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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 1503 Introduced in Senate (IS)]

109th CONGRESS
  1st Session
                                S. 1503

  To reduce healthcare costs, expand access to affordable healthcare 
 coverage, and improve healthcare and strengthen the healthcare safety 
                      net, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             July 26, 2005

Mr. Frist (for himself, Mr. McConnell, Mr. Gregg, Mr. Enzi, Ms. 
        Murkowski, and Mr. DeMint) introduced the following bill; which 
        was read twice and referred to the Committee on FinanceYYYYYYYY

_______________________________________________________________________

                                 A BILL

 
  To reduce healthcare costs, expand access to affordable healthcare 
 coverage, and improve healthcare and strengthen the healthcare safety 
                      net, 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 ``Healthy America 
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--MAKING HEALTH CARE MORE AFFORDABLE

                  Subtitle A--Medical Liability Reform

Sec. 101. Short title.
Sec. 102. Findings and purpose.
Sec. 103. Encouraging speedy resolution of claims.
Sec. 104. Compensating patient injury.
Sec. 105. Maximizing patient recovery.
Sec. 106. Additional health benefits.
Sec. 107. Punitive damages.
Sec. 108. Authorization of payment of future damages to claimants in 
                            health care lawsuits.
Sec. 109. Definitions.
Sec. 110. Effect on other laws.
Sec. 111. State flexibility and protection of States' rights.
Sec. 112. Applicability; effective date.
               Subtitle B--Health Information Technology

                     Chapter 1--General Provisions

Sec. 121. Improving health care, quality, safety, and efficiency.
Sec. 122. HIPAA report.
Sec. 123. Study of reimbursement incentives.
Sec. 124. Reauthorization of incentive grants regarding telemedicine.
Sec. 125. Sense of the Senate on physician payment.
Sec. 126. Establishment of quality measurement systems for medicare 
                            value-based purchasing programs.
Sec. 127. Exception to Federal anti-kickback and physician self 
                            referral laws for the provision of 
                            permitted support.
                   Chapter 2--Value Based Purchasing

Sec. 131. Value based purchasing programs.
           Subtitle C--Patient Safety and Quality Improvement

Sec. 141. Short title.
Sec. 142. Findings and purposes.
Sec. 143. Amendments to Public Health Service Act.
Sec. 144. Studies and reports.
                      Subtitle D--Fraud and Abuse

Sec. 151. National expansion of the medicare-medicaid data match pilot 
                            program.
                  Subtitle E--Miscellaneous Provisions

Sec. 161. Sense of the Senate on establishing a mandated benefits 
                            commission.
Sec. 162. Enforcement of reimbursement provisions by fiduciaries.
 TITLE II--EXPANDING ACCESS TO AFFORDABLE HEALTH COVERAGE THROUGH TAX 
                    INCENTIVES AND OTHER INITIATIVES

             Subtitle A--Refundable Health Insurance Credit

Sec. 201. Refundable health insurance costs credit.
Sec. 202. Advance payment of credit to issuers of qualified health 
                            insurance.
  Subtitle B--High Deductible Health Plans and Health Savings Accounts

Sec. 211. Deduction of premiums for high deductible health plans.
Sec. 212. Refundable credit for contributions to health savings 
                            accounts of small business employees.
       Subtitle C--Improvement of the Health Coverage Tax Credit

Sec. 221. Change in State-based coverage rules related to preexisting 
                            conditions.
Sec. 222. Eligibility of spouse of certain individuals entitled to 
                            medicare.
Sec. 223. Eligible PBGC pension recipient.
Sec. 224. Application of option to offer State-based coverage to Puerto 
                            Rico, Northern Mariana Islands, American 
                            Samoa, Guam, and the United States Virgin 
                            Islands.
Sec. 225. Clarification of disclosure rules.
Sec. 226. Clarification that State-based COBRA continuation coverage is 
                            subject to same rules as Federal COBRA.
Sec. 227. Application of rules for other specified coverage to eligible 
                            alternative taa recipients consistent with 
                            rules for other eligible individuals.
                  Subtitle D--Long-Term Care Insurance

Sec. 231. Sense of the Senate concerning long-term care.
                      Subtitle E--Other Provisions

Sec. 241. Disposition of unused health benefits in cafeteria plans and 
                            flexible spending arrangements.
Sec. 242. Microentrepreneurs.
Sec. 243. Study on access to affordable health insurance for full-time 
                            college and university students.
Sec. 244. Extension of funding for operation of State high risk health 
                            insurance pools.
Sec. 245. Sense of the senate on affordable health coverage for small 
                            employers.
                       Subtitle F--Covering Kids

Sec. 251. Short title.
Sec. 252. Grants to promote innovative outreach and enrollment under 
                            medicaid and SCHIP.
Sec. 253. State option to provide for simplified determinations of a 
                            child's financial eligibility for medical 
                            assistance under medicaid or child health 
                            assistance under SCHIP.
       TITLE III--IMPROVING CARE AND STRENGTHENING THE SAFETY NET

                      Subtitle A--High Needs Areas

Sec. 301. Purpose.
Sec. 302. High need community health centers.
Sec. 303. Grant application process.
          Subtitle B--Qualified Integrated Health Care systems

Sec. 321. Grants to qualified integrated health care systems.
                  Subtitle C--Miscellaneous Provisions

Sec. 331. Community health center collaborative access expansion.
Sec. 332. Improvements to section 340B program.
Sec. 333. Forbearance for student loans for physicians providing 
                            services in free clinics.
Sec. 334. Amendments to the Public Health Service Act relating to 
                            liability.
Sec. 335. Sense of the Senate concerning health disparities.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Health care costs are growing rapidly, putting health 
        insurance and needed care out of reach for too many Americans.
            (2) Rapidly growing health care costs pose a threat to the 
        United States economy, as they make American businesses less 
        competitive and make it more difficult to create new jobs.
            (3) Growing health care costs are compromising the 
        stability of health care safety net and entitlement programs.
            (4) There are a series of steps Congress can and should 
        take to slow the growth of health care costs, expand access to 
        health coverage, and improve access to quality health care for 
        millions of Americans.

              TITLE I--MAKING HEALTH CARE MORE AFFORDABLE

                  Subtitle A--Medical Liability Reform

SEC. 101. SHORT TITLE.

    This subtitle may be cited as the ``Patients First Act of 2005''.

SEC. 102. FINDINGS AND PURPOSE.

    (a) Findings.--
            (1) Effect on health care access and costs.--Congress finds 
        that our current civil justice system is adversely affecting 
        patient access to health care services, better patient care, 
        and cost-efficient health care, in that the current health care 
        liability system is a costly and ineffective mechanism for 
        resolving claims of health care liability and compensating 
        injured patients, and is a deterrent to the sharing of 
        information among health care professionals which impedes 
        efforts to improve patient safety and quality of care.
            (2) Effect on interstate commerce.--Congress finds that the 
        health care and insurance industries are industries affecting 
        interstate commerce and the health care liability litigation 
        systems existing throughout the United States are activities 
        that affect interstate commerce by contributing to the high 
        costs of health care and premiums for health care liability 
        insurance purchased by health care system providers.
            (3) Effect on federal spending.--Congress finds that the 
        health care liability litigation systems existing throughout 
        the United States have a significant effect on the amount, 
        distribution, and use of Federal funds because of--
                    (A) the large number of individuals who receive 
                health care benefits under programs operated or 
                financed by the Federal Government;
                    (B) the large number of individuals who benefit 
                because of the exclusion from Federal taxes of the 
                amounts spent to provide them with health insurance 
                benefits; and
                    (C) the large number of health care providers who 
                provide items or services for which the Federal 
                Government makes payments.
    (b) Purpose.--It is the purpose of this subtitle to implement 
reasonable, comprehensive, and effective health care liability reforms 
designed to--
            (1) improve the availability of health care services in 
        cases in which health care liability actions have been shown to 
        be a factor in the decreased availability of services;
            (2) reduce the incidence of ``defensive medicine'' and 
        lower the cost of health care liability insurance, all of which 
        contribute to the escalation of health care costs;
            (3) ensure that persons with meritorious health care injury 
        claims receive fair and adequate compensation, including 
        reasonable noneconomic damages;
            (4) improve the fairness and cost-effectiveness of our 
        current health care liability system to resolve disputes over, 
        and provide compensation for, health care liability by reducing 
        uncertainty in the amount of compensation provided to injured 
        individuals;
            (5) provide an increased sharing of information in the 
        health care system which will reduce unintended injury and 
        improve patient care.

SEC. 103. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS.

    The time for the commencement of a health care lawsuit shall be 3 
years after the date of manifestation of injury or 1 year after the 
claimant discovers, or through the use of reasonable diligence should 
have discovered, the injury, whichever occurs first. In no event shall 
the time for commencement of a health care lawsuit exceed 3 years after 
the date of manifestation of injury unless tolled for any of the 
following:
            (1) Upon proof of fraud.
            (2) Intentional concealment.
            (3) The presence of a foreign body, which has no 
        therapeutic or diagnostic purpose or effect, in the person of 
        the injured person.
Actions by a minor shall be commenced within 3 years from the date of 
the alleged manifestation of injury except that actions by a minor 
under the full age of 6 years shall be commenced within 3 years of 
manifestation of injury or prior to the minor's 8th birthday, whichever 
provides a longer period. Such time limitation shall be tolled for 
minors for any period during which a parent or guardian and a health 
care provider or health care organization have committed fraud or 
collusion in the failure to bring an action on behalf of the injured 
minor.

SEC. 104. COMPENSATING PATIENT INJURY.

    (a) Unlimited Amount of Damages for Actual Economic Losses in 
Health Care Lawsuits.--In any health care lawsuit, the full amount of a 
claimant's economic loss may be fully recovered without limitation.
    (b) Additional Noneconomic Damages.--In any health care lawsuit, 
the amount of noneconomic damages recovered may be as much as $250,000, 
regardless of the number of parties against whom the action is brought 
or the number of separate claims or actions brought with respect to the 
same occurrence.
    (c) No Discount of Award for Noneconomic Damages.--In any health 
care lawsuit, an award for future noneconomic damages shall not be 
discounted to present value. The jury shall not be informed about the 
maximum award for noneconomic damages. An award for noneconomic damages 
in excess of $250,000 shall be reduced either before the entry of 
judgment, or by amendment of the judgment after entry of judgment, and 
such reduction shall be made before accounting for any other reduction 
in damages required by law. If separate awards are rendered for past 
and future noneconomic damages and the combined awards exceed $250,000, 
the future noneconomic damages shall be reduced first.
    (d) Fair Share Rule.--In any health care lawsuit, each party shall 
be liable for that party's several share of any damages only and not 
for the share of any other person. Each party shall be liable only for 
the amount of damages allocated to such party in direct proportion to 
such party's percentage of responsibility. A separate judgment shall be 
rendered against each such party for the amount allocated to such 
party. For purposes of this section, the trier of fact shall determine 
the proportion of responsibility of each party for the claimant's harm.

SEC. 105. MAXIMIZING PATIENT RECOVERY.

    (a) Court Supervision of Share of Damages Actually Paid to 
Claimants.--In any health care lawsuit, the court shall supervise the 
arrangements for payment of damages to protect against conflicts of 
interest that may have the effect of reducing the amount of damages 
awarded that are actually paid to claimants. In particular, in any 
health care lawsuit in which the attorney for a party claims a 
financial stake in the outcome by virtue of a contingent fee, the court 
shall have the power to restrict the payment of a claimant's damage 
recovery to such attorney, and to redirect such damages to the claimant 
based upon the interests of justice and principles of equity. In no 
event shall the total of all contingent fees for representing all 
claimants in a health care lawsuit exceed the following limits:
            (1) 40 percent of the first $50,000 recovered by the 
        claimant(s).
            (2) 33\1/3\ percent of the next $50,000 recovered by the 
        claimant(s).
            (3) 25 percent of the next $500,000 recovered by the 
        claimant(s).
            (4) 15 percent of any amount by which the recovery by the 
        claimant(s) is in excess of $600,000.
    (b) Applicability.--The limitations in subsection (a) shall apply 
whether the recovery is by judgment, settlement, mediation, 
arbitration, or any other form of alternative dispute resolution. In a 
health care lawsuit involving a minor or incompetent person, a court 
retains the authority to authorize or approve a fee that is less than 
the maximum permitted under this section.
    (c) Expert Witnesses.--
            (1) Requirement.--No individual shall be qualified to 
        testify as an expert witness concerning issues of negligence in 
        any health care lawsuit against a defendant unless such 
        individual--
                    (A) except as required under paragraph (2), is a 
                health care professional who--
                            (i) is appropriately credentialed or 
                        licensed in 1 or more States to deliver health 
                        care services; and
                            (ii) typically treats the diagnosis or 
                        condition or provides the type of treatment 
                        under review; and
                    (B) can demonstrate by competent evidence that, as 
                a result of training, education, knowledge, and 
                experience in the evaluation, diagnosis, and treatment 
                of the disease or injury which is the subject matter of 
                the lawsuit against the defendant, the individual was 
                substantially familiar with applicable standards of 
                care and practice as they relate to the act or omission 
                which is the subject of the lawsuit on the date of the 
                incident.
            (2) Physician review.--In a health care lawsuit, if the 
        claim of the plaintiff involved treatment that is recommended 
        or provided by a physician (allopathic or osteopathic), an 
        individual shall not be qualified to be an expert witness under 
        this subsection with respect to issues of negligence concerning 
        such treatment unless such individual is a physician.
            (3) Specialties and subspecialties.--With respect to a 
        lawsuit described in paragraph (1), a court shall not permit an 
        expert in one medical specialty or subspecialty to testify 
        against a defendant in another medical specialty or 
        subspecialty unless, in addition to a showing of substantial 
        familiarity in accordance with paragraph (1)(B), there is a 
        showing that the standards of care and practice in the two 
        specialty or subspecialty fields are similar.
            (4) Limitation.--The limitations in this subsection shall 
        not apply to expert witnesses testifying as to the degree or 
        permanency of medical or physical impairment.

SEC. 106. ADDITIONAL HEALTH BENEFITS.

    (a) In General.--The amount of any damages received by a claimant 
in any health care lawsuit shall be reduced by the court by the amount 
of any collateral source benefits to which the claimant is entitled, 
less any insurance premiums or other payments made by the claimant (or 
by the spouse, parent, child, or legal guardian of the claimant) to 
obtain or secure such benefits.
    (b) Preservation of Current Law.--Where a payor of collateral 
source benefits has a right of recovery by reimbursement or subrogation 
and such right is permitted under Federal or State law, subsection (a) 
shall not apply.
    (c) Application of Provision.--This section shall apply to any 
health care lawsuit that is settled or resolved by a fact finder.

SEC. 107. PUNITIVE DAMAGES.

    (a) In General.--Punitive damages may, if otherwise permitted by 
applicable State or Federal law, be awarded against any person in a 
health care lawsuit only if it is proven by clear and convincing 
evidence that such person acted with malicious intent to injure the 
claimant, or that such person deliberately failed to avoid unnecessary 
injury that such person knew the claimant was substantially certain to 
suffer. In any health care lawsuit where no judgment for compensatory 
damages is rendered against such person, no punitive damages may be 
awarded with respect to the claim in such lawsuit. No demand for 
punitive damages shall be included in a health care lawsuit as 
initially filed. A court may allow a claimant to file an amended 
pleading for punitive damages only upon a motion by the claimant and 
after a finding by the court, upon review of supporting and opposing 
affidavits or after a hearing, after weighing the evidence, that the 
claimant has established by a substantial probability that the claimant 
will prevail on the claim for punitive damages. At the request of any 
party in a health care lawsuit, the trier of fact shall consider in a 
separate proceeding--
            (1) whether punitive damages are to be awarded and the 
        amount of such award; and
            (2) the amount of punitive damages following a 
        determination of punitive liability.
If a separate proceeding is requested, evidence relevant only to the 
claim for punitive damages, as determined by applicable State law, 
shall be inadmissible in any proceeding to determine whether 
compensatory damages are to be awarded.
    (b) Determining Amount of Punitive Damages.--
            (1) Factors considered.--In determining the amount of 
        punitive damages, if awarded, in a health care lawsuit, the 
        trier of fact shall consider only the following:
                    (A) the severity of the harm caused by the conduct 
                of such party;
                    (B) the duration of the conduct or any concealment 
                of it by such party;
                    (C) the profitability of the conduct to such party;
                    (D) the number of products sold or medical 
                procedures rendered for compensation, as the case may 
                be, by such party, of the kind causing the harm 
                complained of by the claimant;
                    (E) any criminal penalties imposed on such party, 
                as a result of the conduct complained of by the 
                claimant; and
                    (F) the amount of any civil fines assessed against 
                such party as a result of the conduct complained of by 
                the claimant.
            (2) Maximum award.--The amount of punitive damages, if 
        awarded, in a health care lawsuit may be as much as $250,000 or 
        as much as two times the amount of economic damages awarded, 
        whichever is greater. The jury shall not be informed of this 
        limitation.
    (c) No Penalties for Providers in Compliance With FDA Standards.--A 
health care provider who prescribes a medical product approved or 
cleared by the Food and Drug Administration shall not be named as a 
party to a product liability lawsuit involving such product and shall 
not be liable to a claimant in a class action lawsuit against the 
manufacturer, distributor, or seller of such product.

SEC. 108. AUTHORIZATION OF PAYMENT OF FUTURE DAMAGES TO CLAIMANTS IN 
              HEALTH CARE LAWSUITS.

    (a) In General.--In any health care lawsuit, if an award of future 
damages, without reduction to present value, equaling or exceeding 
$50,000 is made against a party with sufficient insurance or other 
assets to fund a periodic payment of such a judgment, the court shall, 
at the request of any party, enter a judgment ordering that the future 
damages be paid by periodic payments in accordance with the Uniform 
Periodic Payment of Judgments Act promulgated by the National 
Conference of Commissioners on Uniform State Laws.
    (b) Applicability.--This section applies to all actions which have 
not been first set for trial or retrial before the effective date of 
this Act.

SEC. 109. DEFINITIONS.

    In this subtitle:
            (1) Alternative dispute resolution system; adr.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system that provides for the resolution of health care lawsuits 
        in a manner other than through a civil action brought in a 
        State or Federal court.
            (2) Claimant.--The term ``claimant'' means any person who 
        brings a health care lawsuit, including a person who asserts or 
        claims a right to legal or equitable contribution, indemnity or 
        subrogation, arising out of a health care liability claim or 
        action, and any person on whose behalf such a claim is asserted 
        or such an action is brought, whether deceased, incompetent, or 
        a minor.
            (3) Collateral source benefits.--The term ``collateral 
        source benefits'' means any amount paid or reasonably likely to 
        be paid in the future to or on behalf of the claimant, or any 
        service, product or other benefit provided or reasonably likely 
        to be provided in the future to or on behalf of the claimant, 
        as a result of the injury or wrongful death, pursuant to--
                    (A) any State or Federal health, sickness, income-
                disability, accident, or workers' compensation law;
                    (B) any health, sickness, income-disability, or 
                accident insurance that provides health benefits or 
                income-disability coverage;
                    (C) any contract or agreement of any group, 
                organization, partnership, or corporation to provide, 
                pay for, or reimburse the cost of medical, hospital, 
                dental, or income disability benefits; and
                    (D) any other publicly or privately funded program.
            (4) Compensatory damages.--The term ``compensatory 
        damages'' means objectively verifiable monetary losses incurred 
        as a result of the provision of, use of, or payment for (or 
        failure to provide, use, or pay for) health care services or 
        medical products, such as past and future medical expenses, 
        loss of past and future earnings, cost of obtaining domestic 
        services, loss of employment, and loss of business or 
        employment opportunities, damages for physical and emotional 
        pain, suffering, inconvenience, physical impairment, mental 
        anguish, disfigurement, loss of enjoyment of life, loss of 
        society and companionship, loss of consortium (other than loss 
        of domestic service), hedonic damages, injury to reputation, 
        and all other nonpecuniary losses of any kind or nature. The 
        term ``compensatory damages'' includes economic damages and 
        noneconomic damages, as such terms are defined in this section.
            (5) Contingent fee.--The term ``contingent fee'' includes 
        all compensation to any person or persons which is payable only 
        if a recovery is effected on behalf of one or more claimants.
            (6) Economic damages.--The term ``economic damages'' means 
        objectively verifiable monetary losses incurred as a result of 
        the provision of, use of, or payment for (or failure to 
        provide, use, or pay for) health care services or medical 
        products, such as past and future medical expenses, loss of 
        past and future earnings, cost of obtaining domestic services, 
        loss of employment, and loss of business or employment 
        opportunities.
            (7) Health care lawsuit.--The term ``health care lawsuit'' 
        means any health care liability claim concerning the provision 
        of health care goods or services affecting interstate commerce, 
        or any health care liability action concerning the provision of 
        health care goods or services affecting interstate commerce, 
        brought in a State or Federal court or pursuant to an 
        alternative dispute resolution system, against a health care 
        provider, a health care organization, or the manufacturer, 
        distributor, supplier, marketer, promoter, or seller of a 
        medical product, regardless of the theory of liability on which 
        the claim is based, or the number of claimants, plaintiffs, 
        defendants, or other parties, or the number of claims or causes 
        of action, in which the claimant alleges a health care 
        liability claim.
            (8) Health care liability action.--The term ``health care 
        liability action'' means a civil action brought in a State or 
        Federal Court or pursuant to an alternative dispute resolution 
        system, against a health care provider, a health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, regardless 
        of the theory of liability on which the claim is based, or the 
        number of plaintiffs, defendants, or other parties, or the 
        number of causes of action, in which the claimant alleges a 
        health care liability claim.
            (9) Health care liability claim.--The term ``health care 
        liability claim'' means a demand by any person, whether or not 
        pursuant to ADR, against a health care provider, health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, including, 
        but not limited to, third-party claims, cross-claims, counter-
        claims, or contribution claims, which are based upon the 
        provision of, use of, or payment for (or the failure to 
        provide, use, or pay for) health care services or medical 
        products, regardless of the theory of liability on which the 
        claim is based, or the number of plaintiffs, defendants, or 
        other parties, or the number of causes of action.
            (10) Health care organization.--The term ``health care 
        organization'' means any person or entity which is obligated to 
        provide or pay for health benefits under any health plan, 
        including any person or entity acting under a contract or 
        arrangement with a health care organization to provide or 
        administer any health benefit.
            (11) Health care provider.--The term ``health care 
        provider'' means any person or entity required by State or 
        Federal laws or regulations to be licensed, registered, or 
        certified to provide health care services, and being either so 
        licensed, registered, or certified, or exempted from such 
        requirement by other statute or regulation.
            (12) Health care goods or services.--The term ``health care 
        goods or services'' means any goods or services provided by a 
        health care organization, provider, or by any individual 
        working under the supervision of a health care provider, that 
        relates to the diagnosis, prevention, or treatment of any human 
        disease or impairment, or the assessment of the health of human 
        beings.
            (13) Malicious intent to injure.--The term ``malicious 
        intent to injure'' means intentionally causing or attempting to 
        cause physical injury other than providing health care goods or 
        services.
            (14) Medical product.--The term ``medical product'' means a 
        drug or device intended for humans, and the terms ``drug'' and 
        ``device'' have the meanings given such terms in sections 
        201(g)(1) and 201(h) of the Federal Food, Drug and Cosmetic Act 
        (21 U.S.C. 321), respectively, including any component or raw 
        material used therein, but excluding health care services.
            (15) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages for physical and emotional pain, suffering, 
        inconvenience, physical impairment, mental anguish, 
        disfigurement, loss of enjoyment of life, loss of society and 
        companionship, loss of consortium (other than loss of domestic 
        service), hedonic damages, injury to reputation, and all other 
        nonpecuniary losses of any kind or nature.
            (16) Punitive damages.--The term ``punitive damages'' means 
        damages awarded, for the purpose of punishment or deterrence, 
        and not solely for compensatory purposes, against a health care 
        provider, health care organization, or a manufacturer, 
        distributor, or supplier of a medical product. Punitive damages 
        are neither economic nor noneconomic damages.
            (17) Recovery.--The term ``recovery'' means the net sum 
        recovered after deducting any disbursements or costs incurred 
        in connection with prosecution or settlement of the claim, 
        including all costs paid or advanced by any person. Costs of 
        health care incurred by the plaintiff and the attorneys' office 
        overhead costs or charges for legal services are not deductible 
        disbursements or costs for such purpose.
            (18) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, American Samoa, the Northern 
        Mariana Islands, the Trust Territory of the Pacific Islands, 
        and any other territory or possession of the United States, or 
        any political subdivision thereof.

