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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 114 Introduced in Senate (IS)]

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 FinanceYYYYYYYY

_______________________________________________________________________

                                 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.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Kids Come First 
Act of 2005''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
    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. 

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Need for universal coverage.--
                    (A) Currently, there are 9,000,000 children under 
                the age of 19 that are uninsured. One out of every 8 
                children are uninsured while 1 in 5 Hispanic children 
                and 1 in 7 African American children are uninsured. 
                Three-quarters, approximately 6,800,000, of these 
                children are eligible but not enrolled in the medicaid 
                program or the State children's health insurance 
                program (SCHIP). Long-range studies found that 1 in 3 
                children went without health insurance for all or part 
                of 2002 and 2003.
                    (B) Low-income children are 3 times as likely as 
                children in higher income families to be uninsured. It 
                is estimated that 65 percent of uninsured children have 
                at least 1 parent working full time over the course of 
                the year.
                    (C) It is estimated that 50 percent of all legal 
                immigrant children in families with income that is less 
                than 200 percent of the Federal poverty line are 
                uninsured. In States without programs to cover 
                immigrant children, 57 percent of non-citizen children 
                are uninsured.
                    (D) Children in the Southern and Western parts of 
                the United States were nearly 1.7 times more likely to 
                be uninsured than children in the Northeast. In the 
                Northeast, 9.4 percent of children are uninsured while 
                in the Midwest, 8.3 percent are uninsured. The South's 
                rate of uninsured children is 14.3 percent while the 
                West has an uninsured rate of 13 percent.
                    (E) Children's health care needs are neglected in 
                the United States. One-quarter of young children in the 
                United States are not fully up to date on their basic 
                immunizations. One-third of children with chronic 
                asthma do not get a prescription for the necessary 
                medications to manage the disease.
                    (F) According to the Centers for Disease Control 
                and Prevention, nearly \1/2\ of all uninsured children 
                have not had a well-child visit in the past year. One 
                out of every 5 children has problems accessing needed 
                care, and 1 out of every 4 children do not receive 
                annual dental exams. One in 6 uninsured children had a 
                delayed or unmet medical need in the past year. 
                Minority children are less likely to receive proven 
                treatments such as prescription medications to treat 
                chronic disease.
                    (G) There are 7,600,000 young adults between the 
                ages of 19 and 20. In the United States, approximately 
                28 percent, or 2,100,000 individuals, of this group are 
                uninsured.
                    (H) Chronic illness and disability among children 
                are on the rise. Children most at risk for chronic 
                illness and disability are children who are most likely 
                to be poor and uninsured.
            (2) Role of the medicaid and state children's health 
        insurance programs.--
                    (A) The medicaid program and SCHIP serve as a 
                crucial health safety net for 30,000,000 children. 
                During the recent economic downturn and the highest 
                number of uninsured individuals ever recorded in the 
                United States, the medicaid program and SCHIP offset 
                losses in employer-sponsored coverage. While the number 
                of children living in low-income families increased by 
                2,000,000 between 2000 and 2003, the number of 
                uninsured children fell due to the medicaid program and 
                SCHIP.
                    (B) In 2003, 25,000,000 children were enrolled in 
                the medicaid program, accounting for \1/2\ of all 
                enrollees and only 19 percent of total program costs.
                    (C) The medicaid program and SCHIP do more than 
                just fill in the gaps. Gains in public coverage have 
                reduced the percentage of low-income uninsured by one-
                third from 1997 to 2003. In addition, a recent study 
                found that publicly-insured children are more likely to 
                obtain medical care, preventive care and dental care 
than similar low-income privately-insured children.
                    (D) Publicly funded programs such as the medicaid 
                program and SCHIP actually improve children's health. 
                Children who are currently insured by public programs 
                are in better health than they were a year ago. 
                Expansion of coverage for children and pregnant women 
                under the medicaid program and SCHIP reduces rates of 
                avoidable hospitalizations by 22 percent.
                    (E) Studies have found that children enrolled in 
                public insurance programs experienced a 68 percent 
                improvement in measures of school performance.
                    (F) Despite the success of expansions in general 
                under the medicaid program and SCHIP, due to current 
                budget constraints, many States have stopped doing 
                aggressive outreach and have raised premiums and cost-
                sharing requirements on families under these programs. 
                In addition, 8 States stopped enrollment in SCHIP for a 
                period of time between April 2003 and July 2004. As a 
                result, SCHIP enrollment fell by 200,000 children for 
                the first time in the program's history.
                    (G) It is estimated that nearly 50 percent of 
                children covered through SCHIP do not remain in the 
                program due to reenrollment barriers. A recent study 
                found that between 10 and 40 percent of these children 
                are ``lost'' in the system. Difficult renewal policies 
                and reenrollment barriers make seamless coverage in 
                SCHIP unattainable. Studies indicate that as many as 67 
                percent of children who were eligible but not enrolled 
                for SCHIP had applied for coverage but were denied due 
                to procedural issues.
                    (H) While the medicaid program and SCHIP expansions 
                to date have done much to offset what otherwise would 
                have been a significant loss of coverage among children 
                because of declining access to employer coverage, the 
                shortcomings of previous expansions, such as the 
                failure to enroll all eligible children and caps on 
                enrollment in SCHIP because of under-funding, also are 
                clear.

