
                          ``(i) any participating provider under this 
                      title at the same payment rates that would be 
                      applicable to such services if the deductible 
                      described in paragraph (1)(A) was not applicable; 
                      or
                          ``(ii) any other provider at payment rates 
                      that do not exceed 125 percent of the payment rate 
                      that would

[[Page 120 STAT. 116]]

                      be applicable to such services furnished by a 
                      participating provider under this title if the 
                      deductible described in paragraph (1)(A) was not 
                      applicable.
                    ``(B) Treatment under medicaid managed care plans.--
                In the case of an individual who is participating in a 
                State demonstration program and is enrolled with a 
                Medicaid managed care organization, the State shall 
                enter into an arrangement with the organization under 
                which the individual may obtain demonstration program 
                Medicaid services from any provider described in clause 
                (ii) of subparagraph (A) at payment rates that do not 
                exceed the payment rates that may be imposed under that 
                clause.
                    ``(C) Computation.--The payment rates described in 
                subparagraphs (A) and (B) shall be computed without 
                regard to any cost sharing that would be otherwise 
                applicable under sections 1916 and 1916A.
                    ``(D) Definitions.--For purposes of this paragraph:
                          ``(i) The term `demonstration program Medicaid 
                      services' means, with respect to an individual 
                      participating in a State demonstration program, 
                      services for which the individual would be 
                      provided medical assistance under this title but 
                      for the application of the deductible described in 
                      paragraph (1)(A).
                          ``(ii) The term `participating provider' 
                      means--
                                    ``(I) with respect to an individual 
                                described in subparagraph (A), a health 
                                care provider that has entered into a 
                                participation agreement with the State 
                                for the provision of services to 
                                individuals entitled to benefits under 
                                the State plan; or
                                    ``(II) with respect to an individual 
                                described in subparagraph (B) who is 
                                enrolled in a Medicaid managed care 
                                organization, a health care provider 
                                that has entered into an arrangement for 
                                the provision of services to enrollees 
                                of the organization under this title.
            ``(4) No effect on subsequent benefits.--Except as provided 
        under paragraphs (1) and (2), alternative benefits for an 
        eligible individual shall consist of the benefits otherwise 
        provided to the individual, including cost sharing relating to 
        such benefits.
            ``(5) Overriding cost sharing and comparability requirements 
        for alternative benefits.--The provisions of this title relating 
        to cost sharing for benefits (including sections 1916 and 1916A) 
        shall not apply with respect to benefits to which the annual 
        deductible under paragraph (1)(A) applies. The provisions of 
        section 1902(a)(10)(B) (relating to comparability) shall not 
        apply with respect to the provision of alternative benefits (as 
        described in this subsection).
            ``(6) Treatment as medical assistance.--Subject to 
        subparagraphs (D) and (E) of subsection (d)(2), payments for 
        alternative benefits under this section (including contributions 
        into a health opportunity account) shall be treated as medical 
        assistance for purposes of section 1903(a).
            ``(7) Use of tiered deductible and cost sharing.--
                    ``(A) In general.--A State--

[[Page 120 STAT. 117]]

                          ``(i) may vary the amount of the annual 
                      deductible applied under paragraph (1)(A) based on 
                      the income of the family involved so long as it 
                      does not favor families with higher income over 
                      those with lower income; and
                          ``(ii) may vary the amount of the maximum out-
                      of-pocket cost sharing (as defined in subparagraph 
                      (B)) based on the income of the family involved so 
                      long as it does not favor families with higher 
                      income over those with lower income.
                    ``(B) Maximum out-of-pocket cost sharing.--For 
                purposes of subparagraph (A)(ii), the term `maximum out-
                of-pocket cost sharing' means, for an individual or 
                family, the amount by which the annual deductible level 
                applied under paragraph (1)(A) to the individual or 
                family exceeds the balance in the health opportunity 
                account for the individual or family.
            ``(8) Contributions by employers.--Nothing in this section 
        shall be construed as preventing an employer from providing 
        health benefits coverage consisting of the coverage described in 
        paragraph (1)(A) to individuals who are provided alternative 
        benefits under this section.

    ``(d) Health Opportunity Account.--
            ``(1) In general.--For purposes of this section, the term 
        `health opportunity account' means an account that meets the 
        requirements of this subsection.
            ``(2) Contributions.--
                    ``(A) In general.--No contribution may be made into 
                a health opportunity account except--
                          ``(i) contributions by the State under this 
                      title; and
                          ``(ii) contributions by other persons and 
                      entities, such as charitable organizations, as 
                      permitted under section 1903(w).
                    ``(B) State contribution.--A State shall specify the 
                contribution amount that shall be deposited under 
                subparagraph (A)(i) into a health opportunity account.
                    ``(C) Limitation on annual state contribution 
                provided and permitting imposition of maximum account 
                balance.--
                          ``(i) In general.--A State--
                                    ``(I) may impose limitations on the 
                                maximum contributions that may be 
                                deposited under subparagraph (A)(i) into 
                                a health opportunity account in a year;
                                    ``(II) may limit contributions into 
                                such an account once the balance in the 
                                account reaches a level specified by the 
                                State; and
                                    ``(III) subject to clauses (ii) and 
                                (iii) and subparagraph (D)(i), may not 
                                provide contributions described in 
                                subparagraph (A)(i) to a health 
                                opportunity account on behalf of an 
                                individual or family to the extent the 
                                amount of such contributions (including 
                                both State and Federal shares) exceeds, 
                                on an annual basis, $2,500 for each 
                                individual (or family member) who is an 
                                adult and $1,000

[[Page 120 STAT. 118]]

                                for each individual (or family member) 
                                who is a child.
                          ``(ii) Indexing of dollar limitations.--For 
                      each year after 2006, the dollar amounts specified 
                      in clause (i)(III) shall be annually increased by 
                      the Secretary by a percentage that reflects the 
                      annual percentage increase in the medical care 
                      component of the consumer price index for all 
                      urban consumers.
                          ``(iii) Budget neutral adjustment.--A State 
                      may provide for dollar limitations in excess of 
                      those specified in clause (i)(III) (as increased 
                      under clause (ii)) for specified individuals if 
                      the State provides assurances satisfactory to the 
                      Secretary that contributions otherwise made to 
                      other individuals will be reduced in a manner so 
                      as to provide for aggregate contributions that do 
                      not exceed the aggregate contributions that would 
                      otherwise be permitted under this subparagraph.
                    ``(D) Limitations on federal matching.--
                          ``(i) State contribution.--A State may 
                      contribute under subparagraph (A)(i) amounts to a 
                      health opportunity account in excess of the 
                      limitations provided under subparagraph 
                      (C)(i)(III), but no Federal financial 
                      participation shall be provided under section 
                      1903(a) with respect to contributions in excess of 
                      such limitations.
                          ``(ii) No ffp for private contributions.--No 
                      Federal financial participation shall be provided 
                      under section 1903(a) with respect to any 
                      contributions described in subparagraph (A)(ii) to 
                      a health opportunity account.
                    ``(E) Application of different matching rates.--The 
                Secretary shall provide a method under which, for 
                expenditures made from a health opportunity account for 
                medical care for which the Federal matching rate under 
                section 1903(a) exceeds the Federal medical assistance 
                percentage, a State may obtain payment under such 
                section at such higher matching rate for such 
                expenditures.
            ``(3) Use.--
                    ``(A) General uses.--
                          ``(i) In general.--Subject to the succeeding 
                      provisions of this paragraph, amounts in a health 
                      opportunity account may be used for payment of 
                      such health care expenditures as the State 
                      specifies.
                          ``(ii) General limitation.--Subject to 
                      subparagraph (B)(ii), in no case shall such 
                      account be used for payment for health care 
                      expenditures that are not payment of medical care 
                      (as defined by section 213(d) of the Internal 
                      Revenue Code of 1986).
                          ``(iii) State restrictions.--In applying 
                      clause (i), a State may restrict payment for--
                                    ``(I) providers of items and 
                                services to providers that are licensed 
                                or otherwise authorized under State law 
                                to provide the item or service and may 
                                deny payment for such a provider on the 
                                basis that the provider has been found, 
                                whether with respect to this title or 
                                any other health benefit

[[Page 120 STAT. 119]]

                                program, to have failed to meet quality 
                                standards or to have committed 1 or more 
                                acts of fraud or abuse; and
                                    ``(II) items and services insofar as 
                                the State finds they are not medically 
                                appropriate or necessary.
                          ``(iv) Electronic withdrawals.--The State 
                      demonstration program shall provide for a method 
                      whereby withdrawals may be made from the account 
                      for such purposes using an electronic system and 
                      shall not permit withdrawals from the account in 
                      cash.
                    ``(B) Maintenance of health opportunity account 
                after becoming ineligible for public benefit.--
                          ``(i) In general.--Notwithstanding any other 
                      provision of law, if an account holder of a health 
                      opportunity account becomes ineligible for 
                      benefits under this title because of an increase 
                      in income or assets--
                                    ``(I) no additional contribution 
                                shall be made into the account under 
                                paragraph (2)(A)(i);
                                    ``(II) subject to clause (iii), the 
                                balance in the account shall be reduced 
                                by 25 percent; and
                                    ``(III) subject to the succeeding 
                                provisions of this subparagraph, the 
                                account shall remain available to the 
                                account holder for 3 years after the 
                                date on which the individual becomes 
                                ineligible for such benefits for 
                                withdrawals under the same terms and 
                                conditions as if the account holder 
                                remained eligible for such benefits, and 
                                such withdrawals shall be treated as 
                                medical assistance in accordance with 
                                subsection (c)(6).
                          ``(ii) Special rules.--Withdrawals under this 
                      subparagraph from an account--
                                    ``(I) shall be available for the 
                                purchase of health insurance coverage; 
                                and
                                    ``(II) may, subject to clause (iv), 
                                be made available (at the option of the 
                                State) for such additional expenditures 
                                (such as job training and tuition 
                                expenses) specified by the State (and 
                                approved by the Secretary) as the State 
                                may specify.
                          ``(iii) Exception from 25 percent savings to 
                      government for private contributions.--Clause 
                      (i)(II) shall not apply to the portion of the 
                      account that is attributable to contributions 
                      described in paragraph (2)(A)(ii). For purposes of 
                      accounting for such contributions, withdrawals 
                      from a health opportunity account shall first be 
                      attributed to contributions described in paragraph 
                      (2)(A)(i).
                          ``(iv) Condition for non-health withdrawals.--
                      No withdrawal may be made from an account under 
                      clause (ii)(II) unless the account holder has 
                      participated in the program under this section for 
                      at least 1 year.
                          ``(v) No requirement for continuation of 
                      coverage.--An account holder of a health 
                      opportunity account, after becoming ineligible for 
                      medical assistance under this title, is not 
                      required to purchase high-

[[Page 120 STAT. 120]]

                      deductible or other insurance as a condition of 
                      maintaining or using the account.
            ``(4) Administration.--A State may coordinate administration 
        of health opportunity accounts through the use of a third party 
        administrator and reasonable expenditures for the use of such 
        administrator shall be reimbursable to the State in the same 
        manner as other administrative expenditures under section 
        1903(a)(7).
            ``(5) Treatment.--Amounts in, or contributed to, a health 
        opportunity account shall not be counted as income or assets for 
        purposes of determining eligibility for benefits under this 
        title.
            ``(6) Unauthorized withdrawals.--A State may establish 
        procedures--
                    ``(A) to penalize or remove an individual from the 
                health opportunity account based on nonqualified 
                withdrawals by the individual from such an account; and
                    ``(B) to recoup costs that derive from such 
                nonqualified withdrawals.''.

SEC. 6083. STATE OPTION TO ESTABLISH NON-EMERGENCY MEDICAL 
            TRANSPORTATION PROGRAM.

    (a) In General.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)), as amended by sections 6033(a) and 6035(b), is 
amended--
            (1) in paragraph (68), by striking ``and'' at the end;
            (2) in paragraph (69) by striking the period at the end and 
        inserting ``; and''; and
            (3) by inserting after paragraph (69) the following:
            ``(70) at the option of the State and notwithstanding 
        paragraphs (1), (10)(B), and (23), provide for the establishment 
        of a non-emergency medical transportation brokerage program in 
        order to more cost-effectively provide transportation for 
        individuals eligible for medical assistance under the State plan 
        who need access to medical care or services and have no other 
        means of transportation which--
                    ``(A) may include a wheelchair van, taxi, stretcher 
                car, bus passes and tickets, secured transportation, and 
                such other transportation as the Secretary determines 
                appropriate; and
                    ``(B) may be conducted under contract with a broker 
                who--
                          ``(i) is selected through a competitive 
                      bidding process based on the State's evaluation of 
                      the broker's experience, performance, references, 
                      resources, qualifications, and costs;
                          ``(ii) has oversight procedures to monitor 
                      beneficiary access and complaints and ensure that 
                      transport personnel are licensed, qualified, 
                      competent, and courteous;
                          ``(iii) is subject to regular auditing and 
                      oversight by the State in order to ensure the 
                      quality of the transportation services provided 
                      and the adequacy of beneficiary access to medical 
                      care and services; and
                          ``(iv) complies with such requirements related 
                      to prohibitions on referrals and conflict of 
                      interest as the Secretary shall establish (based 
                      on the prohibitions

[[Page 120 STAT. 121]]

                      on physician referrals under section 1877 and such 
                      other prohibitions and requirements as the 
                      Secretary determines to be appropriate).''.

    (b) <<NOTE: 42 USC 1396a note.>> Effective Date.--The amendments 
made by subsection (a) take effect on the date of the enactment of this 
Act.

SEC. 6084. EXTENSION OF TRANSITIONAL MEDICAL ASSISTANCE (TMA) AND 
            ABSTINENCE EDUCATION PROGRAM.

    Effective <<NOTE: Effective date.>> as if enacted on December 31, 
2005, activities authorized by sections 510 and 1925 of the Social 
Security Act shall continue through December 31, 2006, in the manner 
authorized for fiscal year 2005, notwithstanding section 1902(e)(1)(A) 
of such Act, and out of any money in the Treasury of the United States 
not otherwise appropriated, there are hereby appropriated such sums as 
may be necessary for such purpose. Grants and payments may be made 
pursuant to this authority through the first quarter of fiscal year 2007 
at the level provided for such activities through the first quarter of 
fiscal year 2006.

SEC. 6085. EMERGENCY SERVICES FURNISHED BY NON-CONTRACT PROVIDERS FOR 
            MEDICAID MANAGED CARE ENROLLEES.

    (a) In General.--Section 1932(b)(2) of the Social Security Act (42 
U.S.C. 1396u-2(b)(2)) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Emergency services furnished by non-contract 
                providers.--Any provider of emergency services that does 
                not have in effect a contract with a Medicaid managed 
                care entity that establishes payment amounts for 
                services furnished to a beneficiary enrolled in the 
                entity's Medicaid managed care plan must accept as 
                payment in full no more than the amounts (less any 
                payments for indirect costs of medical education and 
                direct costs of graduate medical education) that it 
                could collect if the beneficiary received medical 
                assistance under this title other than through 
                enrollment in such an entity. In a State where rates 
                paid to hospitals under the State plan are negotiated by 
                contract and not publicly released, the payment amount 
                applicable under this subparagraph shall be the average 
                contract rate that would apply under the State plan for 
                general acute care hospitals or the average contract 
                rate that would apply under such plan for tertiary 
                hospitals.''.

    (b) <<NOTE: 42 USC 1396u-2 note.>> Effective Date.--The amendment 
made by subsection (a) shall take effect on January 1, 2007.

SEC. 6086. EXPANDED ACCESS TO HOME AND COMMUNITY-BASED SERVICES FOR THE 
            ELDERLY AND DISABLED.

    (a) Home and Community-Based Services as an Optional Benefit for 
Elderly and Disabled Individuals.--Section 1915 of the Social Security 
Act (42 U.S.C. 1396n) is amended by adding at the end the following new 
subsection:
    ``(i) State Plan Amendment Option To Provide Home and Community-
Based Services for Elderly and Disabled Individuals.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, a State may provide through a State plan 
        amendment for the provision of medical assistance for home and 
        community-based services (within the scope of services

[[Page 120 STAT. 122]]

        described in paragraph (4)(B) of subsection (c) for which the 
        Secretary has the authority to approve a waiver and not 
        including room and board or such other services requested by the 
        State as the Secretary may approve) for individuals eligible for 
        medical assistance under the State plan whose income does not 
        exceed 150 percent of the poverty line (as defined in section 
        2110(c)(5)), without determining that but for the provision of 
        such services the individuals would require the level of care 
        provided in a hospital or a nursing facility or intermediate 
        care facility for the mentally retarded, but only if the State 
        meets the following requirements:
                    ``(A) Needs-based criteria for eligibility for, and 
                receipt of, home and community-based services.--The 
                State establishes needs-based criteria for determining 
                an individual's eligibility under the State plan for 
                medical assistance for such home and community-based 
                services, and if the individual is eligible for such 
                services, the specific home and community-based services 
                that the individual will receive.
                    ``(B) Establishment of more stringent needs-based 
                eligibility criteria for institutionalized care.--The 
                State establishes needs-based criteria for determining 
                whether an individual requires the level of care 
                provided in a hospital, a nursing facility, or an 
                intermediate care facility for the mentally retarded 
                under the State plan or under any waiver of such plan 
                that are more stringent than the needs-based criteria 
                established under subparagraph (A) for determining 
                eligibility for home and community-based services.
                    ``(C) Projection of number of individuals to be 
                provided home and community-based services.--
                          ``(i) In general.--The State submits to the 
                      Secretary, in such form and manner, and upon such 
                      frequency as the Secretary shall specify, the 
                      projected number of individuals to be provided 
                      home and community-based services.
                          ``(ii) Authority to limit number of eligible 
                      individuals.--A State may limit the number of 
                      individuals who are eligible for such services and 
                      may establish waiting lists for the receipt of 
                      such services.
                    ``(D) Criteria based on individual assessment.--
                          ``(i) In general.--The criteria established by 
                      the State for purposes of subparagraphs (A) and 
                      (B) requires an assessment of an individual's 
                      support needs and capabilities, and may take into 
                      account the inability of the individual to perform 
                      2 or more activities of daily living (as defined 
                      in section 7702B(c)(2)(B) of the Internal Revenue 
                      Code of 1986) or the need for significant 
                      assistance to perform such activities, and such 
                      other risk factors as the State determines to be 
                      appropriate.
                          ``(ii) Adjustment authority.--The State plan 
                      amendment provides the State with the option to 
                      modify the criteria established under subparagraph 
                      (A) (without having to obtain prior approval from 
                      the Secretary) in the event that the enrollment of 
                      individuals eligible for home and community-based 
                      services

[[Page 120 STAT. 123]]

                      exceeds the projected enrollment submitted for 
                      purposes of subparagraph (C), but only if--
                                    ``(I) <<NOTE: Notice.>> the State 
                                provides at least 60 days notice to the 
                                Secretary and the public of the proposed 
                                modification;
                                    ``(II) the State deems an individual 
                                receiving home and community-based 
                                services on the basis of the most recent 
                                version of the criteria in effect prior 
                                to the effective date of the 
                                modification to be eligible for such 
                                services for a period of at least 12 
                                months beginning on the date the 
                                individual first received medical 
                                assistance for such services; and
                                    ``(III) after the effective date of 
                                such modification, the State, at a 
                                minimum, applies the criteria for 
                                determining whether an individual 
                                requires the level of care provided in a 
                                hospital, a nursing facility, or an 
                                intermediate care facility for the 
                                mentally retarded under the State plan 
                                or under any waiver of such plan which 
                                applied prior to the application of the 
                                more stringent criteria developed under 
                                subparagraph (B).
                    ``(E) Independent evaluation and assessment.--
                          ``(i) Eligibility determination.--The State 
                      uses an independent evaluation for making the 
                      determinations described in subparagraphs (A) and 
                      (B).
                          ``(ii) Assessment.--In the case of an 
                      individual who is determined to be eligible for 
                      home and community-based services, the State uses 
                      an independent assessment, based on the needs of 
                      the individual to--
                                    ``(I) determine a necessary level of 
                                services and supports to be provided, 
                                consistent with an individual's physical 
                                and mental capacity;
                                    ``(II) prevent the provision of 
                                unnecessary or inappropriate care; and
                                    ``(III) establish an individualized 
                                care plan for the individual in 
                                accordance with subparagraph (G).
                    ``(F) Assessment.--The independent assessment 
                required under subparagraph (E)(ii) shall include the 
                following:
                          ``(i) An objective evaluation of an 
                      individual's inability to perform 2 or more 
                      activities of daily living (as defined in section 
                      7702B(c)(2)(B) of the Internal Revenue Code of 
                      1986) or the need for significant assistance to 
                      perform such activities.
                          ``(ii) A face-to-face evaluation of the 
                      individual by an individual trained in the 
                      assessment and evaluation of individuals whose 
                      physical or mental conditions trigger a potential 
                      need for home and community-based services.
                          ``(iii) Where appropriate, consultation with 
                      the individual's family, spouse, guardian, or 
                      other responsible individual.
                          ``(iv) Consultation with appropriate treating 
                      and consulting health and support professionals 
                      caring for the individual.