SEC. 110. EFFECT ON OTHER LAWS.

    (a) Vaccine Injury.--
            (1) To the extent that title XXI of the Public Health 
        Service Act establishes a Federal rule of law applicable to a 
        civil action brought for a vaccine-related injury or death--
                    (A) this subtitle does not affect the application 
                of the rule of law to such an action; and
                    (B) any rule of law prescribed by this subtitle in 
                conflict with a rule of law of such title XXI shall not 
                apply to such action.
            (2) If there is an aspect of a civil action brought for a 
        vaccine-related injury or death to which a Federal rule of law 
        under title XXI of the Public Health Service Act does not 
        apply, then this subtitle or otherwise applicable law (as 
        determined under this subtitle) will apply to such aspect of 
        such action.
    (b) Other Federal Law.--Except as provided in this section, nothing 
in this subtitle shall be deemed to affect any defense available to a 
defendant in a health care lawsuit or action under any other provision 
of Federal law.

SEC. 111. STATE FLEXIBILITY AND PROTECTION OF STATES' RIGHTS.

    (a) Health Care Lawsuits.--The provisions governing health care 
lawsuits set forth in this subtitle preempt, subject to subsections (b) 
and (c), State law to the extent that State law prevents the 
application of any provisions of law established by or under this 
subtitle. The provisions governing health care lawsuits set forth in 
this subtitle supersede chapter 171 of title 28, United States Code, to 
the extent that such chapter--
            (1) provides for a greater amount of damages or contingent 
        fees, a longer period in which a health care lawsuit may be 
        commenced, or a reduced applicability or scope of periodic 
        payment of future damages, than provided in this subtitle; or
            (2) prohibits the introduction of evidence regarding 
        collateral source benefits, or mandates or permits subrogation 
        or a lien on collateral source benefits.
    (b) Protection of States' Rights.--Any issue that is not governed 
by any provision of law established by or under this subtitle 
(including State standards of negligence) shall be governed by 
otherwise applicable State or Federal law. This subtitle does not 
preempt or supersede any law that imposes greater protections (such as 
a shorter statute of limitations) for health care providers and health 
care organizations from liability, loss, or damages than those provided 
by this subtitle.
    (c) State Flexibility.--No provision of this subtitle shall be 
construed to preempt--
            (1) any State law (whether effective before, on, or after 
        the date of the enactment of this subtitle) that specifies a 
        particular monetary amount of compensatory or punitive damages 
        (or the total amount of damages) that may be awarded in a 
        health care lawsuit, regardless of whether such monetary amount 
        is greater or lesser than is provided for under this subtitle, 
        notwithstanding section 104(a); or
            (2) any defense available to a party in a health care 
        lawsuit under any other provision of State or Federal law.

SEC. 112. APPLICABILITY; EFFECTIVE DATE.

    This subtitle shall apply to any health care lawsuit brought in a 
Federal or State court, or subject to an alternative dispute resolution 
system, that is initiated on or after the date of the enactment of this 
Act, except that any health care lawsuit arising from an injury 
occurring prior to the date of the enactment of this Act shall be 
governed by the applicable statute of limitations provisions in effect 
at the time the injury occurred.

               Subtitle B--Health Information Technology

                     CHAPTER 1--GENERAL PROVISIONS

 SEC. 121. IMPROVING HEALTH CARE, QUALITY, SAFETY, AND EFFICIENCY.

    The Public Health Service Act (42 U.S.C. 201 et seq.) is amended by 
adding at the end the following:

              ``TITLE XXIX--HEALTH INFORMATION TECHNOLOGY

``SEC. 2901. DEFINITIONS.

    ``In this title:
            ``(1) Health care provider.--The term `health care 
        provider' means a hospital, skilled nursing facility, home 
        health entity, health care clinic, federally qualified health 
        center, group practice (as defined in section 1877(h)(4) of the 
        Social Security Act), a pharmacist, a pharmacy, a laboratory, a 
        physician (as defined in section 1861(r) of the Social Security 
        Act), a health facility operated by or pursuant to a contract 
        with the Indian Health Service, a rural health clinic, and any 
        other category of facility or clinician determined appropriate 
        by the Secretary.
            ``(2) Health information.--The term `health information' 
        has the meaning given such term in section 1171(4) of the 
        Social Security Act.
            ``(3) Health insurance plan.--The term `health insurance 
        plan' means--
                    ``(A) a health insurance issuer (as defined in 
                section 2791(b)(2));
                    ``(B) a group health plan (as defined in section 
                2791(a)(1)); and
                    ``(C) a health maintenance organization (as defined 
                in section 2791(b)(3)).
            ``(4) Laboratory.--The term `laboratory' has the meaning 
        given that term in section 353.
            ``(5) Pharmacist.--The term `pharmacist' has the meaning 
        given that term in section 804 of the Federal Food, Drug, and 
        Cosmetic Act.
            ``(6) State.--The term `State' means each of the several 
        States, the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, American Samoa, and the Northern Mariana 
        Islands.

``SEC. 2902. OFFICE OF THE NATIONAL COORDINATOR OF HEALTH INFORMATION 
              TECHNOLOGY.

    ``(a) Office of National Health Information Technology.--There is 
established within the Office of the Secretary an Office of the 
National Coordinator of Health Information Technology (referred to in 
this section as the `Office'). The Office shall be headed by a National 
Coordinator who shall be appointed by the Secretary, in consultation 
with the President, and shall report directly to the Secretary.
    ``(b) Purpose.--It shall be the purpose of the Office to coordinate 
with relevant Federal agencies and oversee programs and activities to 
develop a nationwide interoperable health information technology 
infrastructure that--
            ``(1) ensures that patients' individually identifiable 
        health information is secure and protected;
            ``(2) improves health care quality, reduces medical errors, 
        and advances the delivery of patient-centered medical care;
            ``(3) reduces health care costs resulting from 
        inefficiency, medical errors, inappropriate care, and 
        incomplete information;
            ``(4) ensures that appropriate information to help guide 
        medical decisions is available at the time and place of care;
            ``(5) promotes a more effective marketplace, greater 
        competition, and increased choice through the wider 
        availability of accurate information on health care costs, 
        quality, and outcomes; and
            ``(6) improves the coordination of care and information 
        among hospitals, laboratories, physician offices, and other 
        entities through an effective infrastructure for the secure and 
        authorized exchange of health care information.
            ``(c) Duties of the National Coordinator.--The National 
        Coordinator shall--
            ``(1) provide support to the public-private American Health 
        Information Collaborative established under section 2903;
            ``(2) serve as the principal advisor to the Secretary 
        concerning the development, application, and use of health 
        information technology, and coordinate and oversee the health 
        information technology programs of the Department;
            ``(3) facilitate the adoption of a nationwide, 
        interoperable system for the electronic exchange of health 
        information;
            ``(4) ensure the adoption and implementation of standards 
        for the electronic exchange of health information to reduce 
        cost and improve health care quality;
            ``(5) ensure that health information technology policy and 
        programs of the Department are coordinated with those of 
        relevant executive branch agencies (including Federal 
        commissions) with a goal of avoiding duplication of efforts and 
        of helping to ensure that each agency undertakes health 
        information technology activities primarily within the areas of 
        its greatest expertise and technical capability;
            ``(6) to the extent permitted by law, coordinate outreach 
        and consultation by the relevant executive branch agencies 
        (including Federal commissions) with public and private parties 
        of interest, including consumers, payers, employers, hospitals 
        and other health care providers, physicians, community health 
        centers, laboratories, vendors and other stakeholders;
            ``(7) advise the President regarding specific Federal 
        health information technology programs; and
            ``(8) submit the reports described under section 2903(i) 
        (excluding paragraph (4) of such section).
    ``(d) Rule of Construction.--Nothing in this section shall be 
construed to require the duplication of Federal efforts with respect to 
the establishment of the Office, regardless of whether such efforts 
were carried out prior to or after the enactment of this title.

``SEC. 2903. AMERICAN HEALTH INFORMATION COLLABORATIVE.

    ``(a) Purpose.--The Secretary shall establish the public-private 
American Health Information Collaborative (referred to in this section 
as the `Collaborative') to--
            ``(1) advise the Secretary and recommend specific actions 
        to achieve a nationwide interoperable health information 
        technology infrastructure;
            ``(2) serve as a forum for the participation of a broad 
        range of stakeholders to provide input on achieving the 
        interoperability of health information technology; and
            ``(3) recommend standards (including content, 
        communication, and security standards) for the electronic 
        exchange of health information for adoption by the Federal 
        Government and voluntary adoption by private entities.
    ``(b) Composition.--
            ``(1) In general.--The Collaborative shall be composed of--
                    ``(A) the Secretary, who shall serve as the 
                chairperson of the Collaborative;
                    ``(B) the Secretary of Defense, or his or her 
                designee;
                    ``(C) the Secretary of Veterans Affairs, or his or 
                her designee;
                    ``(D) the Secretary of Commerce, or his or her 
                designee;
                    ``(E) representatives of other relevant Federal 
                agencies, as determined appropriate by the Secretary; 
                and
                    ``(F) representatives from among the following 
                categories to be appointed by the Secretary from 
                nominations submitted by the public--
                    ``(i) consumer and patient organizations;
                    ``(ii) experts in health information privacy and 
                security;
                    ``(iii) health care providers;
                    ``(iv) health insurance plans or other third party 
                payors;
                    ``(v) standards development organizations;
                    ``(vi) information technology vendors;
                    ``(vii) purchasers or employers; and
                    ``(viii) State or local government agencies or 
                Indian tribe or tribal organizations.
                    ``(2) Considerations.--In appointing members under 
                paragraph (1)(F), the Secretary shall select 
                individuals with expertise in--
                    ``(A) health information privacy;
                    ``(B) health information security;
                    ``(C) health care quality and patient safety, 
                including those individuals with experience in 
                utilizing health information technology to improve 
                health care quality and patient safety;
                    ``(D) data exchange; and
                    ``(E) developing health information technology 
                standards and new health information technology.
            ``(3) Terms.--Members appointed under paragraph (1)(G) 
        shall serve for 2 year terms, except that any member appointed 
        to fill a vacancy for an unexpired term shall be appointed for 
        the remainder of such term. A member may serve for not to 
        exceed 180 days after the expiration of such member's term or 
        until a successor has been appointed.
    ``(c) Recommendations and Policies.--The Collaborative shall make 
recommendations to identify uniform national policies for adoption by 
the Federal Government and voluntary adoption by private entities to 
support the widespread adoption of health information technology, 
including--
            ``(1) protection of individually identifiable health 
        information through privacy and security practices;
            ``(2) measures to prevent unauthorized access to health 
        information;
            ``(3) methods to facilitate secure patient access to health 
        information;
            ``(4) the ongoing harmonization of industry-wide health 
        information technology standards;
            ``(5) recommendations for a nationwide interoperable health 
        information technology infrastructure;
            ``(6) the identification and prioritization of specific use 
        cases for which health information technology is valuable, 
        beneficial, and feasible;
            ``(7) recommendations for the establishment of an entity to 
        ensure the continuation of the functions of the Collaborative; 
        and
            ``(8) other policies determined to be necessary by the 
        Collaborative.
    ``(d) Standards.--
            ``(1) Existing standards.--The standards adopted by the 
        Consolidated Health Informatics Initiative shall be deemed to 
        have been recommended by the Collaborative under this section.
            ``(2) First year review.--Not later than 1 year after the 
        date of enactment of this title, the Collaborative shall--
                    ``(A) review existing standards (including content, 
                communication, and security standards) for the 
                electronic exchange of health information, including 
                such standards adopted by the Secretary under paragraph 
                (2)(A);
                    ``(B) identify deficiencies and omissions in such 
                existing standards; and
                    ``(C) identify duplication and overlap in such 
                existing standards;
        and recommend modifications to such standards as necessary.
            ``(3) Ongoing review.--Beginning 1 year after the date of 
        enactment of this title, and annually thereafter, the 
        Collaborative shall--
                    ``(A) review existing standards (including content, 
                communication, and security standards) for the 
                electronic exchange of health information, including 
                such standards adopted by the Secretary under paragraph 
                (2)(A);
                    ``(B) identify deficiencies and omissions in such 
                existing standards; and
                    ``(C) identify duplication and overlap in such 
                existing standards;
        and recommend modifications to such standards as necessary.
            ``(4) Limitation.--The standards described in this section 
        shall be consistent with any standards developed pursuant to 
        the Health Insurance Portability and Accountability Act of 
        1996.
    ``(e) Federal Action.--Not later than 60 days after the issuance of 
a recommendation from the Collaborative under subsection (d)(2), the 
Secretary of Health and Human Services, in consultation with the 
Secretary of Veterans Affairs, the Secretary of Defense, and 
representatives of other relevant Federal agencies, as determined 
appropriate by the Secretary, shall review such recommendations. The 
Secretary shall provide for the adoption by the Federal Government of 
any standard or standards contained in such recommendation.
    ``(f) Coordination of Federal Spending.--Not later than 1 year 
after the adoption by the Federal Government of a recommendation as 
provided for in subsection (e), and in compliance with chapter 113 of 
title 40, United States Code, no Federal agency shall expend Federal 
funds for the purchase of any form of health information technology or 
health information technology system for clinical care or for the 
electronic retrieval, storage, or exchange of health information that 
is not consistent with applicable standards adopted by the Federal 
Government under subsection (e).
    ``(g) Coordination of Federal Data Collection.--Not later than 3 
years after the adoption by the Federal Government of a recommendation 
as provided for in subsection (e), all Federal agencies collecting 
health data for the purposes of surveillance, epidemiology, adverse 
event reporting, research, or for other purposes determined appropriate 
by the Secretary shall comply with standards adopted under subsection 
(e).
    ``(h) Voluntary Adoption.--
            ``(1) In general.--Any standards adopted by the Federal 
        Government under subsection (e) shall be voluntary with respect 
        to private entities.
            ``(2) Rule of construction.--Nothing in this section shall 
        be construed to require that a private entity that enters into 
        a contract with the Federal Government adopt the standards 
        adopted by the Federal Government under section 2903 with 
        respect to activities not related to the contract.
            ``(3) Limitation.--Private entities that enter into a 
        contract with the Federal Government shall adopt the standards 
        adopted under section 2903 for the purpose of activities under 
        such Federal contract.
    ``(i) Effect on Other Provisions.--Nothing in this title shall be 
construed to effect the scope or substance of--
            ``(1) section 264 of the Health Insurance Portability and 
        Accountability Act of 1996;
            ``(2) sections 1171 through 1179 of the Social Security 
        Act; and
            ``(3) any regulation issued pursuant to any such section;
and such sections shall remain in effect and shall apply to the 
implementation of standards, programs and activities under this title.
    ``(j) Reports.--The Secretary shall submit to the Committee on 
Health, Education, Labor, and Pensions and the Committee on Finance of 
the Senate and the Committee on Energy and Commerce and the Committee 
on Ways and Means of the House of Representatives, on an annual basis, 
a report that--
            ``(1) describes the specific actions that have been taken 
        by the Federal Government and private entities to facilitate 
        the adoption of an interoperable nationwide system for the 
        electronic exchange of health information;
            ``(2) describes barriers to the adoption of such a 
        nationwide system;
            ``(3) contains recommendations to achieve full 
        implementation of such a nationwide system; and
            ``(4) contains a plan and progress toward the establishment 
        of an entity to ensure the continuation of the functions of the 
        Collaborative.
    ``(k) Application of FACA.--The Federal Advisory Committee Act (5 
U.S.C. App.) shall apply to the Collaborative, except that the term 
provided for under section 14(a)(2) shall be 5 years.
    ``(l) Rule of Construction.--Nothing in this section shall be 
construed to require the duplication of Federal efforts with respect to 
the establishment of the Collaborative, regardless of whether such 
efforts were carried out prior to or after the enactment of this title.

``SEC. 2904. IMPLEMENTATION AND CERTIFICATION OF HEALTH INFORMATION 
              STANDARDS.

    ``(a) Implementation.--
            ``(1) In general.--The Secretary, based upon the 
        recommendations of the Collaborative, shall develop criteria to 
        ensure uniform and consistent implementation of any standards 
        for the electronic exchange of health information voluntarily 
        adopted by private entities in technical conformance with such 
        standards adopted under this title.
            ``(2) Implementation assistance.--The Secretary may 
        recognize a private entity or entities to assist private 
        entities in the implementation of the standards adopted under 
        this title using the criteria developed by the Secretary under 
        this section.
    ``(b) Certification.--
            ``(1) In general.--The Secretary, based upon the 
        recommendations of the Collaborative, shall develop criteria to 
        ensure and certify that hardware, software, and support 
        services that claim to be in compliance with any standard for 
        the electronic exchange of health information adopted under 
        this title have established and maintained such compliance in 
        technical conformance with such standards.
            ``(2) Certification assistance.--The Secretary may 
        recognize a private entity or entities to assist in the 
        certification described under paragraph (1) using the criteria 
        developed by the Secretary under this section.
    ``(c) Delegation Authority.--The Secretary, through consultation 
with the Collaborative, may delegate the development of the criteria 
under subsections (a) and (b) to a private entity.

``SEC. 2905. STUDY OF STATE HEALTH INFORMATION LAWS AND PRACTICES.

    ``(a) In General.--The Secretary shall carry out, or contract with 
a private entity to carry out, a study that examines--
            ``(1) the variation among State laws and practices that 
        relate to the privacy, confidentiality, and security of health 
        information;
            ``(2) how such variation among State laws and practices may 
        impact the electronic exchange of health information--
                    ``(A) among the States;
                    ``(B) between the States and the Federal 
                Government; and
                    ``(C) among private entities; and
            ``(3) how such laws and practices may be harmonized to 
        permit the secure electronic exchange of health information.
    ``(b) Report and Recommendations.--Not later than 1 year after the 
date of enactment of this title, the Secretary shall submit to Congress 
a report that--
            ``(1) describes the results of the study carried out under 
        subsection (a); and
            ``(2) makes recommendations based on the results of such 
        study.

``SEC. 2906. SECURE EXCHANGE OF HEALTH INFORMATION; INCENTIVE GRANTS.

    ``(a) In General.--The Secretary may make grants to States to carry 
out programs under which such States cooperate with other States to 
develop and implement State policies that will facilitate the secure 
electronic exchange of health information utilizing the standards 
adopted under section 2903--
            ``(1) among the States;
            ``(2) between the States and the Federal Government; and
            ``(3) among private entities.
    ``(b) Priority.--In awarding grants under subsection (a), the 
Secretary shall give priority to States that provide assurance that any 
funding awarded under such a grant shall be used to harmonize privacy 
laws and practices between the States, the States and the Federal 
Government, and among private entities related to the privacy, 
confidentiality, and security of health information.
    ``(c) Dissemination of Information.--The Secretary shall 
disseminate information regarding the efficacy of efforts of a 
recipient of a grant under this section.
    ``(d) Technical Assistance.--The Secretary may provide technical 
assistance to recipients of a grant under this section.
    ``(e) Authorization of Appropriations.--For the purpose of carrying 
out subsection (a), there are authorized to be appropriated such sums 
as may be necessary for each of the fiscal years 2006 through 2010.

``SEC. 2907. LICENSURE AND THE ELECTRONIC EXCHANGE OF HEALTH 
              INFORMATION.

    ``(a) In General.--The Secretary shall carry out, or contract with 
a private entity to carry out, a study that examines--
            ``(1) the variation among State laws that relate to the 
        licensure, registration, and certification of medical 
        professionals; and
            ``(2) how such variation among State laws impacts the 
        secure electronic exchange of health information--
                    ``(A) among the States; and
                    ``(B) between the States and the Federal 
                Government.
    ``(b) Report and Recommendations.--Not later than 1 year after the 
date of enactment of this title, the Secretary shall publish a report 
that--
            ``(1) describes the results of the study carried out under 
        subsection (a); and
            ``(2) makes recommendations to States regarding the 
        harmonization of State laws based on the results of such study.

``SEC. 2908. AUTHORIZATION OF APPROPRIATIONS.

    ``(a) In General.--For the purpose of carrying out this title, 
there is authorized to be appropriated $125,000,000 for fiscal year 
2006, and such sums as may be necessary for each of fiscal years 2007 
through 2010.
    ``(b) Availability.--Amounts appropriated under subsection (a) 
shall remain available through fiscal year 2010.''.

SEC. 122. HIPAA REPORT.

    (a) Study.--Not later than 2 years after the date of enactment of 
this Act, the Secretary of Health and Human Services shall carry out, 
or contract with a private entity to carry out, a study that examines 
the integration of the standards adopted under the amendments made by 
this subtitle with the standards adopted under the Health Insurance 
Portability and Accountability Act of 1996 (Public Law 104-191).
    (b) Plan; Report.--
            (1) Plan.--Not later than 3 years after the date of 
        enactment of this Act, the Secretary of Health and Human 
        Services shall, based on the results of the study carried out 
        under subsection (a), develop a plan for the integration of the 
        standards described under such subsection and submit a report 
        to Congress describing such plan.
            (2) Periodic reports.--The Secretary shall submit periodic 
        reports to Congress that describe the progress of the 
        integration described under paragraph (1).

SEC. 123. STUDY OF REIMBURSEMENT INCENTIVES.

    The Secretary of Health and Human Services shall carry out, or 
contract with a private entity to carry out, a study that examines 
methods to create efficient reimbursement incentives for improving 
health care quality in Federally qualified health centers, rural health 
clinics, and free clinics.

SEC. 124. REAUTHORIZATION OF INCENTIVE GRANTS REGARDING TELEMEDICINE.

    Section 330L(b) of the Public Health Service Act (42 U.S.C. 254c-
18(b)) is amended by striking ``2002 through 2006'' and inserting 
``2006 through 2010''.

SEC. 125. SENSE OF THE SENATE ON PHYSICIAN PAYMENT.

    It is the sense of the Senate that modifications to the medicare 
fee schedule for physicians' services under section 1848 of the Social 
Security Act (42 U.S.C. 1394w-4) should include provisions based on the 
reporting of quality measures pursuant to those adopted in section 2909 
of the Public Health Service Act (as added by section 121) and the 
overall improvement of healthcare quality through the use of the 
electronic exchange of health information pursuant to the standards 
adopted under section 2903 of such Act (as added by section 121).

SEC. 126. ESTABLISHMENT OF QUALITY MEASUREMENT SYSTEMS FOR MEDICARE 
              VALUE-BASED PURCHASING PROGRAMS.