    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.

    (a) State Option.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.) is amended by redesignating section 1936 as section 1937, 
and by inserting after section 1935 the following:

 ``state option for increased fmap for medical assistance for children 
  in poverty in exchange for expanded coverage of children in working 
              poor families under this title or title xxi

    ``Sec. 1936. (a) 100 Percent FMAP.--
            ``(1) In general.--Notwithstanding any other provision of 
        this title, in the case of a State that, through an amendment 
        to each of its State plans under this title and title XXI (or 
        to a waiver of either such plan), agrees to satisfy the 
        conditions described in subsections (b), (c), and (d) the 
        Federal medical assistance percentage shall be 100 percent with 
        respect to the total amount expended by the State for providing 
        medical assistance under this title for each fiscal year 
        quarter beginning on or after the date described in subsection 
        (e) for children whose family income does not exceed 100 
        percent of the poverty line.
            ``(2) Limitation on scope of application of increase.--The 
        increase in the Federal medical assistance percentage for a 
        State under this section shall apply only with respect to the 
        total amount expended for providing medical assistance under 
        this title for a fiscal year quarter for children described in 
        paragraph (1) and shall not apply with respect to--
                    ``(A) any other payments made under this title, 
                including disproportionate share hospital payments 
                described in section 1923;
                    ``(B) payments under title IV or XXI; or
                    ``(C) any payments made under this title or title 
                XXI that are based on the enhanced FMAP described in 
                section 2105(b).
    ``(b) Eligibility Expansions.--The condition described in this 
subsection is that the State agrees to do the following:
            ``(1) Coverage under medicaid or schip for children in 
        families whose income does not exceed 300 percent of the 
        poverty line.--
                    ``(A) In general.--The State agrees to provide 
                medical assistance under this title or child health 
                assistance under title XXI to children whose family 
                income exceeds the medicaid applicable income level (as 
                defined in section 2110(b)(4) but by substituting 
                `January 1, 2005' for `March 31, 1997'), but does not 
                exceed 300 percent of the poverty line.
                    ``(B) State option to expand coverage through 
                subsidized purchase of family coverage.--A State may 
                elect to carry out subparagraph (A) through the 
                provision of assistance for the purchase of dependent 
                coverage under a group health plan or health insurance 
                coverage if--
                            ``(i) the dependent coverage is consistent 
                        with the benefit standards under this title or 
                        title XXI, as approved by the Secretary; and
                            ``(ii) the State provides `wrap-around' 
                        coverage under this title or title XXI.
                    ``(C) Deemed satisfaction for certain states.--A 
                State that, as of January 1, 2005, provides medical 
                assistance under this title or child health assistance 
                under title XXI to children whose family income is 300 
                percent of the poverty line shall be deemed to satisfy 
                this paragraph.
            ``(2) Coverage for children under age 21.--The State agrees 
        to define a child for purposes of this title and title XXI as 
        an individual who has not attained 21 years of age.
            ``(3) Opportunity for higher income children to purchase 
        schip coverage.--The State agrees to permit any child whose 
        family income exceeds 300 percent of the poverty line to 
        purchase full or `wrap-around' coverage under title XXI at the 
        full cost of providing such coverage, as determined by the 
        State.
            ``(4) Coverage for legal immigrant children.--The State 
        agrees to--
                    ``(A) provide medical assistance under this title 
                and child health assistance under title XXI for alien 
                children who are lawfully residing in the United States 
                (including battered aliens described in section 431(c) 
                of the Personal Responsibility and Work Opportunity 
                Reconciliation Act of 1996) and who are otherwise 
                eligible for such assistance in accordance with section 
                1903(v)(4) and 2107(e)(1)(E); and
                    ``(B) not establish or enforce barriers that deter 
                applications by such aliens, including through the 
                application of the removal of the barriers described in 
                subsection (c).
    ``(c) Removal of Enrollment and Access Barriers.--The condition 
described in this subsection is that the State agrees to do the 
following:
            ``(1) Presumptive eligibility for children.--The State 
        agrees to--
                    ``(A) provide presumptive eligibility for children 
                under this title and title XXI in accordance with 
                section 1920A; and
                    ``(B) treat any items or services that are provided 
                to an uncovered child (as defined in section 
                2110(c)(8)) who is determined ineligible for medical 
                assistance under this title as child health assistance 
                for purposes of paying a provider of such items or 
                services, so long as such items or services would be 
                considered child health assistance for a targeted low-
                income child under title XXI.
            ``(2) Adoption of 12-month continuous enrollment.--The 
        State agrees to provide that eligibility for assistance under 
        this title and title XXI shall not be regularly redetermined 
        more often than once every year for children.
            ``(3) Acceptance of self-declaration of income.--The State 
        agrees to permit the family of a child applying for medical 
        assistance under this title or child health assistance under 
