II 

109TH CONGRESS 

1ST SESSION S. 114 

To amend titles XIX and XXI of the Social Security Act to ensure that 

every uninsured child in America has health insurance coverage, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 24, 2005 

Mr. KERRY (for himself, Mr. KENNEDY, Mrs. MURRAY, Mr. LAUTENBERG, 

Mr. CORZINE, and Ms. CANTWELL) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend titles XIX and XXI of the Social Security Act 

to ensure that every uninsured child in America has 

health insurance coverage, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Kids Come First Act of 2005’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 
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TITLE I—EXPANDED COVERAGE OF CHILDREN UNDER MEDICAID 

AND SCHIP 

Sec. 101. State option to receive 100 percent FMAP for medical assistance for 

children in poverty in exchange for expanded coverage of children in working poor families under medicaid or SCHIP. 

Sec. 102. Elimination of cap on SCHIP funding for States that expand eligibility for children. 

TITLE II—STATE OPTIONS FOR INCREMENTAL CHILD COVERAGE 

EXPANSIONS 

Sec. 201. State option to provide wrap-around SCHIP coverage to children who 

have other health coverage. 

Sec. 202. State option to enroll low-income children of State employees in 

SCHIP. 

Sec. 203. Optional coverage of legal immigrant children under medicaid and 

SCHIP. 

Sec. 204. State option for passive renewal of eligibility for children under medicaid and SCHIP. 

TITLE III—TAX INCENTIVES FOR HEALTH INSURANCE 

COVERAGE OF CHILDREN 

Sec. 301. Refundable credit for health insurance coverage of children. 

Sec. 302. Forfeiture of personal exemption for any child not covered by health 

insurance. 

TITLE IV—MISCELLANEOUS 

Sec. 401. Requirement for group market health insurers to offer dependent coverage option for workers with children. 

Sec. 402. Effective date. 

TITLE V—REVENUE PROVISION 

Sec. 501. Partial repeal of rate reduction in the highest income tax bracket.

1 SEC. 2. FINDINGS. 

2 Congress makes the following findings: 

3 (1) NEED FOR UNIVERSAL COVERAGE.— 

4 (A) Currently, there are 9,000,000 chil5 dren under the age of 19 that are uninsured. 

6 One out of every 8 children are uninsured while 

7 1 in 5 Hispanic children and 1 in 7 African 

8 American children are uninsured. Three-quar9 ters, approximately 6,800,000, of these children 
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1 are eligible but not enrolled in the medicaid 

2 program or the State children’s health insur3 ance program (SCHIP). Long-range studies 

4 found that 1 in 3 children went without health 

5 insurance for all or part of 2002 and 2003. 

6 (B) Low-income children are 3 times as 

7 likely as children in higher income families to 

8 be uninsured. It is estimated that 65 percent of 

9 uninsured children have at least 1 parent work10 ing full time over the course of the year. 

11 (C) It is estimated that 50 percent of all 

12 legal immigrant children in families with in13 come that is less than 200 percent of the Fed14 eral poverty line are uninsured. In States with15 out programs to cover immigrant children, 57 

16 percent of non-citizen children are uninsured. 

17 (D) Children in the Southern and Western 

18 parts of the United States were nearly 1.7 

19 times more likely to be uninsured than children 

20 in the Northeast. In the Northeast, 9.4 percent 

21 of children are uninsured while in the Midwest, 

22 8.3 percent are uninsured. The South’s rate of 

23 uninsured children is 14.3 percent while the 

24 West has an uninsured rate of 13 percent. 
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1 (E) Children’s health care needs are ne2 glected in the United States. One-quarter of 

3 young children in the United States are not 

4 fully up to date on their basic immunizations. 

5 One-third of children with chronic asthma do 

6 not get a prescription for the necessary medica7 tions to manage the disease. 

8 (F) According to the Centers for Disease 

Control and Prevention, nearly 1 9 ⁄2 of all unin10 sured children have not had a well-child visit in 

11 the past year. One out of every 5 children has 

12 problems accessing needed care, and 1 out of 

13 every 4 children do not receive annual dental 

14 exams. One in 6 uninsured children had a de15 layed or unmet medical need in the past year. 

16 Minority children are less likely to receive prov17 en treatments such as prescription medications 

18 to treat chronic disease. 

19 (G) There are 7,600,000 young adults be20 tween the ages of 19 and 20. In the United 

21 States, approximately 28 percent, or 2,100,000 

22 individuals, of this group are uninsured. 

23 (H) Chronic illness and disability among 

24 children are on the rise. Children most at risk 
5 

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1 for chronic illness and disability are children 

2 who are most likely to be poor and uninsured. 

3 (2) ROLE OF THE MEDICAID AND STATE CHIL4 DREN’S HEALTH INSURANCE PROGRAMS.— 

5 (A) The medicaid program and SCHIP 

6 serve as a crucial health safety net for 

7 30,000,000 children. During the recent eco8 nomic downturn and the highest number of un9 insured individuals ever recorded in the United 

10 States, the medicaid program and SCHIP off11 set losses in employer-sponsored coverage. 

12 While the number of children living in low-in13 come families increased by 2,000,000 between 

14 2000 and 2003, the number of uninsured chil15 dren fell due to the medicaid program and 

16 SCHIP. 

17 (B) In 2003, 25,000,000 children were en18 rolled in the medicaid program, accounting for 

1 19 ⁄2 of all enrollees and only 19 percent of total 

20 program costs. 

21 (C) The medicaid program and SCHIP do 

22 more than just fill in the gaps. Gains in public 

23 coverage have reduced the percentage of low-in24 come uninsured by one-third from 1997 to 

25 2003. In addition, a recent study found that 
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1 publicly-insured children are more likely to ob2 tain medical care, preventive care and dental 

3 care than similar low-income privately-insured 

4 children. 