    (a) In General.--Title XVIII (42 U.S.C. 1395 et seq.) is amended--
            (1) by redesignating part E as part F; and
            (2) by inserting after part D the following new part:

                    ``Part E--Value-Based Purchasing

   ``quality measurement systems for value-based purchasing programs

    ``Sec. 1860E-1. (a) Establishment.--
            ``(1) In general.--The Secretary shall develop quality 
        measurement systems for purposes of providing value-based 
        payments to--
                    ``(A) hospitals pursuant to section 1860E-2;
                    ``(B) physicians and practitioners pursuant to 
                section 1860E-3;
                    ``(C) plans pursuant to section 1860E-4;
                    ``(D) end stage renal disease providers and 
                facilities pursuant to section 1860E-5; and
                    ``(E) home health agencies pursuant to section 
                1860E-6.
            ``(2) Quality.--The systems developed under paragraph (1) 
        shall measure the quality of the care furnished by the provider 
        involved.
            ``(3) High quality health care defined.--In this part, the 
        term `high quality health care' means health care that is safe, 
        effective, patient-centered, timely, equitable, efficient, 
        necessary, and appropriate.
    ``(b) Requirements for Systems.--Under each quality measurement 
system described in subsection (a)(1), the Secretary shall do the 
following:
            ``(1) Measures.--
                    ``(A) In general.--Subject to subparagraph (B), the 
                Secretary shall select measures of quality to be used 
                by the Secretary under each system.
                    ``(B) Requirements.--In selecting the measures to 
                be used under each system pursuant to subparagraph (A), 
                the Secretary shall, to the extent feasible, ensure 
                that--
                            ``(i) such measures are evidence-based, 
                        reliable and valid, and feasible to collect and 
                        report;
                            ``(ii) measures of process, structure, 
                        outcomes, beneficiary experience, efficiency, 
                        and equity are included;
                            ``(iii) measures of overuse and underuse of 
                        health care items and services are included;
                            ``(iv)(I) at least 1 measure of health 
                        information technology infrastructure that 
                        enables the provision of high quality health 
                        care and facilitates the exchange of health 
                        information, such as the use of one or more 
                        elements of a qualified health information 
                        system (as defined in subparagraph (E)), is 
                        included during the first year each system is 
                        implemented; and
                            ``(II) additional measures of health 
                        information technology infrastructure are 
                        included in subsequent years;
                            ``(v) in the case of the system that is 
                        used to provide value-based payments to 
                        hospitals under section 1860E-2, by not later 
                        than January 1, 2008, at least 5 measures that 
                        take into account the unique characteristics of 
                        small hospitals located in rural areas and 
                        frontier areas are included; and
                            ``(vi) measures that assess the quality of 
                        care furnished to frail individuals over the 
                        age of 75 and to individuals with multiple 
                        complex chronic conditions are included.
                    ``(C) Requirement for collection of data on a 
                measure for 1 year prior to use under the systems.--
                Data on any measure selected by the Secretary under 
                subparagraph (A) must be collected by the Secretary for 
                at least a 12-month period before such measure may be 
                used to determine whether a provider receives a value-
                based payment under a program described in subsection 
                (a)(1).
                    ``(D) Authority to vary measures.--
                            ``(i) Under system applicable to 
                        hospitals.--In the case of the system 
                        applicable to hospitals under section 1860E-2, 
                        the Secretary may vary the measures selected 
                        under subparagraph (A) by hospital depending on 
                        the size of, and the scope of services provided 
                        by, the hospital.
                            ``(ii) Under system applicable to 
                        physicians and practitioners.--In the case of 
                        the system applicable to physicians and 
                        practitioners under section 1860E-3, the 
                        Secretary may vary the measures selected under 
                        subparagraph (A) by physician or practitioner 
                        depending on the specialty of the physician, 
                        the type of practitioner, or the volume of 
                        services furnished to beneficiaries by the 
                        physician or practitioner.
                            ``(iii) Under system applicable to esrd 
                        providers and facilities.--In the case of the 
                        system applicable to providers of services and 
                        renal dialysis facilities under section 1860E-
                        5, the Secretary may vary the measures selected 
                        under subparagraph (A) by provider or facility 
                        depending on the type of, the size of, and the 
                        scope of services provided by, the provider or 
                        facility.
                            ``(iv) Under system applicable to home 
                        health agencies.--In the case of the system 
                        applicable to home health agencies under 
                        section 1860E-6, the Secretary may vary the 
                        measures selected under subparagraph (A) by 
                        agency depending on the size of, and the scope 
                        of services provided by, the agency.
                    ``(E) Qualified health information system 
                defined.--For purposes of subparagraph (B)(iv)(I), the 
                term `qualified health information system' means a 
                computerized system (including hardware, software, and 
                training) that--
                            ``(i) protects the privacy and security of 
                        health information and properly encrypts such 
                        health information;
                            ``(ii) maintains and provides access to 
                        patients' health records in an electronic 
                        format;
                            ``(iii) incorporates decision support 
                        software to reduce medical errors and enhance 
                        health care quality;
                            ``(iv) is consistent with data standards 
                        and certification processes recommended by the 
                        Secretary;
                            ``(v) allows for the reporting of quality 
                        measures; and
                            ``(vi) includes other features determined 
                        appropriate by the Secretary.
            ``(2) Weights of measures.--
                    ``(A) In general.--The Secretary shall assign 
                weights to the measures used by the Secretary under 
                each system.
                    ``(B) Consideration.--If the Secretary determines 
                appropriate, in assigning the weights under 
                subparagraph (A)--
                            ``(i) measures of clinical effectiveness 
                        shall be weighted more heavily than measures of 
                        beneficiary experience; and
                            ``(ii) measures of risk adjusted outcomes 
                        shall be weighted more heavily than measures of 
                        process; and
            ``(3) Risk adjustment.--The Secretary shall establish 
        procedures, as appropriate, to control for differences in 
        beneficiary health status and beneficiary characteristics. To 
        the extent feasible, such procedures may be based on existing 
        models for controlling for such differences.
            ``(4) Maintenance.--
                    ``(A) In general.--The Secretary shall, as 
                determined appropriate, but not more often than once 
                each 12-month period, update each system, including 
                through--
                            ``(i) the addition of more accurate and 
                        precise measures under the systems and the 
                        retirement of existing outdated measures under 
                        the system;
                            ``(ii) the refinement of the weights 
                        assigned to measures under the system; and
                            ``(iii) the refinement of the risk 
                        adjustment procedures established pursuant to 
                        paragraph (3) under the system.
                    ``(B) Update shall allow for comparison of data.--
                Each update under subparagraph (A) of a quality 
                measurement system shall allow for the comparison of 
                data from one year to the next for purposes of 
                providing value-based payments under the programs 
                described in subsection (a)(1).
            ``(5) Use of most recent quality data.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the Secretary shall use the most 
                recent quality data with respect to the provider 
                involved that is available to the Secretary.
                    ``(B) Insufficient data due to low volume.--If the 
                Secretary determines that there is insufficient data 
                with respect to a measure or measures because of a low 
                number of services provided, the Secretary may 
                aggregate data across more than 1 fiscal or calendar 
                year, as the case may be.
    ``(c) Requirements for Developing and Updating the Systems.--In 
developing and updating each quality measurement system under this 
section, the Secretary shall--
            ``(1) take into account the quality measures developed by 
        nationally recognized quality measurement organizations, 
        researchers, health care provider organizations, and other 
        appropriate groups;
            ``(2) consult with, and take into account the 
        recommendations of, the entity that the Secretary has an 
        arrangement with under subsection (e);
            ``(3) consult with provider-based groups and clinical 
        specialty societies;
            ``(4) take into account existing quality measurement 
        systems that have been developed through a rigorous process of 
        validation and with the involvement of entities and persons 
        described in subsection (e)(2)(B); and
            ``(5) take into account--
                    ``(A) each of the reports by the Medicare Payment 
                Advisory Commission that are required under the 
                Medicare Value Purchasing Act of 2005;
                    ``(B) the results of--
                            ``(i) the demonstrations required under 
                        such Act;
                            ``(ii) the demonstration program under 
                        section 1866A;
                            ``(iii) the demonstration program under 
                        section 1866C; and
                            ``(iv) any other demonstration or pilot 
                        program conducted by the Secretary relating to 
                        measuring and rewarding quality and efficiency 
                        of care; and
                    ``(C) the report by the Institute of Medicine of 
                the National Academy of Sciences under section 238(b) 
                of the Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173).
    ``(d) Requirements for Implementing the Systems.--In implementing 
each quality measurement system under this section, the Secretary shall 
consult with entities--
            ``(1) that have joined together to develop strategies for 
        quality measurement and reporting, including the feasibility of 
        collecting and reporting meaningful data on quality measures; 
        and
            ``(2) that involve representatives of health care 
        providers, health plans, consumers, employers, purchasers, 
        quality experts, government agencies, and other individuals and 
        groups that are interested in quality of care.
    ``(e) Arrangement With an Entity To Provide Advice and 
Recommendations.--
            ``(1) Arrangement.--On and after July 1, 2006, the 
        Secretary shall have in place an arrangement with an entity 
        that meets the requirements described in paragraph (2) under 
        which such entity provides the Secretary with advice on, and 
        recommendations with respect to, the development and updating 
        of the quality measurement systems under this section, 
        including the assigning of weights to the measures under 
        subsection (b)(2).
            ``(2) Requirements described.--The requirements described 
        in this paragraph are the following:
                    ``(A) The entity is a private nonprofit entity 
                governed by an executive director and a board.
                    ``(B) The members of the entity include 
                representatives of--
                            ``(i)(I) health plans and providers 
                        receiving reimbursement under this title for 
                        the provision of items and services, including 
                        health plans and providers with experience in 
                        the care of the frail elderly and individuals 
                        with multiple complex chronic conditions; or
                            ``(II) groups representing such health 
                        plans and providers;
                            ``(ii) groups representing individuals 
                        receiving benefits under this title;
                            ``(iii) purchasers and employers or groups 
                        representing purchasers or employers;
                            ``(iv) organizations that focus on quality 
                        improvement as well as the measurement and 
                        reporting of quality measures;
                            ``(v) State government health programs;
                            ``(vi) persons skilled in the conduct and 
                        interpretation of biomedical, health services, 
                        and health economics research and with 
                        expertise in outcomes and effectiveness 
                        research and technology assessment; and
                            ``(vii) persons or entities involved in the 
                        development and establishment of standards and 
                        certification for health information technology 
                        systems and clinical data.
                    ``(C) The membership of the entity is 
                representative of individuals with experience with--
                            ``(i) urban health care issues;
                            ``(ii) safety net health care issues; and
                            ``(iii) rural and frontier health care 
                        issues.
                    ``(D) The entity does not charge a fee for 
                membership for participation in the work of the entity 
                related to the arrangement with the Secretary under 
                paragraph (1). If the entity does require a fee for 
                membership for participation in other functions of the 
                entity, there shall be no linkage between such fee and 
                participation in the work of the entity related to such 
                arrangement with the Secretary.
                    ``(E) The entity--
                            ``(i) permits any member described in 
                        subparagraph (B) to vote on matters of the 
                        entity related to the arrangement with the 
                        Secretary under paragraph (1); and
                            ``(ii) ensures that such members have an 
                        equal vote on such matters .
                    ``(F) With respect to matters related to the 
                arrangement with the Secretary under paragraph (1), the 
                entity conducts its business in an open and transparent 
                manner and provides the opportunity for public comment.
                    ``(G) The entity operates as a voluntary consensus 
                standards setting organization as defined for purposes 
                of section 12(d) of the National Technology Transfer 
                and Advancement Act of 1995 (Public Law 104-113) and 
                Office of Management and Budget Revised Circular A-119 
                (published in the Federal Register on February 10, 
                1998).''.
    (b) Conforming References to Previous Part E.--Any reference in law 
(in effect before the date of the enactment of this Act) to part E of 
title XVIII of the Social Security Act is deemed a reference to part F 
of such title (as in effect after such date).

SEC. 127. EXCEPTION TO FEDERAL ANTI-KICKBACK AND PHYSICIAN SELF 
              REFERRAL LAWS FOR THE PROVISION OF PERMITTED SUPPORT.

    (a) Anti-Kickback.--Section 1128B(b) (42 U.S.C. 1320a-7b(b)(3)) is 
amended--
            (1) in paragraph (3)--
                    (A) in subparagraph (G), by striking ``and'' at the 
                end;
                    (B) in subparagraph (H), as added by section 237(d) 
                of the Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173; 117 
                Stat. 2213)--
                            (i) by moving such subparagraph 2 ems to 
                        the left; and
                            (ii) by striking the period at the end and 
                        inserting a semicolon;
                    (C) by redesignating subparagraph (H), as added by 
                section 431(a) of the Medicare Prescription Drug, 
                Improvement, and Modernization Act of 2003 (Public Law 
                108-173; 117 Stat. 2287), as subparagraph (I);
                    (D) in subparagraph (I), as so redesignated--
                            (i) by moving such subparagraph 2 ems to 
                        the left; and
                            (ii) by striking the period at the end and 
                        inserting ``; and''; and
                    (E) by adding at the end the following new:
                    ``(J) during the 5-year period beginning on the 
                date the Secretary issues the interim final rule under 
                section 801(c)(1) of the Medicare Value Purchasing Act 
                of 2005, the provision, with or without charge, of any 
                permitted support (as defined in paragraph (4)).''; and
            (2) by adding at the end the following new paragraph:
            ``(4) Permitted support.--
                    ``(A) Definition of permitted support.--Subject to 
                subparagraph (B), in this section, the term `permitted 
                support' means the provision of any equipment, item, 
                information, right, license, intellectual property, 
                software, training, or service used for developing, 
                implementing, operating, or facilitating the use of 
                systems designed to improve the quality of health care 
                and to promote the electronic exchange of health 
                information.
                    ``(B) Exception.--The term `permitted support' 
                shall not include the provision of--
                            ``(i) any support that is determined in a 
                        manner that is related to the volume or value 
                        of any referrals or other business generated 
                        between the parties for which payment may be 
                        made in whole or in part under a Federal health 
                        care program;
                            ``(ii) any support that has more than 
                        incidental utility or value to the recipient 
                        beyond the exchange of health care information; 
                        or
                            ``(iii) any health information technology 
                        system, product, or service that is not capable 
                        of exchanging health care information in 
                        compliance with data standards consistent with 
                        interoperability.
                    ``(C) Determination.--In establishing regulations 
                with respect to the requirement under subparagraph 
                (B)(iii), the Secretary shall take in account--
                            ``(I) whether the health information 
                        technology system, product, or service is 
                        widely accepted within the industry and whether 
                        there is sufficient industry experience to 
                        ensure successful implementation of the system, 
                        product, or service; and
                            ``(II) whether the health information 
                        technology system, product, or service improves 
                        quality of care, enhances patient safety, or 
                        provides greater administrative 
                        efficiencies.''.
    (b) Physician Self-Referral.--Section 1877(e) (42 U.S.C. 1395nn(e)) 
is amended by adding at the end the following new paragraph:
            ``(9) Permitted support.--During the 5-year period 
        beginning on the date the Secretary issues the interim final 
        rule under section 801(c)(1) of the Medicare Value Purchasing 
        Act of 2005, the provision, with or without charge, of any 
        permitted support (as defined in section 1128B(b)(4)).''.
    (c) Regulations.--In order to carry out the amendments made by this 
section--
            (1) the Secretary shall issue an interim final rule with 
        comment period by not later than the date that is 180 days 
        after the date of enactment of this Act;
            (2) the Secretary shall issue a final rule by not later 
        than the date that is 180 days after the date that the interim 
        final rule under paragraph (1) is issued.

                   CHAPTER 2--VALUE BASED PURCHASING

SEC. 131. VALUE BASED PURCHASING PROGRAMS; SENSE OF THE SENATE.

    (a) Medicare Value Based Purchasing Pilot Program.--
            (1) In general.--The Secretary of Health and Human Services 
        (referred to in this section as the ``Secretary'') shall 
        establish under title XVIII of the Social Security Act (42 
        U.S.C. 1395 et seq.) a value based purchasing pilot program 
        based on the reporting of quality measures pursuant to those 
        adopted in section 1860E-1 of the Social Security Act (as added 
        by section 126). Such pilot program should be based on 
        experience gained through previous demonstration projects 
        conducted by the Secretary, including demonstration projects 
        conducted under sections 1866A and 1866C of the Social Security 
        Act (42 U.S.C. 1395cc-1; 1395cc-3), section 649 of the Medicare 
        Prescription Drug, Improvement, and Modernization Act of 2003 
        (Public Law 108-173; 117 Stat. 2322), and other relevant work 
        conducted by private entities.
            (2) Expansion.--Not later than 2 years after conducting the 
        pilot program under paragraph (1), the Secretary shall 
        transition and implement such program on a national basis.
            (3) Information technology.--Providers reporting quality 
        measurement data electronically under this section shall report 
        such data pursuant to the standards adopted under title XXIX of 
        the Public Health Service Act (as added by section 121).
            (4) Funding.--The Secretary shall ensure that the total 
        amount of expenditures under this Act in a year does not exceed 
        the total amount of expenditures that would have been expended 
        in such year under this Act if this subsection had not been 
        enacted.
    (b) Medicaid Value Based Purchasing Programs.--
            (1) In general.--The Secretary shall authorize waivers 
        under section 1115 of the Social Security Act (42 U.S.C. 1315) 
        for States to establish value based purchasing programs for 
        State medicaid programs established under title XIX of such Act 
        (42 U.S.C. 1396 et seq.). Such programs shall be based on the 
        reporting of quality measures pursuant to those adopted in 
        section 1860E-1 of the Social Security Act (as added by section 
        126).
            (2) Information technology.--Providers reporting quality 
        measurement data electronically under this section shall report 
        such data pursuant to the standards adopted under title XXIX of 
        the Public Health Service Act (as added by section 121).
            (3) Waiver.--In authorizing such waivers, the Secretary 
        shall waive any provisions of title XI or XIX of the Social 
        Security Act that would otherwise prevent a State from 
        establishing a value based purchasing program in accordance 
        with paragraph (1).

           Subtitle C--Patient Safety and Quality Improvement

SEC. 141. SHORT TITLE.

    This subtitle may be cited as the ``Patient Safety and Quality 
Improvement Act of 2005''.

SEC. 142. FINDINGS AND PURPOSES.

    (a) Findings.--Congress makes the following findings:
            (1) In 1999, the Institute of Medicine released a report 
        entitled To Err is Human that described medical errors as the 
        eighth leading cause of death in the United States, with as 
        many as 98,000 people dying as a result of medical errors each 
        year.
            (2) To address these deaths and injuries due to medical 
        errors, the health care system must identify and learn from 
        such errors so that systems of care can be improved.
            (3) In their report, the Institute of Medicine called on 
        Congress to provide legal protections with respect to 
        information reported for the purposes of quality improvement 
        and patient safety.
            (4) The Health, Education, Labor, and Pensions Committee of 
        the Senate held 4 hearings in the 106th Congress and 1 hearing 
        in the 107th Congress on patient safety where experts in the 
        field supported the recommendation of the Institute of Medicine 
        for congressional action.
            (5) Myriad public and private patient safety initiatives 
        have begun. The Quality Interagency Coordination Taskforce has 
        recommended steps to improve patient safety that may be taken 
        by each Federal agency involved in health care and activities 
        relating to these steps are ongoing.
            (6) The research on patient safety unequivocally calls for 
        a learning environment, rather than a punitive environment, in 
        order to improve patient safety.
            (7) Voluntary data gathering systems are more supportive 
        than mandatory systems in creating the learning environment 
        referred to in paragraph (6) as stated in the Institute of 
        Medicine's report.
            (8) Promising patient safety reporting systems have been 
        established throughout the United States and the best ways to 
        structure and use these systems are currently being determined, 
        largely through projects funded by the Agency for Healthcare 
        Research and Quality.
            (9) Many organizations currently collecting patient safety 
        data have expressed a need for legal protections that will 
        allow them to review protected information and collaborate in 
        the development and implementation of patient safety 
        improvement strategies. Currently, the State peer review 
        protections are inadequate to allow the sharing of information 
        to promote patient safety.
    (b) Purposes.--It is the purpose of this subtitle to--
            (1) encourage a culture of safety and quality in the United 
        States health care system by providing for legal protection of 
        information reported voluntarily for the purposes of quality 
        improvement and patient safety; and
            (2) ensure accountability by raising standards and 
        expectations for continuous quality improvements in patient 
        safety.

SEC. 143. AMENDMENTS TO PUBLIC HEALTH SERVICE ACT.

    Title IX of the Public Health Service Act (42 U.S.C. 299 et seq.) 
is amended--
            (1) in section 912(c), by inserting ``, in accordance with 
        part C,'' after ``The Director shall'';
            (2) by redesignating part C as part D;
            (3) by redesignating sections 921 through 928, as sections 
        931 through 938, respectively;
            (4) in 934(d) (as so redesignated), by striking the second 
        sentence and inserting the following: ``Penalties provided for 
        under this section shall be imposed and collected by the 
        Secretary using the administrative and procedural processes 
        used to impose and collect civil money penalties under section 
        1128A of the Social Security Act (other than subsections (a) 
        and (b), the second sentence of subsection (f), and subsections 
        (i), (m), and (n)), unless the Secretary determines that a 
        modification of procedures would be more suitable or reasonable 
        to carry out this subsection and provides for such modification 
        by regulation.'';
            (5) in section 938(1) (as so redesignated), by striking 
        ``921'' and inserting ``931''; and
            (6) by inserting after part B the following:

                  ``PART C--PATIENT SAFETY IMPROVEMENT

``SEC. 921. DEFINITIONS.

    ``In this part:
            ``(1) Non-identifiable information.--
                    ``(A) In general.--The term `non-identifiable 
                information' means, with respect to information, that 
                the information is presented in a form and manner that 
                prevents the identification of a provider, a patient, 
                or a reporter of patient safety data.
                    ``(B) Identifiability of patient.--For purposes of 
                subparagraph (A), the term `presented in a form and 
                manner that prevents the identification of a patient' 
                means, with respect to information that has been 
                subject to rules promulgated pursuant to section 264(c) 
                of the Health Insurance Portability and Accountability 
                Act of 1996 (42 U.S.C. 1320d-2 note), that the 
                information has been de-identified so that it is no 
                longer individually identifiable health information as 
                defined in such rules.
            ``(2) Patient safety data.--
                    ``(A) In general.--The term `patient safety data' 
                means--
                            ``(i) any data, reports, records, 
                        memoranda, analyses (such as root cause 
                        analyses), or written or oral statements that 
                        are--
                                    ``(I) collected or developed by a 
                                provider for reporting to a patient 
                                safety organization, provided that they 
                                are reported to the patient safety 
                                organization within 60 days;
                                    ``(II) requested by a patient 
                                safety organization (including the 
                                contents of such request), if they are 
                                reported to the patient safety 
                                organization within 60 days;
                                    ``(III) reported to a provider by a 
                                patient safety organization; or
                                    ``(IV) collected by a patient 
                                safety organization from another 
                                patient safety organization, or 
                                developed by a patient safety 
                                organization;
                        that could result in improved patient safety, 
                        health care quality, or health care outcomes; 
                        or
                            ``(ii) any deliberative work or process 
                        with respect to any patient safety data 
                        described in clause (i).
                    ``(B) Limitation.--
                            ``(i) Collection.--If the original material 
                        from which any data, reports, records, 
                        memoranda, analyses (such as root case 
                        analyses), or written or oral statements 
                        referred to in subclause (I) or (IV) of 
                        subparagraph (A)(i) are collected and is not 
                        patient safety data, the act of such collection 
                        shall not make such original material patient 
                        safety data for purposes of this part.
                            ``(ii) Separate data.--The term `patient 
                        safety data' shall not include information 
                        (including a patient's medical record, billing 
                        and discharge information or any other patient 
                        or provider record) that is collected or 
                        developed separately from and that exists 
                        separately from patient safety data. Such 
                        separate information or a copy thereof 
                        submitted to a patient safety organization 
                        shall not itself be considered as patient 
                        safety data. Nothing in this part, except for 
                        section 922(f)(1), shall be construed to 
                        limit--
                                    ``(I) the discovery of or 
                                admissibility of information described 
                                in this subparagraph in a criminal, 
                                civil, or administrative proceeding;
                                    ``(II) the reporting of information 
                                described in this subparagraph to a 
                                Federal, State, or local governmental 
                                agency for public health surveillance, 
                                investigation, or other public health 
                                purposes or health oversight purposes; 
                                or
                                    ``(III) a provider's recordkeeping 
                                obligation with respect to information 
                                described in this subparagraph under 
                                Federal, State, or local law.
            ``(3) Patient safety organization.--The term `patient 
        safety organization' means a private or public entity or 
        component thereof that is currently listed by the Secretary 
        pursuant to section 924(c).
            ``(4) Patient safety organization activities.--The term 
        `patient safety organization activities' means the following 
        activities, which are deemed to be necessary for the proper 
        management and administration of a patient safety organization:
                    ``(A) The conduct, as its primary activity, of 
                efforts to improve patient safety and the quality of 
                health care delivery.
                    ``(B) The collection and analysis of patient safety 
                data that are submitted by more than one provider.
                    ``(C) The development and dissemination of 
                information to providers with respect to improving 
                patient safety, such as recommendations, protocols, or 
                information regarding best practices.
                    ``(D) The utilization of patient safety data for 
                the purposes of encouraging a culture of safety and of 
                providing direct feedback and assistance to providers 
                to effectively minimize patient risk.
                    ``(E) The maintenance of procedures to preserve 
                confidentiality with respect to patient safety data.
                    ``(F) The provision of appropriate security 
                measures with respect to patient safety data.
                    ``(G) The utilization of qualified staff.
            ``(5) Person.--The term `person' includes Federal, State, 
        and local government agencies.
            ``(6) Provider.--The term `provider' means--
                    ``(A) a person licensed or otherwise authorized 
                under State law to provide health care services, 
                including--
                            ``(i) a hospital, nursing facility, 
                        comprehensive outpatient rehabilitation 
                        facility, home health agency, hospice program, 
                        renal dialysis facility, ambulatory surgical 
                        center, pharmacy, physician or health care 
                        practitioner's office, long term care facility, 
                        behavior health residential treatment facility, 
                        clinical laboratory, or health center; or
                            ``(ii) a physician, physician assistant, 
                        nurse practitioner, clinical nurse specialist, 
                        certified registered nurse anesthetist, 
                        certified nurse midwife, psychologist, 
                        certified social worker, registered dietitian 
                        or nutrition professional, physical or 
                        occupational therapist, pharmacist, or other 
                        individual health care practitioner; or
                    ``(B) any other person specified in regulations 
                promulgated by the Secretary.

``SEC. 922. PRIVILEGE AND CONFIDENTIALITY PROTECTIONS.