        title XXI to declare and certify by signature under penalty of 
        perjury family income for purposes of collecting financial 
        eligibility information.
            ``(4) Adoption of acceptance of eligibility determinations 
        for other assistance programs.--The State agrees to accept 
        determinations (made within a reasonable period, as found by 
        the State, before its use for this purpose) of an individual's 
        family or household income made by a Federal or State agency 
        (or a public or private entity making such determination on 
        behalf of such agency), including the agencies administering 
        the Food Stamp Act of 1977, the Richard B. Russell National 
        School Lunch Act, and the Child Nutrition Act of 1966, 
        notwithstanding any differences in budget unit, disregard, 
        deeming, or other methodology, but only if--
                    ``(A) such agency has fiscal liabilities or 
                responsibilities affected or potentially affected by 
                such determinations; and
                    ``(B) any information furnished by such agency 
                pursuant to this subparagraph is used solely for 
                purposes of determining eligibility for medical 
                assistance under this title or for child health 
                assistance under title XXI.
            ``(5) No assets test.--The State agrees to not (or 
        demonstrates that it does not) apply any assets or resources 
        test for eligibility under this title or title XXI with respect 
        to children.
            ``(6) Eligibility determinations and redeterminations.--
                    ``(A) In general.--The State agrees for purposes of 
                initial eligibility determinations and redeterminations 
                of children under this title and title XXI not to 
                require a face-to-face interview and to permit 
                applications and renewals by mail, telephone, and the 
                Internet.
                    ``(B) Nonduplication of information.--
                            ``(i) In general.--For purposes of 
                        redeterminations of eligibility for currently 
                        or previously enrolled children under this 
                        title and title XXI, the State agrees to use 
                        all information in its possession (including 
                        information available to the State under other 
                        Federal or State programs) to determine 
                        eligibility or redetermine continued 
                        eligibility before seeking similar information 
                        from parents.
                            ``(ii) Rule of construction.--Nothing in 
                        clause (i) shall be construed as limiting any 
                        obligation of a State to provide notice and a 
                        fair hearing before denying, terminating, or 
                        reducing a child's coverage based on such 
                        information in the possession of the State.
            ``(7) No waiting list for children under schip.--The State 
        agrees to not impose any numerical limitation, waiting list, 
        waiting period, or similar limitation on the eligibility of 
        children for child health assistance under title XXI or to 
        establish or enforce other barriers to the enrollment of 
        eligible children based on the date of their application for 
        coverage.
            ``(8) Adequate provider payment rates.--The State agrees 
        to--
                    ``(A) establish payment rates for children's health 
                care providers under this title that are no less than 
                the average of payment rates for similar services for 
                such providers provided under the benchmark benefit 
                packages described in section 2103(b);
                    ``(B) establish such rates in amounts that are 
                sufficient to ensure that children enrolled under this 
                title or title XXI have adequate access to 
                comprehensive care, in accordance with the requirements 
                of section 1902(a)(30)(A); and
                    ``(C) include provisions in its contracts with 
                providers under this title guaranteeing compliance with 
                these requirements.
    ``(d) Maintenance of Medicaid Eligibility Levels for Children.--
            ``(1) In general.--The condition described in this 
        subsection is that the State agrees to maintain eligibility 
        income, resources, and methodologies applied under this title 
        (including under a waiver of such title or under section 1115) 
        with respect to children that are no more restrictive than the 
        eligibility income, resources, and methodologies applied with 
        respect to children under this title (including under such a 
        waiver) as of January 1, 2005.
            ``(2) Rule of construction.--Nothing in this section shall 
        be construed as implying that a State does not have to comply 
        with the minimum income levels required for children under 
        section 1902(l)(2).
    ``(e) Date Described.--The date described in this subsection is the 
date on which, with respect to a State, a plan amendment that satisfies 
the requirements of subsections (b), (c), and (d) is approved by the 
Secretary.
    ``(f) Definition of Poverty Line.--In this section, the term 
`poverty line' has the meaning given that term in section 
2110(c)(5).''.
    (b) Conforming Amendments.--
            (1) The third sentence of section 1905(b) of the Social 
        Security Act (42 U.S.C. 1396d(b)) is amended by inserting 
        before the period the following: ``, and with respect to 
        amounts expended for medical assistance for children on or 
        after the date described in subsection (d) of section 1936, in 
        the case of a State that has, in accordance with such section, 
        an approved plan amendment under this title and title XXI''.
            (2) Section 1903(f)(4) of the Social Security Act (42 
        U.S.C. 1396b(f)(4)) is amended--
                    (A) in subparagraph (C), by adding ``or'' after 
                ``section 1611(b)(1),''; and
                    (B) by inserting after subparagraph (C), the 
                following:
            ``(D) who would not receive such medical assistance but for 
        State electing the option under section 1936 and satisfying the 
        conditions described in subsections (b), (c), and (d) of such 
        section,''.