5 (D) Publicly funded programs such as the 

6 medicaid program and SCHIP actually improve 

7 children’s health. Children who are currently in8 sured by public programs are in better health 

9 than they were a year ago. Expansion of cov10 erage for children and pregnant women under 

11 the medicaid program and SCHIP reduces 

12 rates of avoidable hospitalizations by 22 per13 cent. 

14 (E) Studies have found that children en15 rolled in public insurance programs experienced 

16 a 68 percent improvement in measures of 

17 school performance. 

18 (F) Despite the success of expansions in 

19 general under the medicaid program and 

20 SCHIP, due to current budget constraints, 

21 many States have stopped doing aggressive out22 reach and have raised premiums and cost-shar23 ing requirements on families under these pro24 grams. In addition, 8 States stopped enrollment 

25 in SCHIP for a period of time between April 
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1 2003 and July 2004. As a result, SCHIP en2 rollment fell by 200,000 children for the first 

3 time in the program’s history. 

4 (G) It is estimated that nearly 50 percent 

5 of children covered through SCHIP do not re6 main in the program due to reenrollment bar7 riers. A recent study found that between 10 and 

8 40 percent of these children are ‘‘lost’’ in the 

9 system. Difficult renewal policies and reenroll10 ment barriers make seamless coverage in 

11 SCHIP unattainable. Studies indicate that as 

12 many as 67 percent of children who were eligi13 ble but not enrolled for SCHIP had applied for 

14 coverage but were denied due to procedural 

15 issues. 

16 (H) While the medicaid program and 

17 SCHIP expansions to date have done much to 

18 offset what otherwise would have been a signifi19 cant loss of coverage among children because of 

20 declining access to employer coverage, the 

21 shortcomings of previous expansions, such as 

22 the failure to enroll all eligible children and 

23 caps on enrollment in SCHIP because of under24 funding, also are clear. 
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1 TITLE I—EXPANDED COVERAGE 

2 OF CHILDREN UNDER MED3 ICAID AND SCHIP 

4 SEC. 101. STATE OPTION TO RECEIVE 100 PERCENT FMAP 

5 FOR MEDICAL ASSISTANCE FOR CHILDREN 

6 IN POVERTY IN EXCHANGE FOR EXPANDED 

7 COVERAGE OF CHILDREN IN WORKING POOR 

8 FAMILIES UNDER MEDICAID OR SCHIP. 

9 (a) STATE OPTION.—Title XIX of the Social Security 

10 Act (42 U.S.C. 1396 et seq.) is amended by redesignating 

11 section 1936 as section 1937, and by inserting after sec12 tion 1935 the following: 

13 ‘‘STATE OPTION FOR INCREASED FMAP FOR MEDICAL AS14 SISTANCE FOR CHILDREN IN POVERTY IN EXCHANGE

15 FOR EXPANDED COVERAGE OF CHILDREN IN WORK16 ING POOR FAMILIES UNDER THIS TITLE OR TITLE

17 XXI

18 ‘‘SEC. 1936. (a) 100 PERCENT FMAP.— 

19 ‘‘(1) IN GENERAL.—Notwithstanding any other 

20 provision of this title, in the case of a State that, 

21 through an amendment to each of its State plans 

22 under this title and title XXI (or to a waiver of ei23 ther such plan), agrees to satisfy the conditions de24 scribed in subsections (b), (c), and (d) the Federal 

25 medical assistance percentage shall be 100 percent 
9 

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1 with respect to the total amount expended by the 

2 State for providing medical assistance under this 

3 title for each fiscal year quarter beginning on or 

4 after the date described in subsection (e) for chil5 dren whose family income does not exceed 100 per6 cent of the poverty line. 

7 ‘‘(2) LIMITATION ON SCOPE OF APPLICATION

8 OF INCREASE.—The increase in the Federal medical 

9 assistance percentage for a State under this section 

10 shall apply only with respect to the total amount ex11 pended for providing medical assistance under this 

12 title for a fiscal year quarter for children described 

13 in paragraph (1) and shall not apply with respect 

14 to— 

15 ‘‘(A) any other payments made under this 

16 title, including disproportionate share hospital 

17 payments described in section 1923; 

18 ‘‘(B) payments under title IV or XXI; or 

19 ‘‘(C) any payments made under this title 

20 or title XXI that are based on the enhanced 

21 FMAP described in section 2105(b). 

22 ‘‘(b) ELIGIBILITY EXPANSIONS.—The condition de23 scribed in this subsection is that the State agrees to do 

24 the following: 
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1 ‘‘(1) COVERAGE UNDER MEDICAID OR SCHIP

2 FOR CHILDREN IN FAMILIES WHOSE INCOME DOES

3 NOT EXCEED 300 PERCENT OF THE POVERTY

4 LINE.— 

5 ‘‘(A) IN GENERAL.—The State agrees to 

6 provide medical assistance under this title or 

7 child health assistance under title XXI to chil8 dren whose family income exceeds the medicaid 

9 applicable income level (as defined in section 

10 2110(b)(4) but by substituting ‘January 1, 

11 2005’ for ‘March 31, 1997’), but does not ex12 ceed 300 percent of the poverty line. 