    ``(a) Privilege.--Notwithstanding any other provision of Federal, 
State, or local law, patient safety data shall be privileged and, 
subject to the provisions of subsection (c)(1), shall not be--
            ``(1) subject to a Federal, State, or local civil, 
        criminal, or administrative subpoena;
            ``(2) subject to discovery in connection with a Federal, 
        State, or local civil, criminal, or administrative proceeding;
            ``(3) disclosed pursuant to section 552 of title 5, United 
        States Code (commonly known as the Freedom of Information Act) 
        or any other similar Federal, State, or local law;
            ``(4) admitted as evidence or otherwise disclosed in any 
        Federal, State, or local civil, criminal, or administrative 
        proceeding; or
            ``(5) utilized in a disciplinary proceeding against a 
        provider.
    ``(b) Confidentiality.--Notwithstanding any other provision of 
Federal, State, or local law, and subject to the provisions of 
subsections (c) and (d), patient safety data shall be confidential and 
shall not be disclosed.
    ``(c) Exceptions to Privilege and Confidentiality.--Nothing in this 
section shall be construed to prohibit one or more of the following 
uses or disclosures:
            ``(1) Disclosure by a provider or patient safety 
        organization of relevant patient safety data for use in a 
        criminal proceeding only after a court makes an in camera 
        determination that such patient safety data contains evidence 
        of a wanton and criminal act to directly harm the patient.
            ``(2) Voluntary disclosure of non-identifiable patient 
        safety data by a provider or a patient safety organization.
    ``(d) Protected Disclosure and Use of Information.--Nothing in this 
section shall be construed to prohibit one or more of the following 
uses or disclosures:
            ``(1) Disclosure of patient safety data by a person that is 
        a provider, a patient safety organization, or a contractor of a 
        provider or patient safety organization, to another such 
        person, to carry out patient safety organization activities.
            ``(2) Disclosure of patient safety data by a provider or 
        patient safety organization to grantees or contractors carrying 
        out patient safety research, evaluation, or demonstration 
        projects authorized by the Director.
            ``(3) Disclosure of patient safety data by a provider to an 
        accrediting body that accredits that provider.
            ``(4) Voluntary disclosure of patient safety data by a 
        patient safety organization to the Secretary for public health 
        surveillance if the consent of each provider identified in, or 
        providing, such data is obtained prior to such disclosure. 
        Nothing in the preceding sentence shall be construed to prevent 
        the release of patient safety data that is provided by, or that 
        relates solely to, a provider from which the consent described 
        in such sentence is obtained because one or more other 
        providers do not provide such consent with respect to the 
        disclosure of patient safety date that relates to such 
        nonconsenting providers. Consent for the future release of 
        patient safety data for such purposes may be requested by the 
        patient safety organization at the time the data is submitted.
            ``(5) Voluntary disclosure of patient safety data by a 
        patient safety organization to State of local government 
        agencies for public health surveillance if the consent of each 
        provider identified in, or providing, such data is obtained 
        prior to such disclosure. Nothing in the preceding sentence 
        shall be construed to prevent the release of patient safety 
        data that is provided by, or that relates solely to, a provider 
        from which the consent described in such sentence is obtained 
        because one or more other providers do not provide such consent 
        with respect to the disclosure of patient safety date that 
        relates to such nonconsenting providers. Consent for the future 
        release of patient safety data for such purposes may be 
        requested by the patient safety organization at the time the 
        data is submitted.
    ``(e) Continued Protection of Information after Disclosure.--
            ``(1) In general.--Except as provided in paragraph (2), 
        patient safety data that is used or disclosed shall continue to 
        be privileged and confidential as provided for in subsections 
        (a) and (b), and the provisions of such subsections shall apply 
        to such data in the possession or control of--
                    ``(A) a provider or patient safety organization 
                that possessed such data before the use or disclosure; 
                or
                    ``(B) a person to whom such data was disclosed.
            ``(2) Exception.--Notwithstanding paragraph (1), and 
        subject to paragraph (3)--
                    ``(A) if patient safety data is used or disclosed 
                as provided for in subsection (c)(1), and such use or 
                disclosure is in open court, the confidentiality 
                protections provided for in subsection (b) shall no 
                longer apply to such data; and
                    ``(B) if patient safety data is used or disclosed 
                as provided for in subsection (c)(2), the privilege and 
                confidentiality protections provided for in subsections 
                (a) and (b) shall no longer apply to such data.
            ``(3) Construction.--Paragraph (2) shall not be construed 
        as terminating or limiting the privilege or confidentiality 
        protections provided for in subsection (a) or (b) with respect 
        to data other than the specific data used or disclosed as 
        provided for in subsection (c).
    ``(f) Limitation on Actions.--
            ``(1) Patient safety organizations.--Except to enforce 
        disclosures pursuant to subsection (c)(1), no action may be 
        brought or process served against a patient safety organization 
        to compel disclosure of information collected or developed 
        under this part whether or not such information is patient 
        safety data unless such information is specifically identified, 
        is not patient safety data, and cannot otherwise be obtained.
            ``(2) Providers.--An accrediting body shall not take an 
        accrediting action against a provider based on the good faith 
        participation of the provider in the collection, development, 
        reporting, or maintenance of patient safety data in accordance 
        with this part. An accrediting body may not require a provider 
        to reveal its communications with any patient safety 
        organization established in accordance with this part.
    ``(g) Reporter Protection.--
            ``(1) In general.--A provider may not take an adverse 
        employment action, as described in paragraph (2), against an 
        individual based upon the fact that the individual in good 
        faith reported information--
                    ``(A) to the provider with the intention of having 
                the information reported to a patient safety 
                organization; or
                    ``(B) directly to a patient safety organization.
            ``(2) Adverse employment action.--For purposes of this 
        subsection, an `adverse employment action' includes--
                    ``(A) loss of employment, the failure to promote an 
                individual, or the failure to provide any other 
                employment-related benefit for which the individual 
                would otherwise be eligible; or
                    ``(B) an adverse evaluation or decision made in 
                relation to accreditation, certification, 
                credentialing, or licensing of the individual.
    ``(h) Enforcement.--
            ``(1) Prohibition.--Except as provided in subsections (c) 
        and (d) and as otherwise provided for in this section, it shall 
        be unlawful for any person to negligently or intentionally 
        disclose any patient safety data, and any such person shall, 
        upon adjudication, be assessed in accordance with section 
        934(d).
            ``(2) Relation to hipaa.--The penalty provided for under 
        paragraph (1) shall not apply if the defendant would otherwise 
        be subject to a penalty under the regulations promulgated under 
        section 264(c) of the Health Insurance Portability and 
        Accountability Act of 1996 (42 U.S.C. 1320d-2 note) or under 
        section 1176 of the Social Security Act (42 U.S.C. 1320d-5) for 
        the same disclosure.
            ``(3) Equitable relief.--
                    ``(A) In general.--Without limiting remedies 
                available to other parties, a civil action may be 
                brought by any aggrieved individual to enjoin any act 
                or practice that violates subsection (g) and to obtain 
                other appropriate equitable relief (including 
                reinstatement, back pay, and restoration of benefits) 
                to redress such violation.
                    ``(B) Against state employees.--An entity that is a 
                State or an agency of a State government may not assert 
                the privilege described in subsection (a) unless before 
                the time of the assertion, the entity or, in the case 
                of and with respect to an agency, the State has 
                consented to be subject to an action as described by 
                this paragraph, and that consent has remained in 
                effect.
    ``(i) Rule of Construction.--Nothing in this section shall be 
construed to--
            ``(1) limit other privileges that are available under 
        Federal, State, or local laws that provide greater 
        confidentiality protections or privileges than the privilege 
        and confidentiality protections provided for in this section;
            ``(2) limit, alter, or affect the requirements of Federal, 
        State, or local law pertaining to information that is not 
        privileged or confidential under this section;
            ``(3) alter or affect the implementation of any provision 
        of section 264(c) of the Health Insurance Portability and 
        Accountability Act of 1996 (Public Law 104-191; 110 Stat. 
        2033), section 1176 of the Social Security Act (42 U.S.C. 
        1320d-5), or any regulation promulgated under such sections;
            ``(4) limit the authority of any provider, patient safety 
        organization, or other person to enter into a contract 
        requiring greater confidentiality or delegating authority to 
        make a disclosure or use in accordance with subsection (c) or 
        (d); and
            ``(5) prohibit a provider from reporting a crime to law 
        enforcement authorities, regardless of whether knowledge of the 
        existence of, or the description of, the crime is based on 
        patient safety data, so long as the provider does not disclose 
        patient safety data in making such report.

``SEC. 923. PATIENT SAFETY NETWORK OF DATABASES.

    ``(a) In General.--The Secretary shall maintain a patient safety 
network of databases that provides an interactive evidence-based 
management resource for providers, patient safety organizations, and 
other persons. The network of databases shall have the capacity to 
accept, aggregate, and analyze nonidentifiable patient safety data 
voluntarily reported by patient safety organizations, providers, or 
other persons.
    ``(b) Network of Database Standards.--The Secretary may determine 
common formats for the reporting to the patient safety network of 
databases maintained under subsection (a) of nonidentifiable patient 
safety data, including necessary data elements, common and consistent 
definitions, and a standardized computer interface for the processing 
of such data. To the extent practicable, such standards shall be 
consistent with the administrative simplification provisions of Part C 
of title XI of the Social Security Act.

``SEC. 924. PATIENT SAFETY ORGANIZATION CERTIFICATION AND LISTING.

    ``(a) Certification.--
            ``(1) Initial certification.--Except as provided in 
        paragraph (2), an entity that seeks to be a patient safety 
        organization shall submit an initial certification to the 
        Secretary that the entity intends to perform the patient safety 
        organization activities.
            ``(2) Delayed certification of collection from more than 
        one provider.--An entity that seeks to be a patient safety 
        organization may--
                    ``(A) submit an initial certification that it 
                intends to perform patient safety organization 
                activities other than the activities described in 
                subparagraph (B) of section 921(4); and
                    ``(B) within 2 years of submitting the initial 
                certification under subparagraph (A), submit a 
                supplemental certification that it performs the patient 
                safety organization activities described in 
                subparagraphs (A) through (F) of section 921(4).
            ``(3) Expiration and renewal.--
                    ``(A) Expiration.--An initial certification under 
                paragraph (1) or (2)(A) shall expire on the date that 
                is 3 years after it is submitted.
                    ``(B) Renewal.--
                            ``(i) In general.--An entity that seeks to 
                        remain a patient safety organization after the 
                        expiration of an initial certification under 
                        paragraph (1) or (2)(A) shall, within the 3-
                        year period described in subparagraph (A), 
                        submit a renewal certification to the Secretary 
                        that the entity performs the patient safety 
                        organization activities described in section 
                        921(4).
                            ``(ii) Term of renewal.--A renewal 
                        certification under clause (i) shall expire on 
                        the date that is 3 years after the date on 
                        which it is submitted, and may be renewed in 
                        the same manner as an initial certification.
    ``(b) Acceptance of Certification.--Upon the submission by an 
organization of an initial certification pursuant to subsection (a)(1) 
or (a)(2)(A), a supplemental certification pursuant to subsection 
(a)(2)(B), or a renewal certification pursuant to subsection (a)(3)(B), 
the Secretary shall review such certification and--
            ``(1) if such certification meets the requirements of 
        subsection (a)(1), (a)(2)(A), (a)(2)(B), or (a)(3)(B), as 
        applicable, the Secretary shall notify the organization that 
        such certification is accepted; or
            ``(2) if such certification does not meet such 
        requirements, as applicable, the Secretary shall notify the 
        organization that such certification is not accepted and the 
        reasons therefor.
    ``(c) Listing.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the Secretary shall compile and maintain a current 
        listing of patient safety organizations with respect to which 
        the Secretary has accepted a certification pursuant to 
        subsection (b).
            ``(2) Removal from listing.--The Secretary shall remove 
        from the listing under paragraph (1)--
                    ``(A) an entity with respect to which the Secretary 
                has accepted an initial certification pursuant to 
                subsection (a)(2)(A) and which does not submit a 
                supplemental certification pursuant to subsection 
                (a)(2)(B) that is accepted by the Secretary;
                    ``(B) an entity whose certification expires and 
                which does not submit a renewal application that is 
                accepted by the Secretary; and
                    ``(C) an entity with respect to which the Secretary 
                revokes the Secretary's acceptance of the entity's 
                certification, pursuant to subsection (d).
    ``(d) Revocation of Acceptance.--
            ``(1) In general.--Except as provided in paragraph (2), if 
        the Secretary determines (through a review of patient safety 
        organization activities) that a patient safety organization 
        does not perform one of the patient safety organization 
        activities described in subparagraph (A) through (F) of section 
        921(4), the Secretary may, after notice and an opportunity for 
        a hearing, revoke the Secretary's acceptance of the 
        certification of such organization.
            ``(2) Delayed certification of collection from more than 
        one provider.--A revocation under paragraph (1) may not be 
        based on a determination that the organization does not perform 
        the activity described in section 921(4)(B) if--
                    ``(A) the listing of the organization is based on 
                its submittal of an initial certification under 
                subsection (a)(2)(A);
                    ``(B) the organization has not submitted a 
                supplemental certification under subsection (a)(2)(B); 
                and
                    ``(C) the 2-year period described in subsection 
                (a)(2)(B) has not expired.
    ``(e) Notification of Revocation or Removal from Listing.--
            ``(1) Supplying confirmation of notification to 
        providers.--Within 15 days of a revocation under subsection 
        (d)(1), a patient safety organization shall submit to the 
        Secretary a confirmation that the organization has taken all 
        reasonable actions to notify each provider whose patient safety 
        data is collected or analyzed by the organization of such 
        revocation.
            ``(2) Publication.--Upon the revocation of an acceptance of 
        an organization's certification under subsection (d)(1), or 
        upon the removal of an organization from the listing under 
        subsection (c)(2), the Secretary shall publish notice of the 
        revocation or removal in the Federal Register.
    ``(f) Status of Data After Removal from Listing.--
            ``(1) New data.--With respect to the privilege and 
        confidentiality protections described in section 922, data 
        submitted to an organization within 30 days after the 
        organization is removed from the listing under subsection 
        (c)(2) shall have the same status as data submitted while the 
        organization was still listed.
            ``(2) Protection to continue to apply.--If the privilege 
        and confidentiality protections described in section 922 
        applied to data while an organization was listed, or during the 
        30-day period described in paragraph (1), such protections 
        shall continue to apply to such data after the organization is 
        removed from the listing under subsection (c)(2).
    ``(g) Disposition of Data.--If the Secretary removes an 
organization from the listing as provided for in subsection (c)(2), 
with respect to the patient safety data that the organization received 
from providers, the organization shall--
            ``(1) with the approval of the provider and another patient 
        safety organization, transfer such data to such other 
        organization;
            ``(2) return such data to the person that submitted the 
        data; or
            ``(3) if returning such data to such person is not 
        practicable, destroy such data.

``SEC. 925. TECHNICAL ASSISTANCE.

    ``The Secretary, acting through the Director, may provide technical 
assistance to patient safety organizations, including convening annual 
meetings for patient safety organizations to discuss methodology, 
communication, data collection, or privacy concerns.

``SEC. 926. PROMOTING THE INTEROPERABILITY OF HEALTH CARE INFORMATION 
              TECHNOLOGY SYSTEMS.

    ``(a) Development.--Not later than 36 months after the date of 
enactment of the Patient Safety and Quality Improvement Act of 2005, 
the Secretary shall develop or adopt voluntary standards that promote 
the electronic exchange of health care information.
    ``(b) Updates.--The Secretary shall provide for the ongoing review 
and periodic updating of the standards developed under subsection (a).
    ``(c) Dissemination.--The Secretary shall provide for the 
dissemination of the standards developed and updated under this 
section.

``SEC. 927. AUTHORIZATION OF APPROPRIATIONS.

    ``There is authorized to be appropriated such sums as may be 
necessary to carry out this part.''.

SEC. 144. STUDIES AND REPORTS.

    (a) In General.--The Secretary of Health and Human Services shall 
enter into a contract (based upon a competitive contracting process) 
with an appropriate research organization for the conduct of a study to 
assess the impact of medical technologies and therapies on patient 
safety, patient benefit, health care quality, and the costs of care as 
well as productivity growth. Such study shall examine--
            (1) the extent to which factors, such as the use of labor 
        and technological advances, have contributed to increases in 
        the share of the gross domestic product that is devoted to 
        health care and the impact of medical technologies and 
        therapies on such increases;
            (2) the extent to which early and appropriate introduction 
        and integration of innovative medical technologies and 
        therapies may affect the overall productivity and quality of 
        the health care delivery systems of the United States; and
            (3) the relationship of such medical technologies and 
        therapies to patient safety, patient benefit, health care 
        quality, and cost of care.
    (b) Report.--Not later than 18 months after the date of enactment 
of this Act, the Secretary of Health and Human Services shall prepare 
and submit to the appropriate committees of Congress a report 
containing the results of the study conducted under subsection (a).

                      Subtitle D--Fraud and Abuse

SEC. 151. NATIONAL EXPANSION OF THE MEDICARE-MEDICAID DATA MATCH PILOT 
              PROGRAM.

    (a) Requirement of the Medicare Integrity Program.--Section 1893 of 
the Social Security Act (42 U.S.C. 1395ddd) is amended--
            (1) in subsection (b), by adding at the end the following:
            ``(6) The Medicare-Medicaid data match program in 
        accordance with subsection (g).''; and
            (2) by adding at the end the following:
    ``(g) Medicare-Medicaid Data Match Program.--
            ``(1) Expansion of program.--
                    ``(A) In general.--The Secretary shall enter into 
                contracts with eligible entities for the purpose of 
                ensuring that, beginning with 2006, the Medicare-
                Medicaid data match program (commonly referred to as 
                the `Medi-Medi Program') is conducted with respect to 
                the program established under this title and the 
                applicable number of State Medicaid programs under 
                title XIX for the purpose of--
                            ``(i) identifying vulnerabilities in both 
                        such programs;
                            ``(ii) assisting States, as appropriate, to 
                        take action to protect the Federal share of 
                        expenditures under the Medicaid program; and
                            ``(iii) increasing the effectiveness and 
                        efficiency of both such programs through cost 
                        avoidance, savings, and recoupments of 
                        fraudulent, wasteful, or abusive expenditures.
                    ``(B) Applicable number.--For purposes of 
                subparagraph (A), the term `applicable number' means--
                            ``(i) in the case of fiscal year 2006, 10 
                        State Medicaid programs;
                            ``(ii) in the case of fiscal year 2007, 12 
                        State Medicaid programs; and
                            ``(iii) in the case of fiscal year 2008, 15 
                        State Medicaid programs.
            ``(2) Limited waiver authority.--The Secretary shall waive 
        only such requirements of this section and of titles XI and XIX 
        as are necessary to carry out paragraph (1).''.
    (b) Funding.--Section 1817(k)(4) of the Social Security Act (42 
U.S.C. 1395i(k)(4)) is amended--
            (1) in subparagraph (A), by striking ``subparagraph (B)'' 
        and inserting ``subparagraphs (B) and (C)''; and
            (2) by adding at the end the following:
                    ``(C) Expansion of the medicare-medicaid data match 
                program.--Of the amount appropriated under subparagraph 
                (A) for a fiscal year, the following amounts shall be 
                used to carry out section 1893(b)(6) for that year:
                            ``(i) $10,000,000 of the amount 
                        appropriated for fiscal year 2006.
                            ``(ii) $12,200,000 of the amount 
                        appropriated for fiscal year 2007.
                            ``(iii) $15,800,000 of the amount 
                        appropriated for fiscal year 2008.''.

                  Subtitle E--Miscellaneous Provisions

SEC. 161. SENSE OF THE SENATE ON ESTABLISHING A MANDATED BENEFITS 
              COMMISSION.

    It is the sense of the Senate that--
            (1) there should be established an independent Federal 
        entity to study and provide advice to Congress on existing and 
        proposed federally mandated health insurance benefits offered 
        by employer-sponsored health plans and insurance issuers; and
            (2) advice provided under paragraph (1) should be evidence- 
        and actuarially-based, and take into consideration the 
        population costs and benefits, including the health, financial, 
        and social impact on affected populations, safety and medical 
        efficacy, the impact on costs and access to insurance 
        generally, and to different types of insurance products, the 
        impact on labor costs and jobs, and any other relevant factors.

SEC. 162. ENFORCEMENT OF REIMBURSEMENT PROVISIONS BY FIDUCIARIES.

    Section 502(a)(3) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1132(a)(3)) is amended by inserting before the 
semicolon the following: ``(which may include the recovery of amounts 
on behalf of the plan by a fiduciary enforcing the terms of the plan 
that provide a right of recovery by reimbursement or subrogation with 
respect to benefits provided to a participant or beneficiary)''.

 TITLE II--EXPANDING ACCESS TO AFFORDABLE HEALTH COVERAGE THROUGH TAX 
                    INCENTIVES AND OTHER INITIATIVES

             Subtitle A--Refundable Health Insurance Credit

SEC. 201. REFUNDABLE HEALTH INSURANCE COSTS CREDIT.