[[Page 120 STAT. 124]]

                          ``(v) An examination of the individual's 
                      relevant history, medical records, and care and 
                      support needs, guided by best practices and 
                      research on effective strategies that result in 
                      improved health and quality of life outcomes.
                          ``(vi) If the State offers individuals the 
                      option to self-direct the purchase of, or control 
                      the receipt of, home and community-based service, 
                      an evaluation of the ability of the individual or 
                      the individual's representative to self-direct the 
                      purchase of, or control the receipt of, such 
                      services if the individual so elects.
                    ``(G) Individualized care plan.--
                          ``(i) In general.--In the case of an 
                      individual who is determined to be eligible for 
                      home and community-based services, the State uses 
                      the independent assessment required under 
                      subparagraph (E)(ii) to establish a written 
                      individualized care plan for the individual.
                          ``(ii) Plan requirements.--The State ensures 
                      that the individualized care plan for an 
                      individual--
                                    ``(I) is developed--
                                            ``(aa) in consultation with 
                                        the individual, the individual's 
                                        treating physician, health care 
                                        or support professional, or 
                                        other appropriate individuals, 
                                        as defined by the State, and, 
                                        where appropriate the 
                                        individual's family, caregiver, 
                                        or representative; and
                                            ``(bb) taking into account 
                                        the extent of, and need for, any 
                                        family or other supports for the 
                                        individual;
                                    ``(II) identifies the necessary home 
                                and community-based services to be 
                                furnished to the individual (or, if the 
                                individual elects to self-direct the 
                                purchase of, or control the receipt of, 
                                such services, funded for the 
                                individual); and
                                    ``(III) is reviewed at least 
                                annually and as needed when there is a 
                                significant change in the individual's 
                                circumstances.
                          ``(iii) State option to offer election for 
                      self-directed services.--
                                    ``(I) Individual choice.--At the 
                                option of the State, the State may allow 
                                an individual or the individual's 
                                representative to elect to receive self-
                                directed home and community-based 
                                services in a manner which gives them 
                                the most control over such services 
                                consistent with the individual's 
                                abilities and the requirements of 
                                subclauses (II) and (III).
                                    ``(II) Self-directed services.--The 
                                term `self-directed' means, with respect 
                                to the home and community-based services 
                                offered under the State plan amendment, 
                                such services for the individual which 
                                are planned and purchased under the 
                                direction and control of such individual 
                                or the individual's authorized 
                                representative, including the amount, 
                                duration, scope, provider, and location 
                                of such services, under the State plan 
                                consistent with the following 
                                requirements:

[[Page 120 STAT. 125]]

                                            ``(aa) Assessment.--There is 
                                        an assessment of the needs, 
                                        capabilities, and preferences of 
                                        the individual with respect to 
                                        such services.
                                            ``(bb) Service plan.--Based 
                                        on such assessment, there is 
                                        developed jointly with such 
                                        individual or the individual's 
                                        authorized representative a plan 
                                        for such services for such 
                                        individual that is approved by 
                                        the State and that satisfies the 
                                        requirements of subclause (III).
                                    ``(III) Plan requirements.--For 
                                purposes of subclause (II)(bb), the 
                                requirements of this subclause are that 
                                the plan--
                                            ``(aa) specifies those 
                                        services which the individual or 
                                        the individual's authorized 
                                        representative would be 
                                        responsible for directing;
                                            ``(bb) identifies the 
                                        methods by which the individual 
                                        or the individual's authorized 
                                        representative will select, 
                                        manage, and dismiss providers of 
                                        such services;
                                            ``(cc) specifies the role of 
                                        family members and others whose 
                                        participation is sought by the 
                                        individual or the individual's 
                                        authorized representative with 
                                        respect to such services;
                                            ``(dd) is developed through 
                                        a person-centered process that 
                                        is directed by the individual or 
                                        the individual's authorized 
                                        representative, builds upon the 
                                        individual's capacity to engage 
                                        in activities that promote 
                                        community life and that respects 
                                        the individual's preferences, 
                                        choices, and abilities, and 
                                        involves families, friends, and 
                                        professionals as desired or 
                                        required by the individual or 
                                        the individual's authorized 
                                        representative;
                                            ``(ee) includes appropriate 
                                        risk management techniques that 
                                        recognize the roles and sharing 
                                        of responsibilities in obtaining 
                                        services in a self-directed 
                                        manner and assure the 
                                        appropriateness of such plan 
                                        based upon the resources and 
                                        capabilities of the individual 
                                        or the individual's authorized 
                                        representative; and
                                            ``(ff) may include an 
                                        individualized budget which 
                                        identifies the dollar value of 
                                        the services and supports under 
                                        the control and direction of the 
                                        individual or the individual's 
                                        authorized representative.
                                    ``(IV) Budget process.--With respect 
                                to individualized budgets described in 
                                subclause (III)(ff), the State plan 
                                amendment--
                                            ``(aa) describes the method 
                                        for calculating the dollar 
                                        values in such budgets based on 
                                        reliable costs and service 
                                        utilization;
                                            ``(bb) defines a process for 
                                        making adjustments in such 
                                        dollar values to reflect changes 
                                        in individual assessments and 
                                        service plans; and

[[Page 120 STAT. 126]]

                                            
                                        ``(cc) <<NOTE: Procedure.>> provi
                                        des a procedure to evaluate 
                                        expenditures under such budgets.
                    ``(H) Quality assurance; conflict of interest 
                standards.--
                          ``(i) Quality assurance.--The State ensures 
                      that the provision of home and community-based 
                      services meets Federal and State guidelines for 
                      quality assurance.
                          ``(ii) Conflict of interest standards.--The 
                      State establishes standards for the conduct of the 
                      independent evaluation and the independent 
                      assessment to safeguard against conflicts of 
                      interest.
                    ``(I) Redeterminations and appeals.--The State 
                allows for at least annual redeterminations of 
                eligibility, and appeals in accordance with the 
                frequency of, and manner in which, redeterminations and 
                appeals of eligibility are made under the State plan.
                    ``(J) Presumptive eligibility for assessment.--The 
                State, at its option, elects to provide for a period of 
                presumptive eligibility (not to exceed a period of 60 
                days) only for those individuals that the State has 
                reason to believe may be eligible for home and 
                community-based services. Such presumptive eligibility 
                shall be limited to medical assistance for carrying out 
                the independent evaluation and assessment under 
                subparagraph (E) to determine an individual's 
                eligibility for such services and if the individual is 
                so eligible, the specific home and community-based 
                services that the individual will receive.
            ``(2) Definition of individual's representative.--In this 
        section, the term `individual's representative' means, with 
        respect to an individual, a parent, a family member, or a 
        guardian of the individual, an advocate for the individual, or 
        any other individual who is authorized to represent the 
        individual.
            ``(3) Nonapplication.--A State may elect in the State plan 
        amendment approved under this section to not comply with the 
        requirements of section 1902(a)(1) (relating to statewideness) 
        and section 1902(a)(10)(C)(i)(III) (relating to income and 
        resource rules applicable in the community), but only for 
        purposes of provided home and community-based services in 
        accordance with such amendment. Any such election shall not be 
        construed to apply to the provision of services to an individual 
        receiving medical assistance in an institutionalized setting as 
        a result of a determination that the individual requires the 
        level of care provided in a hospital or a nursing facility or 
        intermediate care facility for the mentally retarded.
            ``(4) No effect on other waiver authority.--Nothing in this 
        subsection shall be construed as affecting the option of a State 
        to offer home and community-based services under a waiver under 
        subsections (c) or (d) of this section or under section 1115.
            ``(5) Continuation of federal financial participation for 
        medical assistance provided to individuals as of effective date 
        of state plan amendment.--Notwithstanding paragraph (1)(B), 
        Federal financial participation shall continue to be available 
        for an individual who is receiving medical assistance in an 
        institutionalized setting, or home and community-

[[Page 120 STAT. 127]]

        based services provided under a waiver under this section or 
        section 1115 that is in effect as of the effective date of the 
        State plan amendment submitted under this subsection, as a 
        result of a determination that the individual requires the level 
        of care provided in a hospital or a nursing facility or 
        intermediate care facility for the mentally retarded, without 
        regard to whether such individuals satisfy the more stringent 
        eligibility criteria established under that paragraph, until 
        such time as the individual is discharged from the institution 
        or waiver program or no longer requires such level of care.''.

    (b) <<NOTE: 42 USC 1396n note.>> Quality of Care Measures.--
            (1) In general.--The Secretary, acting through the Director 
        of the Agency for Healthcare Research and Quality, shall consult 
        with consumers, health and social service providers and other 
        professionals knowledgeable about long-term care services and 
        supports to develop program performance indicators, client 
        function indicators, and measures of client satisfaction with 
        respect to home and community-based services offered under State 
        Medicaid programs.
            (2) Best practices.--The Secretary shall--
                    (A) use the indicators and measures developed under 
                paragraph (1) to assess such home and community-based 
                services, the outcomes associated with the receipt of 
                such services (particularly with respect to the health 
                and welfare of the recipient of the services), and the 
                overall system for providing home and community-based 
                services under the Medicaid program under title XIX of 
                the Social Security Act; and
                    (B) <<NOTE: Public information.>> make publicly 
                available the best practices identified through such 
                assessment and a comparative analyses of the system 
                features of each State.
            (3) Appropriation.--Out of any funds in the Treasury not 
        otherwise appropriated, there is appropriated to the Secretary 
        of Health and Human Services, $1,000,000 for the period of 
        fiscal years 2006 through 2010 to carry out this subsection.

    (c) <<NOTE: 42 USC 1396n note.>> Effective Date.--The amendments 
made by subsections (a) and (b) take effect on January 1, 2007, and 
apply to expenditures for medical assistance for home and community-
based services provided in accordance with section 1915(i) of the Social 
Security Act (as added by subsections (a) and (b)) on or after that 
date.

SEC. 6087. OPTIONAL CHOICE OF SELF-DIRECTED PERSONAL ASSISTANCE SERVICES 
            (CASH AND COUNSELING).

    (a) Exemption From Certain Requirements.--Section 1915 of the Social 
Security Act (42 U.S.C. 1396n), as amended by section 6086(a), is 
amended by adding at the end the following new subsection:
    ``(j)(1) A State may provide, as `medical assistance', payment for 
part or all of the cost of self-directed personal assistance services 
(other than room and board) under the plan which are provided pursuant 
to a written plan of care to individuals with respect to whom there has 
been a determination that, but for the provision of such services, the 
individuals would require and receive personal care services under the 
plan, or home and community-based services provided pursuant to a waiver 
under subsection (c). Self-directed personal assistance services may not 
be provided under this subsection to individuals who reside in a home or 
property that is

[[Page 120 STAT. 128]]

owned, operated, or controlled by a provider of services, not related by 
blood or marriage.
    ``(2) The Secretary shall not grant approval for a State self-
directed personal assistance services program under this section unless 
the State provides assurances satisfactory to the Secretary of the 
following:
            ``(A) Necessary safeguards have been taken to protect the 
        health and welfare of individuals provided services under the 
        program, and to assure financial accountability for funds 
        expended with respect to such services.
            ``(B) The State will provide, with respect to individuals 
        who--
                    ``(i) are entitled to medical assistance for 
                personal care services under the plan, or receive home 
                and community-based services under a waiver granted 
                under subsection (c);
                    ``(ii) may require self-directed personal assistance 
                services; and
                    ``(iii) may be eligible for self-directed personal 
                assistance services,
        an evaluation of the need for personal care under the plan, or 
        personal services under a waiver granted under subsection (c).
            ``(C) Such individuals who are determined to be likely to 
        require personal care under the plan, or home and community-
        based services under a waiver granted under subsection (c) are 
        informed of the feasible alternatives, if available under the 
        State's self-directed personal assistance services program, at 
        the choice of such individuals, to the provision of personal 
        care services under the plan, or personal assistance services 
        under a waiver granted under subsection (c).
            ``(D) The State will provide for a support system that 
        ensures participants in the self-directed personal assistance 
        services program are appropriately assessed and counseled prior 
        to enrollment and are able to manage their budgets. Additional 
        counseling and management support may be provided at the request 
        of the participant.
            ``(E) <<NOTE: Reports.>> The State will provide to the 
        Secretary an annual report on the number of individuals served 
        and total expenditures on their behalf in the 
        aggregate. <<NOTE: Deadline.>> The State shall also provide an 
        evaluation of overall impact on the health and welfare of 
        participating individuals compared to non-participants every 
        three years.

    ``(3) A State may provide self-directed personal assistance services 
under the State plan without regard to the requirements of section 
1902(a)(1) and may limit the population eligible to receive these 
services and limit the number of persons served without regard to 
section 1902(a)(10)(B).
    ``(4)(A) For purposes of this subsection, the term `self-directed 
personal assistance services' means personal care and related services, 
or home and community-based services otherwise available under the plan 
under this title or subsection (c), that are provided to an eligible 
participant under a self-directed personal assistance services program 
under this section, under which individuals, within an approved self-
directed services plan and budget, purchase personal assistance and 
related services, and permits participants to

[[Page 120 STAT. 129]]

hire, fire, supervise, and manage the individuals providing such 
services.
    ``(B) At the election of the State--
            ``(i) a participant may choose to use any individual capable 
        of providing the assigned tasks including legally liable 
        relatives as paid providers of the services; and
            ``(ii) the individual may use the individual's budget to 
        acquire items that increase independence or substitute (such as 
        a microwave oven or an accessibility ramp) for human assistance, 
        to the extent that expenditures would otherwise be made for the 
        human assistance.

    ``(5) For purpose of this section, the term `approved self-directed 
services plan and budget' means, with respect to a participant, the 
establishment of a plan and budget for the provision of self-directed 
personal assistance services, consistent with the following 
requirements:
            ``(A) Self-direction.--The participant (or in the case of a 
        participant who is a minor child, the participant's parent or 
        guardian, or in the case of an incapacitated adult, another 
        individual recognized by State law to act on behalf of the 
        participant) exercises choice and control over the budget, 
        planning, and purchase of self-directed personal assistance 
        services, including the amount, duration, scope, provider, and 
        location of service provision.
            ``(B) Assessment of needs.--There is an assessment of the 
        needs, strengths, and preferences of the participants for such 
        services.
            ``(C) Service plan.--A plan for such services (and supports 
        for such services) for the participant has been developed and 
        approved by the State based on such assessment through a person-
        centered process that--
                    ``(i) builds upon the participant's capacity to 
                engage in activities that promote community life and 
                that respects the participant's preferences, choices, 
                and abilities; and
                    ``(ii) involves families, friends, and professionals 
                in the planning or delivery of services or supports as 
                desired or required by the participant.
            ``(D) Service budget.--A budget for such services and 
        supports for the participant has been developed and approved by 
        the State based on such assessment and plan and on a methodology 
        that uses valid, reliable cost data, is open to public 
        inspection, and includes a calculation of the expected cost of 
        such services if those services were not self-directed. The 
        budget may not restrict access to other medically necessary care 
        and services furnished under the plan and approved by the State 
        but not included in the budget.
            ``(E) Application of quality assurance and risk 
        management.--There are appropriate quality assurance and risk 
        management techniques used in establishing and implementing such 
        plan and budget that recognize the roles and responsibilities in 
        obtaining services in a self-directed manner and assure the 
        appropriateness of such plan and budget based upon the 
        participant's resources and capabilities.

    ``(6) A State may employ a financial management entity to make 
payments to providers, track costs, and make reports under the program. 
Payment for the activities of the financial management

[[Page 120 STAT. 130]]

entity shall be at the administrative rate established in section 
1903(a).''.
    (b) <<NOTE: 42 USC 1396n note.>> Effective Date.--The amendment made 
by subsection (a) shall apply to services furnished on or after January 
1, 2007.

                            Subtitle B--SCHIP

SEC. 6101. ADDITIONAL ALLOTMENTS TO ELIMINATE FISCAL YEAR 2006 FUNDING 
            SHORTFALLS.

    (a) In General.--Section 2104 of the Social Security Act (42 U.S.C. 
1397dd) is amended by inserting after subsection (c) the following:
    ``(d) Additional Allotments To Eliminate Funding Shortfalls.--
            ``(1) Appropriation; allotment authority.--For the purpose 
        of providing additional allotments to shortfall States described 
        in paragraph (2), there is appropriated, out of any money in the 
        Treasury not otherwise appropriated, $283,000,000 for fiscal 
        year 2006.
            ``(2) Shortfall states described.--For purposes of paragraph 
        (1), a shortfall State described in this paragraph 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 December 16, 2005, that 
        the projected expenditures under such plan for such State for 
        fiscal year 2006 will exceed the sum of--
                    ``(A) the amount of the State's allotments for each 
                of fiscal years 2004 and 2005 that will not be expended 
                by the end of fiscal year 2005;
                    ``(B) the amount, if any, that is to be 
                redistributed to the State during fiscal year 2006 in 
                accordance with subsection (f); and
                    ``(C) the amount of the State's allotment for fiscal 
                year 2006.
            ``(3) Allotments.--In addition to the allotments provided 
        under subsections (b) and (c), subject to paragraph (4), of the 
        amount available for the additional allotments under paragraph 
        (1) for fiscal year 2006, the Secretary shall allot--
                    ``(A) to each shortfall State described in paragraph 
                (2) such amount as the Secretary determines will 
                eliminate the estimated shortfall described in such 
                paragraph for the State; and
                    ``(B) to each commonwealth or territory described in 
                subsection (c)(3), the same proportion as the proportion 
                of the commonwealth's or territory's allotment under 
                subsection (c) (determined without regard to subsection 
                (f)) to 1.05 percent of the amount appropriated under 
                paragraph (1).
            ``(4) Use of additional allotment.--Additional allotments 
        provided under this subsection are only available for amounts 
        expended under a State plan approved under this title for child 
        health assistance for targeted low-income children.
            ``(5) 1-year availability; no redistribution of unexpended 
        additional allotments.--Notwithstanding subsections (e) and (f), 
        amounts allotted to a State pursuant to

[[Page 120 STAT. 131]]

        this subsection for fiscal year 2006 shall only remain available 
        for expenditure by the State through September 30, 2006. 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, 2006.''.

    (b) Conforming Amendments.--Section 2104 of the Social Security Act 
(42 U.S.C. 1397dd) is amended--
            (1) in subsection (a), by inserting ``subject to subsection 
        (d),'' after ``under this section,'';
            (2) in subsection (b)(1), by inserting ``and subsection 
        (d)'' after ``Subject to paragraph (4)''; and
            (3) in subsection (c)(1), by inserting ``subject to 
        subsection (d),'' after ``for a fiscal year,''.

    (c) <<NOTE: 42 USC 1397dd note.>> Effective Date.--The amendments 
made by this section apply to items and services furnished on or after 
October 1, 2005, without regard to whether or not regulations 
implementing such amendments have been issued.

SEC. 6102. PROHIBITION AGAINST COVERING NONPREGNANT CHILDLESS ADULTS 
            WITH SCHIP FUNDS.

    (a) Prohibition on Use of SCHIP Funds.--Section 2107 of the Social 
Security Act (42 U.S.C. 1397gg) is amended by adding at the end the 
following:
    ``(f) Limitation of Waiver Authority.--Notwithstanding subsection 
(e)(2)(A) and section 1115(a), the Secretary may not approve a waiver, 
experimental, pilot, or demonstration project that would allow funds 
made available under this title to be used to provide child health 
assistance or other health benefits coverage to a nonpregnant childless 
adult. For purposes of the preceding sentence, a caretaker relative (as 
such term is defined for purposes of carrying out section 1931) shall 
not be considered a childless adult.''.
    (b) Conforming Amendments.--Section 2105(c)(1) of such Act (42 
U.S.C. 1397ee(c)(1)) is amended--
            (1) by inserting ``and may not include coverage of a 
        nonpregnant childless adult'' after ``section 2101)''; and
            (2) by adding at the end the following: ``For purposes of 
        the preceding sentence, a caretaker relative (as such term is 
        defined for purposes of carrying out section 1931) shall not be 
        considered a childless adult.''.

    (c) <<NOTE: 42 USC 1397gg note.>> Rule of Construction.--Nothing in 
this section or the amendments made by this section shall be construed 
to--
            (1) authorize the waiver of any provision of title XIX or 
        XXI of the Social Security Act (42 U.S.C. 1396 et seq., 1397aa 
        et seq.) that is not otherwise authorized to be waived under 
        such titles or under title XI of such Act (42 U.S.C. 1301 et 
        seq.) as of the date of enactment of this Act;
            (2) imply congressional approval of any waiver, 
        experimental, pilot, or demonstration project affecting funds 
        made available under the State children's health insurance 
        program under title XXI of the Social Security Act (42 U.S.C. 
        1397aa et. seq.) or any amendment to such a waiver or project 
        that has been approved as of such date of enactment; or
            (3) apply to any waiver, experimental, pilot, or 
        demonstration project that would allow funds made available 
        under title XXI of the Social Security Act (42 U.S.C. 1397aa et 
        seq.) to be used to provide child health assistance or other 
        health benefits coverage to a nonpregnant childless adult that 
        is

[[Page 120 STAT. 132]]

        approved before the date of enactment of this Act or to any 
        extension, renewal, or amendment of such a waiver or project 
        that is approved on or after such date of enactment.

    (d) <<NOTE: 42 USC 1397gg note.>> Effective Date.--This section and 
the amendments made by this section shall take effect as if enacted on 
October 1, 2005, and shall apply to any waiver, experimental, pilot, or 
demonstration project that is approved on or after that date.

SEC. 6103. CONTINUED AUTHORITY FOR QUALIFYING STATES TO USE CERTAIN 
            FUNDS FOR MEDICAID EXPENDITURES.

    (a) In General.--Section 2105(g)(1)(A) of the Social Security Act 
(42 U.S.C. 1397ee(g)(1)(A)) is amended by striking ``or 2001'' and 
inserting ``2001, 2004, or 2005''.
    (b) <<NOTE: 42 USC 1397ee note.>> Effective Date.--The amendment 
made by subsection (a) shall apply to expenditures made under title XIX 
of the Social Security Act (42 U.S.C. 1396 et seq.) on or after October 
1, 2005.

                       Subtitle C--Katrina Relief

SEC. 6201. ADDITIONAL FEDERAL PAYMENTS UNDER HURRICANE-RELATED MULTI-
            STATE SECTION 1115 DEMONSTRATIONS.

    (a) In General.--The Secretary of Health and Human Services shall 
pay to each eligible State, from amounts appropriated pursuant to 
subsection (e), amounts for the following purposes:
            (1) Under the authority of an approved Multi-State Section 
        1115 Demonstration Project (in this section referred to as a 
        ``section 1115 project'')--
                    (A) with respect to evacuees receiving health care 
                under such project, for the non-Federal share of 
                expenditures:
                          (i) for medical assistance furnished under 
                      title XIX of the Social Security Act, and
                          (ii) for child health assistance furnished 
                      under title XXI of such Act;
                    (B) with respect to evacuees who do not have other 
                coverage for such assistance through insurance, 
                including (but not limited to) private insurance, under 
                title XIX or title XXI of the Social Security Act, or 
                under State-funded health insurance programs, for the 
                total uncompensated care costs incurred for medically 
                necessary services and supplies or premium assistance 
                for such persons, and for those evacuees receiving 
                medical assistance under the project for the total 
                uncompensated care costs incurred for medically 
                necessary services and supplies beyond those included as 
                medical assistance or child health assistance under the 
                State's approved plan under title XIX or title XXI of 
                the Social Security Act;
                    (C) with respect to affected individuals receiving 
                health care under such project for the non-Federal share 
                of the following expenditures:
                          (i) for medical assistance furnished under 
                      title XIX of the Social Security Act, and
                          (ii) for child health assistance furnished 
                      under title XXI of such Act; and

[[Page 120 STAT. 133]]

                    (D) with respect to affected individuals who do not 
                have other coverage for such assistance through 
                insurance, including (but not limited to) private 
                insurance, under title XIX or title XXI of the Social 
                Security Act, or under State-funded health insurance 
                programs, for the total uncompensated care costs 
                incurred for medically necessary services and supplies 
                or premium assistance for such persons, and for those 
                affected individuals receiving medical assistance under 
                the project for the total uncompensated care costs 
                incurred for medically necessary services and supplies 
                beyond those included as medical assistance or child 
                health assistance under the State's approved plan under 
                title XIX or title XXI of the Social Security Act.
            (2) For reimbursement of the reasonable administrative costs 
        related to subparagraphs (A) through (D) of paragraph (1) as 
        determined by the Secretary.
            (3) Only with respect to affected counties or parishes, for 
        reimbursement with respect to individuals receiving medical 
        assistance under existing State plans approved by the Secretary 
        of Health and Human Services for the following non-Federal share 
        of expenditures:
                    (A) For medical assistance furnished under title XIX 
                of the Social Security Act.
                    (B) For child health assistance furnished under 
                title XXI of such Act.
            (4) For other purposes, if approved by the Secretary under 
        the Secretary's authority, to restore access to health care in 
        impacted communities.

    (b) Definitions.--For purposes of this section:
            (1) The term ``affected individual'' means an individual who 
        resided in an individual assistance designation county or parish 
        pursuant to section 408 of the Robert T. Stafford Disaster 
        Relief and Emergency Assistance Act, as declared by the 
        President as a result of Hurricane Katrina and continues to 
        reside in the same State that such county or parish is located 
        in.
            (2) The term ``affected counties or parishes'' means a 
        county or parish described in paragraph (1).
            (3) The term ``evacuee'' means an affected individual who 
        has been displaced to another State.
            (4) The term ``eligible State'' means a State that has 
        provided care to affected individuals or evacuees under a 
        section 1115 project.