13 ‘‘(B) STATE OPTION TO EXPAND COV14 ERAGE THROUGH SUBSIDIZED PURCHASE OF

15 FAMILY COVERAGE.—A State may elect to carry 

16 out subparagraph (A) through the provision of 

17 assistance for the purchase of dependent cov18 erage under a group health plan or health in19 surance coverage if— 

20 ‘‘(i) the dependent coverage is con21 sistent with the benefit standards under 

22 this title or title XXI, as approved by the 

23 Secretary; and 

24 ‘‘(ii) the State provides ‘wrap-around’ 

25 coverage under this title or title XXI. 
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1 ‘‘(C) DEEMED SATISFACTION FOR CERTAIN

2 STATES.—A State that, as of January 1, 2005, 

3 provides medical assistance under this title or 

4 child health assistance under title XXI to chil5 dren whose family income is 300 percent of the 

6 poverty line shall be deemed to satisfy this 

7 paragraph. 

8 ‘‘(2) COVERAGE FOR CHILDREN UNDER AGE

9 21.—The State agrees to define a child for purposes 

10 of this title and title XXI as an individual who has 

11 not attained 21 years of age. 

12 ‘‘(3) OPPORTUNITY FOR HIGHER INCOME CHIL13 DREN TO PURCHASE SCHIP COVERAGE.—The State 

14 agrees to permit any child whose family income ex15 ceeds 300 percent of the poverty line to purchase 

16 full or ‘wrap-around’ coverage under title XXI at the 

17 full cost of providing such coverage, as determined 

18 by the State. 

19 ‘‘(4) COVERAGE FOR LEGAL IMMIGRANT CHIL20 DREN.—The State agrees to— 

21 ‘‘(A) provide medical assistance under this 

22 title and child health assistance under title XXI 

23 for alien children who are lawfully residing in 

24 the United States (including battered aliens de25 scribed in section 431(c) of the Personal Re-
12 

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1 sponsibility and Work Opportunity Reconcili2 ation Act of 1996) and who are otherwise eligi3 ble for such assistance in accordance with sec4 tion 1903(v)(4) and 2107(e)(1)(E); and 

5 ‘‘(B) not establish or enforce barriers that 

6 deter applications by such aliens, including 

7 through the application of the removal of the 

8 barriers described in subsection (c). 

9 ‘‘(c) REMOVAL OF ENROLLMENT AND ACCESS BAR10 RIERS.—The condition described in this subsection is that 

11 the State agrees to do the following: 

12 ‘‘(1) PRESUMPTIVE ELIGIBILITY FOR CHIL13 DREN.—The State agrees to— 

14 ‘‘(A) provide presumptive eligibility for 

15 children under this title and title XXI in ac16 cordance with section 1920A; and 

17 ‘‘(B) treat any items or services that are 

18 provided to an uncovered child (as defined in 

19 section 2110(c)(8)) who is determined ineligible 

20 for medical assistance under this title as child 

21 health assistance for purposes of paying a pro22 vider of such items or services, so long as such 

23 items or services would be considered child 

24 health assistance for a targeted low-income 

25 child under title XXI. 
13 

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1 ‘‘(2) ADOPTION OF 12-MONTH CONTINUOUS EN2 ROLLMENT.—The State agrees to provide that eligi3 bility for assistance under this title and title XXI 

4 shall not be regularly redetermined more often than 

5 once every year for children. 

6 ‘‘(3) ACCEPTANCE OF SELF-DECLARATION OF

7 INCOME.—The State agrees to permit the family of 

8 a child applying for medical assistance under this 

9 title or child health assistance under title XXI to de10 clare and certify by signature under penalty of per11 jury family income for purposes of collecting finan12 cial eligibility information. 

13 ‘‘(4) ADOPTION OF ACCEPTANCE OF ELIGI14 BILITY DETERMINATIONS FOR OTHER ASSISTANCE

15 PROGRAMS.—The State agrees to accept determina16 tions (made within a reasonable period, as found by 

17 the State, before its use for this purpose) of an indi18 vidual’s family or household income made by a Fed19 eral or State agency (or a public or private entity 

20 making such determination on behalf of such agen21 cy), including the agencies administering the Food 

22 Stamp Act of 1977, the Richard B. Russell National 

23 School Lunch Act, and the Child Nutrition Act of 

24 1966, notwithstanding any differences in budget 
14 

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1 unit, disregard, deeming, or other methodology, but 

2 only if— 

3 ‘‘(A) such agency has fiscal liabilities or 

4 responsibilities affected or potentially affected 

5 by such determinations; and 

6 ‘‘(B) any information furnished by such 

7 agency pursuant to this subparagraph is used 

8 solely for purposes of determining eligibility for 

9 medical assistance under this title or for child 

10 health assistance under title XXI. 

11 ‘‘(5) NO ASSETS TEST.—The State agrees to 

12 not (or demonstrates that it does not) apply any as13 sets or resources test for eligibility under this title 

14 or title XXI with respect to children. 

15 ‘‘(6) ELIGIBILITY DETERMINATIONS AND REDE16 TERMINATIONS.— 

17 ‘‘(A) IN GENERAL.—The State agrees for 

18 purposes of initial eligibility determinations and 

19 redeterminations of children under this title and 

20 title XXI not to require a face-to-face interview 

21 and to permit applications and renewals by 

22 mail, telephone, and the Internet. 

23 ‘‘(B) NONDUPLICATION OF INFORMA24 TION.— 
15 

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1 ‘‘(i) IN GENERAL.—For purposes of 

2 redeterminations of eligibility for currently 

3 or previously enrolled children under this 

4 title and title XXI, the State agrees to use 

5 all information in its possession (including 

6 information available to the State under 

7 other Federal or State programs) to deter8 mine eligibility or redetermine continued 

9 eligibility before seeking similar informa10 tion from parents. 

11 ‘‘(ii) RULE OF CONSTRUCTION.— 

12 Nothing in clause (i) shall be construed as 

13 limiting any obligation of a State to pro14 vide notice and a fair hearing before deny15 ing, terminating, or reducing a child’s cov16 erage based on such information in the 

17 possession of the State. 