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

``SEC. 36. HEALTH INSURANCE COSTS FOR UNINSURED INDIVIDUALS.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to the amount paid by the taxpayer 
during such taxable year for qualified health insurance for the 
taxpayer and the taxpayer's spouse and dependents.
    ``(b) Limitations.--
            ``(1) In general.--Except as provided in paragraphs (2) and 
        (3), the amount allowed as a credit under subsection (a) to the 
        taxpayer for the taxable year shall not exceed the lesser of--
                    ``(A) 90 percent of the sum of the amounts paid by 
                the taxpayer for qualified health insurance for each 
                individual referred to in subsection (a) for coverage 
                months of the individual during the taxable year, or
                    ``(B) $3,000.
            ``(2) Monthly limitation.--
                    ``(A) In general.--For purposes of paragraph (1), 
                amounts paid by the taxpayer for qualified health 
                insurance for an individual for any coverage month of 
                such individual during the taxable year shall not be 
                taken into account to the extent such amounts exceed 
                the amount equal to \1/12\ of--
                            ``(i) $1,111 if such individual is the 
                        taxpayer,
                            ``(ii) $1,111 if--
                                    ``(I) such individual is the spouse 
                                of the taxpayer,
                                    ``(II) the taxpayer and such spouse 
                                are married as of the first day of such 
                                month, and
                                    ``(III) the taxpayer files a joint 
                                return for the taxable year,
                            ``(iii) $1,111 if such individual has 
                        attained the age of 24 as of the close of the 
                        taxable year and is a dependent of the taxpayer 
                        for such taxable year, and
                            ``(iv) one-half of the amount described in 
                        clause (i) if such individual has not attained 
                        the age of 24 as of the close of the taxable 
                        year and is a dependent of the taxpayer for 
                        such taxable year.
                    ``(B) Limitation to 2 young dependents.--If there 
                are more than 2 individuals described in subparagraph 
                (A)(iv) with respect to the taxpayer for any coverage 
                month, the aggregate amounts paid by the taxpayer for 
                qualified health insurance for such individuals which 
                may be taken into account under paragraph (1) shall not 
                exceed 1/12 of the dollar amount in effect under 
                subparagraph (A)(i) for the coverage month.
                    ``(C) Special rule for married individuals.--In the 
                case of a taxpayer--
                            ``(i) who is married (within the meaning of 
                        section 7703) as of the close of the taxable 
                        year but does not file a joint return for such 
                        year, and
                            ``(ii) who does not live apart from such 
                        taxpayer's spouse at all times during the 
                        taxable year,
                any dollar limitation imposed under this paragraph on 
                amounts paid for qualified health insurance for 
                individuals described in subparagraph (A)(iv) shall be 
                divided equally between the taxpayer and the taxpayer's 
                spouse unless they agree on a different division.
            ``(3) Income phaseout of credit percentage for one-person 
        coverage.--
                    ``(A) Phaseout for unmarried individuals (other 
                than surviving spouses and heads of households).--In 
                the case of an individual (other than a surviving 
                spouse, the head of a household, or a married 
                individual) with one-person coverage, if such 
                individual has modified adjusted gross income--
                            ``(i) in excess of $15,000 for a taxable 
                        year but not in excess of $20,000, the 90 
                        percent under paragraph (1)(B) shall be reduced 
                        by the number of percentage points which bears 
                        the same ratio to 40 percentage points as--
                                    ``(I) the excess of modified 
                                adjusted gross income in excess of 
                                $15,000, bears to
                                    ``(II) $5,000, or
                            ``(ii) in excess of $20,000 for a taxable 
                        year, the 90 percent under paragraph (1)(B) 
                        shall be reduced by the sum of 40 percentage 
                        points plus the number of percentage points 
                        which bears the same ratio to 50 percentage 
                        points as--
                                    ``(I) the excess of modified 
                                adjusted gross income in excess of 
                                $20,000, bears to
                                    ``(II) $10,000.
                    ``(B) Phaseout for other individuals.--In the case 
                of a taxpayer (other than an individual described in 
                subparagraph (A) or (C)) with one-person coverage, if 
                the taxpayer has modified adjusted gross income in 
                excess of $25,000 for a taxable year, the 90 percent 
                under paragraph (1)(B) shall be reduced by the number 
                of percentage points which bears the same ratio to 90 
                percentage points as--
                            ``(i) the excess of modified adjusted gross 
                        income in excess of $25,000, bears to
                            ``(ii) $15,000.
                    ``(C) Married filing separate return.--In the case 
                of a taxpayer who is married filing a separate return 
                for the taxable year and who has one-person coverage, 
                if the taxpayer has modified adjusted gross income in 
                excess of $12,500 for the taxable year, the 90 percent 
                under paragraph (1)(B) shall be reduced by the number 
                of percentage points which bears the same ratio to 90 
                percentage points as--
                            ``(i) the excess of modified adjusted gross 
                        income in excess of $12,500, bears to
                            ``(ii) $7,500.
            ``(4) Income phaseout of credit percentage for coverage of 
        more than one person.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), in the case of a taxpayer with 
                coverage of more than one person, if the taxpayer has 
                modified adjusted gross income in excess of $25,000 for 
                a taxable year, the 90 percent under paragraph (1)(B) 
                shall be reduced by the number of percentage points 
                which bears the same ratio to 90 percentage points as--
                            ``(i) the excess of modified adjusted gross 
                        income in excess of $25,000, bears to
                            ``(ii) $35,000.
                    ``(B) Married filing separate return.--In the case 
                of a taxpayer who is married filing a separate return 
                for the taxable year and who has coverage of more than 
                one person, if the taxpayer has modified adjusted gross 
                income in excess of $12,500 for the taxable year, the 
                90 percent under paragraph (1)(B) shall be reduced by 
                the number of percentage points which bears the same 
                ratio to 90 percentage points as--
                            ``(i) the excess of modified adjusted gross 
                        income in excess of $12,500, bears to
                            ``(ii) $17,500.
            ``(5) Rounding.--Any percentage resulting from a reduction 
        under paragraphs (3) and (4) shall be rounded to the nearest 
        one-tenth of a percent.
            ``(6) Modified adjusted gross income.--The term `modified 
        adjusted gross income' means adjusted gross income determined--
                    ``(A) without regard to this section and sections 
                911, 931, and 933, and
                    ``(B) after application of sections 86, 135, 137, 
                219, 221, and 469.
    ``(c) Coverage Month.--For purposes of this section--
            ``(1) In general.--The term `coverage month' means, with 
        respect to an individual, any month if--
                    ``(A) as of the first day of such month such 
                individual is covered by qualified health insurance, 
                and
                    ``(B) the premium for coverage under such insurance 
                for such month is paid by the taxpayer.
            ``(2) Group health plan coverage.--
                    ``(A) In general.--The term `coverage month' shall 
                not include any month for which if, as of the first day 
                of the month, the individual participates in any group 
                health plan (within the meaning of section 5000 without 
                regard to section 5000(d)).
                    ``(B) Exception for certain permitted coverage.--
                Subparagraph (A) shall not apply to an individual if 
                the individual's only coverage for a month is coverage 
                described in clause (i) or (ii) of section 
                223(c)(1)(B).
            ``(3) Employer-provided coverage.--The term `coverage 
        month' shall not include any month during a taxable year if any 
        amount is not includible in the gross income of the taxpayer 
        for such year under section 106 (other than coverage described 
        in clause (i) or (ii) of section 223(c)(1)(B)).
            ``(4) Medicare, medicaid, and schip.--The term `coverage 
        month' shall not include any month with respect to an 
        individual if, as of the first day of such month, such 
        individual--
                    ``(A) is entitled to any benefits under part A of 
                title XVIII of the Social Security Act or is enrolled 
                under part B of such title, or
                    ``(B) is enrolled in the program under title XIX or 
                XXI of such Act (other than under section 1928 of such 
                Act).
            ``(5) Certain other coverage.--The term `coverage month' 
        shall not include any month during a taxable year with respect 
        to an individual if, as of the first day of such month at any 
        time during such month, such individual is enrolled in a 
        program under--
                    ``(A) chapter 89 of title 5, United States Code, or
                    ``(B) chapter 55 of title 10, United States Code.
            ``(6) Prisoners.--The term `coverage month' shall not 
        include any month with respect to an individual if, as of the 
        first day of such month, such individual is imprisoned under 
        Federal, State, or local authority.
            ``(7) Insufficient presence in united states.--The term 
        `coverage month' shall not include any month during a taxable 
        year with respect to an individual if such individual is 
        present in the United States on fewer than 183 days during such 
        year (determined in accordance with section 7701(b)(7)).
    ``(d) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--The term `qualified health insurance' 
        means health insurance coverage (as defined in section 
        9832(b)(1)) which--
                    ``(A) is coverage described in paragraph (2), and
                    ``(B) meets the requirements of paragraph (3).
            ``(2) Eligible coverage.--Coverage described in this 
        paragraph is the following:
                    ``(A) Coverage under individual health insurance.
                    ``(B) Coverage through a private sector health care 
                coverage purchasing pool.
                    ``(C) Coverage through a State care coverage 
                purchasing pool.
                    ``(D) Coverage under a State high-risk pool 
                described in subparagraph (C) of section 35(e)(1).
                    ``(E) Coverage after December 31, 2006, under an 
                eligible State buy in program.
            ``(3) Requirements.--The requirements of this paragraph are 
        as follows:
                    ``(A) Cost limits.--The coverage meets the 
                requirements of section 223(c)(2)(A)(ii).
                    ``(B) Maximum benefits.--Under the coverage, the 
                annual and lifetime maximum benefits are not less than 
                $700,000.
                    ``(C) Broad coverage.--The coverage includes 
                inpatient and outpatient care, emergency benefits, and 
                physician care.
                    ``(D) Guaranteed renewability.--Such coverage is 
                guaranteed renewable by the provider.
            ``(4) Eligible state buy in program.--For purposes of 
        paragraph (2)(E)--
                    ``(A) In general.--The term `eligible State buy in 
                program' means a State program under which an 
                individual who--
                            ``(i) is not eligible for assistance under 
                        the State medicaid program under title XIX of 
                        the Social Security Act,
                            ``(ii) is not eligible for assistance under 
                        the State children's health insurance program 
                        under title XXI of such Act, or
                            ``(iii) is not a State employee,
                is able to buy health insurance coverage through a 
                purchasing arrangement entered into between the State 
                and a private sector health care purchasing group or 
                health plan.
                    ``(B) Requirements.--Subparagraph (A) shall only 
                apply to a State program if--
                            ``(i) the program uses private sector 
                        health care purchasing groups or health plans, 
                        and
                            ``(ii) the State maintains separate risk 
                        pools for participants under the State buy in 
                        program and other participants.
                    ``(C) Subsidies.--
                            ``(i) In general.--A State program shall 
                        not fail to be treated as an eligible State buy 
                        in program merely because the State subsidizes 
                        the costs of an individual in buying health 
                        insurance coverage under the program.
                            ``(ii) Exception.--Clause (i) shall not 
                        apply if the State subsidy under the program 
                        for any adult for any consecutive 12-month 
                        period exceeds the applicable dollar amount.
                            ``(iii) Applicable dollar amount.--
                                    ``(I) In general.--For purposes of 
                                clause (ii), the applicable dollar 
                                amount is $2,000.
                                    ``(II) Reduction.--In the case of a 
                                family with annual income in excess of 
                                133 percent of the applicable poverty 
                                line (as determined in accordance with 
                                criteria established by the Director of 
                                the Office of Management and Budget) 
                                but not in excess of 200 percent of 
                                such line, the dollar amount under 
                                clause (i) shall be ratably reduced 
                                (but not below zero) for each dollar of 
                                such excess. In the case of a family 
                                with annual income in excess of 200 
                                percent of such line, the applicable 
                                dollar amount shall be zero.
    ``(e) Arrangements Under Which Insurers Contribute to HSA.--
            ``(1) In general.--For purposes of this section, health 
        insurance shall not be treated as qualified health insurance if 
        the insurer makes contributions to a health savings account of 
        the taxpayer unless such insurance is provided under an 
        arrangement described in paragraph (2).
            ``(2) Arrangements described.--
                    ``(A) Amounts paid for coverage exceed monthly 
                limitation.--In the case of amounts paid under an 
                arrangement for health insurance for a coverage month 
                in excess of the amount in effect under subsection 
                (b)(2)(A) for such month, an arrangement is described 
                in this subparagraph if under the arrangement--
                            ``(i) the aggregate amount contributed by 
                        the insurer to any health savings account of 
                        the taxpayer does not exceed 90 percent of the 
                        excess of--
                                    ``(I) the amount paid by the 
                                taxpayer for qualified health insurance 
                                under such arrangement for such month, 
                                over
                                    ``(II) the amount in effect under 
                                subsection (b)(2)(A) for such month, 
                                and
                            ``(ii) the amount contributed by the 
                        insurer to a qualified health savings account 
                        of the taxpayer, reduced by the amount of the 
                        excess under clause (i), does not exceed 27 
                        percent of the amount in effect under 
                        subsection (b)(2)(A) for such month.
                    ``(B) Amounts paid for coverage less than monthly 
                limitation.--In the case of an arrangement under which 
                the amount paid for qualified health insurance for a 
                coverage month does not exceed the amount in effect 
                under subsection (b)(2)(A) for such month, an 
                arrangement is described in this subparagraph if--
                            ``(i) under the arrangement the value of 
                        the insured benefits (excluding overhead) 
                        exceeds 65 percent of the amount paid for 
                        qualified health insurance for such month, and
                            ``(ii) the amount contributed by the 
                        insurer to a qualified health savings account 
                        of the taxpayer does not exceed 27 percent of 
                        the amount in effect under subsection (b)(2)(A) 
                        for such month.
            ``(3) Qualified health savings account.--
                    ``(A) In general.--The term `qualified health 
                savings account' means a health savings account (as 
                defined in section 223(d))--
                            ``(i) which is designated (in such form as 
                        the Secretary may prescribe) as a qualified 
                        account for purposes of this section,
                            ``(ii) which may not include any amount 
                        other than contributions described in this 
                        subsection and earnings on such contributions, 
                        and
                            ``(iii) with respect to which section 
                        223(f)(4)(A) is applied by substituting `100 
                        percent' for `10 percent'.
                    ``(B) Subaccounts and separate accounting.--The 
                Secretary may prescribe rules under which a subaccount 
                within a health savings account, or separate accounting 
                with respect to contributions and earnings described in 
                subparagraph (A)(ii), may be treated in the same manner 
                as a qualified health savings account.
                    ``(C) Rollovers.--A contribution of a distribution 
                from a qualified health savings account to another 
                health savings account shall be treated as a rollover 
                contribution for purposes of section 223(f)(5) only if 
                the other account is a qualified health savings 
                account.
    ``(f) Dependents.--For purposes of this section--
            ``(1) Dependent defined.--The term `dependent' has the 
        meaning given such term by section 152 (determined without 
        regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof).
            ``(2) Special rule for dependent child of divorced 
        parents.--An individual who is a child to whom section 152(e) 
        applies shall be treated as a dependent of the custodial parent 
        for a coverage month unless the custodial and noncustodial 
        parent provide otherwise.
            ``(3) 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(c) is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
    ``(g) Inflation Adjustments.--
            ``(1) Credit and health insurance amounts.--In the case of 
        any taxable year beginning after 2006, each dollar amount 
        referred to in subsections (b)(1)(B), (b)(2)(A), (d)(3)(B), and 
        (d)(4)(C)(iii)(I) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 213(d)(10)(B)(ii) for the calendar year 
                in which the taxable year begins, determined by 
                substituting `2005' for `1996' in subclause (II) 
                thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $10, such amount shall be rounded to the nearest 
        multiple of $10.
            ``(2) Income phaseout amounts.--In the case of any taxable 
        year beginning after 2006, each dollar amount referred to in 
        paragraph (3) and (4) of subsection (b) shall be increased by 
        an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2005' for `calendar year 1992' in 
                subparagraph (B) thereof.
        If any amount as adjusted under the preceding sentence is not a 
        multiple of $50, such amount shall be rounded to the next 
        lowest multiple of $50.
    ``(h) Archer MSA Contributions; HSA Contributions.--If a deduction 
would be allowed under section 220 to the taxpayer for a payment for 
the taxable year to the Archer MSA of an individual or under section 
223 to the taxpayer for a payment for the taxable year to the Health 
Savings Account of such individual, subsection (a) shall not apply to 
the taxpayer for any month during such taxable year for which the 
taxpayer, spouse, or dependent is an eligible individual for purposes 
of either such section.
    ``(i) Other Rules.--For purposes of this section--
            ``(1) Coordination with medical expense and premium 
        deductions for high deductible health plans.--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.
            ``(2) Coordination with deduction for health insurance 
        costs of self-employed individuals.--No credit shall be 
        allowable under this section for a taxable year if a deduction 
        is allowed under section 162(l) for the taxable year.
            ``(3) Coordination with advance payment.--Rules similar to 
        the rules of section 35(g)(1) shall apply to any credit to 
        which this section applies.
            ``(4) Coordination with section 35.--If a taxpayer is 
        eligible for the credit allowed under this section and section 
        35 for any taxable year, the taxpayer shall elect which credit 
        is to be allowed.
    ``(j) Expenses Must Be Substantiated.--A payment for insurance to 
which subsection (a) applies may be taken into account under this 
section only if the taxpayer substantiates such payment in such form as 
the Secretary may prescribe.
    ``(k) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (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:

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

    ``(a) In General.--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 such individual or 
any other 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 individual 
                who was provided by such person with coverage under 
                creditable health insurance by reason of such payments 
                and the period of such coverage,
                    ``(C) the aggregate amount of payments described in 
                subsection (a), and
                    ``(D) 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(d)).
    ``(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:
                            ``(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 
                subparagraph (AA), by striking the period at the end of 
                the subparagraph (BB) and inserting ``, or'', and by 
                adding at the end the following:
                    ``(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:

``Sec. 6050U. Returns relating to payments for qualified health 
                            insurance.''.
    (c) Criminal Penalty for Fraud.--Subchapter B of chapter 75 of the 
Internal Revenue Code of 1986 (relating to other offenses) is amended 
by adding at the end the following:

``SEC. 7276. PENALTIES FOR OFFENSES RELATING TO HEALTH INSURANCE TAX 
              CREDIT.

    ``Any person who knowingly misuses Department of the Treasury 
names, symbols, titles, or initials to convey the false impression of 
association with, or approval or endorsement by, the Department of the 
Treasury of any insurance products or group health coverage in 
connection with the credit for health insurance costs under section 36 
shall on conviction thereof be fined not more than $10,000, or 
imprisoned not more than 1 year, or both.''.
    (d) Conforming Amendments.--
            (1) Section 162(l) of the Internal Revenue Code of 1986 is 
        amended by adding at the end the following:
            ``(6) Election to have subsection apply.--No deduction 
        shall be allowed under paragraph (1) for a taxable year unless 
        the taxpayer elects to have this subsection apply for such 
        year.''.
            (2) 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''.
            (3) 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 ``35'' and inserting ``36'' and by 
        inserting after the item relating to section 35 the following:

``Sec. 36. Health insurance costs for uninsured individuals.''.
            (4) The table of sections for subchapter B of chapter 75 of 
        such Code is amended by adding at the end the following:

``Sec. 7276. Penalties for offenses relating to health insurance tax 
                            credit.''.
    (e) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2005.
            (2) Penalties.--The amendments made by subsections (c) and 
        (d)(4) shall take effect on the date of the enactment of this 
        Act.

SEC. 202. ADVANCE PAYMENT OF CREDIT TO ISSUERS OF QUALIFIED HEALTH 
              INSURANCE.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 
(relating to miscellaneous provisions) is amended by adding at the end 
the following:

``SEC. 7529. ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS OF 
              ELIGIBLE INDIVIDUALS.

    ``Not later than July 1, 2007, the Secretary shall establish a 
program for making payments to providers of qualified health insurance 
(as defined in section 36(d)) on behalf of individuals eligible for the 
credit under section 36. Such payments shall be made on the basis of 
modified adjusted gross income of eligible individuals for the 
preceding taxable year.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following:

``Sec. 7529. Advance payment of health insurance credit for purchasers 
                            of qualified health insurance.''.

  Subtitle B--High Deductible Health Plans and Health Savings Accounts

SEC. 211. DEDUCTION OF PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 224 as 
section 225 and by inserting after section 223 the following new 
section:

``SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

    ``(a) Deduction Allowed.--In the case of an individual, there shall 
be allowed as a deduction for the taxable year the aggregate amount 
paid by or on behalf of such individual as premiums under a high 
deductible health plan with respect to months during such year for 
which such individual is an eligible individual with respect to such 
health plan.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Eligible individual.--The term `eligible individual' 
        has the meaning given such term by section 223(c)(1).
            ``(2) High deductible health plan.--The term `high 
        deductible health plan' has the meaning given such term by 
        section 223(c)(2).
    ``(c) Special Rules.--
            ``(1) Deduction allowable for only 1 plan.--For purposes of 
        this section, in the case of an individual covered by more than 
        1 high deductible health plan for any month, the individual may 
        only take into account amounts paid for 1 of such plans for 
        such month.
            ``(2) Group health plan coverage.--
                    ``(A) In general.--No deduction shall be allowed to 
                an individual under subsection (a) for any amount paid 
                for coverage under a high deductible health plan for a 
                month if, as of the first day of that month, that 
                individual participates in any coverage under a group 
                health plan (within the meaning of section 5000 without 
                regard to section 5000(d)).
                    ``(B) Exception for certain permitted coverage.--
                Subparagraph (A) shall not apply to an individual if 
                the individual's only coverage under a group health 
                plan for a month is coverage described in clause (i) or 
                (ii) of section 223(c)(1)(B).
            ``(3) Medicare eligible individuals.--No deduction shall be 
        allowed under subsection (a) with respect to any individual for 
        any month if the individual is entitled to benefits under title 
        XVIII of the Social Security Act for the month.
            ``(4) Health savings account required.--A deduction shall 
        not be allowed under subsection (a) for a taxable year with 
        respect to an individual unless the individual is an account 
        beneficiary of a health savings account during a portion of the 
        taxable year.
            ``(5) Medical and health savings accounts.--Subsection (a) 
        shall not apply with respect to any amount which is paid or 
        distributed out of an Archer MSA or a health savings account 
        which is not included in gross income under section 220(f) or 
        223(f), as the case may be.
            ``(6) Coordination with deduction for health insurance of 
        self-employed individuals.--The amount taken into account by 
        the taxpayer in computing the deduction under section 162(l) 
        shall not be taken into account under this section.
            ``(7) Coordination with medical expense deduction.--The 
        amount taken into account by the taxpayer in computing the 
        deduction under this section shall not be taken into account 
        under section 213.''.
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of the Internal Revenue Code 
of 1986 (defining adjusted gross income) is amended by inserting before 
the last sentence at the end the following new paragraph:
            ``(21) Premiums for high deductible health plans.--The 
        deduction allowed by section 224.''.
    (c) Coordination With Health Insurance Costs Credit.--Section 
35(g)(2) of the Internal Revenue Code of 1986 is amended by striking 
``or 213'' and inserting ``,213, or 224''.
    (d) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by redesignating section 224 as section 225 and by inserting 
before such item the following new item:

``Sec. 224. Premiums for high deductible health plans.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2005.

SEC. 212. REFUNDABLE CREDIT FOR CONTRIBUTIONS TO HEALTH SAVINGS 
              ACCOUNTS OF SMALL BUSINESS EMPLOYEES.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986, as amended by subtitle A, is 
amended by inserting after section 36 the following new section:

``SEC. 36A. SMALL EMPLOYER CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.

    ``(a) General Rule.--In the case of an eligible employer, there 
shall be allowed as a credit against the tax imposed by this subtitle 
an amount equal to the lesser of--
            ``(1) the amount contributed by such employer to any 
        qualified health savings account of any employee who is an 
        eligible individual (as defined in section 223(c)(1)) during 
        the taxable year, or
            ``(2) an amount equal to the product of--
                    ``(A) $200 ($500 if coverage for all months 
                described in subparagraph (B)(i) is family coverage), 
                and
                    ``(B) a fraction--
                            ``(i) the numerator of which is the number 
                        of months that the employee was covered under a 
                        high deductible health plan maintained by the 
                        employer, and
                            ``(ii) the denominator of which is the 
                        number of months in the taxable year.
    ``(b) Eligible Employer.--For purposes of this section--
            ``(1) In general.--The term `eligible employer' means, with 
        respect to any taxable year, an employer which--
                    ``(A) is a small employer, and
                    ``(B) maintains a high deductible health plan under 
                which all employees of the employer reasonably expected 
                to receive at least $5,000 of compensation during the 
                taxable year are eligible to participate.
        An employer may exclude from consideration under subparagraph 
        (B) employees who are covered by an agreement described in 
        section 410(b)(3)(A) if there is evidence that health benefits 
        were the subject of good faith bargaining.
            ``(2) Exception for governmental and tax-exempt 
        employers.--The term `eligible employer' shall not include the 
        Federal Government or any employer described in section 
        457(e)(1).
            ``(3) Small employer.--
                    ``(A) In general.--The term `small employer' means, 
                with respect to any calendar year, any employer if such 
                employer employed an average of 100 or fewer employees 
                on business days during either of the 2 preceding 
                calendar years. For purposes of the preceding sentence, 
                a preceding calendar year may be taken into account 
                only if the employer was in existence throughout such 
                year.
                    ``(B) Employers not in existence in preceding 
                year.--In the case of an employer which was not in 
                existence throughout the 1st preceding calendar year, 
                the determination under subparagraph (A) shall be based 
                on the average number of employees that it is 
                reasonably expected such employer will employ on 
                business days in the current calendar year.
                    ``(C) Special rule.--Any reference in this 
                paragraph to an employer shall include a reference to 
                any predecessor of such employer.
    ``(c) Definitions.--For purposes of this section--
            ``(1) High deductible health plan.--The term `high 
        deductible health plan' has the meaning given such term by 
        section 223(c)(2).
            ``(2) Qualified health savings account.--
                    ``(A) In general.--The term `qualified health 
                savings account' means a health savings account (as 
                defined in section 223(d))--
                            ``(i) which is designated (in such form as 
                        the Secretary may prescribe) as a qualified 
                        account for purposes of this section,
                            ``(ii) which may not include any amount 
                        other than contributions described in 
                        subsection (a) and earnings on such 
                        contributions, and
                            ``(iii) with respect to which section 
                        223(f)(4)(A) is applied by substituting `100 
                        percent' for `10 percent'.
                    ``(B) Subaccounts and separate accounting.--The 
                Secretary may prescribe rules under which a subaccount 
                within a health savings account, or separate accounting 
                with respect to contributions and earnings described in 
                subparagraph (A)(ii), may be treated in the same manner 
                as a qualified health savings account.
                    ``(C) Rollovers.--A contribution of a distribution 
                from a qualified health savings account to another 
                health savings account shall be treated as a rollover 
                contribution for purposes of section 223(f)(5) only if 
                the other account is a qualified health savings 
                account.
    ``(d) Special Rules.--For purposes of this section--
            ``(1) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52, or 
        subsection (n) or (o) of section 414, shall be treated as one 
        person.
            ``(2) Disallowance of deduction.--No deduction shall be 
        allowed for that portion of contributions to any health savings 
        accounts for the taxable year which is equal to the credit 
        determined under subsection (a).
            ``(3) 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) 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 36A of such Code''.
            (2) The table of sections for subpart C of part IV of 
        chapter 1 of the Internal Revenue Code of 1986, as amended by 
        subtitle A, is amended by inserting after the item relating to 
        section 36 the following new item:

``Sec. 36A. Small employer contributions to health savings accounts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contributions made in taxable years beginning after December 
31, 2005.

       Subtitle C--Improvement of the Health Coverage Tax Credit

SEC. 221. CHANGE IN STATE-BASED COVERAGE RULES RELATED TO PREEXISTING 
              CONDITIONS.

