PUBLIC LAW 109–171—FEB. 8, 2006

DEFICIT REDUCTION ACT OF 2005

120 STAT. 4 PUBLIC LAW 109–171—FEB. 8, 2006

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).

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress 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 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) 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

Effective dates.

Agricultural

Reconciliation

Act of 2005.

7 USC 7901 note.

Deficit Reduction

Act of 2005.

42 USC 1305

note.

Feb. 8, 2006

[S. 1932]

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‘‘(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) EFFECTIVE DATE.—The amendments made by this section

take effect on August 1, 2006.

Subtitle B—Conservation

SEC. 1201. WATERSHED REHABILITATION PROGRAM.

The 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—

Termination

date.

7 USC 7937 note.

120 STAT. 6 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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 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 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) CANCELLATION OF UNOBLIGATED PRIOR-YEAR FUNDS.—The

authority to obligate funds previously made available under such

Termination

date.

Termination

date.

Termination

date.

PUBLIC LAW 109–171—FEB. 8, 2006 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 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) 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 TRANS- FERS.—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) 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. 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

12 USC 1701z–11

note.

Effective dates.

Termination

date.

Termination

date.

120 STAT. 8 PUBLIC LAW 109–171—FEB. 8, 2006

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. APPROPRIATED FUNDS REQUIREMENT FOR BELOWMARKET 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

12 USC 1701z–11

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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 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—

Federal Deposit

Insurance

Reform Act of

2005.

Banks and

banking.

12 USC 1811

note.

12 USC 1821

note.

12 USC 1701z–11

note.

120 STAT. 10 PUBLIC LAW 109–171—FEB. 8, 2006

(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) 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 ChainType 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) 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)

Federal Register,

publication.

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PUBLIC LAW 109–171—FEB. 8, 2006 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) 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

Effective dates.

120 STAT. 12 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘$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) 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.’’.

12 USC 1821

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(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) 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.

Applicability.

120 STAT. 14 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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) 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) 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),

Notice.

12 USC 1817

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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 ECO- NOMIC 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

12 USC 1817

note.

120 STAT. 16 PUBLIC LAW 109–171—FEB. 8, 2006

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.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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.—

Regulations.

120 STAT. 18 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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

PUBLIC LAW 109–171—FEB. 8, 2006 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 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

Deadline.

120 STAT. 20 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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. 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) 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

Applicability.

12 USC 1817

note.

Deadline.

Deadline.

Federal Register,

publication.

PUBLIC LAW 109–171—FEB. 8, 2006 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 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 ‘‘fullpower television station licensee that’’;

(iii) by striking ‘‘746 and 806 megahertz’’ and

inserting ‘‘698 and 806 megahertz’’; and

Digital Television

Transition and

Public Safety Act

of 2005.

47 USC 309 note.

120 STAT. 22 PUBLIC LAW 109–171—FEB. 8, 2006

(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 ANA- LOG 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

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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,

Effective date.

120 STAT. 24 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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) 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) 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,

Effective date.

Deadline.

Applicability.

PUBLIC LAW 109–171—FEB. 8, 2006 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. 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. 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) 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-TOANALOG 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

Grants.

Effective date.

New York.

New Jersey.

120 STAT. 26 PUBLIC LAW 109–171—FEB. 8, 2006

transmission on the low-power television station’s analog channel.

An 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 pay- ments 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)). 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 lowpower 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,

Effective date.

Deadline.

PUBLIC LAW 109–171—FEB. 8, 2006 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—

120 STAT. 28 PUBLIC LAW 109–171—FEB. 8, 2006

(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. 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.

Applicability.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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. 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) 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.

42 USC 1395ww

note.

Reports.

Procedures.

Public

information.

120 STAT. 30 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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) 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 evidencebased 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)’’.

Deadline.

Effective date.

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 32 PUBLIC LAW 109–171—FEB. 8, 2006

(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) 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) 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)’’.

Applicability.

Applicability.

PUBLIC LAW 109–171—FEB. 8, 2006 120 STAT. 33

SEC. 5005. EXTENDED PHASE-IN OF THE INPATIENT REHABILITATION

FACILITY CLASSIFICATION CRITERIA.

(a) 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

Applicability.

42 USC 1395ww

note.

120 STAT. 34 PUBLIC LAW 109–171—FEB. 8, 2006

with recommendations for such legislation and administrative

actions as the Secretary considers appropriate.

(c) CONTINUATION OF SUSPENSION ON ENROLLMENT.—

(1) 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. MEDICARE DEMONSTRATION PROJECTS TO PERMIT

GAINSHARING ARRANGEMENTS.