18 ‘‘(7) NO WAITING LIST FOR CHILDREN UNDER

19 SCHIP.—The State agrees to not impose any numer20 ical limitation, waiting list, waiting period, or similar 

21 limitation on the eligibility of children for child 

22 health assistance under title XXI or to establish or 

23 enforce other barriers to the enrollment of eligible 

24 children based on the date of their application for 

25 coverage. 
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1 ‘‘(8) ADEQUATE PROVIDER PAYMENT RATES.— 

2 The State agrees to— 

3 ‘‘(A) establish payment rates for children’s 

4 health care providers under this title that are 

5 no less than the average of payment rates for 

6 similar services for such providers provided 

7 under the benchmark benefit packages de8 scribed in section 2103(b); 

9 ‘‘(B) establish such rates in amounts that 

10 are sufficient to ensure that children enrolled 

11 under this title or title XXI have adequate ac12 cess to comprehensive care, in accordance with 

13 the requirements of section 1902(a)(30)(A); 

14 and 

15 ‘‘(C) include provisions in its contracts 

16 with providers under this title guaranteeing 

17 compliance with these requirements. 

18 ‘‘(d) MAINTENANCE OF MEDICAID ELIGIBILITY LEV19 ELS FOR CHILDREN.— 

20 ‘‘(1) IN GENERAL.—The condition described in 

21 this subsection is that the State agrees to maintain 

22 eligibility income, resources, and methodologies ap23 plied under this title (including under a waiver of 

24 such title or under section 1115) with respect to 

25 children that are no more restrictive than the eligi-
17 

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1 bility income, resources, and methodologies applied 

2 with respect to children under this title (including 

3 under such a waiver) as of January 1, 2005. 

4 ‘‘(2) RULE OF CONSTRUCTION.—Nothing in 

5 this section shall be construed as implying that a 

6 State does not have to comply with the minimum in7 come levels required for children under section 

8 1902(l)(2). 

9 ‘‘(e) DATE DESCRIBED.—The date described in this 

10 subsection is the date on which, with respect to a State, 

11 a plan amendment that satisfies the requirements of sub12 sections (b), (c), and (d) is approved by the Secretary. 

13 ‘‘(f) DEFINITION OF POVERTY LINE.—In this sec14 tion, the term ‘poverty line’ has the meaning given that 

15 term in section 2110(c)(5).’’. 

16 (b) CONFORMING AMENDMENTS.— 

17 (1) The third sentence of section 1905(b) of the 

18 Social Security Act (42 U.S.C. 1396d(b)) is amend19 ed by inserting before the period the following: ‘‘, 

20 and with respect to amounts expended for medical 

21 assistance for children on or after the date described 

22 in subsection (d) of section 1936, in the case of a 

23 State that has, in accordance with such section, an 

24 approved plan amendment under this title and title 

25 XXI’’. 
18 

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1 (2) Section 1903(f)(4) of the Social Security 

2 Act (42 U.S.C. 1396b(f)(4)) is amended— 

3 (A) in subparagraph (C), by adding ‘‘or’’ 

4 after ‘‘section 1611(b)(1),’’; and 

5 (B) by inserting after subparagraph (C), 

6 the following: 

7 ‘‘(D) who would not receive such medical assist8 ance but for State electing the option under section 

9 1936 and satisfying the conditions described in sub10 sections (b), (c), and (d) of such section,’’. 

11 SEC. 102. ELIMINATION OF CAP ON SCHIP FUNDING FOR 

12 STATES THAT EXPAND ELIGIBILITY FOR 

13 CHILDREN. 

14 (a) IN GENERAL.—Section 2105 of the Social Secu15 rity Act (42 U.S.C. 1397dd) is amended by adding at the 

16 end the following: 

17 ‘‘(h) GUARANTEED FUNDING FOR CHILD HEALTH

18 ASSISTANCE FOR COVERAGE EXPANSION STATES.— 

19 ‘‘(1) IN GENERAL.—Only in the case of a State 

20 that has, in accordance with section 1936, an ap21 proved plan amendment under this title and title 

22 XIX, any payment cap that would otherwise apply to 

23 the State under this title as a result of having ex24 pended all allotments available for expenditure by 

25 the State with respect to a fiscal year shall not apply 
19 

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1 with respect to amounts expended by the State on 

2 or after the date described in section 1936(d). 

3 ‘‘(2) APPROPRIATION.—There is appropriated, 

4 out of any money in the Treasury not otherwise ap5 propriated, such sums as may be necessary for the 

6 purpose of paying a State described in paragraph 

7 (1) for each quarter beginning on or after the date 

8 described in section 1936(d), an amount equal to the 

9 enhanced FMAP of expenditures described in para10 graph (1) and incurred during such quarter.’’. 

11 (b) CONFORMING AMENDMENTS.—Section 2104 of 

12 the Social Security Act (42 U.S.C. 1397dd) is amended— 

13 (1) in subsection (a), by inserting ‘‘subject to 

14 section 2105(h),’’ after ‘‘under this section,’’; 

15 (2) in subsection (b)(1), by inserting ‘‘and sec16 tion 2105(h)’’ after ‘‘Subject to paragraph (4)’’; and 

17 (3) in subsection (c)(1), by inserting ‘‘subject to 

18 section 2105(h),’’ after ‘‘for a fiscal year,’’. 
20 

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1 TITLE II—STATE OPTIONS FOR 

2 INCREMENTAL CHILD COV3 ERAGE EXPANSIONS 

4 SEC. 201. STATE OPTION TO PROVIDE WRAP-AROUND 

5 SCHIP COVERAGE TO CHILDREN WHO HAVE 

6 OTHER HEALTH COVERAGE. 

7 (a) IN GENERAL.—Section 2110(b) of the Social Se8 curity Act (42 U.S.C. 1397jj(b)) is amended— 

9 (1) in paragraph (1)(C), by inserting ‘‘, subject 

10 to paragraph (5),’’ after ‘‘under title XIX or’’; and 

11 (2) by adding at the end the following new 

12 paragraph: 

13 ‘‘(5) STATE OPTION TO PROVIDE WRAP-AROUND

14 COVERAGE.— 

15 ‘‘(A) IN GENERAL.—A State may waive 

16 the requirement of paragraph (1)(C) that a tar17 geted low-income child may not be covered 

18 under a group health plan or under health in19 surance coverage in order to provide— 

20 ‘‘(i) items or services that are not cov21 ered, or are only partially covered, under 

22 such plan or coverage; or 

23 ‘‘(ii) cost-sharing protection. 

