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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 16 Introduced in Senate (IS)]

  1st Session
                                 S. 16

 To reduce to the cost of quality health care coverage and improve the 
        availability of health care coverage for all Americans.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                            January 24, 2005

  Mr. Kennedy (for himself, Mr. Reid, Ms. Stabenow, Mr. Corzine, Mr. 
Schumer, Ms. Mikulski, Mr. Akaka, Mr. Inouye, Mr. Levin, Mr. Kerry, Mr. 
   Lautenberg, Mr. Rockefeller, Mr. Dodd, Mr. Pryor, and Mr. Durbin) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL

 
 To reduce to the cost of quality health care coverage and improve the 
        availability of health care coverage for all Americans.

    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 ``Affordable Health 
Care Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
      TITLE I--MAKING PRESCRIPTION DRUGS MORE SAFE AND AFFORDABLE

                Subtitle A--Access to Prescription Drugs

Sec. 101. Findings.
Sec. 102. Repeal of certain section regarding importation of 
                            prescription drugs.
Sec. 103. Importation of prescription drugs; waiver of certain import 
                            restrictions.
Sec. 104. Additional waivers regarding personal importation; 
                            enforcement policies of Secretary.
Sec. 105. Disposition of certain drugs denied admission into United 
                            States.
Sec. 106. Civil actions regarding property.
Sec. 107. Wholesale distribution of drugs; Statements regarding prior 
                            sale, purchase, or trade.
Sec. 108. Repeal of importation exemption under Controlled Substances 
                            Import and Export Act.
Sec. 109. Effect on administration practices.
                    Subtitle B--Ensuring Drug Safety

Sec. 121. Drug safety. 
Sec. 122. Report by GAO on drug safety.
              TITLE II--MODERNIZING THE HEALTH CARE SYSTEM

Sec. 201. Amendment to the Public Health Service Act.
Sec. 202. Standardized measures of quality health care and data 
                            collection.
TITLE III--MAKING HEALTH CARE MORE AFFORDABLE FOR CHILDREN AND PREGNANT 
                                 WOMEN

                   Subtitle A--Covering all Children

Sec. 300. Findings.
   Chapter 1--Expanded Coverage of Children Under Medicaid and SCHIP

Sec. 301. State option to receive 100 percent fmap for medical 
                            assistance for children in poverty in 
                            exchange for expanded coverage of children 
                            in working poor families under title XXI.
Sec. 302. Elimination of cap on SCHIP funding for States that expand 
                            eligibility for children.
   Chapter 2--State Options for Incremental Child Coverage Expansions

Sec. 311. State option to enroll low-income children of State employees 
                            in SCHIP.
Sec. 312. State option for passive renewal of eligibility for children 
                            under medicaid and SCHIP.
  Chapter 3--Tax Incentives for Health Insurance Coverage of Children

Sec. 321. Refundable credit for health insurance coverage of children.
Sec. 322. Forfeiture of personal exemption for any child not covered by 
                            health insurance.
                        Chapter 4--Miscellaneous

Sec. 331. Requirement for group market health insurers to offer 
                            dependent coverage option for workers with 
                            children.
Sec. 332. Effective date.
                  Subtitle B--Covering Pregnant Women

Sec. 351. State option to expand or add coverage of pregnant women 
                            under the medicaid program and State 
                            Children's Health Insurance Program.
Sec. 352. Optional coverage of legal immigrants under the medicaid 
                            program and SCHIP.
Sec. 353. Promoting cessation of tobacco use under the medicaid 
                            program.
Sec. 354. Promoting cessation of tobacco use under the maternal and 
                            child health services block grant program.
Sec. 355. State option to provide family planning services and supplies 
                            to individuals with incomes that do not 
                            exceed a State's income eligibility level 
                            for medical assistance.
Sec. 356. State option to extend the postpartum period for provision of 
                            family planning services and supplies.
Sec. 357. State option to provide wrap-around SCHIP coverage to 
                            children who have other health coverage.
Sec. 358. Innovative outreach programs.
            Subtitle C--Affirming the Importance of Medicaid

Sec. 361. Sense of the Senate.
        TITLE IV--REDUCING HEALTH CARE COSTS FOR SMALL EMPLOYERS

                         Subtitle A--Tax Relief

Sec. 401. Refundable credit for small business employee health 
                            insurance expenses.
                    Subtitle B--Three-Share Program

Sec. 421. Three-share programs.

      TITLE I--MAKING PRESCRIPTION DRUGS MORE SAFE AND AFFORDABLE

                Subtitle A--Access to Prescription Drugs

SEC. 101. FINDINGS.

    Congress finds that--
            (1) Americans unjustly pay up to 5 times more to fill their 
        prescriptions than consumers in other countries;
            (2) the United States is the largest market for 
        pharmaceuticals in the world, yet American consumers pay the 
        highest prices for brand pharmaceuticals in the world;
            (3) a prescription drug is neither safe nor effective to an 
        individual who cannot afford it;
            (4) allowing and structuring the importation of 
        prescription drugs to ensure access to safe and affordable 
        drugs approved by the Food and Drug Administration will provide 
        a level of safety to American consumers that they do not 
        currently enjoy;
            (5) American seniors alone will spend $1,800,000,000,000 on 
        pharmaceuticals over the next 10 years; and
            (6) allowing open pharmaceutical markets could save 
        American consumers at least $38,000,000,000 each year.