SEC. 102. ELIMINATION OF CAP ON SCHIP FUNDING FOR STATES THAT EXPAND 
              ELIGIBILITY FOR CHILDREN.

    (a) In General.--Section 2105 of the Social Security Act (42 U.S.C. 
1397dd) is amended by adding at the end the following:
    ``(h) Guaranteed Funding for Child Health Assistance for Coverage 
Expansion States.--
            ``(1) In general.--Only in the case of a State that has, in 
        accordance with section 1936, an approved plan amendment under 
        this title and title XIX, any payment cap that would otherwise 
        apply to the State under this title as a result of having 
        expended all allotments available for expenditure by the State 
        with respect to a fiscal year shall not apply with respect to 
        amounts expended by the State on or after the date described in 
        section 1936(d).
            ``(2) Appropriation.--There is appropriated, out of any 
        money in the Treasury not otherwise appropriated, such sums as 
        may be necessary for the purpose of paying a State described in 
        paragraph (1) for each quarter beginning on or after the date 
        described in section 1936(d), an amount equal to the enhanced 
        FMAP of expenditures described in paragraph (1) and incurred 
        during such quarter.''.
    (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 section 
        2105(h),'' after ``under this section,'';
            (2) in subsection (b)(1), by inserting ``and section 
        2105(h)'' after ``Subject to paragraph (4)''; and
            (3) in subsection (c)(1), by inserting ``subject to section 
        2105(h),'' after ``for a fiscal year,''.

   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.