    (c) Application to Matching Requirements.--The non-Federal share 
paid under this section shall not be regarded as Federal funds for 
purposes of Medicaid matching requirements, the effect of which is to 
provide fiscal relief to the State in which the Medicaid eligible 
individual originally resided.
    (d) Time Limits on Payments.--
            (1) No payments shall be made by the Secretary under 
        subsection (a)(1)(A) or (a)(1)(C), for costs of health care 
        provided to an eligible evacuee or affected individual for 
        services for such individual incurred after June 30, 2006.
            (2) No payments shall be made by the Secretary under 
        subsection (a)(1)(B) or (a)(1)(D) for costs of health care 
        incurred after January 31, 2006.

[[Page 120 STAT. 134]]

            (3) No payments may be made under subsection (a)(1)(B) or 
        (a)(1)(D) for an item or service that an evacuee or an affected 
        individual has received from an individual or organization as 
        part of a public or private hurricane relief effort.

    (e) Appropriations.--For the purpose of providing funds for payments 
under this section, in addition to any funds made available for the 
National Disaster Medical System under the Department of Homeland 
Security for health care costs related to Hurricane Katrina, including 
under a section 1115 project, there is appropriated out of any money in 
the Treasury not otherwise appropriated, $2,000,000,000, to remain 
available to the Secretary until expended. The total amount of payments 
made under subsection (a) may not exceed the total amount appropriated 
under this subsection.

SEC. 6202. STATE HIGH RISK HEALTH INSURANCE POOL FUNDING.

    (a) <<NOTE: Appropriation authorization.>> In General.--There are 
hereby authorized and appropriated for fiscal year 2006--
            (1) $75,000,000 for grants under subsection (b)(1) of 
        section 2745 of the Public Health Service Act (42 U.S.C. 300gg-
        45); and
            (2) $15,000,000 for grants under subsection (a) of such 
        section.

    (b) Treatment.--The amount appropriated under--
            (1) paragraph (1) shall be treated as if it had been 
        appropriated under subsection (c)(2) of such section; and
            (2) paragraph (2) shall be treated as if it had been 
        appropriated under subsection (c)(1) of such section.

    (c) <<NOTE: Effective date. Applicability.>> References.--Effective 
upon the enactment of the State High Risk Pool Funding Extension Act of 
2005--
            (1) subsection (a)(1) shall be applied by substituting 
        ``subsections (b)(2) and (c)(3)'' for ``subsection ``(b)(1)'';
            (2) subsection (b)(1) shall be applied by substituting 
        ``(d)(1)(B)'' for ``(c)(2)''; and
            (3) subsection (b)(2) shall be applied by substituting 
        ``(d)(1)(A)'' for ``(c)(1)''.

SEC. 6203. IMPLEMENTATION FUNDING.

    For purposes of implementing the provisions of, and amendments made 
by, title V of this Act and this title--
            (1) the Secretary of Health and Human Services shall provide 
        for the transfer, in appropriate part from the Federal Hospital 
        Insurance Trust Fund established under section 1817 of the 
        Social Security Act (42 U.S.C. 1395i) and the Federal 
        Supplementary Medical Insurance Trust Fund established under 
        section 1841 of such Act (42 U.S.C. 1395t), of $30,000,000 to 
        the Centers for Medicare & Medicaid Services Program Management 
        Account for fiscal year 2006; and
            (2) out of any funds in the Treasury not otherwise 
        appropriated, there are appropriated to such Secretary for the 
        Centers for Medicare & Medicaid Services Program Management 
        Account, $30,000,000 for fiscal year 2006.

[[Page 120 STAT. 135]]

             TITLE VII--HUMAN RESOURCES AND OTHER PROVISIONS

SEC. 7001. REFERENCES.

    Except as otherwise expressly provided, wherever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the amendment or repeal shall be 
considered to be made to a section or other provision of the Social 
Security Act.

                            Subtitle A--TANF

SEC. 7101. TEMPORARY ASSISTANCE FOR NEEDY FAMILIES AND RELATED PROGRAMS 
            FUNDING THROUGH SEPTEMBER 30, 2010.

    (a) In General.--Activities authorized by part A of title IV and 
section 1108(b) of the Social Security Act (adjusted, as applicable, by 
or under this subtitle, the amendments made by this subtitle, and the 
TANF Emergency Response and Recovery Act of 2005) shall continue through 
September 30, 2010, in the manner authorized for fiscal year 2004, and 
out of any money in the Treasury of the United States not otherwise 
appropriated, there are hereby appropriated such sums as may be 
necessary for such purpose. Grants and payments may be made pursuant to 
this authority on a quarterly basis through fiscal year 2010 at the 
level provided for such activities for the corresponding quarter of 
fiscal year 2004 (or, as applicable, at such greater level as may result 
from the application of this subtitle, the amendments made by this 
subtitle, and the TANF Emergency Response and Recovery Act of 2005), 
except that in the case of section 403(a)(3) of the Social Security Act, 
grants and payments may be made pursuant to this authority only through 
fiscal year 2008 and in the case of section 403(a)(4) of the Social 
Security Act, no grants shall be made for any fiscal year occurring 
after fiscal year 2005.
    (b) Conforming Amendments.--Part A of title IV (42 U.S.C. 601 et 
seq.) is amended--
            (1) in section 403(a)(3)(H)(ii), <<NOTE: 42 USC 603.>> by 
        striking ``December, 31, 2005'' and inserting ``fiscal year 
        2008'';
            (2) in section 403(b)(3)(C)(ii), by striking ``2006'' and 
        inserting ``2010''; and
            (3) in section <<NOTE: 42 USC 609.>> 409(a)(7)--
                    (A) in subparagraph (A), by striking ``or 2007'' and 
                inserting ``2007, 2008, 2009, 2010, or 2011''; and
                    (B) in subparagraph (B)(ii), by striking ``2006'' 
                and inserting ``2010''.

    (c) Extension of the National Random Sample Study of Child Welfare 
Through September 30, 2010.--Activities authorized by section 429A of 
the Social Security Act shall continue through September 30, 2010, in 
the manner authorized for fiscal year 2004, and out of any money in the 
Treasury of the United States not otherwise appropriated, there are 
hereby appropriated such sums as may be necessary for such purpose. 
Grants and payments may be made pursuant to this authority on a 
quarterly basis through fiscal year 2010 at the level provided for such 
activities for the corresponding quarter of fiscal year 2004.

[[Page 120 STAT. 136]]

SEC. 7102. IMPROVED CALCULATION OF WORK PARTICIPATION RATES AND PROGRAM 
            INTEGRITY.

    (a) Recalibration of Caseload Reduction Credit.--
            (1) In general.--Section 407(b)(3)(A) (42 U.S.C. 
        607(b)(3)(A)) is amended--
                    (A) in clause (i), by inserting ``or any other State 
                program funded with qualified State expenditures (as 
                defined in section 409(a)(7)(B)(i))'' after ``this 
                part''; and
                    (B) by striking clause (ii) and inserting the 
                following:
                          ``(ii) the average monthly number of families 
                      that received assistance under any State program 
                      referred to in clause (i) during fiscal year 
                      2005.''.
            (2) Conforming amendment.--Section 407(b)(3)(B) (42 U.S.C. 
        607(b)(3)(B)) is amended by striking ``and eligibility 
        criteria'' and all that follows through the close parenthesis 
        and inserting ``and the eligibility criteria in effect during 
        fiscal year 2005''.

    (b) Inclusion of Families Receiving Assistance Under Separate State 
Programs in Calculation of Participation Rates.--
            (1) Section 407 (42 U.S.C. 607) is amended in each of 
        subsections (a)(1), (a)(2), (b)(1)(B)(i), (c)(2)(A)(i), (e)(1), 
        and (e)(2), by inserting ``or any other State program funded 
        with qualified State expenditures (as defined in section 
        409(a)(7)(B)(i))'' after ``this part''.
            (2) Section 411(a)(1) (42 U.S.C. 611(a)(1)) is amended--
                    (A) in subparagraph (A), by inserting ``or any other 
                State program funded with qualified State expenditures 
                (as defined in section 409(a)(7)(B)(i))'' before the 
                colon; and
                    (B) in subparagraph (B)(ii), by inserting ``and any 
                other State programs funded with qualified State 
                expenditures (as defined in section 409(a)(7)(B)(i))'' 
                after ``this part''.

    (c) Improved Verification and Oversight of Work Participation.--
            (1) In general.--Section 407(i) (42 U.S.C. 607(i)) is 
        amended to read as follows:

    ``(i) Verification of Work and Work-Eligible Individuals in Order To 
Implement Reforms.--
            ``(1) Secretarial direction and oversight.--
                    ``(A) Regulations for determining whether activities 
                may be counted as `work activities', how to count and 
                verify reported hours of work, and determining who is a 
                work-eligible individual.--
                          ``(i) <<NOTE: Deadline.>> In general.--Not 
                      later than June 30, 2006, the Secretary shall 
                      promulgate regulations to ensure consistent 
                      measurement of work participation rates under 
                      State programs funded under this part and State 
                      programs funded with qualified State expenditures 
                      (as defined in section 409(a)(7)(B)(i)), which 
                      shall include information with respect to--
                                    ``(I) determining whether an 
                                activity of a recipient of assistance 
                                may be treated as a work activity under 
                                subsection (d);
                                    ``(II) uniform methods for reporting 
                                hours of work by a recipient of 
                                assistance;

[[Page 120 STAT. 137]]

                                    ``(III) the type of documentation 
                                needed to verify reported hours of work 
                                by a recipient of assistance; and
                                    ``(IV) the circumstances under which 
                                a parent who resides with a child who is 
                                a recipient of assistance should be 
                                included in the work participation 
                                rates.
                          ``(ii) Issuance of regulations on an interim 
                      final basis.--The regulations referred to in 
                      clause (i) may be effective and final immediately 
                      on an interim basis as of the date of publication 
                      of the regulations. If <<NOTE: Public 
                      comment.>> the Secretary provides for an interim 
                      final regulation, the Secretary shall provide for 
                      a period of public comment on the regulation after 
                      the date of publication. The Secretary may change 
                      or revise the regulation after the public comment 
                      period.
                    ``(B) Oversight of state procedures.--The Secretary 
                shall review the State procedures established in 
                accordance with paragraph (2) to ensure that such 
                procedures are consistent with the regulations 
                promulgated under subparagraph (A) and are adequate to 
                ensure an accurate measurement of work participation 
                under the State programs funded under this part and any 
                other State programs funded with qualified State 
                expenditures (as so defined).
            ``(2) Requirement for states to establish and maintain work 
        participation verification procedures.--
        Not <<NOTE: Deadline.>> later than September 30, 2006, a State 
        to which a grant is made under section 403 shall establish 
        procedures for determining, with respect to recipients of 
        assistance under the State program funded under this part or 
        under any State programs funded with qualified State 
        expenditures (as so defined), whether activities may be counted 
        as work activities, how to count and verify reported hours of 
        work, and who is a work-eligible individual, in accordance with 
        the regulations promulgated pursuant to paragraph (1)(A)(i) and 
        shall establish internal controls to ensure compliance with the 
        procedures.''.
            (2) State penalty for failure to establish or comply with 
        work participation verification procedures.--Section 409(a) (42 
        U.S.C. 609(a)) is amended by adding at the end the following:
            ``(15) Penalty for failure to establish or comply with work 
        participation verification procedures.--
                    ``(A) In general.--If the Secretary determines that 
                a State to which a grant is made under section 403 in a 
                fiscal year has violated section 407(i)(2) during the 
                fiscal year, the Secretary shall reduce the grant 
                payable to the State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount equal to 
                not less than 1 percent and not more than 5 percent of 
                the State family assistance grant.
                    ``(B) Penalty based on severity of failure.--The 
                Secretary shall impose reductions under subparagraph (A) 
                with respect to a fiscal year based on the degree of 
                noncompliance.''.

    (d) <<NOTE: 42 USC 607 note.>> Effective Date.--The amendments made 
by subsections (a) and (b) shall take effect on October 1, 2006.

[[Page 120 STAT. 138]]

SEC. 7103. GRANTS FOR HEALTHY MARRIAGE PROMOTION AND RESPONSIBLE 
            FATHERHOOD.

    (a) Healthy Marriage and Family Funds.--Section 403(a)(2) (42 U.S.C. 
603(a)(2)) is amended to read as follows:
            ``(2) Healthy marriage promotion and responsible fatherhood 
        grants.--
                    ``(A) In general.--
                          ``(i) Use of funds.--Subject to subparagraphs 
                      (B) and (C), the Secretary may use the funds made 
                      available under subparagraph (D) for the purpose 
                      of conducting and supporting research and 
                      demonstration projects by public or private 
                      entities, and providing technical assistance to 
                      States, Indian tribes and tribal organizations, 
                      and such other entities as the Secretary may 
                      specify that are receiving a grant under another 
                      provision of this part.
                          ``(ii) Limitations.--The Secretary may not 
                      award funds made available under this paragraph on 
                      a noncompetitive basis, and may not provide any 
                      such funds to an entity for the purpose of 
                      carrying out healthy marriage promotion activities 
                      or for the purpose of carrying out activities 
                      promoting responsible fatherhood unless the entity 
                      has submitted to the Secretary an application 
                      which--
                                    ``(I) describes--
                                            ``(aa) how the programs or 
                                        activities proposed in the 
                                        application will address, as 
                                        appropriate, issues of domestic 
                                        violence; and
                                            ``(bb) what the applicant 
                                        will do, to the extent relevant, 
                                        to ensure that participation in 
                                        the programs or activities is 
                                        voluntary, and to inform 
                                        potential participants that 
                                        their participation is 
                                        voluntary; and
                                    ``(II) contains a commitment by the 
                                entity--
                                            ``(aa) to not use the funds 
                                        for any other purpose; and
                                            ``(bb) to consult with 
                                        experts in domestic violence or 
                                        relevant community domestic 
                                        violence coalitions in 
                                        developing the programs and 
                                        activities.
                          ``(iii) Healthy marriage promotion 
                      activities.--In clause (ii), the term `healthy 
                      marriage promotion activities' means the 
                      following:
                                    ``(I) Public advertising campaigns 
                                on the value of marriage and the skills 
                                needed to increase marital stability and 
                                health.
                                    ``(II) Education in high schools on 
                                the value of marriage, relationship 
                                skills, and budgeting.
                                    ``(III) Marriage education, marriage 
                                skills, and relationship skills 
                                programs, that may include parenting 
                                skills, financial management, conflict 
                                resolution, and job and career 
                                advancement, for non-married pregnant 
                                women and non-married expectant fathers.
                                    ``(IV) Pre-marital education and 
                                marriage skills training for engaged 
                                couples and for couples or individuals 
                                interested in marriage.

[[Page 120 STAT. 139]]

                                    ``(V) Marriage enhancement and 
                                marriage skills training programs for 
                                married couples.
                                    ``(VI) Divorce reduction programs 
                                that teach relationship skills.
                                    ``(VII) Marriage mentoring programs 
                                which use married couples as role models 
                                and mentors in at-risk communities.
                                    ``(VIII) Programs to reduce the 
                                disincentives to marriage in means-
                                tested aid programs, if offered in 
                                conjunction with any activity described 
                                in this subparagraph.
                    ``(B) Limitation on use of funds for demonstration 
                projects for coordination of provision of child welfare 
                and tanf services to tribal families at risk of child 
                abuse or neglect.--
                          ``(i) In general.--Of the amounts made 
                      available under subparagraph (D) for a fiscal 
                      year, the Secretary may not award more than 
                      $2,000,000 on a competitive basis to fund 
                      demonstration projects designed to test the 
                      effectiveness of tribal governments or tribal 
                      consortia in coordinating the provision to tribal 
                      families at risk of child abuse or neglect of 
                      child welfare services and services under tribal 
                      programs funded under this part.
                          ``(ii) Limitation on use of funds.--A grant 
                      made pursuant to clause (i) to such a project 
                      shall not be used for any purpose other than--
                                    ``(I) to improve case management for 
                                families eligible for assistance from 
                                such a tribal program;
                                    ``(II) for supportive services and 
                                assistance to tribal children in out-of-
                                home placements and the tribal families 
                                caring for such children, including 
                                families who adopt such children; and
                                    ``(III) for prevention services and 
                                assistance to tribal families at risk of 
                                child abuse and neglect.
                          ``(iii) Reports.--The Secretary may require a 
                      recipient of funds awarded under this subparagraph 
                      to provide the Secretary with such information as 
                      the Secretary deems relevant to enable the 
                      Secretary to facilitate and oversee the 
                      administration of any project for which funds are 
                      provided under this subparagraph.
                    ``(C) Limitation on use of funds for activities 
                promoting responsible fatherhood.--
                          ``(i) In general.--Of the amounts made 
                      available under subparagraph (D) for a fiscal 
                      year, the Secretary may not award more than 
                      $50,000,000 on a competitive basis to States, 
                      territories, Indian tribes and tribal 
                      organizations, and public and nonprofit community 
                      entities, including religious organizations, for 
                      activities promoting responsible fatherhood.
                          ``(ii) Activities promoting responsible 
                      fatherhood.--In this paragraph, the term 
                      `activities promoting responsible fatherhood' 
                      means the following:
                                    ``(I) Activities to promote marriage 
                                or sustain marriage through activities 
                                such as counseling, mentoring, 
                                disseminating information about the 
                                benefits of marriage and 2-parent 
                                involvement for

[[Page 120 STAT. 140]]

                                children, enhancing relationship skills, 
                                education regarding how to control 
                                aggressive behavior, disseminating 
                                information on the causes of domestic 
                                violence and child abuse, marriage 
                                preparation programs, premarital 
                                counseling, marital inventories, skills-
                                based marriage education, financial 
                                planning seminars, including improving a 
                                family's ability to effectively manage 
                                family business affairs by means such as 
                                education, counseling, or mentoring on 
                                matters related to family finances, 
                                including household management, 
                                budgeting, banking, and handling of 
                                financial transactions and home 
                                maintenance, and divorce education and 
                                reduction programs, including mediation 
                                and counseling.
                                    ``(II) Activities to promote 
                                responsible parenting through activities 
                                such as counseling, mentoring, and 
                                mediation, disseminating information 
                                about good parenting practices, skills-
                                based parenting education, encouraging 
                                child support payments, and other 
                                methods.
                                    ``(III) Activities to foster 
                                economic stability by helping fathers 
                                improve their economic status by 
                                providing activities such as work first 
                                services, job search, job training, 
                                subsidized employment, job retention, 
                                job enhancement, and encouraging 
                                education, including career-advancing 
                                education, dissemination of employment 
                                materials, coordination with existing 
                                employment services such as welfare-to-
                                work programs, referrals to local 
                                employment training initiatives, and 
                                other methods.
                                    ``(IV) Activities to promote 
                                responsible fatherhood that are 
                                conducted through a contract with a 
                                nationally recognized, nonprofit 
                                fatherhood promotion organization, such 
                                as the development, promotion, and 
                                distribution of a media campaign to 
                                encourage the appropriate involvement of 
                                parents in the life of any child and 
                                specifically the issue of responsible 
                                fatherhood, and the development of a 
                                national clearinghouse to assist States 
                                and communities in efforts to promote 
                                and support marriage and responsible 
                                fatherhood.
                    ``(D) Appropriation.--Out of any money in the 
                Treasury of the United States not otherwise 
                appropriated, there are appropriated $150,000,000 for 
                each of fiscal years 2006 through 2010, for expenditure 
                in accordance with this paragraph.''.

    (b) Counting of Spending on Certain Pro-Family Activities.--Section 
409(a)(7)(B)(i) (42 U.S.C. 609(a)(7)(B)(i)) is amended by adding at the 
end the following:
                                    ``(V) Counting of spending on 
                                certain pro-family activities.--The term 
                                `qualified State expenditures' includes 
                                the total expenditures by the State 
                                during the fiscal year under all State 
                                programs for a purpose described in 
                                paragraph (3) or (4) of section 
                                401(a).''.

[[Page 120 STAT. 141]]

                         Subtitle B--Child Care

SEC. 7201. ENTITLEMENT FUNDING.

    Section 418(a)(3) (42 U.S.C. 618(a)(3)) is amended--
            (1) by striking ``and'' at the end of subparagraph (E);
            (2) by striking the period at the end of subparagraph (F) 
        and inserting a semicolon; and
            (3) by adding at the end the following:
                    ``(G) $2,917,000,000 for each of fiscal years 2006 
                through 2010.''.

                        Subtitle C--Child Support

SEC. 7301. ASSIGNMENT AND DISTRIBUTION OF CHILD SUPPORT.

    (a) Modification of Rule Requiring Assignment of Support Rights as a 
Condition of Receiving TANF.--Section 408(a)(3) (42 U.S.C. 608(a)(3)) is 
amended to read as follows:
            ``(3) No assistance for families not assigning certain 
        support rights to the state.--A State to which a grant is made 
        under section 403 shall require, as a condition of paying 
        assistance to a family under the State program funded under this 
        part, that a member of the family assign to the State any right 
        the family member may have (on behalf of the family member or of 
        any other person for whom the family member has applied for or 
        is receiving such assistance) to support from any other person, 
        not exceeding the total amount of assistance so paid to the 
        family, which accrues during the period that the family receives 
        assistance under the program.''.