SEC. 102. REPEAL OF CERTAIN SECTION REGARDING IMPORTATION OF 
              PRESCRIPTION DRUGS.

    Chapter VIII of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
381 et seq.) is amended by striking section 804.

SEC. 103. IMPORTATION OF PRESCRIPTION DRUGS; WAIVER OF CERTAIN IMPORT 
              RESTRICTIONS.

    (a) In General.--Chapter VIII of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 381 et seq.), as amended by section 102, is 
further amended by inserting after section 803 the following:

``SEC. 804. COMMERCIAL AND PERSONAL IMPORTATION OF PRESCRIPTION DRUGS.

    ``(a) Importation of Prescription Drugs.--
            ``(1) In general.--The Secretary shall in accordance with 
        this section provide by regulation that, in the case of 
        qualifying drugs imported or offered for import into the United 
        States from registered exporters or by registered importers--
                    ``(A) the limitation on importation that is 
                established in section 801(d)(1) is waived; and
                    ``(B) the standards referred to in section 801(a) 
                regarding admission of the drugs are subject to 
                subsection (g) of this section (including with respect 
                to qualifying drugs to which section 801(d)(1) does not 
                apply).
            ``(2) Importers.--A qualifying drug may not be imported 
        under paragraph (1) unless--
                    ``(A) the drug is imported by a pharmacy or a 
                wholesaler that is a registered importer; or
                    ``(B) the drug is imported by an individual for 
                personal use or for the use of a family member of the 
                individual (not for resale) from a registered exporter.
            ``(3) Rule of construction.--This section shall apply only 
        with respect to a drug that is imported or offered for import 
        into the United States--
                    ``(A) by a registered importer; or
                    ``(B) from a registered exporter to an individual.
            ``(4) Definitions.--
                    ``(A) Registered exporter; registered importer.--
                For purposes of this section:
                            ``(i) The term `registered exporter' means 
                        an exporter for which a registration under 
                        subsection (b) has been approved and is in 
                        effect.
                            ``(ii) The term `registered importer' means 
                        a pharmacy, group of pharmacies, or a 
                        wholesaler for which a registration under 
                        subsection (b) has been approved and is in 
                        effect.
                            ``(iii) The term `registration condition' 
                        means a condition that must exist for a 
                        registration under subsection (b) to be 
                        approved.
                    ``(B) Qualifying drug.--For purposes of this 
                section, the term `qualifying drug' means a 
                prescription drug, other than any of the following:
                            ``(i) A controlled substance, as defined in 
                        section 102 of the Controlled Substances Act 
                        (21 U.S.C. 802).
                            ``(ii) A biological product, as defined in 
                        section 351 of the Public Health Service Act 
                        (42 U.S.C. 262).
                            ``(iii) An infused drug, including a 
                        peritoneal dialysis solution.
                            ``(iv) An intravenously injected drug.
                            ``(v) A drug that is inhaled during 
                        surgery.
                    ``(C) Other definitions.--For purposes of this 
                section:
                            ``(i) The term `exporter' means a person 
                        that is in the business of exporting a drug 
                        from Canada to individuals in the United States 
                        or that, pursuant to submitting a registration 
                        under subsection (b), seeks to be in such 
                        business.
                            ``(ii) The term `importer' means a 
                        pharmacy, a group of pharmacies, or a 
                        wholesaler that is in the business of importing 
                        a drug into the United States or that, pursuant 
                        to submitting a registration under subsection 
                        (b), seeks to be in such business.
                            ``(iii) The term `pharmacist' means a 
                        person licensed by a State to practice 
                        pharmacy, including the dispensing and selling 
                        of prescription drugs.
                            ``(iv) The term `pharmacy' means a person 
                        that--
                                    ``(I) is licensed by a State to 
                                engage in the business of selling 
                                prescription drugs at retail; and
                                    ``(II) employs 1 or more 
                                pharmacists.
                            ``(v) The term `prescription drug' means a 
                        drug that is described in section 503(b)(1).
                            ``(vi) The term `wholesaler'--
                                    ``(I) means a person licensed as a 
                                wholesaler or distributor of 
                                prescription drugs in the United States 
                                under section 503(e)(2)(A); and
                                    ``(II) does not include a person 
                                authorized to import drugs under 
                                section 801(d)(1).
                    ``(D) Permitted country.--The term `permitted 
                country' means--
                            ``(i) Australia;
                            ``(ii) Canada;
                            ``(iii) a member country of the European 
                        Union as of January 1, 2003;
                            ``(iv) Japan;
                            ``(v) New Zealand; and
                            ``(vi) Switzerland.
    ``(b) Registration of Importers and Exporters.--
            ``(1) Registration of importers and exporters.--A 
        registration condition is that the importer or exporter 
        involved (referred to in this subsection as a `registrant') 
        submits to the Secretary a registration containing the 
        following:
                    ``(A) The name of the registrant and an 
                identification of all places of business of the 
                registrant that relate to qualifying drugs, including 
                each warehouse or other facility owned or controlled 
                by, or operated for, the registrant.
                    ``(B) Such information as the Secretary determines 
                to be necessary to demonstrate that the registrant is 
                in compliance with registration conditions under--
                            ``(i) in the case of an importer, 
                        subsections (c), (d), (e), (g), and (j) 
                        (relating to the sources of exported drugs; the 
                        inspection of facilities of the importer; the 
                        payment of fees; compliance with the standards 
                        referred to in section 801(a); and maintenance 