    (a) In General.--Section 35(e)(2) of the Internal Revenue Code of 
1986 (relating to requirements for State-based coverage) is amended by 
adding at the end the following:
                    ``(C) Limitation on preexisting condition exclusion 
                period.--The term `qualified health insurance' does not 
                include any coverage described in subparagraphs (C) 
                through (H) of paragraph (1) that imposes a pre-
                existing condition exclusion with respect to any 
                individual unless--
                            ``(i) such exclusion relates to a physical 
                        or mental condition, regardless of the cause of 
                        the condition, for which medical advice, 
                        diagnosis, care, or treatment was recommended 
                        or received within the 6-month period ending on 
                        the date the individual seeks to enroll in the 
                        coverage,
                            ``(ii) such exclusion extends for a period 
                        of not more than 12 months after the individual 
                        seeks to enroll in the coverage,
                            ``(iii) the period of any such preexisting 
                        condition exclusion is reduced by the length of 
                        the aggregate of the periods of creditable 
                        coverage (as defined in section 9801(c)) 
                        applicable to the individual as of the 
                        enrollment date, and
                            ``(iv) such exclusion is not an exclusion 
                        described in section 9801(d).''.
    (b) Conforming Amendments.--
            (1) Internal revenue code of 1986.--Subparagraph (A) of 
        section 35(e)(2) of such Code is amended--
                    (A) by striking clause (ii); and
                    (B) by redesignating clauses (iii) and (iv) as 
                clauses (ii) and (iii), respectively.
            (2) Workforce investment act of 1998 amendments.--Section 
        173(f)(2)(B) of the Workforce Investment Act of 1998 (29 U.S.C. 
        2918(f)(2)(B)) is amended--
                    (A) in clause (i)--
                            (i) by striking subclause (II); and
                            (ii) by redesignating subclauses (III) and 
                        (IV) as subclauses (II) and (III), 
                        respectively; and
                    (B) by adding at the end the following:
                            ``(iii) Limitation on preexisting condition 
                        exclusion period.--The term `qualified health 
                        insurance' does not include any coverage 
                        described in clauses (iii) through (ix) of 
                        subparagraph (A) that imposes a pre-existing 
                        condition exclusion with respect to any 
                        individual unless--
                                    ``(I) such exclusion relates to a 
                                physical or mental condition, 
                                regardless of the cause of the 
                                condition, for which medical advice, 
                                diagnosis, care, or treatment was 
                                recommended or received within the 6-
                                month period ending on the date the 
                                individual seeks to enroll in the 
                                coverage;
                                    ``(II) such exclusion extends for a 
                                period of not more than 12 months after 
                                the individual seeks to enroll in the 
                                coverage;
                                    ``(III) the period of any such 
                                preexisting condition exclusion is 
                                reduced by the length of the aggregate 
                                of the periods of creditable coverage 
                                (as defined in section 9801(c) of the 
                                Internal Revenue Code of 1986) 
                                applicable to the individual as of the 
                                enrollment date; and
                                    ``(IV) such exclusion is not an 
                                exclusion described in section 9801(d) 
                                of such Code.''.
    (c) Effective Date.--The amendments made by this section apply to 
taxable years beginning after December 31, 2005.

SEC. 222. ELIGIBILITY OF SPOUSE OF CERTAIN INDIVIDUALS ENTITLED TO 
              MEDICARE.

    (a) In General.--Subsection (b) of section 35 of such Code 
(defining eligible coverage month) is amended by adding at the end the 
following:
            ``(3) Special rule for spouse of individual entitled to 
        medicare.--Any month which would be an eligible coverage month 
        with respect to a taxpayer (determined without regard to 
        subsection (f)(2)(A)) shall be an eligible coverage month for 
        any spouse of such taxpayer, provided the spouse has attained 
        age 55 and meets the requirements of clauses (ii), (iii), and 
        (iv) of paragraph (1)(A).''.
    (b) Effective Date.--The amendment made by subsection (a) applies 
to taxable years beginning after December 31, 2005.

SEC. 223. ELIGIBLE PBGC PENSION RECIPIENT.

    (a) In General.--Subparagraph (B) of section 35(c)(4) of such Code 
(relating to eligible PBGC pension recipients) is amended by inserting 
before the period the following ``, or, after August 6, 2002, received 
from such Corporation a one-time single-sum pension payment in lieu of 
an annuity''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect as if included in the enactment of section 201 of the Trade 
Act of 2002 (Public Law 107-210, 116 Stat. 954).

SEC. 224. APPLICATION OF OPTION TO OFFER STATE-BASED COVERAGE TO PUERTO 
              RICO, NORTHERN MARIANA ISLANDS, AMERICAN SAMOA, GUAM, AND 
              THE UNITED STATES VIRGIN ISLANDS.

    (a) In General.--Section 35(e) of such Code (relating to 
requirements for qualified health insurance) is amended by adding at 
the end the following:
            ``(4) Application to puerto rico, northern mariana islands, 
        american samoa, guam, and the united states virgin islands.--
        For purposes of this section, Puerto Rico, Northern Mariana 
        Islands, American Samoa, Guam, and the United States Virgin 
        Islands shall be considered States.''.
    (b) Conforming Amendment.--Section 173(f)(2) of the Workforce 
Investment Act of 1998 (29 U.S.C. 2918(f)(2)) is amended by adding at 
the end the following:
                    ``(D) Application to northern mariana islands, 
                american samoa, guam, and the united states virgin 
                islands.--For purposes of subsection (a)(4)(A) and this 
                subsection, the term `State' shall include the Northern 
                Mariana Islands, American Samoa, Guam, and the United 
                States Virgin Islands.''.
    (c) Effective Date.--The amendments made by this section apply to 
taxable years beginning after December 31, 2005.

SEC. 225. CLARIFICATION OF DISCLOSURE RULES.

    (a) In General.--Subsection (k) of section 6103 of such Code 
(relating to disclosure of certain returns and return information for 
tax administration purposes) is amended by adding at the end the 
following:
            ``(10) Disclosure of certain return information for 
        purposes of carrying out a program for advance payment of 
        credit for health insurance costs of eligible individuals.--The 
        Secretary may disclose to providers of health insurance, 
        administrators of health plans, or contractors of such 
        providers or administrators, for any certified individual (as 
        defined in section 7527(c)) the taxpayer identity and health 
        insurance member and group numbers of the certified individual 
        (and any qualifying family member as defined in section 35(d), 
        if applicable) and the amount and period of the payment, to the 
        extent the Secretary deems necessary for the administration of 
        the program established by section 7527 (relating to advance 
        payment of credit for health insurance costs of eligible 
        individuals).''.
    (b) Conforming Amendments.--
            (1) Section 6103 of such Code (relating to confidentiality 
        and disclosure of returns and return information) is amended--
                    (A) in subsection (a)(3), by inserting ``(k)(10),'' 
                after ``(e)(1)(D)(iii),'';
                    (B) in subsection (l), by striking paragraph (18); 
                and
                    (C) in subsection (p)--
                            (i) in paragraph (3)(A)--
                                    (I) by striking ``or (9)'' and 
                                inserting ``(9), or (10)''; and
                                    (II) by striking ``(17), or (18)'' 
                                and inserting ``or (17)''; and
                            (ii) in paragraph (4), by striking ``(18)'' 
                        after ``(l)(16)'' each place it appears.
            (2) Section 7213(a)(2) of such Code (relating to 
        unauthorized disclosure of information) is amended by inserting 
        ``(k)(10)'' before ``(l)(6)''.
            (3) Section 7213A(a)(1)(B) of such Code (relating to 
        unauthorized inspection of returns or return information) is 
        amended by striking ``subsection (l)(18) or (n) of section 
        6103'' and inserting ``section 6103(n)''.
    (c) Effective Date.--The amendments made by this section apply to 
taxable years beginning after December 31, 2005.

SEC. 226. CLARIFICATION THAT STATE-BASED COBRA CONTINUATION COVERAGE IS 
              SUBJECT TO SAME RULES AS FEDERAL COBRA.

    (a) In General.--Section 35(e)(2) of such Code (relating to state-
based coverage requirements) is amended--
            (1) in subparagraph (A), in the matter preceding clause 
        (i), by striking ``(B)'' and inserting ``(C)''; and
            (2) in subparagraph(B)(i), by striking ``(B)'' and 
        inserting ``(C)''.
    (b) Conforming Amendments.--Section 173(f)(2)(B) of the Workforce 
Investment Act of 1998 (29 U.S.C. 2918(f)(2)(B)) is amended--
            (1) in clause (i), in the matter preceding subclause (I), 
        by striking ``(ii)'' and inserting ``(iii)''; and
            (2) in clause (ii)(I), by striking ``(ii)'' and inserting 
        ``(iii)''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the enactment of sections 201 and 203, 
respectively, of the Trade Act of 2002 (Public Law 107-210, 116 Stat. 
954).

SEC. 227. APPLICATION OF RULES FOR OTHER SPECIFIED COVERAGE TO ELIGIBLE 
              ALTERNATIVE TAA RECIPIENTS CONSISTENT WITH RULES FOR 
              OTHER ELIGIBLE INDIVIDUALS.

    (a) In General.--Section 35(f)(1) of such Code (relating to 
subsidized coverage) is amended by striking subparagraph (B) and 
redesignating subparagraph (C) as subparagraph (B).
    (b) Conforming Amendments.--Section 173(f)(7)(A) of the Workforce 
Investment Act of 1998 (29 U.S.C. 2918(f)(7)(A)) is amended by striking 
clause (ii) and redesignating clause (iii) as clause (ii).

                  Subtitle D--Long-Term Care Insurance

SEC. 231. SENSE OF THE SENATE CONCERNING LONG-TERM CARE.

    It is the sense of the Senate that Congress should take steps to 
make long-term care more affordable by providing tax incentives for the 
purchase of long-term care insurance, support for family caregivers, 
and making necessary public program reforms.

                      Subtitle E--Other Provisions

SEC. 241. DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA PLANS AND 
              FLEXIBLE SPENDING ARRANGEMENTS.

    (a) In General.--Section 125 of the Internal Revenue Code of 1986 
(relating to cafeteria plans) is amended by redesignating subsections 
(h) and (i) as subsections (i) and (j), respectively, and by inserting 
after subsection (g) the following:
    ``(h) Contributions of Certain Unused Health Benefits.--
            ``(1) In general.--For purposes of this title, a plan or 
        other arrangement shall not fail to be treated as a cafeteria 
        plan solely because qualified benefits under such plan include 
        a health flexible spending arrangement under which not more 
        than $500 of unused health benefits may be--
                    ``(A) carried forward to the succeeding plan year 
                of such health flexible spending arrangement, or
                    ``(B) to the extent permitted by section 106(c), 
                contributed by the employer to a health savings account 
                (as defined in section 223(d)) maintained for the 
                benefit of the employee.
            ``(2) Health flexible spending arrangement.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `health flexible spending arrangement' means a 
                flexible spending arrangement (as defined in section 
                106(c)) that is a qualified benefit and only permits 
                reimbursement for expenses for medical care (as defined 
                in section 213(d)(1), without regard to subparagraphs 
                (C) and (D) thereof).
                    ``(B) Flexible spending arrangement.--A flexible 
                spending arrangement is a benefit program which 
                provides employees with coverage under which--
                            ``(i) specified incurred expenses may be 
                        reimbursed (subject to reimbursement maximums 
                        and other reasonable conditions), and
                            ``(ii) the maximum amount of reimbursement 
                        which is reasonably available to a participant 
                        for such coverage is less than 500 percent of 
                        the value of such coverage.
                In the case of an insured plan, the maximum amount 
                reasonably available shall be determined on the basis 
                of the underlying coverage.
            ``(3) Unused health benefits.--For purposes of this 
        subsection, with respect to an employee, the term `unused 
        health benefits' means the excess of--
                    ``(A) the maximum amount of reimbursement allowable 
                to the employee for a plan year under a health flexible 
                spending arrangement, over
                    ``(B) the actual amount of reimbursement for such 
                year under such arrangement.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to taxable years beginning after December 31, 2004.

SEC. 242. MICROENTREPRENEURS.

    (Section 404(8) of the Assets for Independence Act (42 U.S.C. 604 
note) is amended by adding at the end the following:
                    ``(F) High deductible health insurance.--
                            ``(i) In general.--The eligible 
                        individual's contribution (as an employer or 
                        employee) for coverage under a high deductible 
                        health plan (as defined in section 223(c)(2) of 
                        the Internal Revenue Code of 1986).
                            ``(ii) Definition of employee.--For 
                        purposes of clause (i), the term `employee' 
                        includes an individual described in section 
                        401(c)(1) of the Internal Revenue Code of 
                        1986.''.

SEC. 243. STUDY ON ACCESS TO AFFORDABLE HEALTH INSURANCE FOR FULL-TIME 
              COLLEGE AND UNIVERSITY STUDENTS.

    (a) Sense of the Senate.--It is the sense of the Senate that, 
because a considerable number of the United States' uninsured 
population are young adults who are enrolled full-time at an 
institution of higher education, Congress should determine whether 
health care coverage proposals targeting this population would be 
effective.
    (b) Study Required.--The Government Accountability Office shall 
provide for the conduct of a study to evaluate existing and potential 
sources of affordable health insurance coverage for graduate and 
undergraduate students enrolled at an institution of higher education 
(as defined in section 1201 of the Higher Education Act of 1965 (20 
U.S.C. 1141)).
    (c) Required Elements of Study.--In conducting the study under 
subsection (b), the Government Accountability Office shall, at a 
minimum, examine the following:
            (1) Student demographics.--
                    (A) In general.--The size and characteristics of 
                the insured and uninsured population of undergraduate 
                and graduate students enrolled at institutions of 
                higher education. Such data shall be differentiated as 
                provided for in subparagraphs (B) and (C).
                    (B) Statistical breakdown.--The data concerning the 
                uninsured student population collected under 
                subparagraph (A) shall be differentiated by--
                            (i) the full-time, full-time equivalent, 
                        and part-time enrollment status of the students 
                        involved;
                            (ii) the type of institution involved (such 
                        as a public, private, non-profit, or community 
                        institution);
                            (iii) the length and type of educational 
                        program involved (such as a certificate or 
                        diploma program, a 2-year or 4-year degree 
                        program, a masters degree program, or a 
                        doctoral degree program); and
                            (iv) the undergraduate and graduate student 
                        populations involved.
                    (C) Coverage.--The data concerning the insured 
                student population collected under subparagraph (A) 
                shall be differentiated by the sources of coverage for 
                such students, including the number and percentage of 
                such insured students who lose parental (or other) 
                coverage during the course of their enrollment at such 
                institutions and the age at which such coverage is 
                lost.
            (2) Impact analysis.--The financial and other impact of 
        uninsured students at such institutions, as compared to insured 
        students, on--
                    (A) the health of students;
                    (B) the student's family;
                    (C) the student's educational progress; and
                    (D) education and health care institutions and 
                facilities.
            (3) Assessment of existing programs.--The effect of 
        mandatory and voluntary programs on the access of students to 
        health insurance coverage, including--
                    (A) the level and type of coverage provided through 
                mandatory and voluntary State and institutionally-
                sponsored health care programs currently providing 
                health care insurance coverage to students;
                    (B) the average premium paid with respect to 
                students covered under such plans;
                    (C) the extent to which any State or institutional 
                health insurance plan may serve as a model for the 
                expansion of access to health insurance for all full-
                time undergraduate and graduate students attending an 
                institution of higher education; and
                    (D) whether such programs targeted to the student 
                population would be more effective in reducing the 
                overall rate of uninsured relative to proposals 
                targeted to broader populations.
            (4) Incentives and disincentives.--The existence of 
        incentives and disincentives offered to institutions of higher 
        education to expand access to health care coverage for 
        students, including--
                    (A) an assessment of the types of incentives and 
                disincentives that may be used to encourage or require 
                an institution of higher education to include health 
                care coverage for all of its students on a mandatory 
                basis, including financial, regulatory, administrative, 
                and other incentives or disincentives;
                    (B) a list of burdensome regulatory or 
                administrative reporting and other requirements (from 
                the Department of Education or other governmental 
                agencies) that could be waived without compromising 
                program integrity as a means of encouraging 
                institutions of higher education to provide uninsured 
                students with access to health care coverage;
                    (C) other incentives or disincentives that would 
                increase the level of institutional participation in 
                health care coverage programs; and
                    (D) an analysis of the costs and effectiveness (to 
                reduce the number of uninsured students) of including 
                the cost of health insurance as an allowable cost of 
                attendance under the Higher Education Act of 1965, and 
                the impact of such inclusion on the student's financial 
                aid package.
    (e) Consultation With Congress.--In carrying out the study under 
subsection (b), the Government Accountability Office shall consult on a 
regular basis with the Secretary of Education, the Secretary of Health 
and Human Services, the Committee on the Budget of the Senate, the 
Committee on Health, Education, Labor, and Pensions of the Senate, and 
the Committee on Education and the Workforce of the House of 
Representatives.
    (f) Report.--Not later than 1 year after the date of enactment of 
this Act, the Government Accountability Office shall prepare and submit 
to the Committee on the Budget and the Committee on Health, Education, 
Labor, and Pensions of the Senate, and the Committee on Education and 
the Workforce of the House of Representatives, a report concerning the 
results of the study conducted under this section.

SEC. 244. EXTENSION OF FUNDING FOR OPERATION OF STATE HIGH RISK HEALTH 
              INSURANCE POOLS.

    Section 2745 of the Public Health Service Act (42 U.S.C. 300gg-45) 
is amended to read as follows:

``SEC. 2745. PROMOTION OF QUALIFIED HIGH RISK POOLS.

    ``(a) Extension of Seed Grants to States.--The Secretary shall 
provide from the funds appropriated under subsection (d)(1)(A) a grant 
of up to $1,000,000 to each State that has not created a qualified high 
risk pool as of the date of enactment of this section for the State's 
costs of creation and initial operation of such a pool.
    ``(b) Grants for Operational Losses.--
            ``(1) In general.--In the case of a State that has 
        established a qualified high risk pool that--
                    ``(A) restricts premiums charged under the pool to 
                no more than 150 percent of the premium for applicable 
                standard risk rates;
                    ``(B) offers a choice of two or more coverage 
                options through the pool; and
                    ``(C) has in effect a mechanism reasonably designed 
                to ensure continued funding of losses incurred by the 
                State after the end of fiscal year 2004 in connection 
                with operation of the pool;
        the Secretary shall provide, from the funds appropriated under 
        subsection (d)(1)(B)(i) and allotted to the State under 
        paragraph (2), a grant for the losses incurred by the State in 
        connection with the operation of the pool.
            ``(2) Allotment.--The amounts appropriated under subsection 
        (d)(1)(B)(i) for a fiscal year shall be made available to the 
        States (or the entities that operate the high risk pool under 
        applicable State law) as follows:
                    ``(A) An amount equal to 50 percent of the 
                appropriated amount for the fiscal year shall be 
                allocated in equal amounts among each eligible State 
                that applies for assistance under this subsection.
                    ``(B) An amount equal to 25 percent of the 
                appropriated amount for the fiscal year shall be 
                allocated among the States so that the amount provided 
                to a State bears the same ratio to such available 
                amount as the number of uninsured individuals in the 
                State bears to the total number of uninsured 
                individuals in all States (as determined by the 
                Secretary).
                    ``(C) An amount equal to 25 percent of the 
                appropriated amount for the fiscal year shall be 
                allocated among the States so that the amount provided 
                to a State bears the same ratio to such available 
                amount as the number of individuals enrolled in health 
                care coverage through the qualified high risk pool of 
                the State bears to the total number of individuals so 
                enrolled through qualified high risk pools in all 
                States (as determined by the Secretary).
    ``(c) Bonus Grants for Supplemental Consumer Benefits.--
            ``(1) In general.--In the case of a State that has 
        established a qualified high risk pool, the Secretary shall 
        provide, from the funds appropriated under subsection 
        (d)(1)(B)(ii) and allotted to the State under paragraph (3), a 
        grant to be used to provide supplemental consumer benefits to 
        enrollees or potential enrollees (or defined subsets of such 
        enrollees or potential enrollees) in qualified high risk pools.
            ``(2) Benefits.--A State shall use amounts received under a 
        grant under this subsection to provide one or more of the 
        following benefits:
                    ``(A) Low-income premium subsidies.
                    ``(B) A reduction in premium trends, actual 
                premiums, or other cost-sharing requirements.
                    ``(C) An expansion or broadening of the pool of 
                individuals eligible for coverage, including 
                eliminating waiting lists, increasing enrollment caps, 
                or providing flexibility in enrollment rules.
                    ``(D) Less stringent rules, or additional waiver 
                authority, with respect to coverage of pre-existing 
                conditions.
                    ``(E) Increased benefits.
                    ``(F) The establishment of disease management 
                programs.
            ``(3) Limitation.--In allotting amounts under this 
        subsection, the Secretary shall ensure that no State receives 
        an amount that exceeds 10 percent of the amount appropriated 
        for the fiscal year involved under subsection (d)(1)(B)(ii).
            ``(4) Rule of construction.--Nothing in this subsection 
        shall be construed to prohibit States that, on the date of 
        enactment of the State High Risk Pool Funding Extension Act of 
        2005, are in the process of implementing programs to provide 
        benefits of the type described in paragraph (2), from being 
        eligible for a grant under this subsection.
    ``(d) Funding.--
            ``(1) In general.--Out of any money in the Treasury of the 
        United States not otherwise appropriated, there are authorized 
        and appropriated--
                    ``(A) $15,000,000 for the period of fiscal years 
                2005 and 2006 to carry out subsection (a); and
                    ``(B) $75,000,000 for each of fiscal years 2005 
                through 2009, of which--
                            ``(i) two-thirds of the amount appropriated 
                        for a fiscal year shall be made available for 
                        allotments under subsection (b)(2); and
                            ``(ii) one-third of the amount appropriated 
                        for a fiscal year shall be made available for 
                        allotments under subsection (c)(2).
            ``(2) Availability.--Funds appropriated under this 
        subsection for a fiscal year shall remain available for 
        obligation through the end of the following fiscal year.
            ``(3) Reallotment.--If, on June 30 of each fiscal year, the 
        Secretary determines that all amounts appropriated under 
        paragraph (1)(B)(ii) for the fiscal year are not allotted, such 
        remaining amounts shall be allotted among States receiving 
        grants under subsection (b) for the fiscal year in amounts 
        determined appropriate by the Secretary.
            ``(4) No entitlement.--Nothing in this section shall be 
        construed as providing a State with an entitlement to a grant 
        under this section.
    ``(e) Applications.--To be eligible for a grant under this section, 
a State shall submit to the Secretary an application at such time, in 
such manner, and containing such information as the Secretary may 
require.
    ``(f) Definitions.--In this section:
            ``(1) Qualified high risk pool.--
                    ``(A) In general.--The term `qualified high risk 
                pool' has the meaning given such term in section 
                2744(c)(2), except that with respect to subparagraph 
                (A) of such section a State may elect to provide for 
                the enrollment of eligible individuals through--
                            ``(i) a combination of a qualified high 
                        risk pool and an acceptable alternative 
                        mechanism; or
                            ``(ii) other health insurance coverage 
                        described in subparagraph (B).
                    ``(B) Health insurance coverage.--Health insurance 
                coverage described in this subparagraph is individual 
                health insurance coverage--
                            ``(i) that meets the requirements of 
                        section 2741;
                            ``(ii) that is subject to limits on the 
                        rates charged to individuals;
                            ``(iii) that is available to all 
                        individuals eligible for health insurance 
                        coverage under this title who are not able to 
                        participate in a qualified high risk pool; and
                            ``(iv) the defined rate limit of which does 
                        not exceed the limit allowed for a qualified 
                        risk pool that is otherwise eligible to receive 
                        assistance under a grant under this section.
                    ``(C) Other coverage.--In addition to coverage 
                described in subparagraph (B), a State may provide for 
                the offering of health insurance coverage that provides 
                first dollar coverage, limits on cost-sharing, and 
                comprehensive medical, hospital and surgical coverage, 
                if the limits on rates for such coverage do not exceed 
                125 percent of the limit described in subparagraph 
                (B)(iv).
            ``(2) Standard risk rate.--The term `standard risk rate' 
        means a rate--
                    ``(A) determined under the State high risk pool by 
                considering the premium rates charged by other health 
                insurers offering health insurance coverage to 
                individuals in the insurance market served;
                    ``(B) that is established using reasonable 
                actuarial techniques; and
                    ``(C) that reflects anticipated claims experience 
                and expenses for the coverage involved.
            ``(3) State.--The term `State' means any of the 50 States 
        and the District of Columbia.''.

SEC. 245. SENSE OF THE SENATE ON AFFORDABLE HEALTH COVERAGE FOR SMALL 
              EMPLOYERS.