    (a) In General.--Section 2110(b) of the Social Security Act (42 
U.S.C. 1397jj(b)) is amended--
            (1) in paragraph (1)(C), by inserting ``, subject to 
        paragraph (5),'' after ``under title XIX or''; and
            (2) by adding at the end the following new paragraph:
            ``(5) State option to provide wrap-around coverage.--
                    ``(A) In general.--A State may waive the 
                requirement of paragraph (1)(C) that a targeted low-
                income child may not be covered under a group health 
                plan or under health insurance coverage in order to 
                provide--
                            ``(i) items or services that are not 
                        covered, or are only partially covered, under 
                        such plan or coverage; or
                            ``(ii) cost-sharing protection.
                    ``(B) Eligibility.--In waiving such requirement, a 
                State may limit the application of the waiver to 
children whose family income does not exceed a level specified by the 
State, so long as the level so specified does not exceed the maximum 
income level otherwise established for other children under the State 
child health plan.
                    ``(C) Continued application of duty to prevent 
                substitution of existing coverage.--Nothing in this 
                paragraph shall be construed as modifying the 
                application of section 2102(b)(3)(C) to a State.''.
    (b) Application of Enhanced Match under Medicaid.--Section 1905 of 
such Act (42 U.S.C. 1396d) is amended--
            (1) in subsection (b), in the fourth sentence, by striking 
        ``subsection (u)(3)'' and inserting ``(u)(3), or (u)(4)''; and
            (2) in subsection (u), by redesignating paragraph (4) as 
        paragraph (5) and by inserting after paragraph (3) the 
        following:
    ``(4) For purposes of subsection (b), the expenditures described in 
this paragraph are expenditures for items and services for children 
described in section 2110(b)(5).''.
    (c) Application of Secondary Payor Provisions.--Section 2107(e)(1) 
of such Act (42 U.S.C. 1397gg(e)(1)) is amended--
            (1) by redesignating subparagraphs (B) through (D) as 
        subparagraphs (C) through (E), respectively; and
            (2) by inserting after subparagraph (A) the following new 
        subparagraph:
                    ``(B) Section 1902(a)(25) (relating to coordination 
                of benefits and secondary payor provisions) with 
                respect to children covered under a waiver described in 
                section 2110(b)(5).''.

SEC. 202. STATE OPTION TO ENROLL LOW-INCOME CHILDREN OF STATE EMPLOYEES 
              IN SCHIP.

    Section 2110(b)(2) of the Social Security Act (42 U.S.C. 
1397jj(b)(2)) is amended--
            (1) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively and realigning the left margins of 
        such clauses appropriately;
            (2) by striking ``Such term'' and inserting the following:
                    ``(A) In general.--Such term''; and
            (3) by adding at the end the following:
                    ``(B) State option to enroll low-income children of 
                state employees.--At the option of a State, 
                subparagraph (A)(ii) shall not apply to any low-income 
                child who would otherwise be eligible for child health 
                assistance under this title but for such 
                subparagraph.''.

SEC. 203. OPTIONAL COVERAGE OF LEGAL IMMIGRANT CHILDREN UNDER MEDICAID 
              AND SCHIP.

    (a) Medicaid Program.--Section 1903(v) of the Social Security Act 
(42 U.S.C. 1396b(v)) is amended--
            (1) in paragraph (1), by striking ``paragraph (2)'' and 
        inserting ``paragraphs (2) and (4)''; and
            (2) by adding at the end the following:
    ``(4)(A) A State may elect (in a plan amendment under this title) 
to provide medical assistance under this title for aliens who are 
lawfully residing in the United States (including battered aliens 
described in section 431(c) of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996) and who are otherwise eligible 
for such assistance, within any of the following eligibility category:
            ``(i) Children.--Children (as defined under such plan), 
        including optional targeted low-income children described in 
        section 1905(u)(2)(B).
    ``(B)(i) In the case of a State that has elected to provide medical 
assistance to a category of aliens under subparagraph (A), no debt 
shall accrue under an affidavit of support against any sponsor of such 
an alien on the basis of provision of assistance to such category and 
the cost of such assistance shall not be considered as an unreimbursed 
cost.
    ``(ii) The provisions of sections 401(a), 402(b), 403, and 421 of 
the Personal Responsibility and Work Opportunity Reconciliation Act of 
1996 shall not apply to a State that makes an election under 
subparagraph (A).''.
    (b) Title XXI.--Section 2107(e)(1) of the Social Security Act (42 
U.S.C. 1397gg(e)(1)) is amended by adding at the end the following:
                    ``(E) Section 1903(v)(4) (relating to optional 
                coverage of permanent resident alien children), but 
                only if the State has elected to apply such section to 
                that category of children under title XIX.''.