                        of records and samples); or
                            ``(ii) in the case of an exporter, 
                        subsections (c), (d), (f), (g), (h), (i), and 
                        (j) (relating to the sources of exported drugs; 
                        the inspection of facilities of the exporter 
                        and the marking of compliant shipments; the 
                        payment of fees; and compliance with the 
                        standards referred to in section 801(a); being 
                        licensed as a pharmacist; conditions for 
                        individual importation from Canada; and 
                        maintenance of records and samples).
                    ``(C) An agreement by the registrant that the 
                registrant will not under subsection (a) import or 
                export any drug that is not a qualifying drug.
                    ``(D) An agreement by the registrant to--
                            ``(i) notify the Secretary of a recall or 
                        withdrawal of a drug distributed in a permitted 
                        country that the registrant has exported or 
                        imported, or intends to export or import, to 
                        the United States under subsection (a);
                            ``(ii) provide for the return to the 
                        registrant of such drug; and
                            ``(iii) cease, or not begin, the 
                        exportation or importation of such drug unless 
                        the Secretary has notified the registrant that 
                        exportation or importation of such drug may 
                        proceed.
                    ``(E) An agreement by the registrant to ensure and 
                monitor compliance with each registration condition, to 
                promptly correct any noncompliance with such a 
                condition, and to promptly report to the Secretary any 
                such noncompliance.
                    ``(F) A plan describing the manner in which the 
                registrant will comply with the agreement under 
                subparagraph (E).
                    ``(G) An agreement by the registrant to enforce a 
                contract under subsection (c)(3)(B) against a party in 
                the chain of custody of a qualifying drug with respect 
                to the authority of the Secretary under clauses (ii) 
                and (iii) of that subsection.
                    ``(H) An agreement by the registrant to notify the 
                Secretary of--
                            ``(i) any change that the registrant 
                        intends to make regarding information provided 
                        under subparagraph (A) or (B); and
                            ``(ii) any change that the registrant 
                        intends to make in the compliance plan under 
                        subparagraph (F).
                    ``(I) In the case of an exporter--
                            ``(i) An agreement by the exporter that a 
                        qualifying drug will not under subsection (a) 
                        be exported to any individual not authorized 
                        pursuant to subsection (a)(2)(B) to be an 
                        importer of such drug.
                            ``(ii) An agreement to post a bond, payable 
                        to the Treasury of the United States if, after 
                        opportunity for an informal hearing, the 
                        Secretary determines that the exporter has 
                        exported a drug to the United States that is 
                        not a qualifying drug or that is not in 
                        compliance with subsections (g) or (i), that is 
                        equal in value to the lesser of--
                                    ``(I) the value of drugs exported 
                                by the exporter to the United States in 
                                a typical 4-week period over the course 
                                of a year under this section; or
                                    ``(II) $1,000,000.
                    ``(J) Such other provisions as the Secretary may 
                require to protect the public health while permitting--
                            ``(i) the importation by pharmacies, groups 
                        of pharmacies, wholesalers as registered 
                        importers of qualifying drugs under subsection 
                        (a); and
                            ``(ii) importation by individuals of 
                        qualifying drugs under subsection (a).
            ``(2) Approval or disapproval of registration.--
                    ``(A) In general.--Not later than 90 days after the 
                date on which a registrant submits to the Secretary a 
                registration under paragraph (1), the Secretary shall 
                notify the registrant whether the registration is 
                approved or is disapproved. The Secretary shall 
                disapprove a registration if there is reason to believe 
                that the registrant is not in compliance with one or 
                more registration conditions, and shall notify the 
                registrant of such reason. In the case of a disapproved 
                registration, the Secretary shall subsequently notify 
                the registrant that the registration is approved if the 
                Secretary determines that the registrant is in 
                compliance with such conditions.
                    ``(B) Changes in registration information.--Not 
                later than 30 days after receiving a notice under 
                paragraph (1)(G) from a registrant, the Secretary shall 
                determine whether the change involved affects the 
                approval of the registration of the registrant under 
                paragraph (1), and shall inform the registrant of the 
                determination.
            ``(3) Publication of contact information for registered 
        exporters.--Through the Internet website of the Food and Drug 
        Administration, the Secretary shall make readily available to 
        the public a list of registered exporters, including contact 
        information for the exporters. Promptly after the approval of a 
        registration submitted under paragraph (1), the Secretary shall 
        update the Internet website accordingly.
            ``(4) Suspension and termination.--
                    ``(A) Suspension.--With respect to the 
                effectiveness of a registration submitted under 
                paragraph (1):
                            ``(i) Subject to clause (ii), if the 
                        Secretary determines, after notice and 
                        opportunity for a hearing, that the registrant 
                        has failed to maintain substantial compliance 
                        with all registration conditions, the Secretary 
                        may suspend the registration.
                            ``(ii) If the Secretary determines that, 
                        under color of the registration, the exporter 
                        has exported a drug or the importer has 
                        imported a drug that is not a qualifying drug, 
                        or a drug that does not meet the criteria under 
                        subsection (g)(2)(A), or has exported a 
                        qualifying drug to an individual in violation 
                        of subsection (i)(1)(F), the Secretary shall 