    It is the sense of the Senate that Congress should pass legislation 
to support expanded, affordable health coverage options for 
individuals, particularly those who work for small businesses, by 
streamlining and reducing regulations and expanding the role of 
associations and other group purchasing arrangements.

                       Subtitle F--Covering Kids

SEC. 251. SHORT TITLE.

    This subtitle may be cited as the ``Covering Kids Act of 2005''.

SEC. 252. GRANTS TO PROMOTE INNOVATIVE OUTREACH AND ENROLLMENT UNDER 
              MEDICAID AND SCHIP.

    (a) Grants for Expanded Outreach Activities.--Title XXI of the 
Social Security Act (42 U.S.C. 1397aa et seq.) is amended by adding at 
the end the following:

``SEC. 2111. EXPANDED OUTREACH ACTIVITIES.

    ``(a) Grants To Conduct Innovative Outreach and Enrollment 
Efforts.--
            ``(1) In general.--The Secretary shall award grants to 
        eligible entities to--
                    ``(A) conduct innovative outreach and enrollment 
                efforts that are designed to increase the enrollment 
                and participation of eligible children under this title 
                and title XIX; and
                    ``(B) promote understanding of the importance of 
                health insurance coverage for prenatal care and 
                children.
            ``(2) Performance bonuses.--The Secretary may reserve a 
        portion of the funds appropriated under subsection (g) for a 
        fiscal year for the purpose of awarding performance bonuses 
        during the succeeding fiscal year to eligible entities that 
        meet enrollment goals or other criteria established by the 
        Secretary.
    ``(b) Priority for Award of Grants.--
            ``(1) In general.--In making grants under subsection 
        (a)(1), the Secretary shall give priority to--
                    ``(A) eligible entities that propose to target 
                geographic areas with high rates of--
                            ``(i) eligible but unenrolled children, 
                        including such children who reside in rural 
                        areas; or
                            ``(ii) racial and ethnic minorities and 
                        health disparity populations, including those 
                        proposals that address cultural and linguistic 
                        barriers to enrollment; and
                    ``(B) eligible entities that plan to engage in 
                outreach efforts with respect to individuals described 
                in subparagraph (A) and that are--
                            ``(i) Federal health safety net 
                        organizations; or
                            ``(ii) faith-based organizations or 
                        consortia.
            ``(2) 10 percent set aside for outreach to indian 
        children.--An amount equal to 10 percent of the funds 
        appropriated under subsection (g) for a fiscal year shall be 
        used by the Secretary to award grants to Indian Health Service 
        providers and urban Indian organizations receiving funds under 
        title V of the Indian Health Care Improvement Act (25 U.S.C. 
        1651 et seq.) for outreach to, and enrollment of, children who 
        are Indians.
    ``(c) Application.--An eligible entity that desires to receive a 
grant under subsection (a)(1) shall submit an application to the 
Secretary in such form and manner, and containing such information, as 
the Secretary may decide. Such application shall include--
            ``(1) quality and outcomes performance measures to evaluate 
        the effectiveness of activities funded by a grant awarded under 
        this section to ensure that the activities are meeting their 
        goals; and
            ``(2) an assurance that the entity shall--
                    ``(A) conduct an assessment of the effectiveness of 
                such activities against such performance measures; and
                    ``(B) cooperate with the collection and reporting 
                of enrollment data and other information determined as 
                a result of conducting such assessments to the 
                Secretary, in such form and manner as the Secretary 
                shall require.
    ``(d) Dissemination of Enrollment Data and Information Determined 
From Effectiveness Assessments; Annual Report.--The Secretary shall--
            ``(1) disseminate to eligible entities and make publicly 
        available the enrollment data and information collected and 
        reported in accordance with subsection (c)(2)(B); and
            ``(2) submit an annual report to Congress on the outreach 
        activities funded by grants awarded under this section.
    ``(e) Supplement, Not Supplant.--Federal funds awarded under this 
section shall be used to supplement, not supplant, non-Federal funds 
that are otherwise available for activities funded under this section.
    ``(f) Definitions.--In this section:
            ``(1) Eligible entity.--The term `eligible entity' means 
        any of the following:
                    ``(A) A State or local government.
                    ``(B) A Federal health safety net organization.
                    ``(C) A national, local, or community-based public 
                or nonprofit private organization.
                    ``(D) A faith-based organization or consortia, to 
                the extent that a grant awarded to such an entity is 
                consistent with the requirements of section 1955 of the 
                Public Health Service Act (42 U.S.C. 300x-65) relating 
                to a grant award to non-governmental entities.
                    ``(E) An elementary or secondary school.
            ``(2) Federal health safety net organization.--The term 
        `Federal health safety net organization' means--
                    ``(A) an Indian tribe, tribal organization, or an 
                urban Indian organization receiving funds under title V 
                of the Indian Health Care Improvement Act (25 U.S.C. 
                1651 et seq.), or an Indian Health Service provider;
                    ``(B) a Federally-qualified health center (as 
                defined in section 1905(l)(2)(B));
                    ``(C) a hospital defined as a disproportionate 
                share hospital for purposes of section 1923;
                    ``(D) a covered entity described in section 
                340B(a)(4) of the Public Health Service Act (42 U.S.C. 
                256b(a)(4)); and
                    ``(E) any other entity or a consortium that serves 
                children under a federally-funded program, including 
                the special supplemental nutrition program for women, 
                infants, and children (WIC) established under section 
                17 of the Child Nutrition Act of 1966 (42 U.S.C. 1786), 
                the head start and early head start programs under the 
                Head Start Act (42 U.S.C. 9801 et seq.), the school 
                lunch program established under the Richard B. Russell 
                National School Lunch Act, and an elementary or 
                secondary school.
            ``(3) Indians; indian tribe; tribal organization; urban 
        indian organization.--The terms `Indian', `Indian tribe', 
        `tribal organization', and `urban Indian organization' have the 
        meanings given such terms in section 4 of the Indian Health 
        Care Improvement Act (25 U.S.C. 1603).
    ``(g) Appropriation.--There is appropriated, out of any money in 
the Treasury not otherwise appropriated, $50,000,000 for each of fiscal 
years 2006 and 2007 for the purpose of awarding grants under this 
section. Amounts appropriated and paid under the authority of this 
section shall be in addition to amounts appropriated under section 2104 
and paid to States in accordance with section 2105, including with 
respect to expenditures for outreach activities in accordance with 
subsection (a)(1)(D)(iii) of that section.''.
    (b) Extending Use of Outstationed Workers To Accept Title XXI 
Applications.--Section 1902(a)(55) of the Social Security Act (42 
U.S.C. 1396a(a)(55)) is amended by striking ``or (a)(10)(A)(ii)(IX)'' 
and inserting ``(a)(10)(A)(ii)(IX), or (a)(10)(A)(ii)(XIV), and 
applications for child health assistance under title XXI''.

SEC. 253. STATE OPTION TO PROVIDE FOR SIMPLIFIED DETERMINATIONS OF A 
              CHILD'S FINANCIAL ELIGIBILITY FOR MEDICAL ASSISTANCE 
              UNDER MEDICAID OR CHILD HEALTH ASSISTANCE UNDER SCHIP.

    (a) Medicaid.--Section 1902(e) of the Social Security Act (42 
U.S.C. 1396a(e)) is amended by adding at the end the following:
            ``(13)(A) At the option of the State, the plan may provide 
        that financial eligibility requirements for medical assistance 
        are met for a child who is under an age specified by the State 
        (not to exceed 21 years of age) by using a determination made 
        within a reasonable period (as determined by the State) before 
        its use for this purpose, of the child's family or household 
        income, or if applicable for purposes of determining 
        eligibility under this title or title XXI, assets or resources, 
        by a Federal or State agency, or a public or private entity 
        making such determination on behalf of such agency, specified 
        by the plan, including (but not limited to) an agency 
        administering the State program funded under part A of title 
        IV, the Food Stamp Act of 1977, the Richard B. Russell National 
        School Lunch Act, or the Child Nutrition Act of 1966, 
        notwithstanding any differences in budget unit, disregard, 
        deeming, or other methodology, but only if--
                    ``(i) the agency has fiscal liabilities or 
                responsibilities affected or potentially affected by 
                such determination; and
                    ``(ii) any information furnished by the agency 
                pursuant to this subparagraph is used solely for 
                purposes of determining financial eligibility for 
                medical assistance under this title or for child health 
                assistance under title XXI.
            ``(B) Nothing in subparagraph (A) shall be construed--
                    ``(i) to authorize the denial of medical assistance 
                under this title or of child health assistance under 
                title XXI to a child who, without the application of 
                this paragraph, would qualify for such assistance;
                    ``(ii) to relieve a State of the obligation under 
                subsection (a)(8) to furnish medical assistance with 
                reasonable promptness after the submission of an 
                initial application that is evaluated or for which 
                evaluation is requested pursuant to this paragraph;
                    ``(iii) to relieve a State of the obligation to 
                determine eligibility for medical assistance under this 
                title or for child health assistance under title XXI on 
                a basis other than family or household income (or, if 
                applicable, assets or resources) if a child is 
                determined ineligible for such assistance on the basis 
                of information furnished pursuant to this paragraph; or
                    ``(iv) as affecting the applicability of any non-
                financial requirements for eligibility for medical 
                assistance under this title or child health assistance 
                under title XXI.''.
    (b) SCHIP.--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 1902(e)(13) (relating to the State 
                option to base a determination of child's financial 
                eligibility for assistance on financial determinations 
                made by a program providing nutrition or other public 
                assistance).''.
    (c) Effective Date.--The amendments made by this section take 
effect on October 1, 2005.

       TITLE III--IMPROVING CARE AND STRENGTHENING THE SAFETY NET

                      Subtitle A--High Needs Areas

SEC. 301. PURPOSE.

    It is the purpose of this subtitle to enhance the quality of life 
of residents of high need areas by increasing their access to the 
preventive and primary healthcare services provided by community health 
centers and rural health centers.

SEC. 302. HIGH NEED COMMUNITY HEALTH CENTERS.

    Section 330 of the Public Health Service Act (42 U.S.C. 254b) is 
amended--
            (1) by redesignating subsections (k) through (r) as 
        subsections (l) through (s), respectively;
            (2) by inserting after subsection (j), the following:
    ``(k) Priority for Residents of High Need Areas.--
            ``(1) In general.--In awarding grants under this section, 
        the Secretary shall give priority to eligible health centers in 
        high need areas.
            ``(2) Eligible health centers.--A health center is 
        described in this paragraph if such health center--
                    ``(A) is a health center as defined under 
                subsection (a) or a rural health clinic that receives 
                funds under section 330A;
                    ``(B) agrees to use grant funds to provide 
                preventive and primary healthcare services to residents 
                of high need areas;
                    ``(C) specifically requests such priority in the 
                grant application;
                    ``(D) describes how the community to be served 
                meets the definition of high need area; and
                    ``(E) otherwise meets all other grant requirements.
            ``(3) High need area.--
                    ``(A) In general.--In this subsection, the term 
                `high need area' means a county or a regional area 
                identified by the Secretary pursuant to the regulations 
                promulgated under subparagraph (B).
                    ``(B) Regulations.--The Secretary shall promulgate 
                regulations that define the term `high need area' for 
                purposes of this subsection. Such regulations shall 
                specify procedures that the Department shall follow in 
                determining estimates on a periodic basis in the United 
                States of the number of medically uninsured persons and 
                the national percentage of medically uninsured persons 
                served by health centers (referred to in this 
                subsection as the `ENP') and for the designation of an 
                area as a `high need area' if the estimated percentage 
                of medically uninsured individuals in the area is 
                higher than the national average and the estimated 
                percentage of medically uninsured individuals in the 
                area served by health centers in the area is below the 
                ENP.
                    ``(C) Medically underserved area.--The Secretary 
                shall designate residents of high need areas as 
                medically underserved for purposes of this section.
            ``(4) Funding preference.--The Secretary may limit the 
        amount of grants awarded to applicants from high need areas as 
        provided for in this subsection to not less than 25 percent of 
        the total amount of grants awarded under this subsection for 
        each grant category for each grant period.'';
            (3) in subsection (e)(1)(B), by striking ``subsection 
        (k)(3)'' and inserting ``subsection (l)(3)'';
            (4) in subsection (l)(3)(H)(iii) (as so redesignated), by 
        striking ``or (p)'' and inserting ``or (q)'';
            (5) in subsection (m) (as so redesignated), by striking 
        ``subsection (k)(3)'' and inserting ``subsection (l)(3)'';
            (6) in subsection (q) (as so redesignated), by striking 
        ``subsection (k)(3)(G)'' and inserting ``subsection 
        (l)(3)(G)''; and
            (7) in subsection (s)(2)(A) (as so redesignated), by 
        striking ``subsection (k)'' each place that such appears and 
        inserting ``subsection (l)''.

SEC. 303. GRANT APPLICATION PROCESS.

    Section 330(k) of the Public Health Service Act (42 U.S.C. 254b(k)) 
is amended by adding at the end the following:
            ``(5) Economic viability of applicants.--
                    ``(A) In general.--In considering applications 
                under this section, the Secretary shall ensure that an 
                application that demonstrates economic viability, 
                consistent with funding guidelines established by the 
                Secretary for purposes of this section, is not 
                disadvantaged in the evaluation process on the basis 
                that it relies solely on Federal funding.
                    ``(B) Qualification of individuals reviewing 
                applications.--The Secretary shall require verification 
                that all individuals who are evaluating community 
                health center grant applications have completed within 
                the 3-year period ending on the date on which the 
                application is being evaluated a training course on the 
                community health center program which addresses the 
                purposes served by community health centers, the 
                critical role of community health centers in the safety 
                net, expectations for the evaluation of applications, 
                and the criteria for awarding grant funding.
                    ``(C) Medically underserved designations.--Not 
                later than 6 months after the date of enactment of this 
                paragraph, the Administrator of the Health Resources 
                and Services Administration shall submit to the 
                appropriate committees of Congress a report concerning 
                the process for designating an area or population as 
                medically underserved. Such report shall contain 
                recommendations for ensuring that such designations are 
                current within the last 3 years. The report shall also 
                detail plans for ensuring subsequent review to maintain 
                an accurate reflection of community needs in areas and 
                populations designated as medically underserved. Not 
                later than 1 year after such date of enactment, the 
                Secretary shall promulgate regulations based on the 
                recommendations contained in the report.''.

          Subtitle B--Qualified Integrated Health Care systems

SEC. 321. GRANTS TO QUALIFIED INTEGRATED HEALTH CARE SYSTEMS.

    (a) Eligibility for Grants Under PHSA.--Part D of title III of the 
Public Health Service Act (42 U.S.C. 254b et seq.) is amended by adding 
at the end the following new subpart:

   ``Subpart XI--Promotion of Integrated Health Care Systems Serving 
                   Medically Underserved Populations

``SEC. 340H. GRANTS TO QUALIFIED INTEGRATED HEALTH CARE SYSTEMS.

    ``(a) Definitions.--For purposes of this section:
            ``(1) Qualified integrated health care system.--The term 
        `qualified integrated health care system' means an integrated 
        health care system that--
                    ``(A) has a demonstrated capacity and commitment to 
                provide a full range of primary, specialty, and 
                hospital care to a medically underserved population in 
                both inpatient and outpatient settings, as appropriate;
                    ``(B) is organized to provide such care in a 
                coordinated fashion;
                    ``(C) operates one or more integrated health 
                centers meeting the requirements of section 340I;
                    ``(D) meets the requirements of subsection (c)(3); 
                and
                    ``(E) agrees to use any funds received under this 
                section to supplement and not to supplant amounts 
                received from other sources for the provision of such 
                care.
            ``(2) Medically underserved population.--The term 
        `medically underserved population' has the meaning given such 
        term in section 330(b)(3).
    ``(b) Operating Grants.--
            ``(1) Authority.--The Secretary may make grants to private 
        nonprofit entities for the costs of the operation of qualified 
        integrated health care systems that provide primary, specialty, 
        and hospital care to medically underserved populations.
            ``(2) Amount.--
                    ``(A) In general.--The amount of any grant made in 
                any fiscal year under paragraph (1) to an integrated 
                health care system shall be determined by the Secretary 
                (taking into account the full range of care, including 
                specialty services, provided by the system), but may 
                not exceed the amount by which the costs of operation 
                of the system in such fiscal year exceed the total of--
                            ``(i) State, local, and other operational 
                        funding provided to the system; and
                            ``(ii) the fees, premiums, and third-party 
                        reimbursements which the system may reasonably 
                        be expected to receive for its operations in 
                        such fiscal year.
                    ``(B) Payments.--Payments under grants under 
                paragraph (1) shall be made in advance or by way of 
                reimbursement and in such installments as the Secretary 
                finds necessary and adjustments may be made for 
                overpayments or underpayments.
                    ``(C) Use of nongrant funds.--Nongrant funds 
                described in clauses (i) and (ii) of subparagraph (A), 
                including any such funds in excess of those originally 
                expected, shall be used as permitted under this 
                section, and may be used for such other purposes as are 
                not specifically prohibited under this section if such 
                use furthers the objectives of the project.
    ``(c) Applications.--
            ``(1) Submission.--No grant may be made under this section 
        unless an application therefore is submitted to, and approved 
        by, the Secretary. Such an application shall be submitted in 
        such form and manner and shall contain such information as the 
        Secretary shall prescribe.
            ``(2) Description of need.--
                    ``(A) In general.--An application for a grant under 
                subsection (b)(1) for an integrated health care system 
                shall include--
                            ``(i) a description of the need for health 
                        care services in the area served by the 
                        integrated health care system;
                            ``(ii) a demonstration by the applicant 
                        that the area or the population group to be 
                        served by the applicant has a shortage of 
                        personal health services; and
                            ``(iii) a demonstration that the health 
                        care system will be located so that it will 
                        provide services to the greatest number of 
                        individuals residing in such area or included 
                        in such population group.
                    ``(B) Demonstrations.--A demonstration shall be 
                made under clauses (ii) or (iii) of subparagraph (A) on 
                the basis of the criteria prescribed by the Secretary 
                under section 330(b)(3) or on the basis of any other 
                criteria which the Secretary may prescribe to determine 
                if the area or population group to be served by the 
                applicant has a shortage of personal health services.
                    ``(C) Condition of approval.--In considering an 
                application for a grant under subsection (b)(1), the 
                Secretary may require as a condition to the approval of 
                such application an assurance that any integrated 
                health center operated by the applicant will provide 
                any required primary health services and any additional 
                health services (as defined in section 340I) that the 
                Secretary finds are needed to meet specific health 
                needs of the area to be served by the applicant. Such a 
                finding shall be made in writing and a copy shall be 
                provided to the applicant.
            ``(3) Requirements.--The Secretary shall approve an 
        application for a grant under subsection (b)(1) if the 
        Secretary determines that the entity for which the application 
        is submitted is an integrated health care system (within the 
        meaning of subsection (a)) and that--
                    ``(A) the primary, specialty, and hospital care 
                provided by the system will be available and accessible 
                in the service area of the system promptly, as 
                appropriate, and in a manner which assures continuity;
                    ``(B) the system is participating (or will 
                participate) in a community consortium of safety net 
                providers serving such area (unless other such safety 
                net providers do not exist in a community, decline or 
                refuse to participate, or place unreasonable conditions 
                on their participation);
                    ``(C) all of the centers operated by the system are 
                accredited by a national accreditation body recognized 
                by the Secretary;
                    ``(D) the system will demonstrate its financial 
                responsibility by the use of such accounting procedures 
                and other requirements as may be prescribed by the 
                Secretary;
                    ``(E) the system provides or will provide services 
                to individuals who are eligible for medical assistance 
                under title XIX of the Social Security Act and to 
                individuals who are eligible for assistance under title 
                XXI of such Act;
                    ``(F) the system--
                            ``(i) has prepared a schedule of fees or 
                        payments for the provision of its services 
                        consistent with locally prevailing rates or 
                        charges and designed to cover its reasonable 
                        costs of operation and has prepared a 
                        corresponding schedule of discounts to be 
                        applied to the payment of such fees or 
                        payments, and which discounts are adjusted on 
                        the basis of the patient's ability to pay;
                            ``(ii)(I) will assure that no patient will 
                        be denied health care services due to an 
                        individual's inability to pay for such 
                        services; and
                            ``(II) will assure that any fees or 
                        payments required by the system for such 
                        services will be reduced or waived to enable 
                        the system to fulfill the assurance described 
                        in subclause (I); and
                            ``(iii) has submitted to the Secretary such 
                        reports as the Secretary may require to 
                        determine compliance with this subparagraph;
                    ``(G) the system has established a governing board 
                that selects the services to be provided by the center, 
                approves the center's annual budget, approves the 
                selection of a director for the center, and establishes 
                general policies for the center;
                    ``(H) the system has developed--
                            ``(i) an overall plan and budget that meets 
                        the requirements of the Secretary; and
                            ``(ii) an effective procedure for compiling 
                        and reporting to the Secretary such statistics 
                        and other information as the Secretary may 
                        require relating to--
                                    ``(I) the costs of its operations;
                                    ``(II) the patterns of use of its 
                                services;
                                    ``(III) the availability, 
                                accessibility, and acceptability of its 
                                services; and
                                    ``(IV) such other matters relating 
                                to operations of the applicant as the 
                                Secretary may require;
                    ``(I) the system will review periodically its 
                service area to--
                            ``(i) ensure that the size of such area is 
                        such that the services to be provided through 
                        the system (including any satellite) are 
                        available and accessible to the residents of 
                        the area promptly and as appropriate;
                            ``(ii) ensure that the boundaries of such 
                        area conform, to the extent practicable, to 
                        relevant boundaries of political subdivisions, 
                        school districts, and Federal and State health 
                        and social service programs; and
                            ``(iii) ensure that the boundaries of such 
                        area eliminate, to the extent possible, 
                        barriers to access to the services of the 
                        system, including barriers resulting from the 
                        area's physical characteristics, its 
                        residential patterns, its economic and social 
                        grouping, and available transportation;
                    ``(J) in the case of a system which serves a 
                substantial proportion of individuals of limited 
                English-speaking ability, the system has--
                            ``(i) developed a plan and made 
                        arrangements for providing services, to the 
                        extent practicable, in the predominant language 
                        or languages of such individuals and in the 
                        cultural context most appropriate to such 
                        individuals; and
                            ``(ii) identified one or more individuals 
                        on its staff who are fluent in such predominant 
                        language or languages and in English and whose 
                        responsibilities shall include providing 
                        guidance to such individuals and to other 
                        appropriate staff members with respect to 
                        cultural sensitivities and bridging linguistic 
                        and cultural differences;
                    ``(K) the system maintains appropriate referral 
                relationships between its hospitals, its physicians 
                with hospital privileges, and any integrated health 
                center operated by the system so that primary, 
                specialty care, and hospital care is provided in a 
                continuous and coordinated way; and
                    ``(L) the system encourages persons receiving or 
                seeking health services from the system to participate 
                in any public or private (including employer-offered) 
                health programs or plans for which the persons are 
                eligible, so long as the center, in complying with this 
                paragraph, does not violate the requirements of 
                subparagraph (F)(ii)(I).
    ``(d) Authorization of Appropriations.--
            ``(1) In general.--There are authorized to be appropriated 
        to carry out this section such sums as may be necessary for 
        each of fiscal years 2006 through 2010.
            ``(2) Funding report.--The Secretary shall annually prepare 
        and submit to the appropriate committees of Congress a report 
        concerning the distribution of funds under this section that 
        are provided to meet the health care needs of medically 
        underserved populations, and the appropriateness of the 
        delivery systems involved in responding to the needs of the 
        particular populations. Such report shall include an assessment 
        of the relative health care access needs of the targeted 
        populations and the rationale for any substantial changes in 
        the distribution of funds.
    ``(e) Records.--
            ``(1) In general.--Each entity which receives a grant under 
        subsection (b)(1) shall establish and maintain such records as 
        the Secretary shall require.
            ``(2) Availability.--Each entity which is required to 
        establish and maintain records under this subsection shall make 
        such books, documents, papers, and records available to the 
        Secretary or the Comptroller General of the United States, or 
        any of their duly authorized representatives, for examination, 
        copying, or mechanical reproduction on or off the premises of 
        such entity upon a reasonable request therefore. The Secretary 
        and the Comptroller General of the United States, or any of 
        their duly authorized representatives, shall have the authority 
        to conduct such examination, copying, and reproduction.
    ``(f) Audits.--
            ``(1) In general.--Each entity which receives a grant under 
        this section shall provide for an independent annual financial 
        audit of any books, accounts, financial records, files, and 
        other papers and property which relate to the disposition or 
        use of the funds received under such grant and such other funds 
        received by or allocated to the project for which such grant 
        was made. For purposes of assuring accurate, current, and 
        complete disclosure of the disposition or use of the funds 
        received, each such audit shall be conducted in accordance with 
        generally accepted accounting principles. Each audit shall 
        evaluate--
                    ``(A) the entity's implementation of the guidelines 
                established by the Secretary respecting cost 
                accounting;
                    ``(B) the processes used by the entity to meet the 
                financial and program reporting requirements of the 
                Secretary; and
                    ``(C) the billing and collection procedures of the 
                entity and the relation of the procedures to its fee 
                schedule and schedule of discounts and to the 
                availability of health insurance and public programs to 
                pay for the health services it provides.
        A report of each such audit shall be filed with the Secretary 
        at such time and in such manner as the Secretary may require.
            ``(2) Records.--Each entity which receives a grant under 
        this section shall establish and maintain such records as the 
        Secretary shall by regulation require to facilitate the audit 
        required by paragraph (1). The Secretary may specify by 
        regulation the form and manner in which such records shall be 
        established and maintained.
            ``(3) Availability of records.--Each entity which is 
        required to establish and maintain records or to provide for an 
        audit under this subsection shall make such books, documents, 
        papers, and records available to the Secretary or the 
        Comptroller General of the United States, or any of their duly 
        authorized representatives, for examination, copying, or 
        mechanical reproduction on or off the premises of such entity 
        upon a reasonable request therefore. The Secretary and the 
        Comptroller General of the United States, or any of their duly 
        authorized representatives, shall have the authority to conduct 
        such examination, copying, and reproduction.
            ``(4) Waiver.--The Secretary may, under appropriate 
        circumstances, waive the application of all or part of the 
        requirements of this subsection with respect to an entity.