    (b) Increasing Child Support Payments to Families and Simplifying 
Child Support Distribution Rules.--
            (1) Distribution rules.--
                    (A) In general.--Section 457(a) (42 U.S.C. 657(a)) 
                is amended to read as follows:

    ``(a) In General.--Subject to subsections (d) and (e), the amounts 
collected on behalf of a family as support by a State pursuant to a plan 
approved under this part shall be distributed as follows:
            ``(1) Families receiving assistance.--In the case of a 
        family receiving assistance from the State, the State shall--
                    ``(A) pay to the Federal Government the Federal 
                share of the amount collected, subject to paragraph 
                (3)(A);
                    ``(B) retain, or pay to the family, the State share 
                of the amount collected, subject to paragraph (3)(B); 
                and
                    ``(C) pay to the family any remaining amount.
            ``(2) Families that formerly received assistance.--In the 
        case of a family that formerly received assistance from the 
        State:
                    ``(A) Current support.--To the extent that the 
                amount collected does not exceed the current support 
                amount, the State shall pay the amount to the family.
                    ``(B) Arrearages.--Except as otherwise provided in 
                an election made under section 454(34), to the extent 
                that the amount collected exceeds the current support 
                amount, the State--

[[Page 120 STAT. 142]]

                          ``(i) shall first pay to the family the excess 
                      amount, to the extent necessary to satisfy support 
                      arrearages not assigned pursuant to section 
                      408(a)(3);
                          ``(ii) if the amount collected exceeds the 
                      amount required to be paid to the family under 
                      clause (i), shall--
                                    ``(I) pay to the Federal Government 
                                the Federal share of the excess amount 
                                described in this clause, subject to 
                                paragraph (3)(A); and
                                    ``(II) retain, or pay to the family, 
                                the State share of the excess amount 
                                described in this clause, subject to 
                                paragraph (3)(B); and
                          ``(iii) shall pay to the family any remaining 
                      amount.
            ``(3) Limitations.--
                    ``(A) Federal reimbursements.--The total of the 
                amounts paid by the State to the Federal Government 
                under paragraphs (1) and (2) of this subsection with 
                respect to a family shall not exceed the Federal share 
                of the amount assigned with respect to the family 
                pursuant to section 408(a)(3).
                    ``(B) State reimbursements.--The total of the 
                amounts retained by the State under paragraphs (1) and 
                (2) of this subsection with respect to a family shall 
                not exceed the State share of the amount assigned with 
                respect to the family pursuant to section 408(a)(3).
            ``(4) Families that never received assistance.--In the case 
        of any other family, the State shall distribute to the family 
        the portion of the amount so collected that remains after 
        withholding any fee pursuant to section 454(6)(B)(ii).
            ``(5) Families under certain agreements.--Notwithstanding 
        paragraphs (1) through (3), in the case of an amount collected 
        for a family in accordance with a cooperative agreement under 
        section 454(33), the State shall distribute the amount collected 
        pursuant to the terms of the agreement.''.
                    (B) State option to pass through additional support 
                with federal financial participation beginning with 
                fiscal year 2009.--
                          (i) In general.--Section 457(a) (42 U.S.C. 
                      657(a)) is amended by adding at the end the 
                      following:
            ``(7) State option to pass through additional support with 
        federal financial participation.--
                    ``(A) Families that formerly received assistance.--
                Notwithstanding paragraph (2), a State shall not be 
                required to pay to the Federal Government the Federal 
                share of an amount collected on behalf of a family that 
                formerly received assistance from the State to the 
                extent that the State pays the amount to the family.
                    ``(B) Families that currently receive assistance.--
                          ``(i) In general.--Notwithstanding paragraph 
                      (1), in the case of a family that receives 
                      assistance from the State, a State shall not be 
                      required to pay to the Federal Government the 
                      Federal share of the excepted portion (as defined 
                      in clause (ii)) of any amount collected on behalf 
                      of such family during a month to the extent that--
                                    ``(I) the State pays the excepted 
                                portion to the family; and

[[Page 120 STAT. 143]]

                                    ``(II) the excepted portion is 
                                disregarded in determining the amount 
                                and type of assistance provided to the 
                                family under such program.
                          ``(ii) Excepted portion defined.--For purposes 
                      of this subparagraph, the term ``excepted 
                      portion'' means that portion of the amount 
                      collected on behalf of a family during a month 
                      that does not exceed $100 per month, or in the 
                      case of a family that includes 2 or more children, 
                      that does not exceed an amount established by the 
                      State that is not more than $200 per month.''.
                          (ii) <<NOTE: 42 USC 657 note.>> Effective 
                      date.--The amendment made by clause (i) shall take 
                      effect on October 1, 2008.
                          (iii) Redesignation.--Effective October 1, 
                      2009, paragraph (7) of section 457(a) of the 
                      Social Security Act (as added by clause (i)) is 
                      redesignated as paragraph (6).
                    (C) State plan to include election as to which rules 
                to apply in distributing child support arrearages 
                collected on behalf of families formerly receiving 
                assistance.--Section 454 (42 U.S.C. 654) is amended--
                          (i) by striking ``and'' at the end of 
                      paragraph (32);
                          (ii) by striking the period at the end of 
                      paragraph (33) and inserting ``; and''; and
                          (iii) by inserting after paragraph (33) the 
                      following:
            ``(34) include an election by the State to apply section 
        457(a)(2)(B) of this Act or former section 457(a)(2)(B) of this 
        Act (as in effect for the State immediately before the date this 
        paragraph first applies to the State) to the distribution of the 
        amounts which are the subject of such sections and, for so long 
        as the State elects to so apply such former section, the 
        amendments made by subsection (b)(1) of section 7301 of the 
        Deficit Reduction Act of 2005 shall not apply with respect to 
        the State, notwithstanding subsection (e) of such section 
        7301.''.
            (2) Current support amount defined.--Section 457(c) (42 
        U.S.C. 657(c)) is amended by adding at the end the following:
            ``(5) Current support amount.--The term `current support 
        amount' means, with respect to amounts collected as support on 
        behalf of a family, the amount designated as the monthly support 
        obligation of the noncustodial parent in the order requiring the 
        support or calculated by the State based on the order.''.

    (c) State Option To Discontinue Older Support Assignments.--Section 
457(b) (42 U.S.C. 657(b)) is amended to read as follows:
    ``(b) Continuation of Assignments.--
            ``(1) State option to discontinue pre-1997 support 
        assignments.--
                    ``(A) In general.--Any rights to support obligations 
                assigned to a State as a condition of receiving 
                assistance from the State under part A and in effect on 
                September 30, 1997 (or such earlier date on or after 
                August 22, 1996, as the State may choose), may remain 
                assigned after such date.

[[Page 120 STAT. 144]]

                    ``(B) Distribution of amounts after assignment 
                discontinuation.--If a State chooses to discontinue the 
                assignment of a support obligation described in 
                subparagraph (A), the State may treat amounts collected 
                pursuant to the assignment as if the amounts had never 
                been assigned and may distribute the amounts to the 
                family in accordance with subsection (a)(4).
            ``(2) State option to discontinue post-1997 assign- ments.--
                    ``(A) In general.--Any rights to support obligations 
                accruing before the date on which a family first 
                receives assistance under part A that are assigned to a 
                State under that part and in effect before the 
                implementation date of this section may remain assigned 
                after such date.
                    ``(B) Distribution of amounts after assignment 
                discontinuation.--If a State chooses to discontinue the 
                assignment of a support obligation described in 
                subparagraph (A), the State may treat amounts collected 
                pursuant to the assignment as if the amounts had never 
                been assigned and may distribute the amounts to the 
                family in accordance with subsection (a)(4).''.

    (d) Conforming Amendments.--Section 6402(c) of the Internal Revenue 
Code of 1986 <<NOTE: 26 USC 6402.>> (relating to offset of past-due 
support against overpayments) is amended--
            (1) in the first sentence, by striking ``the Social Security 
        Act.'' and inserting ``of such Act.''; and
            (2) by striking the third sentence and inserting the 
        following: ``The Secretary shall apply a reduction under this 
        subsection first to an amount certified by the State as past due 
        support under section 464 of the Social Security Act before any 
        other reductions allowed by law.''.

    (e) <<NOTE: 42 USC 608 note.>> Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        section, the amendments made by the preceding provisions of this 
        section shall take effect on October 1, 2009, and shall apply to 
        payments under parts A and D of title IV of the Social Security 
        Act for calendar quarters beginning on or after such date, and 
        without regard to whether regulations to implement the 
        amendments (in the case of State programs operated under such 
        part D) are promulgated by such date.
            (2) State option to accelerate effective date.--
        Notwithstanding paragraph (1), a State may elect to have the 
        amendments made by the preceding provisions of this section 
        apply to the State and to amounts collected by the State (and 
        the payments under parts A and D), on and after such date as the 
        State may select that is not earlier than October 1, 2008, and 
        not later than September 30, 2009.

    (f) Use of Tax Refund Intercept Program To Collect Past-Due Child 
Support on Behalf of Children Who Are Not Minors.--
            (1) In general.--Section 464 (42 U.S.C. 664) is amended--
                    (A) in subsection (a)(2)(A), by striking ``(as that 
                term is defined for purposes of this paragraph under 
                subsection (c))''; and
                    (B) in subsection (c)--
                          (i) in paragraph (1)--

[[Page 120 STAT. 145]]

                                    (I) by striking ``(1) Except as 
                                provided in paragraph (2), as used in'' 
                                and inserting ``In''; and
                                    (II) by inserting ``(whether or not 
                                a minor)'' after ``a child'' each place 
                                it appears; and
                          (ii) by striking paragraphs (2) and (3).
            (2) <<NOTE: 42 USC 664 note.>> Effective date.--The 
        amendments made by paragraph (1) shall take effect on October 1, 
        2007.

    (g) State Option To Use Statewide Automated Data Processing and 
Information Retrieval System for Interstate Cases.--Section 
466(a)(14)(A)(iii) (42 U.S.C. 666(a)(14)(A)(iii)) is amended by 
inserting before the semicolon the following: ``(but the assisting State 
may establish a corresponding case based on such other State's request 
for assistance)''.

SEC. 7302. MANDATORY REVIEW AND ADJUSTMENT OF CHILD SUPPORT ORDERS FOR 
            FAMILIES RECEIVING TANF.

    (a) In General.--Section 466(a)(10)(A)(i) (42 U.S.C. 
666(a)(10)(A)(i)) is amended--
            (1) by striking ``parent, or,'' and inserting ``parent or''; 
        and
            (2) by striking ``upon the request of the State agency under 
        the State plan or of either parent,''.

    (b) <<NOTE: 42 USC 666 note.>> Effective Date.--The amendments made 
by subsection (a) shall take effect on October 1, 2007.

SEC. 7303. DECREASE IN AMOUNT OF CHILD SUPPORT ARREARAGE TRIGGERING 
            PASSPORT DENIAL.

    (a) In General.--Section 452(k)(1) (42 U.S.C. 652(k)(1)) is amended 
by striking ``$5,000'' and inserting ``$2,500''.
    (b) Conforming Amendment.--Section 454(31) (42 U.S.C. 654(31)) is 
amended by striking ``$5,000'' and inserting ``$2,500''.
    (c) <<NOTE: 42 USC 652 note.>> Effective Date.--The amendments made 
by this section shall take effect on October 1, 2006.

SEC. 7304. MAINTENANCE OF TECHNICAL ASSISTANCE FUNDING.

    Section 452(j) (42 U.S.C. 652(j)) is amended by inserting ``or the 
amount appropriated under this paragraph for fiscal year 2002, whichever 
is greater'' before ``, which shall be available''.

SEC. 7305. MAINTENANCE OF FEDERAL PARENT LOCATOR SERVICE FUNDING.

    Section 453(o) (42 U.S.C. 653(o)) is amended--
            (1) in the first sentence, by inserting ``or the amount 
        appropriated under this paragraph for fiscal year 2002, 
        whichever is greater'' before ``, which shall be available''; 
        and
            (2) in the second sentence, by striking ``for each of fiscal 
        years 1997 through 2001''.

SEC. 7306. INFORMATION COMPARISONS WITH INSURANCE DATA.

    (a) Duties of the Secretary.--Section 452 (42 U.S.C. 652) is amended 
by adding at the end the following:
    ``(l) Comparisons With Insurance Information.--
            ``(1) In general.--The Secretary, through the Federal Parent 
        Locator Service, may--
                    ``(A) compare information concerning individuals 
                owing past-due support with information maintained by 
                insurers (or their agents) concerning insurance claims, 
                settlements, awards, and payments; and

[[Page 120 STAT. 146]]

                    ``(B) furnish information resulting from the data 
                matches to the State agencies responsible for collecting 
                child support from the individuals.
            ``(2) Liability.--An insurer (including any agent of an 
        insurer) shall not be liable under any Federal or State law to 
        any person for any disclosure provided for under this 
        subsection, or for any other action taken in good faith in 
        accordance with this subsection.''.

    (b) State Reimbursement of Federal Costs.--Section 453(k)(3) (42 
U.S.C. 653(k)(3)) is amended by inserting ``or section 452(l)'' after 
``pursuant to this section''.

SEC. 7307. REQUIREMENT THAT STATE CHILD SUPPORT ENFORCEMENT AGENCIES 
            SEEK MEDICAL SUPPORT FOR CHILDREN FROM EITHER PARENT.

    (a) State Agencies Required To Seek Medical Support From Either 
Parent.--
            (1) In general.--Section 466(a)(19)(A) (42 U.S.C. 
        666(a)(19)(A)) is amended by striking ``which include a 
        provision for the health care coverage of the child are 
        enforced'' and inserting ``shall include a provision for medical 
        support for the child to be provided by either or both parents, 
        and shall be enforced''.
            (2) Conforming amendments.--
                    (A) Title iv-d.--
                          (i) Section 452(f) (42 U.S.C. 652(f)) is 
                      amended by striking ``include medical support as 
                      part of any child support order and enforce 
                      medical support'' and inserting ``enforce medical 
                      support included as part of a child support 
                      order''.
                          (ii) Section 466(a)(19) (42 U.S.C. 
                      666(a)(19)), as amended by paragraph (1) of this 
                      subsection, is amended--
                                    (I) in subparagraph (A)--
                                            (aa) by striking ``section 
                                        401(e)(3)(C)'' and inserting 
                                        ``section 401(e)''; and
                                            (bb) by striking ``section 
                                        401(f)(5)(C)'' and inserting 
                                        ``section 401(f)'';
                                    (II) in subparagraph (B)--
                                            (aa) by striking 
                                        ``noncustodial'' each place it 
                                        appears; and
                                            (bb) in clause (iii), by 
                                        striking ``section 466(b)'' and 
                                        inserting ``subsection (b)''; 
                                        and
                                    (III) in subparagraph (C), by 
                                striking ``noncustodial'' each place it 
                                appears and inserting ``obligated''.
                    (B) State or local governmental group health 
                plans.--Section 401(e)(2) of the Child Support 
                Performance and Incentive Act of 1998 (29 U.S.C. 1169 
                note) is amended, in the matter preceding subparagraph 
                (A), by striking ``who is a noncustodial parent of the 
                child''.
                    (C) Church plans.--Section 401(f)(5)(C) of the Child 
                Support Performance and Incentive Act of 1998 (29 U.S.C. 
                1169 note) is amended by striking ``noncustodial'' each 
                place it appears.

    (b) Enforcement of Medical Support Requirements.--Section 452(f) (42 
U.S.C. 652(f)), as amended by subsection (a)(2)(A)(i),

[[Page 120 STAT. 147]]

is amended by inserting after the first sentence the following: ``A 
State agency administering the program under this part may enforce 
medical support against a custodial parent if health care coverage is 
available to the custodial parent at a reasonable cost, notwithstanding 
any other provision of this part.''.
    (c) Definition of Medical Support.--Section 452(f) (42 U.S.C. 
652(f)), as amended by subsections (a)(2)(A)(i) and (b) of this section, 
is amended by adding at the end the following: ``For purposes of this 
part, the term `medical support' may include health care coverage, such 
as coverage under a health insurance plan (including payment of costs of 
premiums, co-payments, and deductibles) and payment for medical expenses 
incurred on behalf of a child.''.

SEC. 7308. REDUCTION OF FEDERAL MATCHING RATE FOR LABORATORY COSTS 
            INCURRED IN DETERMINING PATERNITY.

    (a) In General.--Section 455(a)(1)(C) (42 U.S.C. 655(a)(1)(C)) is 
amended by striking ``90 percent (rather than the percentage specified 
in subparagraph (A))'' and inserting ``66 percent''.
    (b) <<NOTE: 42 USC 655 note.>> Effective Date.--The amendment made 
by subsection (a) shall take effect on October 1, 2006, and shall apply 
to costs incurred on or after that date.

SEC. 7309. ENDING FEDERAL MATCHING OF STATE SPENDING OF FEDERAL 
            INCENTIVE PAYMENTS.

    (a) In General.--Section 455(a)(1) (42 U.S.C. 655(a)(1)) is amended 
by inserting ``from amounts paid to the State under section 458 or'' 
before ``to carry out an agreement''.
    (b) <<NOTE: 42 USC 655 note.>> Effective Date.--The amendment made 
by subsection (a) shall take effect on October 1, 2007.

SEC. 7310. MANDATORY FEE FOR SUCCESSFUL CHILD SUPPORT COLLECTION FOR 
            FAMILY THAT HAS NEVER RECEIVED TANF.

    (a) In General.--Section 454(6)(B) (42 U.S.C. 654(6)(B)) is 
amended--
            (1) by inserting ``(i)'' after ``(B)'';
            (2) by redesignating clauses (i) and (ii) as subclauses (I) 
        and (II), respectively;
            (3) by adding ``and'' after the semicolon; and
            (4) by adding after and below the end the following new 
        clause:
                    ``(ii) in the case of an individual who has never 
                received assistance under a State program funded under 
                part A and for whom the State has collected at least 
                $500 of support, the State shall impose an annual fee of 
                $25 for each case in which services are furnished, which 
                shall be retained by the State from support collected on 
                behalf of the individual (but not from the first $500 so 
                collected), paid by the individual applying for the 
                services, recovered from the absent parent, or paid by 
                the State out of its own funds (the payment of which 
                from State funds shall not be considered as an 
                administrative cost of the State for the operation of 
                the plan, and the fees shall be considered income to the 
                program);''.

    (b) Conforming Amendments.--Section 457(a)(3) (42 U.S.C. 657(a)(3)) 
is amended to read as follows:
            ``(3) Families that never received assistance.--In the case 
        of any other family, the State shall distribute to the

[[Page 120 STAT. 148]]

        family the portion of the amount so collected that remains after 
        withholding any fee pursuant to section 454(6)(B)(ii).''.

    (c) <<NOTE: 42 USC 654 note.>> Effective Date.--The amendments made 
by this section shall take effect on October 1, 2006.

SEC. 7311. <<NOTE: 42 USC 654 note.>> EXCEPTION TO GENERAL EFFECTIVE 
            DATE FOR STATE PLANS REQUIRING STATE LAW AMENDMENTS.

    In the case of a State plan under part D of title IV of the Social 
Security Act which the Secretary determines requires State legislation 
in order for the plan to meet the additional requirements imposed by the 
amendments made by this subtitle, the effective date of the amendments 
imposing the additional requirements shall be 3 months after the first 
day of the first calendar quarter beginning after the close of the first 
regular session of the State legislature that begins after the date of 
the enactment of this Act. For purposes of the preceding sentence, in 
the case of a State that has a 2-year legislative session, each year of 
the session shall be considered to be a separate regular session of the 
State legislature.

                        Subtitle D--Child Welfare

SEC. 7401. STRENGTHENING COURTS.

    (a) Court Improvement Grants.--
            (1) In general.--Section 438(a) (42 U.S.C. 629h(a)) is 
        amended--
                    (A) by striking ``and'' at the end of paragraph (1);
                    (B) by striking the period at the end of paragraph 
                (2) and inserting a semicolon; and
                    (C) by adding at the end the following:
            ``(3) to ensure that the safety, permanence, and well-being 
        needs of children are met in a timely and complete manner; and
            ``(4) to provide for the training of judges, attorneys and 
        other legal personnel in child welfare cases.''.
            (2) Applications.--Section 438(b) (42 U.S.C. 629h(b)) is 
        amended to read as follows:

    ``(b) Applications.--
            ``(1) In general.--In order to be eligible to receive a 
        grant under this section, a highest State court shall submit to 
        the Secretary an application at such time, in such form, and 
        including such information and assurances as the Secretary may 
        require, including--
                    ``(A) in the case of a grant for the purpose 
                described in subsection (a)(3), a description of how 
                courts and child welfare agencies on the local and State 
                levels will collaborate and jointly plan for the 
                collection and sharing of all relevant data and 
                information to demonstrate how improved case tracking 
                and analysis of child abuse and neglect cases will 
                produce safe and timely permanency decisions;
                    ``(B) in the case of a grant for the purpose 
                described in subsection (a)(4), a demonstration that a 
                portion of the grant will be used for cross-training 
                initiatives that are jointly planned and executed with 
                the State agency or

[[Page 120 STAT. 149]]

                any other agency under contract with the State to 
                administer the State program under the State plan under 
                subpart 1, the State plan approved under section 434, or 
                the State plan approved under part E; and
                    ``(C) in the case of a grant for any purpose 
                described in subsection (a), a demonstration of 
                meaningful and ongoing collaboration among the courts in 
                the State, the State agency or any other agency under 
                contract with the State who is responsible for 
                administering the State program under part B or E, and, 
                where applicable, Indian tribes.
            ``(2) <<NOTE: Grants.>> Separate applications.--A highest 
        State court desiring grants under this section for 2 or more 
        purposes shall submit separate applications for the following 
        grants:
                    ``(A) A grant for the purposes described in 
                paragraphs (1) and (2) of subsection (a).
                    ``(B) A grant for the purpose described in 
                subsection (a)(3).
                    ``(C) A grant for the purpose described in 
                subsection (a)(4).''.
            (3) Allotments.--Section 438(c) <<NOTE: 42 USC 629h.>> (42 
        U.S.C. 429h(c)) is amended--
                    (A) in paragraph (1)--
                          (i) by inserting ``of this section for a grant 
                      described in subsection (b)(2)(A) of this 
                      section'' after ``subsection (b)''; and
                          (ii) by striking ``paragraph (2) of this 
                      subsection'' and inserting ``subparagraph (B) of 
                      this paragraph'';
                    (B) in paragraph (2)--
                          (i) by striking ``this paragraph'' and 
                      inserting ``this subparagraph'';
                          (ii) by striking ``paragraph (1) of this 
                      subsection'' and inserting ``subparagraph (A) of 
                      this paragraph''; and
                          (iii) by inserting ``for such a grant'' after 
                      ``subsection (b)'';
                    (C) by redesignating and indenting paragraphs (1) 
                and (2) as subparagraphs (A) and (B), respectively;
                    (D) by inserting before and above such subparagraph 
                (A) the following:
            ``(1) Grants to assess and improve handling of court 
        proceedings relating to foster care and adoption.--''; and
                    (E) by adding at the end the following:
            ``(2) Grants for improved data collection and training.--
                    ``(A) In general.--Each highest State court which 
                has an application approved under subsection (b) of this 
                section for a grant referred to in subparagraph (B) or 
                (C) of subsection (b)(2) shall be entitled to payment, 
                for each of fiscal years 2006 through 2010, from the 
                amount made available under whichever of paragraph (1) 
                or (2) of subsection (e) applies with respect to the 
                grant, of an amount equal to the sum of $85,000 plus the 
                amount described in subparagraph (B) of this paragraph 
                for the fiscal year with respect to the grant.
                    ``(B) Formula.--The amount described in this 
                subparagraph for any fiscal year with respect to a grant 
                referred

[[Page 120 STAT. 150]]

                to in subparagraph (B) or (C) of subsection (b)(2) is 
                the amount that bears the same ratio to the amount made 
                available under subsection (e) for such a grant (reduced 
                by the dollar amount specified in subparagraph (A) of 
                this paragraph) as the number of individuals in the 
                State who have not attained 21 years of age bears to the 
                total number of such individuals in all States the 
                highest State courts of which have approved applications 
                under subsection (b) for such a grant.''.
            (4) Funding.--Section 438 (42 U.S.C. 629h) is amended by 
        adding at the end the following:

    ``(e) Funding for Grants for Improved Data Collection and 
Training.--Out of any money in the Treasury of the United States not 
otherwise appropriated, there are appropriated to the Secretary, for 
each of fiscal years 2006 through 2010--
            ``(1) $10,000,000 for grants referred to in subsection 
        (b)(2)(B); and
            ``(2) $10,000,000 for grants referred to in subsection 
        (b)(2)(C).''.

    (b) Requirement To Demonstrate Meaningful Collaboration Between 
Courts and Agencies in Child Welfare Services Programs.--Section 422(b) 
(42 U.S.C. 622(b)) is amended--
            (1) by striking ``and'' at the end of paragraph (13);
            (2) by striking the period at the end of paragraph (14) and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(15) demonstrate substantial, ongoing, and meaningful 
        collaboration with State courts in the development and 
        implementation of the State plan under subpart 1, the State plan 
        approved under subpart 2, and the State plan approved under part 
        E, and in the development and implementation of any program 
        improvement plan required under section 1123A.''.

    (c) Use of Child Welfare Records in State Court Proceedings.--
Section 471 (42 U.S.C. 671) is amended--
            (1) in subsection (a)(8), by inserting ``subject to 
        subsection (c),'' after ``(8)''; and
            (2) by adding at the end the following:

    ``(c) Use of Child Welfare Records in State Court Proceedings.--
Subsection (a)(8) shall not be construed to limit the flexibility of a 
State in determining State policies relating to public access to court 
proceedings to determine child abuse and neglect or other court hearings 
held pursuant to part B or this part, except that such policies shall, 
at a minimum, ensure the safety and well-being of the child, parents, 
and family.''.

SEC. 7402. FUNDING OF SAFE AND STABLE FAMILIES PROGRAMS.