24 ‘‘(B) ELIGIBILITY.—In waiving such re25 quirement, a State may limit the application of 
21 

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1 the waiver to children whose family income does 

2 not exceed a level specified by the State, so long 

3 as the level so specified does not exceed the max4 imum income level otherwise established for 

5 other children under the State child health plan. 

6 ‘‘(C) CONTINUED APPLICATION OF DUTY

7 TO PREVENT SUBSTITUTION OF EXISTING COV8 ERAGE.—Nothing in this paragraph shall be 

9 construed as modifying the application of sec10 tion 2102(b)(3)(C) to a State.’’. 

11 (b) APPLICATION OF ENHANCED MATCH UNDER

12 MEDICAID.—Section 1905 of such Act (42 U.S.C. 1396d) 

13 is amended— 

14 (1) in subsection (b), in the fourth sentence, by 

15 striking ‘‘subsection (u)(3)’’ and inserting ‘‘(u)(3), 

16 or (u)(4)’’; and 

17 (2) in subsection (u), by redesignating para18 graph (4) as paragraph (5) and by inserting after 

19 paragraph (3) the following: 

20 ‘‘(4) For purposes of subsection (b), the expenditures 

21 described in this paragraph are expenditures for items and 

22 services for children described in section 2110(b)(5).’’. 

23 (c) APPLICATION OF SECONDARY PAYOR PROVI24 SIONS.—Section 2107(e)(1) of such Act (42 U.S.C. 

25 1397gg(e)(1)) is amended— 
22 

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1 (1) by redesignating subparagraphs (B) 

2 through (D) as subparagraphs (C) through (E), re3 spectively; and 

4 (2) by inserting after subparagraph (A) the fol5 lowing new subparagraph: 

6 ‘‘(B) Section 1902(a)(25) (relating to co7 ordination of benefits and secondary payor pro8 visions) with respect to children covered under 

9 a waiver described in section 2110(b)(5).’’. 

10 SEC. 202. STATE OPTION TO ENROLL LOW-INCOME CHIL11 DREN OF STATE EMPLOYEES IN SCHIP. 

12 Section 2110(b)(2) of the Social Security Act (42 

13 U.S.C. 1397jj(b)(2)) is amended— 

14 (1) by redesignating subparagraphs (A) and 

15 (B) as clauses (i) and (ii), respectively and realign16 ing the left margins of such clauses appropriately; 

17 (2) by striking ‘‘Such term’’ and inserting the 

18 following: 

19 ‘‘(A) IN GENERAL.—Such term’’; and 

20 (3) by adding at the end the following: 

21 ‘‘(B) STATE OPTION TO ENROLL LOW-IN22 COME CHILDREN OF STATE EMPLOYEES.—At 

23 the option of a State, subparagraph (A)(ii) shall 

24 not apply to any low-income child who would 
23 

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1 otherwise be eligible for child health assistance 

2 under this title but for such subparagraph.’’. 

3 SEC. 203. OPTIONAL COVERAGE OF LEGAL IMMIGRANT 

4 CHILDREN UNDER MEDICAID AND SCHIP. 

5 (a) MEDICAID PROGRAM.—Section 1903(v) of the 

6 Social Security Act (42 U.S.C. 1396b(v)) is amended— 

7 (1) in paragraph (1), by striking ‘‘paragraph 

8 (2)’’ and inserting ‘‘paragraphs (2) and (4)’’; and 

9 (2) by adding at the end the following: 

10 ‘‘(4)(A) A State may elect (in a plan amendment 

11 under this title) to provide medical assistance under this 

12 title for aliens who are lawfully residing in the United 

13 States (including battered aliens described in section 

14 431(c) of the Personal Responsibility and Work Oppor15 tunity Reconciliation Act of 1996) and who are otherwise 

16 eligible for such assistance, within any of the following eli17 gibility category: 

18 ‘‘(i) CHILDREN.—Children (as defined under 

19 such plan), including optional targeted low-income 

20 children described in section 1905(u)(2)(B). 

21 ‘‘(B)(i) In the case of a State that has elected to pro22 vide medical assistance to a category of aliens under sub23 paragraph (A), no debt shall accrue under an affidavit of 

24 support against any sponsor of such an alien on the basis 

25 of provision of assistance to such category and the cost 
24 

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1 of such assistance shall not be considered as an unreim2 bursed cost. 

3 ‘‘(ii) The provisions of sections 401(a), 402(b), 403, 

4 and 421 of the Personal Responsibility and Work Oppor5 tunity Reconciliation Act of 1996 shall not apply to a 

6 State that makes an election under subparagraph (A).’’. 

7 (b) TITLE XXI.—Section 2107(e)(1) of the Social 

8 Security Act (42 U.S.C. 1397gg(e)(1)) is amended by add9 ing at the end the following: 

10 ‘‘(E) Section 1903(v)(4) (relating to op11 tional coverage of permanent resident alien chil12 dren), but only if the State has elected to apply 

13 such section to that category of children under 

14 title XIX.’’. 