(a) 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

Deadlines.

42 USC 1395ww

note.

Deadline.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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.

Deadline.

120 STAT. 36 PUBLIC LAW 109–171—FEB. 8, 2006

(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. POST-ACUTE CARE PAYMENT REFORM DEMONSTRATION

PROGRAM.

(a) ESTABLISHMENT.—

(1) 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

Deadline.

42 USC 1395b–1

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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

Applicability.

120 STAT. 38 PUBLIC LAW 109–171—FEB. 8, 2006

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 POWERDRIVEN 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) 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

42 USC 1395m

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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

42 USC 1395m

note.

120 STAT. 40 PUBLIC LAW 109–171—FEB. 8, 2006

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—

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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

42 USC 1395w–4

note.

120 STAT. 42 PUBLIC LAW 109–171—FEB. 8, 2006

(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 preBBA 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. 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) 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

42 USC 1395l

note.

Deadline.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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

Deadline.

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120 STAT. 44 PUBLIC LAW 109–171—FEB. 8, 2006

(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 EXAMINA- TION.—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) 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) EFFECTIVE DATE.—The amendments made by this section

shall apply to services furnished on or after January 1, 2007.

42 USC 1395l

note.

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note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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).

42 USC 1395u

note.

120 STAT. 46 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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) 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) 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

42 USC 1395fff

note.

42 USC 1395p

note.

PUBLIC LAW 109–171—FEB. 8, 2006 120 STAT. 47

market basket percentage increase applicable

under such clause for such year shall be reduced

by 2 percentage points. 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) PUBLIC AVAILABILITY OF DATA SUB- MITTED.—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) 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.

42 USC 1395h

note.

Procedures.

Applicability.

120 STAT. 48 PUBLIC LAW 109–171—FEB. 8, 2006

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

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 50 PUBLIC LAW 109–171—FEB. 8, 2006

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-forservice 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.—

PUBLIC LAW 109–171—FEB. 8, 2006 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. 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.

42 USC 1395eee

note.

120 STAT. 52 PUBLIC LAW 109–171—FEB. 8, 2006

(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

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 54 PUBLIC LAW 109–171—FEB. 8, 2006

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 PAY- MENT.—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) 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) 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’’;

Deadline.

Reports.

Certification.

PUBLIC LAW 109–171—FEB. 8, 2006 120 STAT. 55

(2) by adding at the end of subsection (e) the following

new paragraph:

‘‘(5) 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 is amended—

(1) in subparagraph (A)—

(A) in clause (i), by inserting ‘‘month of a’’ after ‘‘last

day of each’’; and

(B) 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) REQUIREMENT TO PROMULGATE REGULATION.— 42 USC 1396r–8

note.

Effective date.

42 USC 1396r–8.

Effective date.

120 STAT. 56 PUBLIC LAW 109–171—FEB. 8, 2006

(A) 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) 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 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.

42 USC 1396r–8.

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PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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:

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120 STAT. 58 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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 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) EFFECTIVE DATE.—The amendments made by this subsection shall take effect on the date of the enactment of this

Act.

(g) EFFECTIVE DATE.—Except as otherwise provided, the amendments made by this section shall take effect on January 1, 2007,

42 USC 1396r–8

note.

42 USC 1396r–8

note.

42 USC 1396r–8,

1395x.

PUBLIC LAW 109–171—FEB. 8, 2006 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) IDENTIFICATION 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) 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);

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120 STAT. 60 PUBLIC LAW 109–171—FEB. 8, 2006

(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 MANUFAC- TURER 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) 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

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PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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

42 USC 1396r–8

note.

42 USC 1396r–8

note.

120 STAT. 62 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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) 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

42 USC 1396p

note.

42 USC 1396p

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PUBLIC LAW 109–171—FEB. 8, 2006 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) 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

Notification.

120 STAT. 64 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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) 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

42 USC 1396r–5

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PUBLIC LAW 109–171—FEB. 8, 2006 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) The Secretary shall establish a process whereby paragraph

(1) is waived in the case of a demonstrated hardship.’’.

(b) 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 longterm 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),

42 USC 1396p

note.

Procedures.

120 STAT. 66 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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 lookback 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:

Applicability.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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.

42 USC 1396p

note.

120 STAT. 68 PUBLIC LAW 109–171—FEB. 8, 2006

Subchapter 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) 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.

Reports.

Notification.