    Section 436(a) (42 U.S.C. 629f(a)) is amended to read as follows:
    ``(a) Authorization.--In addition to any amount otherwise made 
available to carry out this subpart, there are authorized to be 
appropriated to carry out this subpart $345,000,000 for fiscal year 
2006. Notwithstanding the preceding sentence, the total amount 
authorized to be so appropriated for fiscal year 2006 under this 
subsection and under this subsection (as in effect before the date of 
the enactment of the Deficit Reduction Act of 2005) is $345,000,000.''.

[[Page 120 STAT. 151]]

SEC. 7403. CLARIFICATION REGARDING FEDERAL MATCHING OF CERTAIN 
            ADMINISTRATIVE COSTS UNDER THE FOSTER CARE MAINTENANCE 
            PAYMENTS PROGRAM.

    (a) Administrative Costs Relating to Unlicensed Care.--Section 472 
(42 U.S.C. 672) is amended by inserting after subsection (h) the 
following:
    ``(i) Administrative Costs Associated With Otherwise Eligible 
Children Not in Licensed Foster Care Settings.--Expenditures by a State 
that would be considered administrative expenditures for purposes of 
section 474(a)(3) if made with respect to a child who was residing in a 
foster family home or child-care institution shall be so considered with 
respect to a child not residing in such a home or institution--
            ``(1) in the case of a child who has been removed in 
        accordance with subsection (a) of this section from the home of 
        a relative specified in section 406(a) (as in effect on July 16, 
        1996), only for expenditures--
                    ``(A) with respect to a period of not more than the 
                lesser of 12 months or the average length of time it 
                takes for the State to license or approve a home as a 
                foster home, in which the child is in the home of a 
                relative and an application is pending for licensing or 
                approval of the home as a foster family home; or
                    ``(B) with respect to a period of not more than 1 
                calendar month when a child moves from a facility not 
                eligible for payments under this part into a foster 
                family home or child care institution licensed or 
                approved by the State; and
            ``(2) in the case of any other child who is potentially 
        eligible for benefits under a State plan approved under this 
        part and at imminent risk of removal from the home, only if--
                    ``(A) reasonable efforts are being made in 
                accordance with section 471(a)(15) to prevent the need 
                for, or if necessary to pursue, removal of the child 
                from the home; and
                    ``(B) the State agency has made, not less often than 
                every 6 months, a determination (or redetermination) as 
                to whether the child remains at imminent risk of removal 
                from the home.''.

    (b) Conforming Amendment.--Section 474(a)(3) (42 U.S.C. 674(a)(3)) 
is amended by inserting ``subject to section 472(i)'' before ``an amount 
equal to''.

SEC. 7404. CLARIFICATION OF ELIGIBILITY FOR FOSTER CARE MAINTENANCE 
            PAYMENTS AND ADOPTION ASSISTANCE.

    (a) Foster Care Maintenance Payments.--Section 472(a) (42 U.S.C. 
672(a)) is amended to read as follows:
    ``(a) In General.--
            ``(1) Eligibility.--Each State with a plan approved under 
        this part shall make foster care maintenance payments on behalf 
        of each child who has been removed from the home of a relative 
        specified in section 406(a) (as in effect on July 16, 1996) into 
        foster care if--
                    ``(A) the removal and foster care placement met, and 
                the placement continues to meet, the requirements of 
                paragraph (2); and

[[Page 120 STAT. 152]]

                    ``(B) the child, while in the home, would have met 
                the AFDC eligibility requirement of paragraph (3).
            ``(2) Removal and foster care placement requirements.--The 
        removal and foster care placement of a child meet the 
        requirements of this paragraph if--
                    ``(A) the removal and foster care placement are in 
                accordance with--
                          ``(i) a voluntary placement agreement entered 
                      into by a parent or legal guardian of the child 
                      who is the relative referred to in paragraph (1); 
                      or
                          ``(ii) a judicial determination to the effect 
                      that continuation in the home from which removed 
                      would be contrary to the welfare of the child and 
                      that reasonable efforts of the type described in 
                      section 471(a)(15) for a child have been made;
                    ``(B) the child's placement and care are the 
                responsibility of--
                          ``(i) the State agency administering the State 
                      plan approved under section 471; or
                          ``(ii) any other public agency with which the 
                      State agency administering or supervising the 
                      administration of the State plan has made an 
                      agreement which is in effect; and
                    ``(C) the child has been placed in a foster family 
                home or child-care institution.
            ``(3) AFDC eligibility requirement.--
                    ``(A) In general.--A child in the home referred to 
                in paragraph (1) would have met the AFDC eligibility 
                requirement of this paragraph if the child--
                          ``(i) would have received aid under the State 
                      plan approved under section 402 (as in effect on 
                      July 16, 1996) in the home, in or for the month in 
                      which the agreement was entered into or court 
                      proceedings leading to the determination referred 
                      to in paragraph (2)(A)(ii) of this subsection were 
                      initiated; or
                          ``(ii)(I) would have received the aid in the 
                      home, in or for the month referred to in clause 
                      (i), if application had been made therefor; or
                          ``(II) had been living in the home within 6 
                      months before the month in which the agreement was 
                      entered into or the proceedings were initiated, 
                      and would have received the aid in or for such 
                      month, if, in such month, the child had been 
                      living in the home with the relative referred to 
                      in paragraph (1) and application for the aid had 
                      been made.
                    ``(B) Resources determination.--For purposes of 
                subparagraph (A), in determining whether a child would 
                have received aid under a State plan approved under 
                section 402 (as in effect on July 16, 1996), a child 
                whose resources (determined pursuant to section 
                402(a)(7)(B), as so in effect) have a combined value of 
                not more than $10,000 shall be considered a child whose 
                resources have a combined value of not more than $1,000 
                (or such lower amount as the State may determine for 
                purposes of section 402(a)(7)(B)).
            ``(4) Eligibility of certain alien children.--Subject to 
        title IV of the Personal Responsibility and Work Opportunity

[[Page 120 STAT. 153]]

        Reconciliation Act of 1996, if the child is an alien 
        disqualified under section 245A(h) or 210(f) of the Immigration 
        and Nationality Act from receiving aid under the State plan 
        approved under section 402 in or for the month in which the 
        agreement described in paragraph (2)(A)(i) was entered into or 
        court proceedings leading to the determination described in 
        paragraph (2)(A)(ii) were initiated, the child shall be 
        considered to satisfy the requirements of paragraph (3), with 
        respect to the month, if the child would have satisfied the 
        requirements but for the disqualification.''.

    (b) Adoption Assistance.--Section 473(a)(2) (42 U.S.C. 673(a)(2)) is 
amended to read as follows:
    ``(2)(A) For purposes of paragraph (1)(B)(ii), a child meets the 
requirements of this paragraph if the child--
            ``(i)(I)(aa) was removed from the home of a relative 
        specified in section 406(a) (as in effect on July 16, 1996) and 
        placed in foster care in accordance with a voluntary placement 
        agreement with respect to which Federal payments are provided 
        under section 474 (or section 403, as such section was in effect 
        on July 16, 1996), or in accordance with a judicial 
        determination to the effect that continuation in the home would 
        be contrary to the welfare of the child; and
            ``(bb) met the requirements of section 472(a)(3) with 
        respect to the home referred to in item (aa) of this subclause;
            ``(II) meets all of the requirements of title XVI with 
        respect to eligibility for supplemental security income 
        benefits; or
            ``(III) is a child whose costs in a foster family home or 
        child-care institution are covered by the foster care 
        maintenance payments being made with respect to the minor parent 
        of the child as provided in section 475(4)(B); and
            ``(ii) has been determined by the State, pursuant to 
        subsection (c) of this section, to be a child with special 
        needs.

    ``(B) <<NOTE: Applicability.>> Section 472(a)(4) shall apply for 
purposes of subparagraph (A) of this paragraph, in any case in which the 
child is an alien described in such section.

    ``(C) A child shall be treated as meeting the requirements of this 
paragraph for the purpose of paragraph (1)(B)(ii) if the child--
            ``(i) meets the requirements of subparagraph (A)(ii);
            ``(ii) was determined eligible for adoption assistance 
        payments under this part with respect to a prior adoption;
            ``(iii) is available for adoption because--
                    ``(I) the prior adoption has been dissolved, and the 
                parental rights of the adoptive parents have been 
                terminated; or
                    ``(II) the child's adoptive parents have died; and
            ``(iv) fails to meet the requirements of subparagraph (A) 
        but would meet such requirements if--
                    ``(I) the child were treated as if the child were in 
                the same financial and other circumstances the child was 
                in the last time the child was determined eligible for 
                adoption assistance payments under this part; and
                    ``(II) the prior adoption were treated as never 
                having occurred.''.

[[Page 120 STAT. 154]]

                Subtitle E--Supplemental Security Income

SEC. 7501. REVIEW OF STATE AGENCY BLINDNESS AND DISABILITY 
            DETERMINATIONS.

     Section 1633 (42 U.S.C. 1383b) is amended by adding at the end the 
following:
    ``(e)(1) The Commissioner of Social Security shall review 
determinations, made by State agencies pursuant to subsection (a) in 
connection with applications for benefits under this title on the basis 
of blindness or disability, that individuals who have attained 18 years 
of age are blind or disabled as of a specified onset date. The 
Commissioner of Social Security shall review such a determination before 
any action is taken to implement the determination.
    ``(2)(A) In carrying out paragraph (1), the Commissioner of Social 
Security shall review--
            ``(i) at least 20 percent of all determinations referred to 
        in paragraph (1) that are made in fiscal year 2006;
            ``(ii) at least 40 percent of all such determinations that 
        are made in fiscal year 2007; and
            ``(iii) at least 50 percent of all such determinations that 
        are made in fiscal year 2008 or thereafter.

    ``(B) In carrying out subparagraph (A), the Commissioner of Social 
Security shall, to the extent feasible, select for review the 
determinations which the Commissioner of Social Security identifies as 
being the most likely to be incorrect.''.

SEC. 7502. PAYMENT OF CERTAIN LUMP SUM BENEFITS IN INSTALLMENTS UNDER 
            THE SUPPLEMENTAL SECURITY INCOME PROGRAM.

    (a) In General.--Section 1631(a)(10)(A)(i) (42 U.S.C. 
1383(a)(10)(A)(i)) is amended by striking ``12'' and inserting ``3''.
    (b) <<NOTE: 42 USC 1383 note.>> Effective Date.--The amendment made 
by subsection (a) shall take effect 3 months after the date of the 
enactment of this Act.

       Subtitle F--Repeal of Continued Dumping and Subsidy Offset

SEC. 7601. REPEAL OF CONTINUED DUMPING AND SUBSIDY OFFSET.

    (a) <<NOTE: Effective date.>> Repeal.--Effective upon the date of 
enactment of this Act, section 754 of the Tariff Act of 1930 (19 U.S.C. 
1675c), and the item relating to section 754 in the table of contents of 
title VII of that Act, are repealed.

    (b) <<NOTE: 19 USC 1675c note.>> Distributions on Certain Entries.--
All duties on entries of goods made and filed before October 1, 2007, 
that would, but for subsection (a) of this section, be distributed under 
section 754 of the Tariff Act of 1930, shall be distributed as if 
section 754 of the Tariff Act of 1930 had not been repealed by 
subsection (a).

[[Page 120 STAT. 155]]

                       Subtitle G--Effective Date

SEC. 7701. <<NOTE: 42 USC 603 note.>> EFFECTIVE DATE.

    Except as otherwise provided in this title, this title and the 
amendments made by this title shall take effect as if enacted on October 
1, 2005.

          TITLE VIII--EDUCATION AND PENSION BENEFIT PROVISIONS

   Subtitle <<NOTE: Higher Education Reconciliation Act of 2005.>> A--
Higher Education Provisions

SEC. 8001. SHORT TITLE; REFERENCE; EFFECTIVE DATE.

    (a) <<NOTE: 20 USC 1001 note.>> Short Title.--This subtitle may be 
cited as the ``Higher Education Reconciliation Act of 2005''.

    (b) References.--Except as otherwise expressly provided, whenever in 
this subtitle an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).
    (c) <<NOTE: 20 USC 1002 note.>> Effective Date.--Except as otherwise 
provided in this subtitle or the amendments made by this subtitle, the 
amendments made by this subtitle shall be effective July 1, 2006.

SEC. 8002. MODIFICATION OF 50/50 RULE.

    Section 102(a)(3) (20 U.S.C. 1002(a)(3)) is amended--
            (1) in subparagraph (A), by inserting ``(excluding courses 
        offered by telecommunications as defined in section 484(l)(4))'' 
        after ``courses by correspondence''; and
            (2) in subparagraph (B), by inserting ``(excluding courses 
        offered by telecommunications as defined in section 484(l)(4))'' 
        after ``correspondence courses''.

SEC. 8003. ACADEMIC COMPETITIVENESS GRANTS.

    Subpart 1 of part A of title IV (20 U.S.C. 1070a) is amended by 
adding after section 401 the following new section:

``SEC. 401A. <<NOTE: 20 USC 1070a-1.>> ACADEMIC COMPETITIVENESS GRANTS.

    ``(a) Academic Competitiveness Grant Program.--
            ``(1) Academic competitiveness grants authorized.--The 
        Secretary shall award grants, in the amounts specified in 
        subsection (d)(1), to eligible students to assist the eligible 
        students in paying their college education expenses.
            ``(2) Academic competitiveness council.--
                    ``(A) Establishment.--There is established an 
                Academic Competitiveness Council (referred to in this 
                paragraph as the `Council'). From the funds made 
                available under subsection (e) for fiscal year 2006, 
                $50,000 shall be available to the Council to carry out 
                the duties described in subparagraph (B). The Council 
                shall be chaired by the Secretary of Education, and the 
                membership of the Council

[[Page 120 STAT. 156]]

                shall consist of officials from Federal agencies with 
                responsibilities for managing existing Federal programs 
                that promote mathematics and science (or designees of 
                such officials with significant decision-making 
                authority).
                    ``(B) Duties.--The Council shall--
                          ``(i) identify all Federal programs with a 
                      mathematics or science focus;
                          ``(ii) identify the target populations being 
                      served by such programs;
                          ``(iii) determine the effectiveness of such 
                      programs;
                          ``(iv) identify areas of overlap or 
                      duplication in such programs; and
                          ``(v) recommend ways to efficiently integrate 
                      and coordinate such programs.
                    ``(C) Report.--Not later than one year after the 
                date of enactment of the Higher Education Reconciliation 
                Act of 2005, the Council shall transmit a report to each 
                committee of Congress with jurisdiction over a Federal 
                program identified under subparagraph (B)(i), detailing 
                the findings and recommendations under subparagraph (B), 
                including recommendations for legislative or 
                administrative action.

    ``(b) Designation.--A grant under this section--
            ``(1) for the first or second academic year of a program of 
        undergraduate education shall be known as an `Academic 
        Competitiveness Grant'; and
            ``(2) for the third or fourth academic year of a program of 
        undergraduate education shall be known as a `National Science 
        and Mathematics Access to Retain Talent Grant' or a `National 
        SMART Grant'.

    ``(c) Definition of Eligible Student.--In this section the term 
`eligible student' means a full-time student who, for the academic year 
for which the determination of eligibility is made--
            ``(1) is a citizen of the United States;
            ``(2) is eligible for a Federal Pell Grant; and
            ``(3) in the case of a student enrolled or accepted for 
        enrollment in--
                    ``(A) the first academic year of a program of 
                undergraduate education at a two- or four-year degree-
                granting institution of higher education--
                          ``(i) has successfully completed, after 
                      January 1, 2006, a rigorous secondary school 
                      program of study established by a State or local 
                      educational agency and recognized as such by the 
                      Secretary; and
                          ``(ii) has not been previously enrolled in a 
                      program of undergraduate education;
                    ``(B) the second academic year of a program of 
                undergraduate education at a two- or four-year degree-
                granting institution of higher education--
                          ``(i) has successfully completed, after 
                      January 1, 2005, a rigorous secondary school 
                      program of study established by a State or local 
                      educational agency and recognized as such by the 
                      Secretary; and
                          ``(ii) <<NOTE: Regulations.>> has obtained a 
                      cumulative grade point average of at least 3.0 (or 
                      the equivalent as determined under regulations 
                      prescribed by the Secretary) at the end of the 
                      first academic year of such program of 
                      undergraduate education; or

[[Page 120 STAT. 157]]

                    ``(C) the third or fourth academic year of a program 
                of undergraduate education at a four-year degree-
                granting institution of higher education--
                          ``(i) is pursuing a major in--
                                    ``(I) the physical, life, or 
                                computer sciences, mathematics, 
                                technology, or engineering (as 
                                determined by the Secretary pursuant to 
                                regulations); or
                                    ``(II) a foreign language that the 
                                Secretary, in consultation with the 
                                Director of National Intelligence, 
                                determines is critical to the national 
                                security of the United States; and
                          ``(ii) <<NOTE: Regulations.>> has obtained a 
                      cumulative grade point average of at least 3.0 (or 
                      the equivalent as determined under regulations 
                      prescribed by the Secretary) in the coursework 
                      required for the major described in clause (i).

    ``(d) Grant Award.--
            ``(1) Amounts.--
                    ``(A) The Secretary shall award a grant under this 
                section in the amount of--
                          ``(i) $750 for an eligible student under 
                      subsection (c)(3)(A);
                          ``(ii) $1,300 for an eligible student under 
                      subsection (c)(3)(B); or
                          ``(iii) $4,000 for an eligible student under 
                      subsection (c)(3)(C).
                    ``(B) Notwithstanding subparagraph (A)--
                          ``(i) the amount of such grant, in combination 
                      with the Federal Pell Grant assistance and other 
                      student financial assistance available to such 
                      student, shall not exceed the student's cost of 
                      attendance;
                          ``(ii) if the amount made available under 
                      subsection (e) for any fiscal year is less than 
                      the amount required to be provided grants to all 
                      eligible students in the amounts determined under 
                      subparagraph (A) and clause (i) of this 
                      subparagraph, then the amount of the grant to each 
                      eligible student shall be ratably reduced; and
                          ``(iii) if additional amounts are appropriated 
                      for any such fiscal year, such reduced amounts 
                      shall be increased on the same basis as they were 
                      reduced.
            ``(2) Limitations.--The Secretary shall not award a grant 
        under this section--
                    ``(A) to any student for an academic year of a 
                program of undergraduate education described in 
                subparagraph (A), (B), or (C) of subsection (c)(3) for 
                which the student received credit before the date of 
                enactment of the Higher Education Reconciliation Act of 
                2005; or
                    ``(B) to any student for more than--
                          ``(i) one academic year under subsection 
                      (c)(3)(A);
                          ``(ii) one academic year under subsection 
                      (c)(3)(B); or
                          ``(iii) two academic years under subsection 
                      (c)(3)(C).

    ``(e) Funding.--
            ``(1) Authorization and appropriation of funds.--There are 
        authorized to be appropriated, and there are appropriated,

[[Page 120 STAT. 158]]

        out of any money in the Treasury not otherwise appropriated, for 
        the Department of Education to carry out this section--
                    ``(A) $790,000,000 for fiscal year 2006;
                    ``(B) $850,000,000 for fiscal year 2007;
                    ``(C) $920,000,000 for fiscal year 2008;
                    ``(D) $960,000,000 for fiscal year 2009; and
                    ``(E) $1,010,000,000 for fiscal year 2010.
            ``(2) Use of excess funds.--If, at the end of a fiscal year, 
        the funds available for awarding grants under this section 
        exceed the amount necessary to make such grants in the amounts 
        authorized by subsection (d), then all of the excess funds shall 
        remain available for awarding grants under this section during 
        the subsequent fiscal year.

    ``(f) Recognition of Programs of Study.--The Secretary shall 
recognize at least one rigorous secondary school program of study in 
each State under subsection (c)(3)(A) and (B) for the purpose of 
determining student eligibility under such subsection.
    ``(g) Sunset Provision.--The authority to make grants under this 
section shall expire at the end of academic year 2010-2011.''.

SEC. 8004. REAUTHORIZATION OF FEDERAL FAMILY EDUCATION LOAN PROGRAM.

    (a) Authorization of Appropriations.--Section 421(b)(5) (20 U.S.C. 
1071(b)(5)) is amended by striking ``an administrative cost allowance'' 
and inserting ``a loan processing and issuance fee''.
    (b) Extension of Authority.--
            (1) Federal insurance limitations.--Section 424(a) (20 
        U.S.C. 1074(a)) is amended--
                    (A) by striking ``2004'' and inserting ``2012''; and
                    (B) by striking ``2008'' and inserting ``2016''.
            (2) Guaranteed loans.--Section 428(a)(5) (20 U.S.C. 
        1078(a)(5)) is amended--
                    (A) by striking ``2004'' and inserting ``2012''; and
                    (B) by striking ``2008'' and inserting ``2016''.
            (3) Consolidation loans.--Section 428C(e) (20 U.S.C. 1078-
        3(e)) is amended by striking ``2004'' and inserting ``2012''.

SEC. 8005. LOAN LIMITS.

    (a) Federal Insurance Limits.--Section 425(a)(1)(A) (20 U.S.C. 
1075(a)(1)(A)) is amended--
            (1) in clause (i)(I), by striking ``$2,625'' and inserting 
        ``$3,500''; and
            (2) in clause (ii)(I), by striking ``$3,500'' and inserting 
        ``$4,500''.

    (b) Guarantee Limits.--Section 428(b)(1)(A) (20 U.S.C. 
1078(b)(1)(A)) is amended--
            (1) in clause (i)(I), by striking ``$2,625'' and inserting 
        ``$3,500''; and
            (2) in clause (ii)(I), by striking ``$3,500'' and inserting 
        ``$4,500''.

    (c) Federal PLUS Loans.--Section 428B (20 U.S.C. 1078-2) is 
amended--
            (1) in subsection (a)(1)--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``Parents'' and inserting ``A graduate or 
                professional student or the parents'';

[[Page 120 STAT. 159]]

                    (B) in subparagraph (A), by striking ``the parents'' 
                and inserting ``the graduate or professional student or 
                the parents''; and
                    (C) in subparagraph (B), by striking ``the parents'' 
                and inserting ``the graduate or professional student or 
                the parents'';
            (2) in subsection (b), by striking ``any parent'' and 
        inserting ``any graduate or professional student or any 
        parent'';
            (3) in subsection (c)(2), by striking ``parent'' and 
        inserting ``graduate or professional student or parent''; and
            (4) in subsection (d)(1), by striking ``the parent'' and 
        inserting ``the graduate or professional student or the 
        parent''.

    (d) Unsubsidized Stafford Loans for Graduate or Professional 
Students.--Section 428H(d)(2) (20 U.S.C. 1078-8(d)(2)) is amended--
            (1) in subparagraph (C), by striking ``$10,000'' and 
        inserting ``$12,000''; and
            (2) in subparagraph (D)--
                    (A) in clause (i), by striking ``$5,000'' and 
                inserting ``$7,000''; and
                    (B) in clause (ii), by striking ``$5,000'' and 
                inserting ``$7,000''.

    (e) <<NOTE: 20 USC 1075 note.>> Effective Date of Increases.--The 
amendments made by subsections (a), (b), and (d) shall be effective July 
1, 2007.

SEC. 8006. PLUS LOAN INTEREST RATES AND ZERO SPECIAL ALLOWANCE PAYMENT.