15 SEC. 204. STATE OPTION FOR PASSIVE RENEWAL OF ELIGI16 BILITY FOR CHILDREN UNDER MEDICAID 

17 AND SCHIP. 

18 (a) IN GENERAL.—Section 1902(l) of the Social Se19 curity Act (42 U.S.C. 1396a(l)) is amended by adding at 

20 the end the following: 

21 ‘‘(5) Notwithstanding any other provision of this title, 

22 a State may provide that an individual who has not at23 tained 21 years of age who has been determined eligible 

24 for medical assistance under this title shall remain eligible 

25 for medical assistance until such time as the State has 
25 

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1 information demonstrating that the individual is no longer 

2 so eligible.’’. 

3 (b) APPLICATION UNDER TITLE XXI.—Section 

4 2107(e)(1) of the Social Security Act (42 U.S.C. 

5 1397gg(e)) is amended— 

6 (1) by redesignating subparagraphs (B) 

7 through (D) as subparagraphs (C) through (E), re8 spectively; and 

9 (2) by inserting after subparagraph (A), the fol10 lowing: 

11 ‘‘(B) Section 1902(l)(5) (relating to pas12 sive renewal of eligibility for children).’’. 

13 TITLE III—TAX INCENTIVES FOR 

14 HEALTH INSURANCE COV15 ERAGE OF CHILDREN 

16 SEC. 301. REFUNDABLE CREDIT FOR HEALTH INSURANCE 

17 COVERAGE OF CHILDREN. 

18 (a) IN GENERAL.—Subpart C of part IV of sub19 chapter A of chapter 1 of the Internal Revenue Code of 

20 1986 (relating to refundable credits) is amended by redes21 ignating section 36 as section 37 and by inserting after 

22 section 35 the following new section: 

23 ‘‘SEC. 36. HEALTH INSURANCE COVERAGE OF CHILDREN. 

24 ‘‘(a) IN GENERAL.—In the case of an individual, 

25 there shall be allowed as a credit against the tax imposed 
26 

•S 114 IS 

1 by this subtitle an amount equal to so much of the amount 

2 paid during the taxable year, not compensated for by in3 surance or otherwise, for qualified health insurance for 

4 each dependent child of the taxpayer, as exceeds 5 percent 

5 of the adjusted gross income of such taxpayer for such 

6 taxable year. 

7 ‘‘(b) DEPENDENT CHILD.—For purposes of this sec8 tion, the term ‘dependent child’ means any child (as de9 fined in section 152(f)(1)) who has not attained the age 

10 of 19 as of the close of the calendar year in which the 

11 taxable year of the taxpayer begins and with respect to 

12 whom a deduction under section 151 is allowable to the 

13 taxpayer. 

14 ‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur15 poses of this section— 

16 ‘‘(1) IN GENERAL.—The term ‘qualified health 

17 insurance’ means insurance, either employer-pro18 vided or made available under title XIX or XXI of 

19 the Social Security Act, which constitutes medical 

20 care as defined in section 213(d) without regard 

21 to— 

22 ‘‘(A) paragraph (1)(C) thereof, and 

23 ‘‘(B) so much of paragraph (1)(D) thereof 

24 as relates to qualified long-term care insurance 

25 contracts. 
27 

•S 114 IS 

1 ‘‘(2) EXCLUSION OF CERTAIN OTHER CON2 TRACTS.—Such term shall not include insurance if a 

3 substantial portion of its benefits are excepted bene4 fits (as defined in section 9832(c)). 

5 ‘‘(d) MEDICAL SAVINGS ACCOUNT AND HEALTH SAV6 INGS ACCOUNT CONTRIBUTIONS.— 

7 ‘‘(1) IN GENERAL.—If a deduction would (but 

8 for paragraph (2)) be allowed under section 220 or 

9 223 to the taxpayer for a payment for the taxable 

10 year to the medical savings account or health sav11 ings account of an individual, subsection (a) shall be 

12 applied by treating such payment as a payment for 

13 qualified health insurance for such individual. 

14 ‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc15 tion shall be allowed under section 220 or 223 for 

16 that portion of the payments otherwise allowable as 

17 a deduction under section 220 or 223 for the taxable 

18 year which is equal to the amount of credit allowed 

19 for such taxable year by reason of this subsection. 

20 ‘‘(e) SPECIAL RULES.— 

21 ‘‘(1) DETERMINATION OF INSURANCE COSTS.— 

22 The Secretary shall provide rules for the allocation 

23 of the cost of any qualified health insurance for fam24 ily coverage to the coverage of any dependent child 

25 under such insurance. 
28 

•S 114 IS 

1 ‘‘(2) COORDINATION WITH DEDUCTION FOR

2 HEALTH INSURANCE COSTS OF SELF-EMPLOYED IN3 DIVIDUALS.—In the case of a taxpayer who is eligi4 ble to deduct any amount under section 162(l) for 

5 the taxable year, this section shall apply only if the 

6 taxpayer elects not to claim any amount as a deduc7 tion under such section for such year. 

8 ‘‘(3) COORDINATION WITH MEDICAL EXPENSE

9 AND HIGH DEDUCTIBLE HEALTH PLAN DEDUC10 TIONS.—The amount which would (but for this 

11 paragraph) be taken into account by the taxpayer 

12 under section 213 or 224 for the taxable year shall 

13 be reduced by the credit (if any) allowed by this sec14 tion to the taxpayer for such year. 

15 ‘‘(4) DENIAL OF CREDIT TO DEPENDENTS.—No 

16 credit shall be allowed under this section to any indi17 vidual with respect to whom a deduction under sec18 tion 151 is allowable to another taxpayer for a tax19 able year beginning in the calendar year in which 

20 such individual’s taxable year begins. 