42 USC 1396p

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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 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. 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 longterm 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).

Records.

Applicability.

120 STAT. 70 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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 postclaims 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 longterm 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

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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 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 longterm 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 longterm care and the impact of such partnerships on Federal

Deadline.

Deadline.

120 STAT. 72 PUBLIC LAW 109–171—FEB. 8, 2006

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 longterm 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 LongTerm 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 longterm 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 longterm 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) 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:

42 USC 1396h.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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

Procedures.

42 USC 1396h

note.

120 STAT. 74 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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) 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 as section 1937; and

(2) by inserting after section 1935 the following:

‘‘MEDICAID INTEGRITY PROGRAM

‘‘SEC. 1936. (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

Contracts.

42 USC 1396u–6.

42 USC 1396v.

42 USC 1396b

note.

42 USC 1396a

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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

Regulations.

120 STAT. 76 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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

Regulations.

PUBLIC LAW 109–171—FEB. 8, 2006 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 CON- TROL 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 (MEDIMEDI) 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) 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

Contracts.

120 STAT. 78 PUBLIC LAW 109–171—FEB. 8, 2006

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)). 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) 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—

42 USC 1396a

note.

Deadline.

PUBLIC LAW 109–171—FEB. 8, 2006 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,

120 STAT. 80 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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

42 USC 1396a

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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. (a) STATE FLEXIBILITY.— ‘‘(1) IN GENERAL.—Notwithstanding sections 1916 and

1902(a)(10)(B), a State, at its option and through a State plan

42 USC 1396o–1.

42 USC 1396b

note.

42 USC 1396b

note.

120 STAT. 82 PUBLIC LAW 109–171—FEB. 8, 2006

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.

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 84 PUBLIC LAW 109–171—FEB. 8, 2006

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

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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 nonpreferred 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

42 USC 1396o

note.

120 STAT. 86 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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 nonemergency 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.—

42 USC 1396o–1

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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 prudentlayperson 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 nonemergency 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.’’.

120 STAT. 88 PUBLIC LAW 109–171—FEB. 8, 2006

(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-EMER- GENCY 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) 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 and by inserting after section 1936 the following new section:

‘‘STATE FLEXIBILITY IN BENEFIT PACKAGES

‘‘SEC. 1937. (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

42 USC 1396u–7.

42 USC 1396v.

42 USC 1396b

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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.

120 STAT. 90 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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 SPENDDOWN 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.—

PUBLIC LAW 109–171—FEB. 8, 2006 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 COV- ERAGE.—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 ageappropriate 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—

120 STAT. 92 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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) 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) 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

42 USC 1396b

note.

42 USC 1396u–7

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 94 PUBLIC LAW 109–171—FEB. 8, 2006

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—

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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. 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) 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.

42 USC 1396n

note.

Public comment.

42 USC 1396n

note.

120 STAT. 96 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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 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);

Family

Opportunity Act

of 2005.

42 USC 1305

note.

42 USC 1396r–4

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 98 PUBLIC LAW 109–171—FEB. 8, 2006

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

PUBLIC LAW 109–171—FEB. 8, 2006 120 STAT. 99

term excludes any child eligible for medical assistance only by

reason of section 1902(a)(10)(A)(ii)(XIX).’’.

(d) 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. 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 costeffectiveness 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

42 USC 1396a

note.

42 USC 1396a

note.

120 STAT. 100 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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

Grants.

Contracts.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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’’;

Applicability.

120 STAT. 102 PUBLIC LAW 109–171—FEB. 8, 2006

(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) 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. 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—

Grants.

42 USC 1396a

note.

42 USC 1396a

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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 communitybased 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 longterm 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

120 STAT. 104 PUBLIC LAW 109–171—FEB. 8, 2006

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

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 106 PUBLIC LAW 109–171—FEB. 8, 2006

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 longterm 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

PUBLIC LAW 109–171—FEB. 8, 2006 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 onetime 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 longterm care services.

(12) OPTIONAL PROGRAM FOR SELF-DIRECTED SERVICES.—

If the State elects to provide for any home and communitybased 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 selfdirected 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

120 STAT. 108 PUBLIC LAW 109–171—FEB. 8, 2006

(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—

PUBLIC LAW 109–171—FEB. 8, 2006 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 MFPenhanced FMAP for a State exceed 90 percent.

(f) QUALITY ASSURANCE AND IMPROVEMENT; TECHNICAL ASSISTANCE; OVERSIGHT.—

120 STAT. 110 PUBLIC LAW 109–171—FEB. 8, 2006

(1) 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) 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.