    (a) PLUS Loans.--Section 427A(l)(2) (20 U.S.C. 1077a(l)(2)) is 
amended by striking ``7.9 percent'' and inserting ``8.5 percent''.
    (b) Conforming Amendments for Special Allowances.--
            (1) Amendments.--Subparagraph (I) of section 438(b)(2) (20 
        U.S.C. 1087-1(b)(2)) is amended--
                    (A) in clause (iii), by striking ``, subject to 
                clause (v) of this subparagraph'';
                    (B) in clause (iv), by striking ``, subject to 
                clause (vi) of this subparagraph''; and
                    (C) by striking clauses (v), (vi), and (vii) and 
                inserting the following:
                          ``(v) Recapture of excess interest.--
                                    ``(I) Excess credited.--With respect 
                                to a loan on which the applicable 
                                interest rate is determined under 
                                subsection (k) or (l) of section 427A 
                                and for which the first disbursement of 
                                principal is made on or after April 1, 
                                2006, if the applicable interest rate 
                                for any 3-month period exceeds the 
                                special allowance support level 
                                applicable to such loan under this 
                                subparagraph for such period, then an 
                                adjustment shall be made by calculating 
                                the excess interest in the amount 
                                computed under subclause (II) of this 
                                clause, and by crediting the excess 
                                interest to the Government not less 
                                often than annually.
                                    ``(II) Calculation of excess.--The 
                                amount of any adjustment of interest on 
                                a loan to be made under this subsection 
                                for any quarter shall be equal to--

[[Page 120 STAT. 160]]

                                            ``(aa) the applicable 
                                        interest rate minus the special 
                                        allowance support level 
                                        determined under this 
                                        subparagraph; multiplied by
                                            ``(bb) the average daily 
                                        principal balance of the loan 
                                        (not including unearned interest 
                                        added to principal) during such 
                                        calendar quarter; divided by
                                            ``(cc) four.
                                    ``(III) Special allowance support 
                                level.--For purposes of this clause, the 
                                term `special allowance support level' 
                                means, for any loan, a number expressed 
                                as a percentage equal to the sum of the 
                                rates determined under subclauses (I) 
                                and (III) of clause (i), and applying 
                                any substitution rules applicable to 
                                such loan under clauses (ii), (iii), and 
                                (iv) in determining such sum.''.
            (2) <<NOTE: 20 USC 1087-1 note.>> Effective date.--The 
        amendments made by this subsection shall not apply with respect 
        to any special allowance payment made under section 438 of the 
        Higher Education Act of 1965 (20 U.S.C. 1087-1) before April 1, 
        2006.

SEC. 8007. DEFERMENT OF STUDENT LOANS FOR MILITARY SERVICE.

    (a) Federal Family Education Loans.--Section 428(b)(1)(M) (20 U.S.C. 
1078(b)(1)(M)) is amended--
            (1) by striking ``or'' at the end of clause (ii);
            (2) by redesignating clause (iii) as clause (iv); and
            (3) by inserting after clause (ii) the following new clause:
                          ``(iii) not in excess of 3 years during which 
                      the borrower--
                                    ``(I) is serving on active duty 
                                during a war or other military operation 
                                or national emergency; or
                                    ``(II) is performing qualifying 
                                National Guard duty during a war or 
                                other military operation or national 
                                emergency; or''.

    (b) Direct Loans.--Section 455(f)(2) (20 U.S.C. 1087e(f)(2)) is 
amended--
            (1) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (2) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) not in excess of 3 years during which the 
                borrower--
                          ``(i) is serving on active duty during a war 
                      or other military operation or national emergency; 
                      or
                          ``(ii) is performing qualifying National Guard 
                      duty during a war or other military operation or 
                      national emergency; or''.

    (c) Perkins Loans.--Section 464(c)(2)(A) (20 U.S.C. 1087dd(c)(2)(A)) 
is amended--
            (1) by redesignating clauses (iii) and (iv) as clauses (iv) 
        and (v), respectively; and
            (2) by inserting after clause (ii) the following new clause:
                          ``(iii) not in excess of 3 years during which 
                      the borrower--

[[Page 120 STAT. 161]]

                                    ``(I) is serving on active duty 
                                during a war or other military operation 
                                or national emergency; or
                                    ``(II) is performing qualifying 
                                National Guard duty during a war or 
                                other military operation or national 
                                emergency;''.

    (d) Definitions.--Section 481 (20 U.S.C. 1088) is amended by adding 
at the end the following new subsection:
    ``(d) Definitions for Military Deferments.--For purposes of parts B, 
D, and E of this title:
            ``(1) Active duty.--The term `active duty' has the meaning 
        given such term in section 101(d)(1) of title 10, United States 
        Code, except that such term does not include active duty for 
        training or attendance at a service school.
            ``(2) Military operation.--The term `military operation' 
        means a contingency operation as such term is defined in section 
        101(a)(13) of title 10, United States Code.
            ``(3) National emergency.--The term `national emergency' 
        means the national emergency by reason of certain terrorist 
        attacks declared by the President on September 14, 2001, or 
        subsequent national emergencies declared by the President by 
        reason of terrorist attacks.
            ``(4) Serving on active duty.--The term `serving on active 
        duty during a war or other military operation or national 
        emergency' means service by an individual who is--
                    ``(A) a Reserve of an Armed Force ordered to active 
                duty under section 12301(a), 12301(g), 12302, 12304, or 
                12306 of title 10, United States Code, or any retired 
                member of an Armed Force ordered to active duty under 
                section 688 of such title, for service in connection 
                with a war or other military operation or national 
                emergency, regardless of the location at which such 
                active duty service is performed; and
                    ``(B) any other member of an Armed Force on active 
                duty in connection with such emergency or subsequent 
                actions or conditions who has been assigned to a duty 
                station at a location other than the location at which 
                such member is normally assigned.
            ``(5) Qualifying national guard duty.--The term `qualifying 
        National Guard duty during a war or other military operation or 
        national emergency' means service as a member of the National 
        Guard on full-time National Guard duty (as defined in section 
        101(d)(5) of title 10, United States Code) under a call to 
        active service authorized by the President or the Secretary of 
        Defense for a period of more than 30 consecutive days under 
        section 502(f) of title 32, United States Code, in connection 
        with a war, other military operation, or a national emergency 
        declared by the President and supported by Federal funds.''.

    (e) <<NOTE: 20 USC 1078 note.>> Rule of Construction.--Nothing in 
the amendments made by this section shall be construed to authorize any 
refunding of any repayment of a loan.

    (f) <<NOTE: 20 USC 1078 note.>> Effective Date.--The amendments made 
by this section shall apply with respect to loans for which the first 
disbursement is made on or after July 1, 2001.

[[Page 120 STAT. 162]]

SEC. 8008. ADDITIONAL LOAN TERMS AND CONDITIONS.

    (a) Disbursement.--Section 428(b)(1)(N) (20 U.S.C. 1078(b)(1)(N)) is 
amended--
            (1) by striking ``or'' at the end of clause (i); and
            (2) by striking clause (ii) and inserting the following:
                          ``(ii) in the case of a student who is 
                      studying outside the United States in a program of 
                      study abroad that is approved for credit by the 
                      home institution at which such student is 
                      enrolled, and only after verification of the 
                      student's enrollment by the lender or guaranty 
                      agency, are, at the request of the student, 
                      disbursed directly to the student by the means 
                      described in clause (i), unless such student 
                      requests that the check be endorsed, or the funds 
                      transfer be authorized, pursuant to an authorized 
                      power-of-attorney; or
                          ``(iii) in the case of a student who is 
                      studying outside the United States in a program of 
                      study at an eligible foreign institution, are, at 
                      the request of the foreign institution, disbursed 
                      directly to the student, only after verification 
                      of the student's enrollment by the lender or 
                      guaranty agency by the means described in clause 
                      (i).''.

    (b) Repayment Plans: Direct Loans.--Section 455(d)(1) (20 U.S.C. 
1087e(d)(1)) is amended by striking subparagraphs (A), (B), and (C) and 
inserting the following:
                    ``(A) a standard repayment plan, consistent with 
                subsection (a)(1) of this section and with section 
                428(b)(9)(A)(i);
                    ``(B) a graduated repayment plan, consistent with 
                section 428(b)(9)(A)(ii);
                    ``(C) an extended repayment plan, consistent with 
                section 428(b)(9)(A)(v), except that the borrower shall 
                annually repay a minimum amount determined by the 
                Secretary in accordance with section 428(b)(1)(L); 
                and''.

    (c) Origination Fees.--
            (1) FFEL program.--Paragraph (2) of section 438(c) (20 
        U.S.C. 1087-1(c)) is amended--
                    (A) by striking the designation and heading of such 
                paragraph and inserting the following:
            ``(2) Amount of origination fees.--
                    ``(A) In general.--''; and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(B) <<NOTE: Applicability.>> Subsequent 
                reductions.--Subparagraph (A) shall be applied to loans 
                made under this part (other than loans made under 
                sections 428C and 439(o))--
                          ``(i) by substituting `2.0 percent' for `3.0 
                      percent' with respect to loans for which the first 
                      disbursement of principal is made on or after July 
                      1, 2006, and before July 1, 2007;
                          ``(ii) by substituting `1.5 percent' for `3.0 
                      percent' with respect to loans for which the first 
                      disbursement of principal is made on or after July 
                      1, 2007, and before July 1, 2008;
                          ``(iii) by substituting `1.0 percent' for `3.0 
                      percent' with respect to loans for which the first 
                      disbursement

[[Page 120 STAT. 163]]

                      of principal is made on or after July 1, 2008, and 
                      before July 1, 2009;
                          ``(iv) by substituting `0.5 percent' for `3.0 
                      percent' with respect to loans for which the first 
                      disbursement of principal is made on or after July 
                      1, 2009, and before July 1, 2010; and
                          ``(v) by substituting `0.0 percent' for `3.0 
                      percent' with respect to loans for which the first 
                      disbursement of principal is made on or after July 
                      1, 2010.''.
            (2) Direct loan program.--Subsection (c) of section 455 (20 
        U.S.C. 1087e(c)) is amended--
                    (A) by striking ``(c) Loan Fee.--'' and inserting 
                the following:

    ``(c) Loan Fee.--
            ``(1) In general.--''; and
                    (B) by adding at the end the following:
            ``(2) <<NOTE: Applicability.>> Subsequent reduction.--
        Paragraph (1) shall be applied to loans made under this part, 
        other than Federal Direct Consolidation loans and Federal Direct 
        PLUS loans--
                    ``(A) by substituting `3.0 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after the date 
                of enactment of the Higher Education Reconciliation Act 
                of 2005, and before July 1, 2007;
                    ``(B) by substituting `2.5 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after July 1, 
                2007, and before July 1, 2008;
                    ``(C) by substituting `2.0 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after July 1, 
                2008, and before July 1, 2009;
                    ``(D) by substituting `1.5 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after July 1, 
                2009, and before July 1, 2010; and
                    ``(E) by substituting `1.0 percent' for `4.0 
                percent' with respect to loans for which the first 
                disbursement of principal is made on or after July 1, 
                2010.''.
            (3) Conforming amendment.--Section 455(b)(8)(A) (20 U.S.C. 
        1087e(b)(8)(A)) is amended by inserting ``or origination fee'' 
        after ``reductions in the interest rate''.

SEC. 8009. CONSOLIDATION LOAN CHANGES.

    (a) Consolidation Between Programs.--Section 428C (20 U.S.C. 1078-3) 
is amended--
            (1) in subsection (a)(3)(B)(i)--
                    (A) by inserting ``or under section 455(g)'' after 
                ``under this section'' both places it appears;
                    (B) by inserting ``under both sections'' after 
                ``terminates'';
                    (C) by striking ``and'' at the end of subclause 
                (III);
                    (D) by striking the period at the end of subclause 
                (IV) and inserting ``; and''; and
                    (E) by adding at the end the following new 
                subclause:
                    ``(V) an individual may obtain a subsequent 
                consolidation loan under section 455(g) only for the 
                purposes of

[[Page 120 STAT. 164]]

                obtaining an income contingent repayment plan, and only 
                if the loan has been submitted to the guaranty agency 
                for default aversion.''; and
            (2) in subsection (b)(5), by striking the first sentence and 
        inserting the following: ``In the event that a lender with an 
        agreement under subsection (a)(1) of this section denies a 
        consolidation loan application submitted to the lender by an 
        eligible borrower under this section, or denies an application 
        submitted to the lender by such a borrower for a consolidation 
        loan with income-sensitive repayment terms, the Secretary shall 
        offer any such borrower who applies for it, a Federal Direct 
        Consolidation loan. The Secretary shall offer such a loan to a 
        borrower who has defaulted, for the purpose of resolving the 
        default.''.

    (b) Repeal of In-School Consolidation.--
            (1) Definition of repayment period.--Section 428(b)(7)(A) 
        (20 U.S.C. 1078(b)(7)(A)) is amended by striking ``shall begin--
        '' and all that follows through ``earlier date.'' and inserting 
        the following: ``shall begin the day after 6 months after the 
        date the student ceases to carry at least one-half the normal 
        full-time academic workload (as determined by the 
        institution).''.
            (2) Conforming change to eligible borrower definition.--
        Section 428C(a)(3)(A)(ii)(I) (20 U.S.C. 1078-3(a)(3)(A)(ii)(I)) 
        is amended by inserting ``as determined under section 
        428(b)(7)(A)'' after ``repayment status''.

    (c) Additional Amendments.--Section 428C (20 U.S.C. 1078-3) is 
amended in subsection (a)(3), by striking subparagraph (C).
    (d) Conforming Amendments to Direct Loan Program.--Section 455 (20 
U.S.C. 1087e) is amended--
            (1) in subsection (a)(1) by inserting ``428C,'' after 
        ``428B,'';
            (2) in subsection (a)(2)--
                    (A) by striking ``and'' at the end of subparagraph 
                (B);
                    (B) by redesignating subparagraph (C) as 
                subparagraph (D); and
                    (C) by inserting after subparagraph (B) the 
                following:
                    ``(C) section 428C shall be known as `Federal Direct 
                Consolidation Loans'; and ''; and
            (3) in subsection (g)--
                    (A) by striking the second sentence; and
                    (B) by adding at the end the following new 
                sentences: ``To be eligible for a consolidation loan 
                under this part, a borrower shall meet the eligibility 
                criteria set forth in section 428C(a)(3). The Secretary, 
                upon application for such a loan, shall comply with the 
                requirements applicable to a lender under section 
                428C(b)(1)(F).''.

SEC. 8010. REQUIREMENTS FOR DISBURSEMENTS OF STUDENT LOANS.

    Section 428G (20 U.S.C. 1078-7) is amended--
            (1) in subsection (a)(3), by adding at the end the 
        following: ``Notwithstanding section 422(d) of the Higher 
        Education Amendments of 1998, this paragraph shall be effective 
        beginning on the date of enactment of the Higher Education 
        Reconciliation Act of 2005.'';
            (2) in subsection (b)(1), by adding at the end the 
        following: ``Notwithstanding section 422(d) of the Higher 
        Education Amendments of 1998, the second sentence of this 
        paragraph

[[Page 120 STAT. 165]]

        shall be effective beginning on the date of enactment of the 
        Higher Education Reconciliation Act of 2005.''; and
            (3) in subsection (e), by striking ``, made to a student to 
        cover the cost of attendance at an eligible institution outside 
        the United States''.

SEC. 8011. SCHOOL AS LENDER.

    Paragraph (2) of section 435(d) (20 U.S.C. 1085(d)(2)) is amended to 
read as follows:
            ``(2) Requirements for eligible institutions.--
                    ``(A) In general.--To be an eligible lender under 
                this part, an eligible institution--
                          ``(i) shall employ at least one person whose 
                      full-time responsibilities are limited to the 
                      administration of programs of financial aid for 
                      students attending such institution;
                          ``(ii) shall not be a home study school;
                          ``(iii) shall not--
                                    ``(I) make a loan to any 
                                undergraduate student;
                                    ``(II) make a loan other than a loan 
                                under section 428 or 428H to a graduate 
                                or professional student; or
                                    ``(III) make a loan to a borrower 
                                who is not enrolled at that institution;
                          ``(iv) shall award any contract for financing, 
                      servicing, or administration of loans under this 
                      title on a competitive basis;
                          ``(v) shall offer loans that carry an 
                      origination fee or an interest rate, or both, that 
                      are less than such fee or rate authorized under 
                      the provisions of this title;
                          ``(vi) shall not have a cohort default rate 
                      (as defined in section 435(m)) greater than 10 
                      percent;
                          ``(vii) shall, for any year for which the 
                      institution engages in activities as an eligible 
                      lender, provide for a compliance audit conducted 
                      in accordance with section 428(b)(1)(U)(iii)(I), 
                      and the regulations thereunder, and submit the 
                      results of such audit to the Secretary;
                          ``(viii) shall use any proceeds from special 
                      allowance payments and interest payments from 
                      borrowers, interest subsidies received from the 
                      Department of Education, and any proceeds from the 
                      sale or other disposition of loans, for need-based 
                      grant programs; and
                          ``(ix) shall have met the requirements of 
                      subparagraphs (A) through (F) of this paragraph as 
                      in effect on the day before the date of enactment 
                      of the Higher Education Reconciliation Act of 
                      2005, and made loans under this part, on or before 
                      April 1, 2006.
                    ``(B) Administrative expenses.--An eligible lender 
                under subparagraph (A) shall be permitted to use a 
                portion of the proceeds described in subparagraph 
                (A)(viii) for reasonable and direct administrative 
                expenses.
                    ``(C) Supplement, not supplant.--An eligible lender 
                under subparagraph (A) shall ensure that the proceeds 
                described in subparagraph (A)(viii) are used to 
                supplement,

[[Page 120 STAT. 166]]

                and not to supplant, non-Federal funds that would 
                otherwise be used for need-based grant programs.''.

SEC. 8012. REPAYMENT BY THE SECRETARY OF LOANS OF BANKRUPT, DECEASED, OR 
            DISABLED BORROWERS; TREATMENT OF BORROWERS ATTENDING SCHOOLS 
            THAT FAIL TO PROVIDE A REFUND, ATTENDING CLOSED SCHOOLS, OR 
            FALSELY CERTIFIED AS ELIGIBLE TO BORROW.

    Section 437 (20 U.S.C. 1087) is amended--
            (1) in the section heading, by striking ``CLOSED SCHOOLS OR 
        FALSELY CERTIFIED AS ELIGIBLE TO BORROW'' and inserting 
        ``SCHOOLS THAT FAIL TO PROVIDE A REFUND, ATTENDING CLOSED 
        SCHOOLS, OR FALSELY CERTIFIED AS ELIGIBLE TO BORROW''; and
            (2) in the first sentence of subsection (c)(1), by inserting 
        ``or was falsely certified as a result of a crime of identity 
        theft'' after ``falsely certified by the eligible institution''.

SEC. 8013. ELIMINATION OF TERMINATION DATES FROM TAXPAYER-TEACHER 
            PROTECTION ACT OF 2004.

    (a) Extension of Limitations on Special Allowance for Loans From the 
Proceeds of Tax Exempt Issues.--Section 438(b)(2)(B) (20 U.S.C. 1087-
1(b)(2)(B)) is amended--
            (1) in clause (iv), by striking ``and before January 1, 
        2006,''; and
            (2) in clause (v)(II)--
                    (A) by striking ``and before January 1, 2006,'' each 
                place it appears in divisions (aa) and (bb); and
                    (B) by striking ``, and before January 1, 2006'' in 
                division (cc).

    (b) Additional Limitation on Special Allowance for Loans From the 
Proceeds of Tax Exempt Issues.--Section 438(b)(2)(B) (20 U.S.C 1087-
1(b)(2)(B)) is further amended by adding at the end thereof the 
following new clauses:
            ``(vi) Notwithstanding clauses (i), (ii), and (v), but 
        subject to clause (vii), the quarterly rate of the special 
        allowance shall be the rate determined under subparagraph (A), 
        (E), (F), (G), (H), or (I) of this paragraph, as the case may 
        be, for a holder of loans--
                    ``(I) that were made or purchased on or after the 
                date of enactment of the Higher Education Reconciliation 
                Act of 2005; or
                    ``(II) that were not earning a quarterly rate of 
                special allowance determined under clauses (i) or (ii) 
                of subparagraph (B) of this paragraph (20 U.S.C. 1087-
                1(b)(2)(b)) as of the date of enactment of the Higher 
                Education Reconciliation Act of 2005.
            ``(vii) <<NOTE: Applicability.>> Clause (vi) shall be 
        applied by substituting `December 31, 2010' for `the date of 
        enactment of the Higher Education Reconciliation Act of 2005' in 
        the case of a holder of loans that--
                    ``(I) was, as of the date of enactment of the Higher 
                Education Reconciliation Act of 2005, and during the 
                quarter for which the special allowance is paid, a unit 
                of State or local government or a nonprofit private 
                entity;
                    ``(II) was, as of such date of enactment, and during 
                such quarter, not owned or controlled by, or under 
                common ownership or control with, a for-profit entity; 
                and

[[Page 120 STAT. 167]]

                    ``(III) held, directly or through any subsidiary, 
                affiliate, or trustee, a total unpaid balance of 
                principal equal to or less than $100,000,000 on loans 
                for which special allowances were paid under this 
                subparagraph in the most recent quarterly payment prior 
                to September 30, 2005.''.

    (c) Elimination of Effective Date Limitation on Higher Teacher Loan 
Forgiveness Benefits.--
            (1) Technical clarification.--The matter preceding paragraph 
        (1) of section 2 of the Taxpayer-Teacher Protection Act of 2004 
        (Public Law 108-409; 118 Stat. 2299) <<NOTE: 20 USC 1087-1.>> is 
        amended by inserting ``of the Higher Education Act of 1965'' 
        after ``Section 438(b)(2)(B)''.
            (2) Amendment.--Paragraph (3) of section 3(b) of the 
        Taxpayer-Teacher Protection Act of 2004 (20 U.S.C. 1078-10 note) 
        is amended by striking ``, and before October 1, 2005''.
            (3) <<NOTE: 20 USC 1087-1 note.>> Effective dates.--The 
        amendment made by paragraph (1) shall be effective as if enacted 
        on October 30, 2004, and the amendment made by paragraph (2) 
        shall be effective as if enacted on October 1, 2005.

    (d) Coordination With Second Higher Education Extension Act of 
2005.--
            (1) Repeal.--Section 2 of the Second Higher Education 
        Extension Act of 2005 <<NOTE: 20 USC 1087-1, 1078 note.>> is 
        amended by striking subsections (b) and (c).
            (2) <<NOTE: Effective date. 20 USC 1087-1 note.>> Effect on 
        amendments.--The amendments made by subsections (a) and (c) of 
        this section shall be effective as if the amendments made in 
        subsections (b) and (c) of section 2 of the Second Higher 
        Education Extension Act of 2005 had not been enacted.