SEC. 204. STATE OPTION FOR PASSIVE RENEWAL OF ELIGIBILITY FOR CHILDREN 
              UNDER MEDICAID AND SCHIP.

    (a) In General.--Section 1902(l) of the Social Security Act (42 
U.S.C. 1396a(l)) is amended by adding at the end the following:
    ``(5) Notwithstanding any other provision of this title, a State 
may provide that an individual who has not attained 21 years of age who 
has been determined eligible for medical assistance under this title 
shall remain eligible for medical assistance until such time as the 
State has information demonstrating that the individual is no longer so 
eligible.''.
    (b) Application under Title XXI.--Section 2107(e)(1) of the Social 
Security Act (42 U.S.C. 1397gg(e)) is amended--
            (1) by redesignating subparagraphs (B) through (D) as 
        subparagraphs (C) through (E), respectively; and
            (2) by inserting after subparagraph (A), the following:
                    ``(B) Section 1902(l)(5) (relating to passive 
                renewal of eligibility for children).''.

  TITLE III--TAX INCENTIVES FOR HEALTH INSURANCE COVERAGE OF CHILDREN

SEC. 301. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE OF CHILDREN.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. HEALTH INSURANCE COVERAGE OF CHILDREN.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle an amount 
equal to so much of the amount paid during the taxable year, not 
compensated for by insurance or otherwise, for qualified health 
insurance for each dependent child of the taxpayer, as exceeds 5 
percent of the adjusted gross income of such taxpayer for such taxable 
year.
    ``(b) Dependent Child.--For purposes of this section, the term 
`dependent child' means any child (as defined in section 152(f)(1)) who 
has not attained the age of 19 as of the close of the calendar year in 
which the taxable year of the taxpayer begins and with respect to whom 
a deduction under section 151 is allowable to the taxpayer.
    ``(c) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--The term `qualified health insurance' 
        means insurance, either employer-provided or made available 
        under title XIX or XXI of the Social Security Act, which 
        constitutes medical care as defined in section 213(d) without 
        regard to--
                    ``(A) paragraph (1)(C) thereof, and
                    ``(B) so much of paragraph (1)(D) thereof as 
                relates to qualified long-term care insurance 
                contracts.
            ``(2) Exclusion of certain other contracts.--Such term 
        shall not include insurance if a substantial portion of its 
        benefits are excepted benefits (as defined in section 9832(c)).
    ``(d) Medical Savings Account and Health Savings Account 
Contributions.--
            ``(1) In general.--If a deduction would (but for paragraph 
        (2)) be allowed under section 220 or 223 to the taxpayer for a 
        payment for the taxable year to the medical savings account or 
        health savings account of an individual, subsection (a) shall 
        be applied by treating such payment as a payment for qualified 
        health insurance for such individual.
            ``(2) Denial of double benefit.--No deduction shall be 
        allowed under section 220 or 223 for that portion of the 
        payments otherwise allowable as a deduction under section 220 
        or 223 for the taxable year which is equal to the amount of 
        credit allowed for such taxable year by reason of this 
        subsection.
    ``(e) Special Rules.--
            ``(1) Determination of insurance costs.--The Secretary 
        shall provide rules for the allocation of the cost of any 
        qualified health insurance for family coverage to the coverage 
        of any dependent child under such insurance.
            ``(2) Coordination with deduction for health insurance 
        costs of self-employed individuals.--In the case of a taxpayer 
        who is eligible to deduct any amount under section 162(l) for 
        the taxable year, this section shall apply only if the taxpayer 
        elects not to claim any amount as a deduction under such 
        section for such year.
            ``(3) Coordination with medical expense and high deductible 
        health plan deductions.--The amount which would (but for this 
        paragraph) be taken into account by the taxpayer under section 
        213 or 224 for the taxable year shall be reduced by the credit 
        (if any) allowed by this section to the taxpayer for such year.
            ``(4) Denial of credit to dependents.--No credit shall be 
        allowed under this section to any individual with respect to 
        whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
            ``(5) Denial of double benefit.--No credit shall be allowed 
        under subsection (a) if the credit under section 35 is allowed 
        and no credit shall be allowed under 35 if a credit is allowed 
        under this section.
            ``(6) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.''.
    (b) Information Reporting.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 of the Internal Revenue Code of 1986 (relating to 
        information concerning transactions with other persons) is 
        amended by inserting after section 6050T the following new 
        section:

``SEC. 6050U. RETURNS RELATING TO PAYMENTS FOR QUALIFIED HEALTH 
              INSURANCE.

    ``(a) In General.--Any governmental unit or any person who, in 
connection with a trade or business conducted by such person, receives 
payments during any calendar year from any individual for coverage of a 
dependent child (as defined in section 36(b)) of such individual under 
creditable health insurance, shall make the return described in 
subsection (b) (at such time as the Secretary may by regulations 
prescribe) with respect to each individual from whom such payments were 
received.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe, and
            ``(2) contains--
                    ``(A) the name, address, and TIN of the individual 
                from whom payments described in subsection (a) were 
                received,
                    ``(B) the name, address, and TIN of each dependent 
                child (as so defined) who was provided by such person 
                with coverage under creditable health insurance by 
                reason of such payments and the period of such 
                coverage, and
                    ``(C) such other information as the Secretary may 
                reasonably prescribe.
    ``(c) Creditable Health Insurance.--For purposes of this section, 
the term `creditable health insurance' means qualified health insurance 
(as defined in section 36(c)).
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required under subsection (b)(2)(A) to be set forth in such return a 
written statement showing--
            ``(1) the name and address of the person required to make 
        such return and the phone number of the information contact for 
        such person,
            ``(2) the aggregate amount of payments described in 
        subsection (a) received by the person required to make such 
        return from the individual to whom the statement is required to 
        be furnished, and
            ``(3) the information required under subsection (b)(2)(B) 
        with respect to such payments.
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) is required to be made.
    ``(e) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of any amount received by any person on 
behalf of another person, only the person first receiving such amount 
shall be required to make the return under subsection (a).''.
            (2) Assessable penalties.--
                    (A) Subparagraph (B) of section 6724(d)(1) of such 
                Code (relating to definitions) is amended by 
                redesignating clauses (xiii) through (xviii) as clauses 
                (xiv) through (xix), respectively, and by inserting 
                after clause (xii) the following new clause:
                            ``(xiii) section 6050U (relating to returns 
                        relating to payments for qualified health 
                        insurance),''.
                    (B) Paragraph (2) of section 6724(d) of such Code 
                is amended by striking ``or'' at the end of the next to 
                last subparagraph, by striking the period at the end of 
                the last subparagraph and inserting ``, or'', and by 
                adding at the end the following new subparagraph:
                    ``(CC) section 6050U(d) (relating to returns 
                relating to payments for qualified health 
                insurance).''.
            (3) Clerical amendment.--The table of sections for subpart 
        B of part III of subchapter A of chapter 61 of such Code is 
        amended by inserting after the item relating to section 6050T 
        the following new item:

                              ``Sec. 6050U. Returns relating to 
                                        payments for qualified health 
                                        insurance.''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 36 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the last item and inserting the 
        following new items:

                              ``Sec. 36. Health insurance coverage of 
                                        children.
                              ``Sec. 37. Overpayments of tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 302. FORFEITURE OF PERSONAL EXEMPTION FOR ANY CHILD NOT COVERED BY 
              HEALTH INSURANCE.