                        immediately suspend the registration. A 
                        suspension under the preceding sentence is not 
                        subject to the provision by the Secretary of 
                        prior notice, and the Secretary shall provide 
                        to the registrant an opportunity for a hearing 
                        not later than 10 days after the date on which 
                        the registration is suspended.
                            ``(iii) The Secretary may reinstate the 
                        registration, whether suspended under clause 
                        (i) or (ii), if the Secretary determines that 
                        the registrant has demonstrated that further 
                        violations of registration conditions will not 
                        occur.
                    ``(B) Termination.--The Secretary, after notice and 
                opportunity for a hearing, may terminate the 
                registration under paragraph (1) of a registrant if the 
                Secretary determines that the registrant has engaged in 
                a pattern or practice of violating 1 or more 
                registration conditions, or if on 1 or more occasions 
                the Secretary has under subparagraph (A)(ii) suspended 
                the registration of the registrant. The Secretary may 
                make the termination permanent, or for a fixed period 
                of not less than 1 year. During the period in which the 
                registration is terminated, any registration submitted 
                under paragraph (1) by the registrant, or a person that 
is a partner in the export or import enterprise, or a principal officer 
in such enterprise, and any registration prepared with the assistance 
of the registrant or such a person, has no legal effect under this 
section.
    ``(c) Sources of Qualifying Drugs.--A registration condition is 
that the exporter or importer involved agrees that a qualifying drug 
will under subsection (a) be exported or imported to the United States 
only if there is compliance with the following:
            ``(1) The drug was manufactured in an establishment--
                    ``(A) required to register under subsection (h) or 
                (i) of section 510; or
                    ``(B) inspected by the Secretary as provided by 
                this section.
            ``(2) The establishment is located in the United States or 
        in any foreign country, and the establishment manufactured the 
        drug for distribution in the United States or for distribution 
        in 1 or more of the permitted countries (without regard to 
        whether in addition the drug was manufactured for distribution 
        in a foreign country that is not a permitted country).
            ``(3) The exporter or importer obtained the drug--
                    ``(A) directly from the establishment; or
                    ``(B) directly from an entity that, by contract 
                with the exporter or importer--
                            ``(i) provides to the exporter or importer 
                        a statement (in such form and containing such 
                        information as the Secretary may require) that, 
                        for the chain of custody from the 
                        establishment, identifies each prior sale, 
                        purchase, or trade of the drug (including the 
                        date of the transaction and the names and 
                        addresses of all parties to the transaction);
                            ``(ii) agrees to permit the Secretary to 
                        inspect such statements and related records to 
                        determine their accuracy;
                            ``(iii) agrees, with respect to the 
                        qualifying drugs involved, to permit the 
                        Secretary to inspect warehouses and other 
                        facilities of the entity for purposes of 
                        determining whether the facilities are in 
                        compliance with any standards under this Act 
                        that are applicable to facilities of that type 
                        in the United States; and
                            ``(iv) has ensured, through such 
                        contractual relationships as may be necessary, 
                        that the Secretary has the same authority 
                        regarding other parties in the chain of custody 
                        from the establishment that the Secretary has 
                        under clauses (ii) and (iii) regarding such 
                        entity.
            ``(4) The foreign country from which the importer will 
        import the drug is a permitted country.
            ``(5) The foreign country from which the exporter will 
        export the drug is Canada.
            ``(6) During any period in which the drug was not in the 
        control of the manufacturer of the drug, the drug did not enter 
        any country that is not a permitted country.
            ``(7) The exporter or importer retains a sample of each lot 
        of the drug sufficient for testing by the Secretary.
    ``(d) Inspection of Facilities; Marking of Shipments.--
            ``(1) Inspection of facilities.--A registration condition 
        is that, for the purpose of assisting the Secretary in 
        determining whether the exporter involved is in compliance with 
        all other registration conditions--
                    ``(A) the exporter agrees to permit the Secretary--
                            ``(i) to conduct onsite inspections, 
                        including monitoring on a day-to-day basis, of 
                        places of business of the exporter that relate 
                        to qualifying drugs, including each warehouse 
                        or other facility owned or controlled by, or 
                        operated for, the exporter;
                            ``(ii) to have access, including on a day-
                        to-day basis, to--
                                    ``(I) records of the exporter that 
                                relate to the export of such drugs, 
                                including financial records; and
                                    ``(II) samples of such drugs;
                            ``(iii) to carry out the duties described 
                        in paragraph (3); and
                            ``(iv) to carry out any other functions 
                        determined by the Secretary to be necessary 
                        regarding the compliance of the exporter; and
                    ``(B) the Secretary has assigned 1 or more 
                employees of the Secretary to carry out the functions 
                described in this subsection for the Secretary not less 
                than every 3 weeks on the premises of places of 
                businesses referred to in subparagraph (A)(i), and such 
                an assignment remains in effect on a continuous basis.
            ``(2) Marking of compliant shipments.--A registration 
        condition is that the exporter involved agrees to affix to each 
        shipping container of qualifying drugs exported under 
        subsection (a) such markings as the Secretary determines to be 
        necessary to identify the shipment as being in compliance with 
        all registration conditions. Markings under the preceding 
        sentence--
                    ``(A) shall be designed to prevent affixation of 