21 ‘‘(5) DENIAL OF DOUBLE BENEFIT.—No credit 

22 shall be allowed under subsection (a) if the credit 

23 under section 35 is allowed and no credit shall be al24 lowed under 35 if a credit is allowed under this sec25 tion. 
29 

•S 114 IS 

1 ‘‘(6) ELECTION NOT TO CLAIM CREDIT.—This 

2 section shall not apply to a taxpayer for any taxable 

3 year if such taxpayer elects to have this section not 

4 apply for such taxable year.’’. 

5 (b) INFORMATION REPORTING.— 

6 (1) IN GENERAL.—Subpart B of part III of 

7 subchapter A of chapter 61 of the Internal Revenue 

8 Code of 1986 (relating to information concerning 

9 transactions with other persons) is amended by in10 serting after section 6050T the following new sec11 tion: 

12 ‘‘SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR 

13 QUALIFIED HEALTH INSURANCE. 

14 ‘‘(a) IN GENERAL.—Any governmental unit or any 

15 person who, in connection with a trade or business con16 ducted by such person, receives payments during any cal17 endar year from any individual for coverage of a depend18 ent child (as defined in section 36(b)) of such individual 

19 under creditable health insurance, shall make the return 

20 described in subsection (b) (at such time as the Secretary 

21 may by regulations prescribe) with respect to each indi22 vidual from whom such payments were received. 

23 ‘‘(b) FORM AND MANNER OF RETURNS.—A return 

24 is described in this subsection if such return— 
30 

•S 114 IS 

1 ‘‘(1) is in such form as the Secretary may pre2 scribe, and 

3 ‘‘(2) contains— 

4 ‘‘(A) the name, address, and TIN of the 

5 individual from whom payments described in 

6 subsection (a) were received, 

7 ‘‘(B) the name, address, and TIN of each 

8 dependent child (as so defined) who was pro9 vided by such person with coverage under cred10 itable health insurance by reason of such pay11 ments and the period of such coverage, and 

12 ‘‘(C) such other information as the Sec13 retary may reasonably prescribe. 

14 ‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur15 poses of this section, the term ‘creditable health insurance’ 

16 means qualified health insurance (as defined in section 

17 36(c)). 

18 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID19 UALS WITH RESPECT TO WHOM INFORMATION IS RE20 QUIRED.—Every person required to make a return under 

21 subsection (a) shall furnish to each individual whose name 

22 is required under subsection (b)(2)(A) to be set forth in 

23 such return a written statement showing— 
31 

•S 114 IS 

1 ‘‘(1) the name and address of the person re2 quired to make such return and the phone number 

3 of the information contact for such person, 

4 ‘‘(2) the aggregate amount of payments de5 scribed in subsection (a) received by the person re6 quired to make such return from the individual to 

7 whom the statement is required to be furnished, and 

8 ‘‘(3) the information required under subsection 

9 (b)(2)(B) with respect to such payments. 

10 The written statement required under the preceding sen11 tence shall be furnished on or before January 31 of the 

12 year following the calendar year for which the return 

13 under subsection (a) is required to be made. 

14 ‘‘(e) RETURNS WHICH WOULD BE REQUIRED TO BE

15 MADE BY 2 OR MORE PERSONS.—Except to the extent 

16 provided in regulations prescribed by the Secretary, in the 

17 case of any amount received by any person on behalf of 

18 another person, only the person first receiving such 

19 amount shall be required to make the return under sub20 section (a).’’. 

21 (2) ASSESSABLE PENALTIES.— 

22 (A) Subparagraph (B) of section 

23 6724(d)(1) of such Code (relating to defini24 tions) is amended by redesignating clauses (xiii) 

25 through (xviii) as clauses (xiv) through (xix), 
32 

•S 114 IS 

1 respectively, and by inserting after clause (xii) 

2 the following new clause: 

3 ‘‘(xiii) section 6050U (relating to re4 turns relating to payments for qualified 

5 health insurance),’’. 

6 (B) Paragraph (2) of section 6724(d) of 

7 such Code is amended by striking ‘‘or’’ at the 

8 end of the next to last subparagraph, by strik9 ing the period at the end of the last subpara10 graph and inserting ‘‘, or’’, and by adding at 

11 the end the following new subparagraph: 

12 ‘‘(CC) section 6050U(d) (relating to re13 turns relating to payments for qualified health 

14 insurance).’’. 

15 (3) CLERICAL AMENDMENT.—The table of sec16 tions for subpart B of part III of subchapter A of 

17 chapter 61 of such Code is amended by inserting 

18 after the item relating to section 6050T the fol19 lowing new item: 

‘‘Sec. 6050U. Returns relating to payments for qualified health 

insurance.’’. 

20 (c) CONFORMING AMENDMENTS.— 

21 (1) Paragraph (2) of section 1324(b) of title 

22 31, United States Code, is amended by inserting be23 fore the period ‘‘, or from section 36 of such Code’’. 
33 

•S 114 IS 

1 (2) The table of sections for subpart C of part 

2 IV of subchapter A of chapter 1 of the Internal Rev3 enue Code of 1986 is amended by striking the last 

4 item and inserting the following new items: 

‘‘Sec. 36. Health insurance coverage of children. 

‘‘Sec. 37. Overpayments of tax.’’. 