Contracts.

Contracts.

PUBLIC LAW 109–171—FEB. 8, 2006 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.—

120 STAT. 112 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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

PUBLIC LAW 109–171—FEB. 8, 2006 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 as section 1939; and

(2) by inserting after section 1937 the following new section:

‘‘HEALTH OPPORTUNITY ACCOUNTS

‘‘SEC. 1938. (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) 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:

Effective date.

42 USC 1396u–8.

42 USC 1396v.

120 STAT. 114 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 116 PUBLIC LAW 109–171—FEB. 8, 2006

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—

PUBLIC LAW 109–171—FEB. 8, 2006 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 outof-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 outof-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

120 STAT. 118 PUBLIC LAW 109–171—FEB. 8, 2006

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

PUBLIC LAW 109–171—FEB. 8, 2006 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 highVerDate 14-DEC-2004 08:29 Mar 15, 2006 Jkt 049139 PO 00171 Frm 00117 Fmt 6580 Sfmt 6581 E:\PUBLAW\PUBL171.109 APPS06 PsN: PUBL171
120 STAT. 120 PUBLIC LAW 109–171—FEB. 8, 2006

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

PUBLIC LAW 109–171—FEB. 8, 2006 120 STAT. 121

on physician referrals under section 1877 and such

other prohibitions and requirements as the Secretary

determines to be appropriate).’’.

(b) 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 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) 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

42 USC 1396u–2

note.

Effective date.

42 USC 1396a

note.

120 STAT. 122 PUBLIC LAW 109–171—FEB. 8, 2006

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

PUBLIC LAW 109–171—FEB. 8, 2006 120 STAT. 123

exceeds the projected enrollment submitted for purposes of subparagraph (C), but only if—

‘‘(I) 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.

Notice.

120 STAT. 124 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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 communitybased 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 SELFDIRECTED 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 selfdirected 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 ‘selfdirected’ 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:

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 126 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(cc) provides 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 communitybased 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 communityProcedure.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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) 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

42 USC 1396n

note.

Public

information.

42 USC 1396n

note.

120 STAT. 128 PUBLIC LAW 109–171—FEB. 8, 2006

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 selfdirected 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 communitybased 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 communitybased 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) 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. 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

Deadline.

Reports.

PUBLIC LAW 109–171—FEB. 8, 2006 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 selfdirected 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

120 STAT. 130 PUBLIC LAW 109–171—FEB. 8, 2006

entity shall be at the administrative rate established in section

1903(a).’’.

(b) 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 SHORT- FALLS.—‘‘(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 UNEX- PENDED ADDITIONAL ALLOTMENTS.—Notwithstanding subsections (e) and (f), amounts allotted to a State pursuant to

42 USC 1396n

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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

42 USC 1397gg

note.

42 USC 1397dd

note.

120 STAT. 132 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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) 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 HURRICANERELATED 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

42 USC 1397ee

note.

42 USC 1397gg

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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 Statefunded 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.

120 STAT. 134 PUBLIC LAW 109–171—FEB. 8, 2006

(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) 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) 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.

Effective date.

Applicability.

Appropriation

authorization.

PUBLIC LAW 109–171—FEB. 8, 2006 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), 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 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.

42 USC 609.

42 USC 603.

120 STAT. 136 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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;

Deadline.

PUBLIC LAW 109–171—FEB. 8, 2006 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 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 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) EFFECTIVE DATE.—The amendments made by subsections

(a) and (b) shall take effect on October 1, 2006.

42 USC 607 note.

Deadline.

Public comment.

120 STAT. 138 PUBLIC LAW 109–171—FEB. 8, 2006

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 nonmarried 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.

PUBLIC LAW 109–171—FEB. 8, 2006 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 WEL- FARE 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 FATHER- HOOD.—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

120 STAT. 140 PUBLIC LAW 109–171—FEB. 8, 2006

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 PROFAMILY 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).’’.

PUBLIC LAW 109–171—FEB. 8, 2006 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—

120 STAT. 142 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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 SUP- PORT 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

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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.

42 USC 657 note.

120 STAT. 144 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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 ASSIGNMENTS.—

‘‘(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 (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) 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 PASTDUE 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)—

42 USC 608 note.

26 USC 6402.

PUBLIC LAW 109–171—FEB. 8, 2006 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) EFFECTIVE DATE.—The amendments made by paragraph

(1) shall take effect on October 1, 2007.