                the markings to any shipping container that is not 
                authorized to bear the markings; and
                    ``(B) may include anti-counterfeiting or track-and-
                trace technologies.
            ``(3) Certain duties relating to exporters.--Duties of the 
        Secretary with respect to an exporter include the following:
                    ``(A) Verifying the chain of custody of a 
                statistically significant sample of qualifying drugs 
                from the establishment in which the drug was 
                manufactured to the exporter, which may be accomplished 
                by the use of anticounterfeiting or track-and-trace 
                technologies, if available.
                    ``(B) Randomly reviewing records of exports to 
                individuals for the purpose of determining whether the 
                drugs are being imported by the individuals in 
                accordance with the conditions under subsection (i). 
                Such reviews shall be conducted in a manner that will 
                result in a statistically significant determination of 
                compliance with all such conditions.
                    ``(C) Monitoring the affixing of markings under 
                paragraph (2).
                    ``(D) Inspect as the Secretary determines is 
                necessary the warehouses and other facilities of other 
                parties in the chain of custody of qualifying drugs.
                    ``(E) Determine whether the exporter is in 
                compliance with all other registration conditions.
            ``(4) Certain duties relating to importers.--Duties of the 
        Secretary with respect to an importer include the following:
                    ``(A) As authorized under section 704, inspect not 
                less than every 3 weeks, the places of business of the 
                importer that relate to the receipt and distribution of 
                a qualifying drug, including each warehouse or other 
                facility owned or controlled by, or operated for, the 
                importer at which qualifying drugs are received or from 
                which they are distributed to pharmacies.
                    ``(B) During the inspections under subparagraph 
                (A), verify the chain of custody of a statistically 
                significant sample of qualifying drugs from the 
                establishment in which the drug was manufactured to the 
                importer, which may be accomplished by the use of 
                anticounterfeiting or track-and-trace technologies, if 
                available.
                    ``(C) Inspect as the Secretary determines is 
                necessary the warehouses and other facilities of other 
                parties in the chain of custody of qualifying drugs.
                    ``(D) Determine whether the importer is in 
                compliance with all other registration conditions.
    ``(e) Importer Fees.--
            ``(1) Registration fee.--A registration condition is that 
        the importer involved pays to the Secretary a fee of $10,000 
        due on the date on which the importer first submits the 
        registration to the Secretary under subsection (b).
            ``(2) Inspection fee.--A registration condition is that the 
        importer involved pays to the Secretary in accordance with this 
        subsection a fee on a semiannual basis, with the first fee due 
        on the date that is 6 months after the date on which the 
        registration of the importer under subsection (b) is first 
        approved by the Secretary.
            ``(3) Amount of inspection fee.--
                    ``(A) Aggregate total of fees.--The Secretary shall 
                ensure that the aggregate total of fees collected under 
                paragraph (2) for a fiscal year from all importers is 
                sufficient, and no more than necessary, to pay the 
                costs of administering this section with respect to 
                registered importers for a fiscal year, including--
                            ``(i) inspection of the facilities of 
                        importers under subsection (d)(4);
                            ``(ii) reviewing qualifying drugs offered 
                        for import to importers; and
                            ``(iii) determining the compliance of 
                        importers with registration conditions.
                    ``(B) Limitation.--The aggregate total of fees 
                collected under paragraph (2) shall not exceed 1 
                percent of the total price of drugs imported annually 
                to the United States by registered importers under this 
                section.
                    ``(C) Individual importer fee.--Subject to the 
                limitation described in subparagraph (B), a fee under 
                paragraph (2) for an importer shall be an amount that 
                is a reasonable estimate by the Secretary of the 
                semiannual share of the importer of the volume of drugs 
                imported by importers under this section.
                    ``(D) Adjustment of fee.--The Secretary shall 
                annually adjust the fees under paragraph (2) to ensure 
                that the fees accurately reflect the actual costs 
                referred to in subparagraph (A) and do not exceed, in 
                the aggregate, 1 percent of the total price of drugs 
                imported annually to the United States under this 
                section.
            ``(4) Use of fees.--Subject to appropriations Acts, fees 
        collected by the Secretary under paragraphs (1) and (2) are 
        available only to the Secretary and are for the sole purpose of 
        paying the costs referred to in paragraph (3)(A).
    ``(f) Exporter Fees.--
            ``(1) Registration fee.--A registration condition is that 
        the exporter involved pays to the Secretary a fee of $10,000 
        due on the date on which the exporter first submits that 
        registration to the Secretary under subsection (b).
            ``(2) Inspection fee.--A registration condition is that the 
        exporter involved pays to the Secretary in accordance with this 
        subsection a fee on a semiannual basis, with the first fee due 
        on the date that is 6 months after the date on which the 
        registration of the exporter under subsection (b) is first 
        approved by the Secretary.
            ``(3) Amount of inspection fee.--
                    ``(A) Aggregate total of fees.--The Secretary shall 
                ensure that the aggregate total of fees collected under 
                paragraph (2) for a fiscal year from all exporters is 
                sufficient, and not more than necessary, to pay the 
                costs of administering this section with respect to 
                registered exporters for a fiscal year, including--
                            ``(i) monitoring foreign facilities under 
                        subsection (d);
                            ``(ii) developing, implementing, and 
                        maintaining under such subsection a system to 
                        mark shipments to indicate compliance with all 
                        registration conditions; and
                            ``(iii) conducting under such subsection 
                        inspections within the United States to 
determine compliance with conditions under subsections (h) and (i).
                    ``(B) Limitation.--The aggregate total of fees 