5 (d) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning after 

7 December 31, 2004. 

8 SEC. 302. FORFEITURE OF PERSONAL EXEMPTION FOR ANY 

9 CHILD NOT COVERED BY HEALTH INSUR10 ANCE. 

11 (a) IN GENERAL.—Section 151(d) of the Internal 

12 Revenue Code of 1986 (relating to exemption amount) is 

13 amended by adding at the end the following new para14 graph: 

15 ‘‘(5) REDUCTION OF EXEMPTION AMOUNT FOR

16 ANY CHILD NOT COVERED BY HEALTH INSUR17 ANCE.— 

18 ‘‘(A) IN GENERAL.—Except as otherwise 

19 provided in this paragraph, the exemption 

20 amount otherwise determined under this sub21 section for any dependent child (as defined in 

22 section 36(b)) for any taxable year shall be re23 duced by the same percentage as the percentage 

24 of such taxable year during which such depend-
34 

•S 114 IS 

1 ent child was not covered by qualified health in2 surance (as defined in section 36(c)). 

3 ‘‘(B) FULL REDUCTION IF NO PROOF OF

4 COVERAGE IS PROVIDED.—For purposes of sub5 paragraph (A), in the case of any taxpayer who 

6 fails to attach to the return of tax for any tax7 able year a copy of the statement furnished to 

8 such taxpayer under section 6050U, the per9 centage reduction under such subparagraph 

10 shall be deemed to be 100 percent. 

11 ‘‘(C) NONAPPLICATION OF PARAGRAPH TO

12 TAXPAYERS IN LOWEST TAX BRACKET.—This 

13 paragraph shall not apply to any taxpayer 

14 whose taxable income for the taxable year does 

15 not exceed the initial bracket amount deter16 mined under section 1(i)(1)(B).’’. 

17 (b) EFFECTIVE DATE.—The amendment made by 

18 this section shall apply to taxable years beginning after 

19 December 31, 2004. 

20 TITLE IV—MISCELLANEOUS 

21 SEC. 401. REQUIREMENT FOR GROUP MARKET HEALTH IN22 SURERS TO OFFER DEPENDENT COVERAGE 

23 OPTION FOR WORKERS WITH CHILDREN. 

24 (a) ERISA.— 
35 

•S 114 IS 

1 (1) IN GENERAL.—Subpart B of part 7 of sub2 title B of title I of the Employee Retirement Income 

3 Security Act of 1974 (29 U.S.C. 1185 et seq.) is 

4 amended by adding at the end the following: 

5 ‘‘SEC. 714. REQUIREMENT TO OFFER OPTION TO PURCHASE 

6 DEPENDENT COVERAGE FOR CHILDREN. 

7 ‘‘(a) REQUIREMENTS FOR COVERAGE.—A group 

8 health plan, and a health insurance issuer providing health 

9 insurance coverage in connection with a group health plan, 

10 shall offer an individual who is enrolled in such coverage 

11 the option to purchase dependent coverage for a child of 

12 the individual. 

13 ‘‘(b) NO EMPLOYER CONTRIBUTION REQUIRED.—An 

14 employer shall not be required to contribute to the cost 

15 of purchasing dependent coverage for a child by an indi16 vidual who is an employee of such employer. 

17 ‘‘(c) DEFINITION OF CHILD.—In this section, the 

18 term ‘child’ means an individual who has not attained 21 

19 years of age.’’. 

20 (2) CLERICAL AMENDMENT.—The table of con21 tents in section 1 of the Employee Retirement In22 come Security Act of 1974 (29 U.S.C. 1001) is 

23 amended by inserting after the item relating to sec24 tion 713 the following: 

‘‘Sec. 714. Requirement to offer option to purchase dependent coverage for children.’’. 
36 

•S 114 IS 

1 (b) PUBLIC HEALTH SERVICE ACT.—Subpart 2 of 

2 part A of title XXVII of the Public Health Service Act 

3 (42 U.S.C. 300gg–4 et seq.) is amended by adding at the 

4 end the following: 

5 ‘‘SEC. 2707. REQUIREMENT TO OFFER OPTION TO PUR6 CHASE DEPENDENT COVERAGE FOR CHIL7 DREN. 

8 ‘‘(a) REQUIREMENTS FOR COVERAGE.—A group 

9 health plan, and a health insurance issuer providing health 

10 insurance coverage in connection with a group health plan, 

11 shall offer an individual who is enrolled in such coverage 

12 the option to purchase dependent coverage for a child of 

13 the individual. 

14 ‘‘(b) NO EMPLOYER CONTRIBUTION REQUIRED.—An 

15 employer shall not be required to contribute to the cost 

16 of purchasing dependent coverage for a child by an indi17 vidual who is an employee of such employer. 

18 ‘‘(c) DEFINITION OF CHILD.—In this section, the 

19 term ‘child’ means an individual who has not attained 21 

20 years of age.’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply with respect to plan years begin23 ning on or after January 1, 2006. 
37 

•S 114 IS 

1 SEC. 402. EFFECTIVE DATE. 

2 Unless otherwise provided, the amendments made by 

3 this Act shall take effect on October 1, 2005, and shall 

4 apply to child health assistance and medical assistance 

5 provided on or after that date without regard to whether 

6 or not final regulations to carry out such amendments 

7 have been promulgated by such date. 

8 TITLE V—REVENUE PROVISION 

9 SEC. 501. PARTIAL REPEAL OF RATE REDUCTION IN THE 

10 HIGHEST INCOME TAX BRACKET. 

11 Section 1(i)(2) of the Internal Revenue Code of 1986 

12 is amended by adding at the end the following flush sen13 tence: 

14 ‘‘In the case of taxable years beginning during cal15 endar year 2005 and thereafter, the final item in the 

16 fourth column in the preceding table shall be applied 

17 by substituting for ‘35.0%’ such rate as the Sec18 retary determines is necessary to provide sufficient 

19 revenues to offset the Federal outlays required to 

20 implement the provisions of, and amendments made 

21 by, the Kids Come First Act of 2005.’’. 

Æ