(g) STATE OPTION TO USE STATEWIDE AUTOMATED DATA PROC- ESSING 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) 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) 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

42 USC 652 note.

42 USC 666 note.

42 USC 664 note.

120 STAT. 146 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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),

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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

42 USC 655 note.

42 USC 655 note.

120 STAT. 148 PUBLIC LAW 109–171—FEB. 8, 2006

family the portion of the amount so collected that remains

after withholding any fee pursuant to section 454(6)(B)(ii).’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall take effect on October 1, 2006.

SEC. 7311. 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

42 USC 654 note.

42 USC 654 note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) (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

42 USC 629h.

Grants.

120 STAT. 150 PUBLIC LAW 109–171—FEB. 8, 2006

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.’’.

PUBLIC LAW 109–171—FEB. 8, 2006 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 childcare 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

120 STAT. 152 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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.’’.

Applicability.

120 STAT. 154 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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) 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) 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).

19 USC 1675c

note.

Effective date.

42 USC 1383

note.

PUBLIC LAW 109–171—FEB. 8, 2006 120 STAT. 155

Subtitle G—Effective Date

SEC. 7701. 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 A—Higher Education Provisions

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

(a) 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) 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. 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

20 USC 1070a–1.

20 USC 1002

note.

20 USC 1001

note.

Higher Education

Reconciliation

Act of 2005.

42 USC 603 note.

120 STAT. 156 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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

Regulations.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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,

Regulations.

120 STAT. 158 PUBLIC LAW 109–171—FEB. 8, 2006

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’’;

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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—

20 USC 1075

note.

120 STAT. 160 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(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) 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—

20 USC 1087–1

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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.

20 USC 1078

note.

20 USC 1078

note.

120 STAT. 162 PUBLIC LAW 109–171—FEB. 8, 2006

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-ofattorney; 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) 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

Applicability.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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

Applicability.

120 STAT. 164 PUBLIC LAW 109–171—FEB. 8, 2006

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

PUBLIC LAW 109–171—FEB. 8, 2006 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 fulltime 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,

120 STAT. 166 PUBLIC LAW 109–171—FEB. 8, 2006

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 TAXPAYERTEACHER 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) 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

Applicability.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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 is amended by striking subsections (b)

and (c).

(2) 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—

Effective date.

20 USC 1087–1

note.

20 USC 1087–1,

1078 note.

20 USC 1087–1

note.

20 USC 1087–1.

120 STAT. 168 PUBLIC LAW 109–171—FEB. 8, 2006

(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) 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,

20 USC 1078

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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.’’.

120 STAT. 170 PUBLIC LAW 109–171—FEB. 8, 2006

(2) 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—

20 USC 1078

note.

PUBLIC LAW 109–171—FEB. 8, 2006 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’’.

120 STAT. 172 PUBLIC LAW 109–171—FEB. 8, 2006

SEC. 8015. FUNDS FOR ADMINISTRATIVE EXPENSES.

Section 458 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

20 USC 1087h.

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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) 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) 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

20 USC 1087gg

note.

20 USC 1087pp

note.

20 USC 1087oo

note.

120 STAT. 174 PUBLIC LAW 109–171—FEB. 8, 2006

(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 meanstested 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—

PUBLIC LAW 109–171—FEB. 8, 2006 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) 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)

20 USC 1087ss

note.

120 STAT. 176 PUBLIC LAW 109–171—FEB. 8, 2006

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’’;

PUBLIC LAW 109–171—FEB. 8, 2006 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

120 STAT. 178 PUBLIC LAW 109–171—FEB. 8, 2006

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’’;

PUBLIC LAW 109–171—FEB. 8, 2006 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. 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) 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

Public

information.

20 USC 1092e.

120 STAT. 180 PUBLIC LAW 109–171—FEB. 8, 2006

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) 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

Deadline.

PUBLIC LAW 109–171—FEB. 8, 2006 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 SINGLEEMPLOYER PLANS.—

120 STAT. 182 PUBLIC LAW 109–171—FEB. 8, 2006

‘‘(A) IN GENERAL.—If there is a termination of a singleemployer 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) 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)’’.

29 USC 1306 (d) EFFECTIVE DATES.— note.

Deadline.

PUBLIC LAW 109–171—FEB. 8, 2006 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 BANK- RUPTCY.—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) 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) 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

28 USC 1913

note.

28 USC 1913

note.

120 STAT. 184 PUBLIC LAW 109–171—FEB. 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.

Æ

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) 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) 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) 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.

28 USC 1930

note.

28 USC 1931

note.

28 USC 1914

note.