                collected under paragraph (2) shall not exceed 1 
                percent of the total price of drugs imported annually 
                to the United States by registered exporters under this 
                section.
                    ``(C) Individual exporter fee.--Subject to the 
                limitation described in subparagraph (B), a fee under 
                paragraph (2) for an exporter shall be an amount that 
                is a reasonable estimate by the Secretary of the 
                semiannual share of the exporter of the volume of drugs 
                exported by exporters under this section.
                    ``(D) Adjustment of fee.--The Secretary shall 
                annually adjust the fees under paragraph (2) to ensure 
                that the fees accurately reflect the actual costs 
                referred to in subparagraph (A) and do not exceed, in 
                the aggregate, 1 percent of the total price of drugs 
                imported annually to the United States under this 
                section.
            ``(4) Use of fees.--Subject to appropriations Acts, fees 
        collected by the Secretary under paragraphs (1) and (2) are 
        only available to the Secretary and are for the sole purpose of 
        paying the costs referred to in paragraph (3)(A).
    ``(g) Compliance With Section 801(a).--
            ``(1) In general.--A registration condition is that each 
        qualifying drug exported under subsection (a) by the registered 
        exporter involved or imported under subsection (a) by the 
        registered importer involved is in compliance with the 
        standards referred to in section 801(a) regarding admission of 
        the drug into the United States, subject to paragraphs (2), 
        (3), and (4).
            ``(2) Section 505; approval status.--
                    ``(A) In general.--For purposes of administrative 
                and judicial procedure, there is a presumption that a 
                drug proposed for export or import under subsection (a) 
                is an approved drug under section 505(b) if the 
                following criteria are met:
                            ``(i) The drug proposed for export or 
                        import is in compliance with subsection (c).
                            ``(ii) The drug proposed for export or 
                        import has the same active ingredient or 
                        ingredients, route of administration, dosage 
                        form, and strength, according to information 
                        provided by the labeling of the drug proposed 
                        for export or import, as a drug (referred to in 
                        this subsection as a `U.S. label drug') that--
                                    ``(I) is manufactured by or for the 
                                person that manufactures the drug 
                                proposed for export or import; and
                                    ``(II) is approved under section 
                                505(b).
                    ``(B) Importation.--Subject to subparagraphs (D) 
                and (E), a drug meeting the criteria described in 
                subparagraph (A) may, in accordance with the other 
                subsections of this section, be imported into the 
                United States.
                    ``(C) Notice by manufacturer; general provisions.--
                            ``(i) In general.--The person that 
                        manufactures a drug that may be imported under 
                        subsection (a) shall in accordance with this 
                        paragraph submit to the Secretary a notice 
                        that--
                                    ``(I) includes each difference in 
                                the drug from a condition established 
                                in the approved application for the 
                                U.S. label drug beyond the variations 
                                provided for in the application, any 
                                difference in labeling, the date on 
                                which the drug with such difference 
                                was, or will be, introduced for 
                                commercial distribution in a permitted 
                                country, and such additional 
                                information as the Secretary may 
                                require; or
                                    ``(II) states that there is no 
                                difference in the drug from a condition 
                                established in the approved application 
                                for the U.S. label drug beyond the 
                                variations provided for in the 
                                application and differences in 
                                labeling.
                            ``(ii) Information regarding foreign 
                        government.--A notice under clause (i)(I) shall 
                        with respect to the permitted country that 
                        approved the drug for commercial distribution, 
                        or with respect to which such approval is 
                        sought, include the following:
                                    ``(I) Information demonstrating 
                                that the person submitting the notice 
                                has also notified the government of the 
                                permitted country in writing that the 
                                person is submitting to the Secretary a 
                                notice under clause (i)(I), which 
                                notice describes the difference in the 
                                drug from a condition established in 
                                the approved application for the U.S. 
                                label drug.
                                    ``(II) The information that the 
                                person submitted or will submit to the 
                                government of the permitted country for 
                                purposes of obtaining approval for 
                                commercial distribution of the drug in 
                                the country which, if in a language 
                                other than English, shall be 
                                accompanied by an English translation 
                                verified to be complete and accurate, 
                                with the name, address, and a brief 
                                statement of the qualifications of the 
                                person that made the translation.
                            ``(iii) Certifications.--The chief 
                        executive officer and the chief medical officer 
                        of the manufacturer involved shall each certify 
                        in the notice under clause (i) that--
                                    ``(I) the information provided in 
                                the notice is complete and true; and
                                    ``(II) a copy of the notice has 
                                been provided to the Federal Trade 
                                Commission and to the Assistant 
                                Attorney General in charge of the 
                                Antitrust Division of the Department of 
                                Justice (referred to in this subsection 