``SEC. 340I. INTEGRATED HEALTH CENTER.

    ``(a) Integrated Health Center.--The term `integrated health 
center' means an health center that is operated by an integrated health 
care system and that serves a medically underserved population (as 
defined for purposes of section 330(b)(3)) by providing, either through 
the staff and supporting resources of the center or through contracts 
or cooperative arrangements--
            ``(1) required primary health services (as defined in 
        subsection (b)(1)); and
            ``(2) as may be appropriate for particular centers 
        additional health services (as defined in subsection (b)(2)) 
        necessary for the adequate support of the primary health 
        services required under paragraph (1);
for all residents of the area served by the center.
    ``(b) Definitions.--For purposes of this section:
            ``(1) Required primary health services.--The term `required 
        primary health services' means--
                    ``(A) basic health services which, for purposes of 
                this section, shall consist of--
                            ``(i) health services related to family 
                        medicine, internal medicine, pediatrics, 
                        obstetrics, or gynecology that are furnished by 
                        physicians and where appropriate, physician 
                        assistants, nurse practitioners, and nurse 
                        midwives;
                            ``(ii) diagnostic laboratory and radiologic 
                        services;
                            ``(iii) preventive health services, 
                        including--
                                    ``(I) prenatal and perinatal 
                                services;
                                    ``(II) appropriate cancer 
                                screening;
                                    ``(III) well-child services;
                                    ``(IV) immunizations against 
                                vaccine-preventable diseases;
                                    ``(V) screenings for elevated blood 
                                lead levels, communicable diseases, and 
                                cholesterol;
                                    ``(VI) pediatric eye, ear, and 
                                dental screenings to determine the need 
                                for vision and hearing correction and 
                                dental care;
                                    ``(VII) voluntary family planning 
                                services; and
                                    ``(VIII) preventive dental 
                                services;
                            ``(iv) emergency medical services; and
                            ``(v) pharmaceutical services and 
                        medication therapy management services as may 
                        be appropriate for particular centers;
                    ``(B) referrals to providers of medical services 
                (including specialty and hospital care referrals when 
                medically indicated) and other health-related services 
                (including substance abuse and mental health services);
                    ``(C) patient case management services (including 
                counseling, referral, and follow-up services) and other 
                services designed to assist health center patients in 
                establishing eligibility for and gaining access to 
                Federal, State, and local programs that provide or 
                financially support the provision of medical, social, 
                housing, educational, or other related services;
                    ``(D) services that enable individuals to use the 
                services of the center (including outreach and 
                transportation services and, if a substantial number of 
                the individuals in the population served by a center 
                are of limited English-speaking ability, the services 
                of appropriate personnel fluent in the languages spoken 
                by a predominant number of such individuals); and
                    ``(E) education of patients and the general 
                population served by the center regarding the 
                availability and proper use of health services.
            ``(2) Additional health services.--The term `additional 
        health services' means services that are not included as 
        required primary health services and that are appropriate to 
        meet the health needs of the population served by the center 
        involved. Such term may include--
                    ``(A) behavioral and mental health and substance 
                abuse services;
                    ``(B) recuperative care services; and
                    ``(C) environmental health services.''.
    (b) Coverage Under the Medicare Program.--
            (1) Part b benefit.--Section 1861(s)(2)(E) of the Social 
        Security Act (42 U.S.C. 1395x(s)(2)(E)) is amended--
                    (A) by striking ``services and'' and inserting 
                ``services,''; and
                    (B) by striking ``services'' the second place it 
                appears and inserting ``services, and integrated health 
                center services''.
            (2) Definitions.--Section 1861(aa) of the Social Security 
        Act (42 U.S.C. 1395x(aa)) is amended--
                    (A) in the heading--
                            (i) by striking ``Services and'' and 
                        inserting ``Services,''; and
                            (ii) by striking ``Services'' the second 
                        place it appears and inserting ``Services, and 
                        Integrated Health Center Services'';
                    (B) in paragraph (1)(B), by striking ``paragraph 
                (5))'' and inserting ``paragraph (7));
                    (C) by redesignating paragraphs (5), (6), and (7) 
                as paragraphs (7), (8), and (9), respectively; and
                    (D) by inserting after paragraph (4) the following 
                new paragraph:
    ``(5) The term `integrated health center services' means--
            ``(A) services of the type described in subparagraphs (A) 
        through (C) of paragraph (1); and
            ``(B) preventive primary health services that a center is 
        required to provide under section 340I of the Public Health 
        Service Act,
when furnished to an individual as an outpatient of an integrated 
health center, and for this purpose, any reference to a rural health 
clinic or a physician described in paragraph (2)(B) is deemed a 
reference to an integrated health center or a physician at the center, 
respectively.
    ``(6) The term `integrated health center' means a center that is 
operated by a qualified integrated health care system (as defined in 
section 340H(a)(1) of the Public Health Service Act that--
            ``(A) is receiving a grant under section 340H of such Act; 
        or
            ``(B) is determined by the Secretary to meet the 
        requirements for receiving such a grant.''.
            (3) Payment.--
                    (A) In general.--Section 1832(a)(2)(D) of the 
                Social Security Act (42 U.S.C. 1395k(a)(2)(D)) is 
                amended--
                            (i) by striking ``and (ii)'' and inserting 
                        ``, (ii)''; and
                            (ii) by striking ``services'' the second 
                        place it appears and inserting ``services, and 
                        (iii) integrated health center services.''.
                    (B) Part b deductible does not apply.--Section 
                1833(b)(4) of the Social Security Act (42 U.S.C. 
                13951(b)(4)) is amended by inserting ``or integrated 
                health center services'' after ``Federally qualified 
                health center services''.
                    (C) Exclusion from payment removed.--The second 
                sentence of section 1862(a) of the Social Security Act 
                (42 U.S.C. 1395y(a)) is amended by inserting ``or 
                integrated health center services described in section 
                1861 (aa)(5)(B)'' after ``section 1861(aa)(3)(B)''.
                    (D) Waiver of anti-kickback restriction.--Section 
                1128B(b)(3)(D) of the Social Security Act (42 U.S.C. 
                1320a-7b(b)(3)(D)) is amended by inserting ``or by an 
                integrated health center'' after ``Federally qualified 
                health center''.
            (4) Conforming amendments.--(A) Clauses (ii) and (iv) of 
        section 1834(a)(1)(E) of the Social Security Act (42 U.S.C. 
        1395m(a)(1)(E)) are each amended by striking ``section 
        1861(aa)(5)'' and inserting ``section 1861(aa)(7)''.
            (B) Section 1842(b)(18)(C)(i) of the Social Security Act 
        (42 U.S.C. 1395u(b)(18)(C)(i)) is amended by striking ``section 
        1861(aa)(5)'' and inserting ``section 1861(aa)(7)''.
            (C) Section 1861(s)(2) of the Social Security Act (42 
        U.S.C. 1395x(s)(2)) is amended--
                    (i) in subparagraph (H)(i), by striking 
                ``subsection (aa)(5)'' and inserting ``subsection 
                (aa)(7)''; and
                    (ii) in subparagraph (K)--
                            (I) by striking ``subsection (aa)(5)'' each 
                        place it appears and inserting ``subsection 
                        (aa)(7)''; and
                            (II) by striking ``subsection (aa)(6)'' and 
                        inserting ``subsection (aa)(8)''.
            (D) Section 1861(dd)(3)(B) of the Social Security Act (42 
        U.S.C. 1395x(dd)(3)(B)) is amended by striking ``subsection 
        (aa)(5)'' and inserting ``subsection (aa)(7)''.
    (c) Recognition Under Medicaid.--
            (1) Coverage.--Section 1905(a)(2) of the Social Security 
        Act (42 U.S.C. 1396d(a)(2)) is amended--
                    (A) by striking ``and (C)'' and inserting ``, 
                (C)''; and
                    (B) by inserting ``, and
                    ``(D) integrated health center services (as defined 
                in subsection (1)(3)(A)) and any other ambulatory 
                services offered by the integrated health center and 
                which are otherwise included in the plan.'' after 
                ``included in the plan'' the second place it appears.
            (2) Definitions.--Section 1905(l) of such Act (42 U.S.C. 
        1396d(l)) is amended by adding at the end the following:
    ``(3)(A) The term `integrated health center services' means 
services of the type described in subparagraphs (A) through (C) of 
section 1861(aa) when furnished to an individual as a patient of an 
integrated health center and, for this purpose, any reference to a 
rural health clinic or a physician described in section 1861(aa)(2)(B) 
is deemed a reference to an integrated health center or a physician at 
the center, respectively.
    ``(B) The term `integrated health center' means a center that is 
operated by a qualified integrated health care system that--
            ``(i) is receiving a grant under section 340H of the Public 
        Health Service Act; or
            ``(ii) is determined by the Secretary, based on the 
        recommendations of the Administrator of the Centers for 
        Medicare & Medicaid Services, to meet the requirements for 
        receiving such a grant.''.
            (3) Payment.--Section 1902(a) of such Act (42 U.S.C. 
        1396a(a)) is amended--
                    (A) in paragraph (15), by inserting ``and for 
                services described in clause (D) of section 1905(a)(2) 
                in accordance with the provisions of subsection (cc)'' 
                after ``subsection (bb)''; and
                    (B) by adding at the end the following:
    ``(cc) Payment for Services Provided by Integrated Health 
Centers.--
            ``(1) In general.--Beginning with fiscal year 2006 with 
        respect to services furnished on or after January 1, 2006, and 
        each succeeding fiscal year, the State plan shall provide for 
        payment for services described in section 1905(a)(2)(D) 
        furnished by an integrated health center in accordance with the 
        provisions of this subsection.
            ``(2) Fiscal year 2006.--Subject to paragraph (4), for 
        services furnished on and after January 1, 2006, during fiscal 
        year 2006, the State plan shall provide for payment for such 
        services in an amount (calculated on a per visit basis) that is 
        equal to 100 percent of the average of the costs of the center 
        of furnishing such services during fiscal years 2004 and 2005 
        which are reasonable and related to the cost of furnishing such 
        services, or based on such other tests of reasonableness as the 
        Secretary prescribes in regulations under section 1833(a)(3), 
        or, in the case of services to which such regulations do not 
        apply, the same methodology used under section 1833(a)(3), 
        adjusted to take into account any increase or decrease in the 
        scope of such services furnished by the center during fiscal 
        years 2004 and 2005.
            ``(3) Fiscal year 2007 and succeeding fiscal years.--
        Subject to paragraph (4), for services furnished during fiscal 
        year 2007 or a succeeding fiscal year, the State plan shall 
        provide for payment for such services in an amount (calculated 
        on a per visit basis) that is equal to the amount calculated 
        for such services under this subsection for the preceding 
        fiscal year--
                    ``(A) increased by the percentage increase in the 
                MEI (as defined in section 1842(i)(3)) for that fiscal 
                year; and
                    ``(B) adjusted to take into account any increase or 
                decrease in the scope of such services furnished by the 
                center during that fiscal year.
            ``(4) Establishment of initial year payment amount for new 
        centers.--In any case in which an entity first qualifies as an 
        integrated health center after fiscal year 2006, the State plan 
        shall provide for payment for services described in section 
        1905(a)(2)(D) furnished by the center in the first fiscal year 
        in which the center so qualifies in an amount (calculated on a 
        per visit basis) that is equal to 100 percent of the costs of 
        furnishing such services during such fiscal year based on the 
        rates established under this subsection for the fiscal year for 
        other such centers located in the same or adjacent area with a 
        similar case load or, in the absence of such a center, in 
        accordance with the regulations and methodology referred to in 
        paragraph (2) or based on such other tests of reasonableness as 
        the Secretary may specify. For each fiscal year following the 
        fiscal year in which the entity first qualifies as an 
        integrated health center, the State plan shall provide for the 
        payment amount to be calculated in accordance with paragraph 
        (3).
            ``(5) Administration in the case of managed care.--
                    ``(A) In general.--In the case of services 
                furnished by an integrated health center pursuant to a 
                contract between the center and a managed care entity 
                (as defined in section 1932(a)(1)(B)), the State plan 
                shall provide for payment to the center by the State of 
                a supplemental payment equal to the amount (if any) by 
                which the amount determined under paragraphs (2), (3), 
                and (4) exceeds the amount of the payments provided 
                under the contract.
                    ``(B) Payment schedule.--The supplemental payment 
                required under subparagraph (A) shall be made pursuant 
                to a payment schedule agreed to by the State and the 
                integrated health center, but in no case less 
                frequently than every 4 months.
            ``(6) Alternative payment methodologies.--Notwithstanding 
        any other provision of this section, the State plan may provide 
        for payment in any fiscal year to an integrated health center 
        for services described in section 1905(a)(2)(D) in an amount 
        which is determined under an alternative payment methodology 
        that--
                    ``(A) is agreed to by the State and the center; and
                    ``(B) results in payment to the center of an amount 
                which is at least equal to the amount otherwise 
                required to be paid to the center under this 
                section.''.
            (4) Waiver prohibited.--Section 1915(b) of the Social 
        Security Act (42 U.S.C.1396n(b)) is amended in the matter 
        preceding paragraph (1), by inserting ``1902(cc),'' after 
        ``1902(bb),''.
    (d) Protection Against Liability.--Section 224(g) of the Public 
Health Service Act (42 U.S.C. 233(g)) is amended--
            (1) In paragraph (4), by striking ``An entity'' and 
        inserting ``Subject to paragraph (6), an entity''; and
            (2) by adding at the end the following:
    ``(6) For purposes of this section--
            ``(A) a qualified integrated health care system receiving a 
        grant under section 340H and any integrated health center 
        operated by such system shall be considered to be an entity 
        described in paragraph (4); and
            ``(B) the provisions of this section shall apply to such 
        system and centers in the same manner as such provisions apply 
        to an entity described in such paragraph (4), except that--
                    ``(i) notwithstanding paragraph (1)(B), the deeming 
                of any system or center, or of an officer, governing 
                board member, employee, or contractor of such system or 
                center, to be an employee of the Public Health Service 
                for purposes of this section shall apply only with 
                respect to items and services that are furnished to a 
                member of the underserved population served by the 
                entity;
                    ``(ii) notwithstanding paragraph (3), this 
                paragraph shall apply only with respect to causes of 
                action arising from acts or omissions that occur on or 
                after January 1, 2006; and
                    ``(iii) the Secretary shall make separate estimates 
                under subsection (k)(1) with respect to such systems 
                and centers and entities described in paragraph (4) 
                (other than such systems and centers), establish 
                separate funds under subsection (k)(2) with respect to 
                such groups of entities, and any appropriations under 
                this subsection for such systems and centers shall be 
                separate from the amounts authorized by subsection 
                (k)(2).''.
    (e) Effective Date.--The amendments made subsections (b) and (c) 
shall apply to items and services furnished on or after October 1, 
2005.

                  Subtitle C--Miscellaneous Provisions

SEC. 331. COMMUNITY HEALTH CENTER COLLABORATIVE ACCESS EXPANSION.

    Section 330 of the Public Health Service Act (42 U.S.C. 254b) is 
amended by adding at the end the following:
    ``(s) Miscellaneous Provisions.--
            ``(1) Rule of construction with respect to rural health 
        clinics.--
                    ``(A) In general.--Nothing in this section shall be 
                construed to prevent a community health center from 
                contracting with a federally certified rural health 
                clinic (as defined by section 1861(aa)(2) of the Social 
                Security Act) for the delivery of primary health care 
                services that are available at the rural health clinic 
                to individuals who would otherwise be eligible for free 
                or reduced cost care if that individual were able to 
                obtain that care at the community health center. Such 
                services may be limited in scope to those primary 
                health care services available in that rural health 
                clinic.
                    ``(B) Assurances.--In order for a rural health 
                clinic to receive funds under this section through a 
                contract with a community health center under paragraph 
                (1), such rural health clinic shall establish policies 
                to ensure--
                            ``(i) nondiscrimination based upon the 
                        ability of a patient to pay; and
                            ``(ii) the establishment of a sliding fee 
                        scale for low-income patients.''.

SEC. 332. IMPROVEMENTS TO SECTION 340B PROGRAM.

    (a) Elimination of Group Purchasing Prohibition for Certain 
Hospitals.--Section 340B(a)(4)(L) of the Public Health Service Act (42 
U.S.C. 256b(a)(4)(L)) is amended--
            (1) in clause (i), by adding ``and'' at the end;
            (2) in clause (ii), by striking ``; and'' and inserting a 
        period; and
            (3) by striking clause (iii).
    (b) Permitting Use of Multiple Contract Pharmacies.--Section 340B f 
the Public Health Service Act (42 U.S.C. 256b) is amended by adding at 
the end the following:
    ``(e) Permitting Use of Multiple Contract Pharmacies.--Nothing in 
this section shall be construed as prohibiting a covered entity from 
entering into contracts with more than one pharmacy for the provision 
of covered drugs, including a contract that--
            ``(1) supplements the use of an in-house pharmacy 
        arrangement; or
            ``(2) requires the approval of the Secretary.''.
    (c) Improvements in Program Administration.--Section 340B of the 
Public Health Service Act (42 U.S.C. 256b), as amended by subsection 
(b), is further amended by adding at the end the following:
    ``(f) Improvements in Program Administration.--
            ``(1) In general.--The Secretary shall provide, from funds 
        appropriated under paragraph (2), for improvements in the 
        integrity and administration of the program under this section 
        in order to prevent abuse and misuse of discounted prices made 
        available under this section. Such improvements shall include 
        the following:
                    ``(A) The development of a system to verify the 
                accuracy of information regarding covered entities that 
                is listed on the Internet website of the Department of 
                Health and Human Services relating to this section.
                    ``(B) The establishment of a third-party auditing 
                system by which covered entities and manufacturers are 
                regularly audited to ensure compliance with the 
                requirements of this section.
                    ``(C) The conduct of such audits under subsection 
                (a)(5)(C) that supplement the audits conducted under 
                subparagraph (B) as the Secretary determines 
                appropriate and the implementation of dispute 
                resolution guidelines and other compliance programs.
                    ``(D) The development of more detailed guidance 
                regarding the definition of section 340B patients and 
                describing options for billing under the medicaid 
                program under title XIX of the Social Security Act in 
                order to avoid duplicative discounts.
                    ``(E) The issuance of advisory opinions within 
                defined time periods in response to questions from 
                manufacturers or covered entities regarding the 
                application of the requirements of this section in 
                specific factual circumstances.
                    ``(F) Insofar as the Secretary determines feasible, 
                providing access through the Internet website of the 
                Department of Health and Human Services on the prices 
                for covered drugs made available under this section, 
                but only in a manner (such as through the use of 
                password protection) that limits such access to covered 
                entities.
                    ``(G) The improved dissemination of educational 
                materials regarding the program under this section to 
                covered entities that are not currently participating 
                in such programs including regional educational 
                sessions.
            ``(2) Authorization of appropriations.--There are 
        authorized to be appropriated to carry out this subsection, 
        such sums as may be necessary for fiscal year 2006 and each 
        succeeding fiscal year.''.

SEC. 333. FORBEARANCE FOR STUDENT LOANS FOR PHYSICIANS PROVIDING 
              SERVICES IN FREE CLINICS.

    (a) In General.--Section 428(c)(3)(A) of the Higher Education Act 
of 1965 (20 U.S.C. 1078(c)(3)(A)) is amended--
            (1) in clause (i)--
                    (A) in subclause (III), by striking ``or'' at the 
                end;
                    (B) in subclause (V), by adding ``or'' at the end; 
                and
                    (C) by adding at the end the following:
                                    ``(V) is volunteering without pay 
                                for at least 80 hours per month at a 
                                free clinic as defined under section 
                                224 of the Public Health Service 
                                Act;''; and
            (2) in clause (ii)(III), by inserting ``or (i)(V)'' after 
        ``clause (i)(III)''.
    (b) Perkins Program.--Section 464(e) of the Higher Education Act of 
1965 (20 U.S.C. 1087dd(e)) is amended--
            (1) in paragraph (1), by striking ``or'' at the end;
            (2) in paragraph (2), by striking the period and inserting 
        ``; or''; and
            (3) by adding at the end the following:
            ``(3) the borrower is volunteering without pay for at least 
        80 hours per month at a free clinic as defined under section 
        224 of the Public Health Service Act.''.

SEC. 334. AMENDMENTS TO THE PUBLIC HEALTH SERVICE ACT RELATING TO 
              LIABILITY.

    Section 224 of the Public Health Service Act (42 U.S.C. 233) is 
amended--
            (1) in subsection (g)(1)--
                    (A) in subparagraph (A)--
                            (i) in the first sentence, by striking ``or 
                        employee'' and inserting ``employee, or 
                        (subject to subsection (k)(4)) volunteer 
                        practitioner''; and
                            (ii) in the second sentence, by inserting 
                        ``and subsection (k)(4)'' after ``subject to 
                        paragraph (5)''; and
                    (B) by adding at the end the following:
    ``(I) For purposes of this subsection, the term `employee' shall 
include a health professional who volunteers to provide health-related 
services for an entity described in paragraph (4).'';
            (2) in subsection (k), by adding at the end the following:
    ``(4)(A) Subsections (g) through (m) apply with respect to 
volunteer practitioners beginning with the first fiscal year for which 
an appropriations Act provides that amounts in the fund under paragraph 
(2) are available with respect to such practitioners.
    ``(B) For purposes of subsections (g) through (m), the term 
`volunteer practitioner' means a practitioner who, with respect to an 
entity described in subsection (g)(4), meets the following conditions:
            ``(i) The practitioner is a licensed physician or a 
        licensed clinical psychologist.
            ``(ii) At the request of such entity, the practitioner 
        provides services to patients of the entity, at a site at which 
        the entity operates or at a site designated by the entity. The 
        weekly number of hours of services provided to the patients by 
        the practitioner is not a factor with respect to meeting 
        conditions under this subparagraph.
            ``(iii) The practitioner does not for the provision of such 
        services receive any compensation from such patients, from the 
        entity, or from third-party payors (including reimbursement 
        under any insurance policy or health plan, or under any Federal 
        or State health benefits program).'';
            (3) in subsection (o)(2)--
                    (A) in subparagraph (D), by striking clause (i) and 
                inserting the following:
                    ``(i) The health care practitioner may provide the 
                services involved as an employee of the free clinic, or 
                may receive repayment from the free clinic only for 
                reasonable expenses incurred by the health care 
                practitioner in the provision of the services to the 
                individual.''; and
                    (B) by adding at the end the following:
            ``(G) The health care practitioner is providing the 
        services involved as a paid employee of the free clinic.''; and
            (4) in each of subsections (g), (i), (j), (k), (l), and 
        (m), by striking ``employee, or contractor'' each place such 
        term appears and inserting ``employee, volunteer practitioner, 
        or contractor''.

SEC. 335. SENSE OF THE SENATE CONCERNING HEALTH DISPARITIES.

    It is the sense of the Senate that additional measures are needed 
to reduce or eliminate disparities in health care related to race, 
ethnicity, socioeconomic status, and geography that affect access to 
quality health care.
                                 <all>
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