    (e) Additional Changes to Teacher Loan Forgiveness Provisions.--
            (1) FFEL provisions.--Section 428J (20 U.S.C. 1078-10) is 
        amended--
                    (A) in subsection (b)(1)(B), by inserting after 
                ``1965'' the following: ``, or meets the requirements of 
                subsection (g)(3)''; and
                    (B) in subsection (g), by adding at the end the 
                following new paragraph:
            ``(3) Private school teachers.--An individual who is 
        employed as a teacher in a private school and is exempt from 
        State certification requirements (unless otherwise applicable 
        under State law), may, in lieu of the requirement of subsection 
        (b)(1)(B), have such employment treated as qualifying employment 
        under this section if such individual is permitted to and does 
        satisfy rigorous subject knowledge and skills tests by taking 
        competency tests in the applicable grade levels and subject 
        areas. For such purposes, the competency tests taken by such a 
        private school teacher shall be recognized by 5 or more States 
        for the purpose of fulfilling the highly qualified teacher 
        requirements under section 9101 of the Elementary and Secondary 
        Education Act of 1965, and the score achieved by such teacher on 
        each test shall equal or exceed the average passing score of 
        those 5 States.''.
            (2) Direct loan provisions.--Section 460 (20 U.S.C. 1087j) 
        is amended--

[[Page 120 STAT. 168]]

                    (A) in subsection (b)(1)(A)(ii), by inserting after 
                ``1965'' the following: ``, or meets the requirements of 
                subsection (g)(3)''; and
                    (B) in subsection (g), by adding at the end the 
                following new paragraph:
            ``(3) Private school teachers.--An individual who is 
        employed as a teacher in a private school and is exempt from 
        State certification requirements (unless otherwise applicable 
        under State law), may, in lieu of the requirement of subsection 
        (b)(1)(A)(ii), have such employment treated as qualifying 
        employment under this section if such individual is permitted to 
        and does satisfy rigorous subject knowledge and skills tests by 
        taking competency tests in the applicable grade levels and 
        subject areas. For such purposes, the competency tests taken by 
        such a private school teacher shall be recognized by 5 or more 
        States for the purpose of fulfilling the highly qualified 
        teacher requirements under section 9101 of the Elementary and 
        Secondary Education Act of 1965, and the score achieved by such 
        teacher on each test shall equal or exceed the average passing 
        score of those 5 States.''.

SEC. 8014. ADDITIONAL ADMINISTRATIVE PROVISIONS.

    (a) Insurance Percentage.--
            (1) Amendment.--Subparagraph (G) of section 428(b)(1) (20 
        U.S.C. 1078(b)(1)(G)) is amended to read as follows:
                    ``(G) insures 98 percent of the unpaid principal of 
                loans insured under the program, except that--
                          ``(i) such program shall insure 100 percent of 
                      the unpaid principal of loans made with funds 
                      advanced pursuant to section 428(j) or 439(q);
                          ``(ii) for any loan for which the first 
                      disbursement of principal is made on or after July 
                      1, 2006, the preceding provisions of this 
                      subparagraph shall be applied by substituting `97 
                      percent' for `98 percent'; and
                          ``(iii) notwithstanding the preceding 
                      provisions of this subparagraph, such program 
                      shall insure 100 percent of the unpaid principal 
                      amount of exempt claims as defined in subsection 
                      (c)(1)(G);''.
            (2) <<NOTE: 20 USC 1078 note.>> Effective date of 
        amendment.--The amendment made by this subsection shall apply 
        with respect to loans for which the first disbursement of 
        principal is made on or after July 1, 2006.

    (b) Federal Default Fees.--
            (1) In general.--Subparagraph (H) of section 428(b)(1) (20 
        U.S.C. 1078(b)(1)(H)) is amended to read as follows:
                    ``(H) provides--
                          ``(i) for loans for which the date of 
                      guarantee of principal is before July 1, 2006, for 
                      the collection of a single insurance premium equal 
                      to not more than 1.0 percent of the principal 
                      amount of the loan, by deduction proportionately 
                      from each installment payment of the proceeds of 
                      the loan to the borrower, and ensures that the 
                      proceeds of the premium will not be used for 
                      incentive payments to lenders; or
                          ``(ii) for loans for which the date of 
                      guarantee of principal is on or after July 1, 
                      2006, for the collection,

[[Page 120 STAT. 169]]

                      and the deposit into the Federal Student Loan 
                      Reserve Fund under section 422A of a Federal 
                      default fee of an amount equal to 1.0 percent of 
                      the principal amount of the loan, which fee shall 
                      be collected either by deduction from the proceeds 
                      of the loan or by payment from other non-Federal 
                      sources, and ensures that the proceeds of the 
                      Federal default fee will not be used for incentive 
                      payments to lenders;''.
            (2) Unsubsidized loans.--Section 428H(h) (20 U.S.C. 1078-
        8(h)) is amended by adding at the end the following new 
        sentences: ``Effective for loans for which the date of guarantee 
        of principal is on or after July 1, 2006, in lieu of the 
        insurance premium authorized under the preceding sentence, each 
        State or nonprofit private institution or organization having an 
        agreement with the Secretary under section 428(b)(1) shall 
        collect and deposit into the Federal Student Loan Reserve Fund 
        under section 422A, a Federal default fee of an amount equal to 
        1.0 percent of the principal amount of the loan, which fee shall 
        be collected either by deduction from the proceeds of the loan 
        or by payment from other non-Federal sources. The Federal 
        default fee shall not be used for incentive payments to 
        lenders.''.
            (3) Voluntary flexible agreements.--Section 428A(a)(1) (20 
        U.S.C. 1078-1(a)(1)) is amended--
                    (A) by striking ``or'' at the end of subparagraph 
                (A);
                    (B) by striking the period at the end of 
                subparagraph (B) and inserting ``; or''; and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(C) the Federal default fee required by section 
                428(b)(1)(H) and the second sentence of section 
                428H(h).''.

    (c) Treatment of Exempt Claims.--
            (1) Amendment.--Section 428(c)(1) (20 U.S.C. 1078(c)(1)) is 
        amended--
                    (A) by redesignating subparagraph (G) as 
                subparagraph (H), and moving such subparagraph 2 em 
                spaces to the left; and
                    (B) by inserting after subparagraph (F) the 
                following new subparagraph:
            ``(G)(i) Notwithstanding any other provisions of this 
        section, in the case of exempt claims, the Secretary shall apply 
        the provisions of--
                    ``(I) the fourth sentence of subparagraph (A) by 
                substituting `100 percent' for `95 percent';
                    ``(II) subparagraph (B)(i) by substituting `100 
                percent' for `85 percent'; and
                    ``(III) subparagraph (B)(ii) by substituting `100 
                percent' for `75 percent'.
            ``(ii) For purposes of clause (i) of this subparagraph, the 
        term `exempt claims' means claims with respect to loans for 
        which it is determined that the borrower (or the student on 
        whose behalf a parent has borrowed), without the lender's or the 
        institution's knowledge at the time the loan was made, provided 
        false or erroneous information or took actions that caused the 
        borrower or the student to be ineligible for all or a portion of 
        the loan or for interest benefits thereon.''.

[[Page 120 STAT. 170]]

            (2) <<NOTE: 20 USC 1078 note.>> Effective date of 
        amendments.--The amendments made by this subsection shall apply 
        with respect to loans for which the first disbursement of 
        principal is made on or after July 1, 2006.

    (d) Consolidation of Defaulted Loans.--Section 428(c) (20 U.S.C. 
1078(c)) is further amended--
            (1) in paragraph (2)(A)--
                    (A) by inserting ``(i)'' after ``including''; and
                    (B) by inserting before the semicolon at the end the 
                following: ``and (ii) requirements establishing 
                procedures to preclude consolidation lending from being 
                an excessive proportion of guaranty agency recoveries on 
                defaulted loans under this part'';
            (2) in paragraph (2)(D), by striking ``paragraph (6)'' and 
        inserting ``paragraph (6)(A)''; and
            (3) in paragraph (6)--
                    (A) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii), respectively;
                    (B) by inserting ``(A)'' before ``For the purpose of 
                paragraph (2)(D),''; and
                    (C) by adding at the end the following new 
                subparagraphs:
            ``(B) A guaranty agency shall--
                    ``(i) on or after October 1, 2006--
                          ``(I) not charge the borrower collection costs 
                      in an amount in excess of 18.5 percent of the 
                      outstanding principal and interest of a defaulted 
                      loan that is paid off through consolidation by the 
                      borrower under this title; and
                          ``(II) remit to the Secretary a portion of the 
                      collection charge under subclause (I) equal to 8.5 
                      percent of the outstanding principal and interest 
                      of such defaulted loan; and
                    ``(ii) on and after October 1, 2009, remit to the 
                Secretary the entire amount charged under clause (i)(I) 
                with respect to each defaulted loan that is paid off 
                with excess consolidation proceeds.
            ``(C) For purposes of subparagraph (B), the term `excess 
        consolidation proceeds' means, with respect to any guaranty 
        agency for any Federal fiscal year beginning on or after October 
        1, 2009, the proceeds of consolidation of defaulted loans under 
        this title that exceed 45 percent of the agency's total 
        collections on defaulted loans in such Federal fiscal year.''.

    (e) Documentation of Forbearance Agreements.--Section 428(c) (20 
U.S.C. 1078(c)) is further amended--
            (1) in paragraph (3)(A)(i)--
                    (A) by striking ``in writing''; and
                    (B) by inserting ``and documented in accordance with 
                paragraph (10)'' after ``approval of the insurer''; and
            (2) by adding at the end the following new paragraph:
            ``(10) Documentation of forbearance agreements.--For the 
        purposes of paragraph (3), the terms of forbearance agreed to by 
        the parties shall be documented by confirming the agreement of 
        the borrower by notice to the borrower from the lender, and by 
        recording the terms in the borrower's file.''.

    (f) Voluntary Flexible Agreements.--Section 428A(a) (20 U.S.C. 1078-
1(a)) is further amended--

[[Page 120 STAT. 171]]

            (1) in paragraph (1)(B), by striking ``unless the 
        Secretary'' and all that follows through ``designated 
        guarantor'';
            (2) by striking paragraph (2);
            (3) by redesignating paragraph (3) as paragraph (2); and
            (4) by striking paragraph (4).

    (g) Fraud; Repayment Required.--Section 428B(a)(1) (20 U.S.C. 1078-
2(a)(1)) is further amended--
            (1) by striking ``and'' at the end of subparagraph (A);
            (2) by redesignating subparagraph (B) as subparagraph (C); 
        and
            (3) by inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) in the case of a graduate or professional 
                student or parent who has been convicted of, or has pled 
                nolo contendere or guilty to, a crime involving fraud in 
                obtaining funds under this title, such graduate or 
                professional student or parent has completed the 
                repayment of such funds to the Secretary, or to the 
                holder in the case of a loan under this title obtained 
                by fraud; and''.

    (h) Default Reduction Program.--Section 428F(a)(1) (20 U.S.C. 1078-
6(a)(1)) is amended--
            (1) in subparagraph (A), by striking ``consecutive payments 
        for 12 months'' and inserting ``9 payments made within 20 days 
        of the due date during 10 consecutive months'';
            (2) by redesignating subparagraph (C) as subparagraph (D); 
        and
            (3) by inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) A guaranty agency may charge the borrower and 
                retain collection costs in an amount not to exceed 18.5 
                percent of the outstanding principal and interest at the 
                time of sale of a loan rehabilitated under subparagraph 
                (A).''.

    (i) Exceptional Performance Insurance Rate.--Section 428I(b)(1) (20 
U.S.C. 1078-9(b)(1)) is amended--
            (1) in the heading, by striking ``100 percent'' and 
        inserting ``99 percent''; and
            (2) by striking ``100 percent of the unpaid'' and inserting 
        ``99 percent of the unpaid''.

    (j) Uniform Administrative and Claims Procedure.--Section 
432(l)(1)(H) (20 U.S.C. 1082(l)(1)(H)) is amended by inserting ``and 
anticipated graduation date'' after ``status change''.
            (1) Section 428(a)(3)(A)(v) (20 U.S.C. 1078(a)(3)(A)(v)) is 
        amended--
                    (A) by striking ``or'' at the end of subclause (I);
                    (B) by striking the period at the end of subclause 
                (II) and inserting ``; or''; and
                    (C) by adding after subclause (II) the following new 
                subclause:
                    ``(III) in the case of a loan disbursed through an 
                escrow agent, 3 days before the first disbursement of 
                the loan.''.
            (2) Section 428(c)(1)(A) (20 U.S.C. 1078(c)(1)(A)) is 
        amended by striking ``45 days'' in the last sentence and 
        inserting ``30 days''.
            (3) Section 428(i)(1) (20 U.S.C. 1078(i)(1)) is amended by 
        striking ``21 days'' in the third sentence and inserting ``10 
        days''.

[[Page 120 STAT. 172]]

SEC. 8015. FUNDS FOR ADMINISTRATIVE EXPENSES.

    Section 458 <<NOTE: 20 USC 1087h.>> is amended to read as follows:

``SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES.

    ``(a) Administrative Expenses.--
            ``(1) Mandatory funds for fiscal year 2006.--For fiscal year 
        2006, there shall be available to the Secretary, from funds not 
        otherwise appropriated, funds to be obligated for--
                    ``(A) administrative costs under this part and part 
                B, including the costs of the direct student loan 
                programs under this part; and
                    ``(B) account maintenance fees payable to guaranty 
                agencies under part B and calculated in accordance with 
                subsections (b) and (c),
        not to exceed (from such funds not otherwise appropriated) 
        $820,000,000 in fiscal year 2006.
            ``(2) Authorization for administrative costs beginning in 
        fiscal years 2007 through 2011.--For each of the fiscal years 
        2007 through 2011, there are authorized to be appropriated such 
        sums as may be necessary for administrative costs under this 
        part and part B, including the costs of the direct student loan 
        programs under this part.
            ``(3) Continuing mandatory funds for account maintenance 
        fees.--For each of the fiscal years 2007 through 2011, there 
        shall be available to the Secretary, from funds not otherwise 
        appropriated, funds to be obligated for account maintenance fees 
        payable to guaranty agencies under part B and calculated in 
        accordance with subsection (b).
            ``(4) Account maintenance fees.--Account maintenance fees 
        under paragraph (3) shall be paid quarterly and deposited in the 
        Agency Operating Fund established under section 422B.
            ``(5) Carryover.--The Secretary may carry over funds made 
        available under this section to a subsequent fiscal year.

    ``(b) Calculation Basis.--Account maintenance fees payable to 
guaranty agencies under subsection (a)(3) shall not exceed the basis of 
0.10 percent of the original principal amount of outstanding loans on 
which insurance was issued under part B.
    ``(c) Budget Justification.--No funds may be expended under this 
section unless the Secretary includes in the Department of Education's 
annual budget justification to Congress a detailed description of the 
specific activities for which the funds made available by this section 
have been used in the prior and current years (if applicable), the 
activities and costs planned for the budget year, and the projection of 
activities and costs for each remaining year for which administrative 
expenses under this section are made available.''.

SEC. 8016. COST OF ATTENDANCE.

    Section 472 (20 U.S.C. 1087ll) is amended--
            (1) by striking paragraph (4) and inserting the following:
            ``(4) for less than half-time students (as determined by the 
        institution), tuition and fees and an allowance for only--
                    ``(A) books, supplies, and transportation (as 
                determined by the institution);
                    ``(B) dependent care expenses (determined in 
                accordance with paragraph (8)); and

[[Page 120 STAT. 173]]

                    ``(C) room and board costs (determined in accordance 
                with paragraph (3)), except that a student may receive 
                an allowance for such costs under this subparagraph for 
                not more than 3 semesters or the equivalent, of which 
                not more than 2 semesters or the equivalent may be 
                consecutive;'';
            (2) in paragraph (11), by striking ``and'' after the 
        semicolon;
            (3) in paragraph (12), by striking the period and inserting 
        ``; and''; and
            (4) by adding at the end the following:
            ``(13) at the option of the institution, for a student in a 
        program requiring professional licensure or certification, the 
        one-time cost of obtaining the first professional credentials 
        (as determined by the institution).''.

SEC. 8017. FAMILY CONTRIBUTION.

    (a) Family Contribution for Dependent Students.--
            (1) Amendments.--Section 475 (20 U.S.C. 1087oo) is amended--
                    (A) in subsection (g)(2)(D), by striking ``$2,200'' 
                and inserting ``$3,000''; and
                    (B) in subsection (h), by striking ``35'' and 
                inserting ``20''.
            (2) <<NOTE: 20 USC 1087oo note.>> Effective date.--The 
        amendments made by paragraph (1) shall apply with respect to 
        determinations of need for periods of enrollment beginning on or 
        after July 1, 2007.

    (b) Family Contribution for Independent Students Without Dependents 
Other Than a Spouse.--
            (1) Amendments.--Section 476 (20 U.S.C. 1087pp) is amended--
                    (A) in subsection (b)(1)(A)(iv)--
                          (i) in subclause (I), by striking ``$5,000'' 
                      and inserting ``$6,050'';
                          (ii) in subclause (II), by striking ``$5,000'' 
                      and inserting ``$6,050''; and
                          (iii) in subclause (III), by striking 
                      ``$8,000'' and inserting ``$9,700''; and
                    (B) in subsection (c)(4), by striking ``35'' and 
                inserting ``20''.
            (2) <<NOTE: 20 USC 1087pp note.>> Effective date.--The 
        amendments made by paragraph (1) shall apply with respect to 
        determinations of need for periods of enrollment beginning on or 
        after July 1, 2007.

    (c) Family Contribution for Independent Students With Dependents 
Other Than a Spouse.--
            (1) Amendment.--Section 477(c)(4) (20 U.S.C. 1087qq(c)(4)) 
        is amended by striking ``12'' and inserting ``7''.
            (2) <<NOTE: 20 USC 1087gg note.>> Effective date.--The 
        amendment made by paragraph (1) shall apply with respect to 
        determinations of need for periods of enrollment beginning on or 
        after July 1, 2007.

    (d) Regulations; Updated Tables.--Section 478(b) (20 U.S.C. 
1087rr(b)) is amended--
            (1) in paragraph (1), by adding at the end the following: 
        ``For the 2007-2008 academic year, the Secretary shall revise 
        the tables in accordance with this paragraph, except that the 
        Secretary shall increase the amounts contained in the table in 
        section 477(b)(4) by a percentage equal to the greater of the 
        estimated percentage increase in the Consumer Price Index

[[Page 120 STAT. 174]]

        (as determined under the preceding sentence) or 5 percent.''; 
        and
            (2) in paragraph (2)--
                    (A) by striking ``2000-2001'' and inserting ``2007-
                2008''; and
                    (B) by striking ``1999'' and inserting ``2006''.

    (e) Employment Expense Allowance.--Section 478(h) (20 U.S.C. 
1087rr(h)) is amended--
            (1) by striking ``476(b)(4)(B),''; and
            (2) by striking ``meals away from home, apparel and upkeep, 
        transportation, and housekeeping services'' and inserting ``food 
        away from home, apparel, transportation, and household 
        furnishings and operations''.

SEC. 8018. SIMPLIFIED NEED TEST AND AUTOMATIC ZERO IMPROVEMENTS.

    (a) Amendments.--Section 479 (20 U.S.C. 1087ss) is amended--
            (1) in subsection (b)--
                    (A) in paragraph (1)--
                          (i) in subparagraph (A), by striking clause 
                      (i) and inserting the following:
                          ``(i) the student's parents--
                                    ``(I) file, or are eligible to file, 
                                a form described in paragraph (3);
                                    ``(II) certify that the parents are 
                                not required to file a Federal income 
                                tax return; or
                                    ``(III) received, or the student 
                                received, benefits at some time during 
                                the previous 12-month period under a 
                                means-tested Federal benefit program as 
                                defined under subsection (d); and''; and
                          (ii) in subparagraph (B), by striking clause 
                      (i) and inserting the following:
                          ``(i) the student (and the student's spouse, 
                      if any)--
                                    ``(I) files, or is eligible to file, 
                                a form described in paragraph (3);
                                    ``(II) certifies that the student 
                                (and the student's spouse, if any) is 
                                not required to file a Federal income 
                                tax return; or
                                    ``(III) received benefits at some 
                                time during the previous 12-month period 
                                under a means-tested Federal benefit 
                                program as defined under subsection (d); 
                                and''; and
                    (B) in the matter preceding subparagraph (A) of 
                paragraph (3), by striking ``A student or family files a 
                form described in this subsection, or subsection (c), as 
                the case maybe, if the student or family, respectively, 
                files'' and inserting ``In the case of an independent 
                student, the student, or in the case of a dependent 
                student, the family, files a form described in this 
                subsection, or subsection (c), as the case may be, if 
                the student or family, as appropriate, files'';
            (2) in subsection (c)--
                    (A) in paragraph (1)--
                          (i) by striking subparagraph (A) and inserting 
                      the following:
                    ``(A) the student's parents--

[[Page 120 STAT. 175]]

                          ``(i) file, or are eligible to file, a form 
                      described in subsection (b)(3);
                          ``(ii) certify that the parents are not 
                      required to file a Federal income tax return; or
                          ``(iii) received, or the student received, 
                      benefits at some time during the previous 12-month 
                      period under a means-tested Federal benefit 
                      program as defined under subsection (d); and''; 
                      and
                          (ii) by striking subparagraph (B) and 
                      inserting the following:
                    ``(B) the sum of the adjusted gross income of the 
                parents is less than or equal to $20,000; or''; and
                    (B) in paragraph (2)--
                          (i) by striking subparagraph (A) and inserting 
                      the following:
                    ``(A) the student (and the student's spouse, if 
                any)--
                          ``(i) files, or is eligible to file, a form 
                      described in subsection (b)(3);
                          ``(ii) certifies that the student (and the 
                      student's spouse, if any) is not required to file 
                      a Federal income tax return; or
                          ``(iii) received benefits at some time during 
                      the previous 12-month period under a means-tested 
                      Federal benefit program as defined under 
                      subsection (d); and''; and
                          (ii) by striking subparagraph (B) and 
                      inserting the following:
                    ``(B) the sum of the adjusted gross income of the 
                student and spouse (if appropriate) is less than or 
                equal to $20,000.''; and
            (3) by adding at the end the following:

    ``(d) Definition of Means-Tested Federal Benefit Program.--In this 
section, the term `means-tested Federal benefit program' means a 
mandatory spending program of the Federal Government, other than a 
program under this title, in which eligibility for the program's 
benefits, or the amount of such benefits, are determined on the basis of 
income or resources of the individual or family seeking the benefit, and 
may include such programs as--
            ``(1) the supplemental security income program under title 
        XVI of the Social Security Act (42 U.S.C. 1381 et seq.);
            ``(2) the food stamp program under the Food Stamp Act of 
        1977 (7 U.S.C. 2011 et seq.);
            ``(3) the free and reduced price school lunch program 
        established under the Richard B. Russell National School Lunch 
        Act (42 U.S.C. 1751 et seq.);
            ``(4) the program of block grants for States for temporary 
        assistance for needy families established under part A of title 
        IV of the Social Security Act (42 U.S.C. 601 et seq.);
            ``(5) the special supplemental nutrition program for women, 
        infants, and children established by section 17 of the Child 
        Nutrition Act of 1966 (42 U.S.C. 1786); and
            ``(6) other programs identified by the Secretary.''.

    (b) <<NOTE: 20 USC 1087ss note.>> Evaluation of Simplified Needs 
Test.--
            (1) Eligibility guidelines.--The Secretary of Education 
        shall regularly evaluate the impact of the eligibility 
        guidelines in subsections (b)(1)(A)(i), (b)(1)(B)(i), (c)(1)(A), 
        and (c)(2)(A)

[[Page 120 STAT. 176]]

        of section 479 of the Higher Education Act of 1965 (20 U.S.C. 
        1087ss(b)(1)(A)(i), (b)(1)(B)(i), (c)(1)(A), and (c)(2)(A)).
            (2) Means-tested federal benefit program.--For each 3-year 
        period, the Secretary of Education shall evaluate the impact of 
        including the receipt of benefits by a student or parent under a 
        means-tested Federal benefit program (as defined in section 
        479(d) of the Higher Education Act of 1965 (20 U.S.C. 1087ss(d)) 
        as a factor in determining eligibility under subsections (b) and 
        (c) of section 479 of the Higher Education Act of 1965 (20 
        U.S.C. 1087ss(b) and (c)).

SEC. 8019. ADDITIONAL NEED ANALYSIS AMENDMENTS.