                                as the `Assistant Attorney General').
                            ``(iv) Fee.--If a notice submitted under 
                        clause (i) includes a difference that would, 
                        under section 506A, require the submission of a 
                        supplemental application if made as a change to 
                        the U.S. label drug, the person that submits 
                        the notice shall pay to the Secretary a fee in 
                        the same amount as would apply if the person 
                        were paying a fee pursuant to section 
                        736(a)(1)(A)(ii). Subject to appropriations 
                        Acts, fees collected by the Secretary under the 
                        preceding sentence are available only to the 
                        Secretary and are for the sole purpose of 
                        paying the costs of reviewing notices submitted 
                        under clause (i).
                            ``(v) Timing of submission of notices.--
                                    ``(I) Prior approval notices.--A 
                                notice under clause (i) to which 
                                subparagraph (D) applies shall be 
                                submitted to the Secretary not later 
                                than 120 days before the drug with the 
                                difference is introduced for commercial 
                                distribution in a permitted country, 
                                unless the country requires that 
                                distribution of the drug with the 
                                difference begin less than 120 days 
                                after the country requires the 
                                difference.
                                    ``(II) Other approval notices.--A 
                                notice under clause (i) to which 
                                subparagraph (E) applies shall be 
                                submitted to the Secretary not later 
                                than the day on which the drug with the 
                                difference is introduced for commercial 
                                distribution in a permitted country.
                                    ``(III) Other notices.--A notice 
                                under clause (i) to which subparagraph 
                                (F) applies shall be submitted to the 
                                Secretary on the date that the drug is 
                                first introduced for commercial 
                                distribution in a permitted country and 
                                annually thereafter.
                            ``(vi) Review by secretary.--
                                    ``(I) In general.--In this 
                                paragraph, the difference in a drug 
                                that may be imported under subsection 
                                (a) from the U.S. label drug shall be 
                                treated by the Secretary as if it was a 
                                manufacturing change to the U.S. label 
                                drug under section 506A.
                                    ``(II) Review by the secretary.--
                                The Secretary shall review and approve 
                                or disapprove the difference in a 
                                notice submitted under clause (i), if 
                                required under section 506A, not later 
                                than 120 days after the date on which 
                                the notice is submitted.
                                    ``(III) Establishment inspection.--
                                If review of such difference would 
                                require an inspection by the Secretary 
                                of the establishment in which the drug 
                                is manufactured, such inspection shall 
                                be authorized by section 704.
                            ``(vii) Publication of information on 
                        notices.--
                                    ``(I) In general.--Through the 
                                Internet website of the Food and Drug 
                                Administration, the Secretary shall 
                                readily make available to the public a 
                                list of notices submitted under clause 
                                (i).
                                    ``(II) Contents.--The list under 
                                subclause (I) shall include the date on 
                                which a notice is submitted and 
                                whether--
                                            ``(aa) a notice is under 
                                        review;
                                            ``(bb) the Secretary has 
                                        ordered that importation of the 
                                        drug from a permitted country 
                                        cease; or
                                            ``(cc) the importation of 
                                        the drug is permitted under 
                                        subsection (a).
                                    ``(III) Update.--The Secretary 
                                shall promptly update the Internet 
                                website with any changes to the list.
                    ``(D) Notice; drug difference requiring prior 
                approval.--In the case of a notice under subparagraph 
                (C)(i) that includes a difference that would, under 
                section 506A(c) or (d)(3)(B)(i), require the approval 
                of a supplemental application before the difference 
                could be made to the U.S. label drug the following 
                shall occur:
                            ``(i) Promptly after the notice is 
                        submitted, the Secretary shall notify 
                        registered exporters, registered importers, the 
                        Federal Trade Commission, and the Assistant 
                        Attorney General that the notice has been 
                        submitted with respect to the drug involved.
                            ``(ii) If the Secretary has not made a 
                        determination whether a supplemental 
                        application regarding the U.S. label drug would 
                        be approved or disapproved by the date on which 
                        the drug involved is to be introduced for 
                        commercial distribution in a permitted country, 
                        the Secretary shall--
                                    ``(I) order that the importation of 
                                the drug involved from the permitted 
                                country cease for the period in 
which the Secretary completes review of the notice; and
                                    ``(II) promptly notify registered 
                                exporters, registered importers, the 
                                Federal Trade Commission, and the 
                                Attorney General of the order.
                            ``(iii) If the Secretary determines that 
                        such a supplemental application regarding the 
                        U.S. label drug would not be approved, the 