    (a) In General.--Section 151(d) of the Internal Revenue Code of 
1986 (relating to exemption amount) is amended by adding at the end the 
following new paragraph:
            ``(5) Reduction of exemption amount for any child not 
        covered by health insurance.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, the exemption amount otherwise 
                determined under this subsection for any dependent 
                child (as defined in section 36(b)) for any taxable 
                year shall be reduced by the same percentage as the 
                percentage of such taxable year during which such 
                dependent child was not covered by qualified health 
                insurance (as defined in section 36(c)).
                    ``(B) Full reduction if no proof of coverage is 
                provided.--For purposes of subparagraph (A), in the 
                case of any taxpayer who fails to attach to the return 
                of tax for any taxable year a copy of the statement 
                furnished to such taxpayer under section 6050U, the 
                percentage reduction under such subparagraph shall be 
                deemed to be 100 percent.
                    ``(C) Nonapplication of paragraph to taxpayers in 
                lowest tax bracket.--This paragraph shall not apply to 
                any taxpayer whose taxable income for the taxable year 
                does not exceed the initial bracket amount determined 
                under section 1(i)(1)(B).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2004.

                        TITLE IV--MISCELLANEOUS

SEC. 401. REQUIREMENT FOR GROUP MARKET HEALTH INSURERS TO OFFER 
              DEPENDENT COVERAGE OPTION FOR WORKERS WITH CHILDREN.

    (a) ERISA.--
            (1) In general.--Subpart B of part 7 of subtitle B of title 
        I of the Employee Retirement Income Security Act of 1974 (29 
        U.S.C. 1185 et seq.) is amended by adding at the end the 
        following:

``SEC. 714. REQUIREMENT TO OFFER OPTION TO PURCHASE DEPENDENT COVERAGE 
              FOR CHILDREN.

    ``(a) Requirements for Coverage.--A group health plan, and a health 
insurance issuer providing health insurance coverage in connection with 
a group health plan, shall offer an individual who is enrolled in such 
coverage the option to purchase dependent coverage for a child of the 
individual.
    ``(b) No Employer Contribution Required.--An employer shall not be 
required to contribute to the cost of purchasing dependent coverage for 
a child by an individual who is an employee of such employer.
    ``(c) Definition of Child.--In this section, the term `child' means 
an individual who has not attained 21 years of age.''.
            (2) Clerical amendment.--The table of contents in section 1 
        of the Employee Retirement Income Security Act of 1974 (29 
        U.S.C. 1001) is amended by inserting after the item relating to 
        section 713 the following:

``Sec. 714. Requirement to offer option to purchase dependent coverage 
                            for children.''.
    (b) Public Health Service Act.--Subpart 2 of part A of title XXVII 
of the Public Health Service Act (42 U.S.C. 300gg-4 et seq.) is amended 
by adding at the end the following:

``SEC. 2707. REQUIREMENT TO OFFER OPTION TO PURCHASE DEPENDENT COVERAGE 
              FOR CHILDREN.

    ``(a) Requirements for Coverage.--A group health plan, and a health 
insurance issuer providing health insurance coverage in connection with 
a group health plan, shall offer an individual who is enrolled in such 
coverage the option to purchase dependent coverage for a child of the 
individual.
    ``(b) No Employer Contribution Required.--An employer shall not be 
required to contribute to the cost of purchasing dependent coverage for 
a child by an individual who is an employee of such employer.
    ``(c) Definition of Child.--In this section, the term `child' means 
an individual who has not attained 21 years of age.''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to plan years beginning on or after January 1, 2006.

SEC. 402. EFFECTIVE DATE.

    Unless otherwise provided, the amendments made by this Act shall 
take effect on October 1, 2005, and shall apply to child health 
assistance and medical assistance provided on or after that date 
without regard to whether or not final regulations to carry out such 
amendments have been promulgated by such date.

                       TITLE V--REVENUE PROVISION

SEC. 501. PARTIAL REPEAL OF RATE REDUCTION IN THE HIGHEST INCOME TAX 
              BRACKET.

    Section 1(i)(2) of the Internal Revenue Code of 1986 is amended by 
adding at the end the following flush sentence:
        ``In the case of taxable years beginning during calendar year 
        2005 and thereafter, the final item in the fourth column in the 
        preceding table shall be applied by substituting for `35.0%' 
        such rate as the Secretary determines is necessary to provide 
        sufficient revenues to offset the Federal outlays required to 
        implement the provisions of, and amendments made by, the Kids 
        Come First Act of 2005.''.
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