    (a) Treating Active Duty Members of the Armed Forces as Independent 
Students.--Section 480(d)(3) (20 U.S.C. 1087vv(d)(3)) is amended by 
inserting before the semicolon at the end the following: ``or is 
currently serving on active duty in the Armed Forces for other than 
training purposes''.
    (b) Definition of Assets.--Section 480(f)(1) (20 U.S.C. 
1087vv(f)(1)) is amended by inserting ``qualified education benefits 
(except as provided in paragraph (3)),'' after ``tax shelters,''.
    (c) Treatment of Family Ownership of Small Businesses.--Section 
480(f)(2) (20 U.S.C. 1087vv(f)(2)) is amended--
            (1) in subparagraph (A), by striking ``or'';
            (2) in subparagraph (B), by striking the period at the end 
        and inserting ``; or''; and
            (3) by adding at the end the following new subparagraph:
            ``(C) a small business with not more than 100 full-time or 
        full-time equivalent employees (or any part of such a small 
        business) that is owned and controlled by the family.''.

    (d) Additional Definitions.--Section 480(f) is further amended by 
adding at the end the following new paragraphs:
    ``(3) A qualified education benefit shall not be considered an asset 
of a student for purposes of section 475.
    ``(4) In determining the value of assets in a determination of need 
under this title (other than for subpart 4 of part A), the value of a 
qualified education benefit shall be--
            ``(A) the refund value of any tuition credits or 
        certificates purchased under a qualified education benefit; and
            ``(B) in the case of a program in which contributions are 
        made to an account that is established for the purpose of 
        meeting the qualified higher education expenses of the 
        designated beneficiary of the account, the current balance of 
        such account.

    ``(5) In this subsection:
            ``(A) The term `qualified education benefit' means--
                    ``(i) a qualified tuition program (as defined in 
                section 529(b)(1)(A) of the Internal Revenue Code of 
                1986) or other prepaid tuition plan offered by a State; 
                and
                    ``(ii) a Coverdell education savings account (as 
                defined in section 530(b)(1) of the Internal Revenue 
                Code of 1986).
            ``(B) The term `qualified higher education expenses' has the 
        meaning given the term in section 529(e) of the Internal Revenue 
        Code of 1986.''.

    (e) Designated Assistance.--Section 480(j) (20 U.S.C. 1087vv(j)) is 
amended--
            (1) in the subsection heading, by striking ``; Tuition 
        Prepayment Plans'';

[[Page 120 STAT. 177]]

            (2) by striking paragraph (2);
            (3) by redesignating paragraph (3) as paragraph (2); and
            (4) by adding at the end the following new paragraph:

    ``(3) Notwithstanding paragraph (1) and section 472, assistance not 
received under this title may be excluded from both estimated financial 
assistance and cost of attendance, if that assistance is provided by a 
State and is designated by such State to offset a specific component of 
the cost of attendance. If that assistance is excluded from either 
estimated financial assistance or cost of attendance, it shall be 
excluded from both.''.

SEC. 8020. GENERAL PROVISIONS.

    (a) Academic Year.--Paragraph (2) of section 481(a) (20 U.S.C. 
1088(a)) is amended to read as follows:
    ``(2)(A) For the purpose of any program under this title, the term 
`academic year' shall--
            ``(i) require a minimum of 30 weeks of instructional time 
        for a course of study that measures its program length in credit 
        hours; or
            ``(ii) require a minimum of 26 weeks of instructional time 
        for a course of study that measures its program length in clock 
        hours; and
            ``(iii) require an undergraduate course of study to contain 
        an amount of instructional time whereby a full-time student is 
        expected to complete at least--
                    ``(I) 24 semester or trimester hours or 36 quarter 
                credit hours in a course of study that measures its 
                program length in credit hours; or
                    ``(II) 900 clock hours in a course of study that 
                measures its program length in clock hours.

    ``(B) The Secretary may reduce such minimum of 30 weeks to not less 
than 26 weeks for good cause, as determined by the Secretary on a case-
by-case basis, in the case of an institution of higher education that 
provides a 2-year or 4-year program of instruction for which the 
institution awards an associate or baccalaureate degree.''.
    (b) Distance Education: Eligible Program.--Section 481(b) (20 U.S.C. 
1088(b)) is amended by adding at the end the following new paragraphs:
    ``(3) An otherwise eligible program that is offered in whole or in 
part through telecommunications is eligible for the purposes of this 
title if the program is offered by an institution, other than a foreign 
institution, that has been evaluated and determined (before or after the 
date of enactment of the Higher Education Reconciliation Act of 2005) to 
have the capability to effectively deliver distance education programs 
by an accrediting agency or association that--
            ``(A) is recognized by the Secretary under subpart 2 of part 
        H; and
            ``(B) has evaluation of distance education programs within 
        the scope of its recognition, as described in section 496(n)(3).

    ``(4) For purposes of this title, the term `eligible program' 
includes an instructional program that, in lieu of credit hours or clock 
hours as the measure of student learning, utilizes direct assessment of 
student learning, or recognizes the direct assessment of student 
learning by others, if such assessment is consistent with the 
accreditation of the institution or program utilizing the

[[Page 120 STAT. 178]]

results of the assessment. In the case of a program being determined 
eligible for the first time under this paragraph, such determination 
shall be made by the Secretary before such program is considered to be 
an eligible program.''.
    (c) Correspondence Courses.--Section 484(l)(1) (20 U.S.C. 
1091(l)(1)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``for a program of study of 1 year 
                or longer''; and
                    (B) by striking ``unless the total'' and all that 
                follows through ``courses at the institution''; and
            (2) by amending subparagraph (B) to read as follows:
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to an institution or school described in section 3(3)(C) 
                of the Carl D. Perkins Vocational and Technical 
                Education Act of 1998.''.

SEC. 8021. STUDENT ELIGIBILITY.

    (a) Fraud: Repayment Required.--Section 484(a) (20 U.S.C. 1091(a)) 
is amended--
            (1) by striking the period at the end of paragraph (5) and 
        inserting ``; and''; and
            (2) by adding at the end the following new paragraph:
            ``(6) if the student has been convicted of, or has pled nolo 
        contendere or guilty to, a crime involving fraud in obtaining 
        funds under this title, have completed the repayment of such 
        funds to the Secretary, or to the holder in the case of a loan 
        under this title obtained by fraud.''.

    (b) Verification of Income Date.--Paragraph (1) of section 484(q) 
(20 U.S.C. 1091(q)) is amended to read as follows:
            ``(1) Confirmation with irs.--The Secretary of Education, in 
        cooperation with the Secretary of the Treasury, is authorized to 
        confirm with the Internal Revenue Service the information 
        specified in section 6103(l)(13) of the Internal Revenue Code of 
        1986 reported by applicants (including parents) under this title 
        on their Federal income tax returns for the purpose of verifying 
        the information reported by applicants on student financial aid 
        applications.''.

    (c) Suspension of Eligibility for Drug Offenses.--Section 484(r)(1) 
(20 U.S.C. 1091(r)(1)) is amended by striking everything preceding the 
table and inserting the following:
            ``(1) In general.--A student who is convicted of any offense 
        under any Federal or State law involving the possession or sale 
        of a controlled substance for conduct that occurred during a 
        period of enrollment for which the student was receiving any 
        grant, loan, or work assistance under this title shall not be 
        eligible to receive any grant, loan, or work assistance under 
        this title from the date of that conviction for the period of 
        time specified in the following table:''.

SEC. 8022. INSTITUTIONAL REFUNDS.

    Section 484B (20 U.S.C. 1091b) is amended--
            (1) in the matter preceding clause (i) of subsection 
        (a)(2)(A), by striking ``a leave of'' and inserting ``1 or more 
        leaves of'';
            (2) in subsection (a)(3)(B)(ii), by inserting ``(as 
        determined in accordance with subsection (d))'' after ``student 
        has completed'';

[[Page 120 STAT. 179]]

            (3) in subsection (a)(3)(C)(i), by striking ``grant or loan 
        assistance under this title'' and inserting ``grant assistance 
        under subparts 1 and 3 of part A, or loan assistance under parts 
        B, D, and E,'';
            (4) in subsection (a)(4), by amending subparagraph (A) to 
        read as follows:
                    ``(A) In general.--After determining the eligibility 
                of the student for a late disbursement or post-
                withdrawal disbursement (as required in regulations 
                prescribed by the Secretary), the institution of higher 
                education shall contact the borrower and obtain 
                confirmation that the loan funds are still required by 
                the borrower. In making such contact, the institution 
                shall explain to the borrower the borrower's obligation 
                to repay the funds following any such disbursement. The 
                institution shall document in the borrower's file the 
                result of such contact and the final determination made 
                concerning such disbursement.'';
            (5) in subsection (b)(1), by inserting ``not later than 45 
        days from the determination of withdrawal'' after ``return'';
            (6) in subsection (b)(2), by amending subparagraph (C) to 
        read as follows:
                    ``(C) Grant overpayment requirements.--
                          ``(i) In general.--Notwithstanding 
                      subparagraphs (A) and (B), a student shall only be 
                      required to return grant assistance in the amount 
                      (if any) by which--
                                    ``(I) the amount to be returned by 
                                the student (as determined under 
                                subparagraphs (A) and (B)), exceeds
                                    ``(II) 50 percent of the total grant 
                                assistance received by the student under 
                                this title for the payment period or 
                                period of enrollment.
                          ``(ii) Minimum.--A student shall not be 
                      required to return amounts of $50 or less.'';
            (7) in subsection (d), by striking ``(a)(3)(B)(i)'' and 
        inserting ``(a)(3)(B)''; and
            (8) in subsection (d)(2), by striking ``clock hours--'' and 
        all that follows through the period and inserting ``clock hours 
        scheduled to be completed by the student in that period as of 
        the day the student withdrew.''.

SEC. 8023. COLLEGE ACCESS INITIATIVE.

    Part G is further amended by inserting after section 485C (20 U.S.C. 
1092c) the following new section:

``SEC. 485D. <<NOTE: 20 USC 1092e.>> COLLEGE ACCESS INITIATIVE.

    ``(a) State-by-State Information.--The Secretary shall direct each 
guaranty agency with which the Secretary has an agreement under section 
428(c) to provide to the Secretary the information necessary for the 
development of Internet web links and access for students and families 
to a comprehensive listing of the postsecondary education opportunities, 
programs, publications, Internet web sites, and other services available 
in the States for which such agency serves as the designated guarantor.
    ``(b) Guaranty Agency Activities.--
            ``(1) <<NOTE: Public information.>> Plan and activity 
        required.--Each guaranty agency with which the Secretary has an 
        agreement under section 428(c) shall develop a plan, and 
        undertake the activity necessary, to gather the information 
        required under subsection (a) and

[[Page 120 STAT. 180]]

        to make such information available to the public and to the 
        Secretary in a form and manner as prescribed by the Secretary.
            ``(2) Activities.--Each guaranty agency shall undertake such 
        activities as are necessary to promote access to postsecondary 
        education for students through providing information on college 
        planning, career preparation, and paying for college. The 
        guaranty agency shall publicize such information and coordinate 
        such activities with other entities that either provide or 
        distribute such information in the States for which such 
        guaranty agency serves as the designated guarantor.
            ``(3) Funding.--The activities required by this section may 
        be funded from the guaranty agency's Operating Fund established 
        pursuant to section 422B and, to the extent funds remain, from 
        earnings on the restricted account established pursuant to 
        section 422(h)(4).
            ``(4) Rule of construction.--Nothing in this subsection 
        shall be construed to require a guaranty agency to duplicate any 
        efforts under way on the date of enactment of the Higher 
        Education Reconciliation Act of 2005 that meet the requirements 
        of this section.

    ``(c) Access to Information.--
            ``(1) Secretary's responsibility.--The Secretary shall 
        ensure the availability of the information provided, by the 
        guaranty agencies in accordance with this section, to students, 
        parents, and other interested individuals, through Internet web 
        links or other methods prescribed by the Secretary.
            ``(2) Guaranty agency responsibility.--The guaranty agencies 
        shall ensure that the information required by this section is 
        available without charge in printed format for students and 
        parents requesting such information.
            ``(3) <<NOTE: Deadline.>> Publicity.--Not later than 270 
        days after the date of enactment of the Higher Education 
        Reconciliation Act of 2005, the Secretary and guaranty agencies 
        shall publicize the availability of the information required by 
        this section, with special emphasis on ensuring that populations 
        that are traditionally underrepresented in postsecondary 
        education are made aware of the availability of such 
        information.''.

SEC. 8024. WAGE GARNISHMENT REQUIREMENT.

    Section 488A(a)(1) (20 U.S.C. 1095a(a)(1)) is amended by striking 
``10 percent'' and inserting ``15 percent''.

                          Subtitle B--Pensions

SEC. 8101. INCREASES IN PBGC PREMIUMS.

    (a) Flat-Rate Premiums.--
            (1) Single-employer plans.--
                    (A) In general.--Clause (i) of section 4006(a)(3)(A) 
                of the Employee Retirement Income Security Act of 1974 
                (29 U.S.C. 1306(a)(3)(A)) is amended by striking ``$19'' 
                and inserting ``$30''.
                    (B) Adjustment for inflation.--Section 4006(a)(3) of 
                such Act (29 U.S.C. 1306(a)(3)) is amended by adding at 
                the end the following new subparagraph:

    ``(F) For each plan year beginning in a calendar year after 2006, 
there shall be substituted for the premium rate specified

[[Page 120 STAT. 181]]

in clause (i) of subparagraph (A) an amount equal to the greater of--
            ``(i) the product derived by multiplying the premium rate 
        specified in clause (i) of subparagraph (A) by the ratio of--
                    ``(I) the national average wage index (as defined in 
                section 209(k)(1) of the Social Security Act) for the 
                first of the 2 calendar years preceding the calendar 
                year in which such plan year begins, to
                    ``(II) the national average wage index (as so 
                defined) for 2004; and
            ``(ii) the premium rate in effect under clause (i) of 
        subparagraph (A) for plan years beginning in the preceding 
        calendar year.

If the amount determined under this subparagraph is not a multiple of 
$1, such product shall be rounded to the nearest multiple of $1.''.
            (2) Multiemployer plans.--
                    (A) In general.--Section 4006(a)(3)(A) of such Act 
                (29 U.S.C. 1306(a)(3)(A)) is amended--
                          (i) in clause (iii)--
                                    (I) by inserting ``and before 
                                January 1, 2006,'' after ``Act of 
                                1980,''; and
                                    (II) by striking the period at the 
                                end and inserting ``, or''; and
                          (ii) by adding at the end the following:
            ``(iv) in the case of a multiemployer plan, for plan years 
        beginning after December 31, 2005, $8.00 for each individual who 
        is a participant in such plan during the applicable plan 
        year.''.
                    (B) Adjustment for inflation.--Section 4006(a)(3) of 
                such Act (29 U.S.C. 1306(a)(3)), as amended by this 
                subsection, is amended by adding at the end the 
                following new subparagraph:

    ``(G) For each plan year beginning in a calendar year after 2006, 
there shall be substituted for the premium rate specified in clause (iv) 
of subparagraph (A) an amount equal to the greater of--
            ``(i) the product derived by multiplying the premium rate 
        specified in clause (iv) of subparagraph (A) by the ratio of--
                    ``(I) the national average wage index (as defined in 
                section 209(k)(1) of the Social Security Act) for the 
                first of the 2 calendar years preceding the calendar 
                year in which such plan year begins, to
                    ``(II) the national average wage index (as so 
                defined) for 2004; and
            ``(ii) the premium rate in effect under clause (iv) of 
        subparagraph (A) for plan years beginning in the preceding 
        calendar year.

If the amount determined under this subparagraph is not a multiple of 
$1, such product shall be rounded to the nearest multiple of $1.''.
    (b) Premium Rate for Certain Terminated Single-Employer Plans.--
Subsection (a) of section 4006 of such Act (29 U.S.C. 1306) is amended 
by adding at the end the following:
    ``(7) Premium Rate for Certain Terminated Single-Employer Plans.--

[[Page 120 STAT. 182]]

            ``(A) In general.--If there is a termination of a single-
        employer plan under clause (ii) or (iii) of section 
        4041(c)(2)(B) or section 4042, there shall be payable to the 
        corporation, with respect to each applicable 12-month period, a 
        premium at a rate equal to $1,250 multiplied by the number of 
        individuals who were participants in the plan immediately before 
        the termination date. Such premium shall be in addition to any 
        other premium under this section.
            ``(B) Special rule for plans terminated in bankruptcy 
        reorganization.--In the case of a single-employer plan 
        terminated under section 4041(c)(2)(B)(ii) or under section 4042 
        during pendency of any bankruptcy reorganization proceeding 
        under chapter 11 of title 11, United States Code, or under any 
        similar law of a State or a political subdivision of a State (or 
        a case described in section 4041(c)(2)(B)(i) filed by or against 
        such person has been converted, as of such date, to such a case 
        in which reorganization is sought), subparagraph (A) shall not 
        apply to such plan until the date of the discharge or dismissal 
        of such person in such case.
            ``(C) Applicable 12-month period.--For purposes of 
        subparagraph (A)--
                    ``(i) In general.--The term `applicable 12-month 
                period' means--
                          ``(I) the 12-month period beginning with the 
                      first month following the month in which the 
                      termination date occurs, and
                          ``(II) each of the first two 12-month periods 
                      immediately following the period described in 
                      subclause (I).
                    ``(ii) Plans terminated in bankruptcy 
                reorganization.--In any case in which the requirements 
                of subparagraph (B)(i)(I) are met in connection with the 
                termination of the plan with respect to 1 or more 
                persons described in such subparagraph, the 12-month 
                period described in clause (i)(I) shall be the 12-month 
                period beginning with the first month following the 
                month which includes the earliest date as of which each 
                such person is discharged or dismissed in the case 
                described in such clause in connection with such person.
            ``(D) Coordination with section 4007.--
                    ``(i) Notwithstanding section 4007--
                          ``(I) <<NOTE: Deadline.>> premiums under this 
                      paragraph shall be due within 30 days after the 
                      beginning of any applicable 12-month period, and
                          ``(II) the designated payor shall be the 
                      person who is the contributing sponsor as of 
                      immediately before the termination date.
                    ``(ii) The fifth sentence of section 4007(a) shall 
                not apply in connection with premiums determined under 
                this paragraph.
            ``(E) Termination.--Subparagraph (A) shall not apply with 
        respect to any plan terminated after December 31, 2010.''.

    (c) Conforming Amendment.--Section 4006(a)(3)(B) of such Act (29 
U.S.C. 1306(a)(3)(B)) is amended by striking ``subparagraph (A)(iii)'' 
and inserting ``clause (iii) or (iv) of subparagraph (A)''.
    (d) <<NOTE: 29 USC 1306 note.>> Effective Dates.--

[[Page 120 STAT. 183]]

            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        plan years beginning after December 31, 2005.
            (2) Premium rate for certain terminated single-employer 
        plans.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the amendment made by subsection (b) shall apply to 
                plans terminated after December 31, 2005.
                    (B) Special rule for plans terminated in 
                bankruptcy.--The amendment made by subsection (b) shall 
                not apply to a termination of a single-employer plan 
                that is terminated during the pendency of any bankruptcy 
                reorganization proceeding under chapter 11 of title 11, 
                United States Code (or under any similar law of a State 
                or political subdivision of a State), if the proceeding 
                is pursuant to a bankruptcy filing occurring before 
                October 18, 2005.

                       TITLE IX--LIHEAP PROVISIONS

SEC. 9001. FUNDING AVAILABILITY.

    (a) In General.--In addition to amounts otherwise made available, 
there are appropriated, out of any money in the Treasury not otherwise 
appropriated, to the Secretary of Health and Human Services for a 1-time 
only obligation and expenditure--
            (1) $250,000,000 for fiscal year 2007 for allocation under 
        section 2604(a) through (d) of the Low-Income Home Energy 
        Assistance Act of 1981 (42 U.S.C. 8623(a) through (d)); and
            (2) $750,000,000 for fiscal year 2007 for allocation under 
        section 2604(e) of the Low-Income Home Energy Assistance Act of 
        1981 (42 U.S.C. 8623(e)).

    (b) Sunset.--The provisions of this section shall terminate, be null 
and void, and have no force and effect whatsoever after September 30, 
2007. No monies provided for under this section shall be available after 
such date.

                  TITLE X--JUDICIARY RELATED PROVISIONS

                  Subtitle A--Civil Filing Adjustments

SEC. 10001. CIVIL CASE FILING FEE INCREASES.

    (a) Civil Actions Filed in District Courts.--Section 1914(a) of 
title 28, United States Code, is amended by striking ``$250'' and 
inserting ``$350''.
    (b) <<NOTE: 28 USC 1913 note.>> Appeals Filed in Courts of 
Appeals.--The $250 fee for docketing a case on appeal or review, or 
docketing any other proceeding, in a court of appeals, as prescribed by 
the Judicial Conference, effective as of January 1, 2005, under section 
1913 of title 28, United States Code, shall be increased to $450.

    (c) <<NOTE: 28 USC 1913 note.>> Expenditure Limitation.--Incremental 
amounts collected by reason of the enactment of this section shall be 
deposited in a special fund in the Treasury to be established after the 
enactment

[[Page 120 STAT. 184]]

of this Act. Such amounts shall be available for the purposes specified 
in section 1931(a) of title 28, United States Code, but only to the 
extent specifically appropriated by an Act of Congress enacted after the 
enactment of this Act.

    (d) <<NOTE: 28 USC 1914 note.>> Effective Date.--This section and 
the amendment made by this section shall take effect 60 days after the 
date of the enactment of this Act.

                       Subtitle B--Bankruptcy Fees

SEC. 10101. BANKRUPTCY FEES.

    (a) Bankruptcy Filing Fees.--Section 1930(a) of title 28, United 
States Code, is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (A) by striking ``$220'' and 
                inserting ``$245''; and
                    (B) in subparagraph (B) by striking ``$150'' and 
                inserting ``$235''; and
            (2) in paragraph (2) by striking ``$1,000'' and inserting 
        ``$2,750''.

    (b) <<NOTE: 28 USC 1931 note.>> Expenditure Limitation.--Incremental 
amounts collected by reason of the amendments made by subsection (a) 
shall be deposited in a special fund in the Treasury to be established 
after the enactment of this Act. Such amounts shall be available for the 
purposes specified in section 1931(a) of title 28, United States Code, 
but only to the extent specifically appropriated by an Act of Congress 
enacted after the enactment of this Act.

    (c) <<NOTE: 28 USC 1930 note.>> Effective Date.--This section and 
the amendments made by this section shall take effect 60 days after the 
date of the enactment of this Act.

    Approved February 8, 2006.

LEGISLATIVE HISTORY--S. 1932 (H.R. 4241):
---------------------------------------------------------------------------

HOUSE REPORTS: Nos. 109-276 accompanying H.R. 4241 (Comm. on the Budget) 
and 109-362 (Comm. of Conference).
CONGRESSIONAL RECORD:
                                                        Vol. 151 (2005):
                                    Oct. 31, Nov. 1-3, considered and 
                                        passed Senate.
                                    Nov. 17, considered and passed 
                                        House, amended, in lieu of H.R. 
                                        4241.
                                    Dec. 18, House agreed to conference 
                                        report.
                                    Dec. 19-21, Senate considered and 
                                        disagreed to conference report. 
                                        Senate concurred in House 
                                        amendment with an amendment.
                                                        Vol. 152 (2006):
                                    Feb. 1, House concurred in Senate 
                                        amendment pursuant to H. Res. 
                                        653.
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 42 (2006):
            Feb. 8, Presidential statement and remarks.

                                  <all>
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