                        Secretary shall--
                                    ``(I) order that the importation of 
                                the drug involved from the permitted 
                                country cease, or provide that an order 
                                under clause (ii), if any, remains in 
                                effect;
                                    ``(II) notify the permitted country 
                                that approved the drug for commercial 
                                distribution of the determination; and
                                    ``(III) promptly notify registered 
                                exporters, registered importers, the 
                                Federal Trade Commission, and the 
                                Assistant Attorney General of the 
                                determination.
                            ``(iv) If the Secretary determines that 
                        such a supplemental application regarding the 
                        U.S. label drug would be approved, the 
                        Secretary shall vacate the order under clause 
                        (ii), if any, permit importation of the drug 
                        under subsection (a), and promptly notify 
                        registered exporters, registered importers, the 
                        Federal Trade Commission, and the Assistant 
                        Attorney General of the determination.
                    ``(E) Notice; drug difference not requiring prior 
                approval.--In the case of a notice under subparagraph 
                (C)(i) that includes a difference that would, under 
                section 506A(d)(3)(B)(ii), not require the approval of 
                a supplemental application before the difference could 
                be made to the U.S. label drug the following shall 
                occur:
                            ``(i) During the period in which the notice 
                        is being reviewed by the Secretary, the 
                        authority under this subsection to import the 
                        drug involved continues in effect.
                            ``(ii) If the Secretary determines that 
                        such a supplemental application regarding the 
                        U.S. label drug would not be approved, the 
                        Secretary shall order that the importation of 
                        the drug involved from the permitted country 
                        cease, shall notify the permitted country that 
                        approved the drug for commercial distribution 
                        of the determination, and shall promptly notify 
                        registered exporters, registered importers, the 
                        Federal Trade Commission, and the Assistant 
                        Attorney General of the determination.
                    ``(F) Notice; drug difference not requiring 
                approval; no difference.--In the case of a notice under 
                subparagraph (C)(i) that includes a difference for 
                which, under section 506A(d)(1)(A), a supplemental 
                application would not be required for the difference to 
                be made to the U.S. label drug, or that states that 
                there is no difference, the Secretary--
                            ``(i) may not order that the importation of 
                        the drug involved cease; and
                            ``(ii) shall promptly notify registered 
                        exporters and registered importers.
                    ``(G) Differences in active ingredient, route of 
                administration, dosage form, or strength.--
                            ``(i) In general.--A person who 
                        manufactures a U.S. label drug shall submit an 
                        application under section 505(b) for a drug 
                        that is manufactured for distribution in a 
                        permitted country by or for the person that 
                        manufactures the U.S. label drug if--
                                    ``(I) there is no drug for export 
                                from at least half of the permitted 
                                countries with the same active 
                                ingredient or ingredients, route of 
                                administration, dosage form, and 
                                strength as the U.S. label drug; and
                                    ``(II) each active ingredient of 
                                the drug is related to an active 
                                ingredient of the U.S. label drug, as 
                                defined in clause (v).
                            ``(ii) Application under section 505(b).--
                        The application under section 505(b) required 
                        under clause (i) shall--
                                    ``(I) request approval of the drug 
                                for the indication or indications for 
                                which the U.S. label drug is approved 
                                under section 505;
                                    ``(II) include the information that 
                                the person submitted to the government 
                                of the permitted country for purposes 
                                of obtaining approval for commercial 
                                distribution of the drug in that 
                                country, which if in a language other 
                                than English, shall be accompanied by 
                                an English translation verified to be 
                                complete and accurate, with the name, 
                                address, and a brief statement of the 
                                qualifications of the person that made 
                                the translation;
                                    ``(III) include a right of 
                                reference to the application under 
                                section 505(b) for the U.S. label drug; 
                                and
                                    ``(IV) include such additional 
                                information as the Secretary may 
                                require.
                            ``(iii) Timing of submission of 
                        application.--An application under section 
                        505(b) required under clause (i) shall be 
                        submitted to the Secretary not later than the 
                        day on which the information referred to in 
                        clause (ii)(II) is submitted to the government 
                        of the permitted country.
                            ``(iv) Notice of decision on application.--
                        The Secretary shall promptly notify registered 
                        exporters, registered importers, the Federal 
                        Trade Commission, and the Assistant Attorney 
                        General of a determination to approve or to 
                        disapprove an application under section 505(b) 
                        required under clause (i).
                            ``(v) Related active ingredients.--For 
                        purposes of clause (i)(II), 2 active 
                        ingredients are related if they are--
                                    ``(I) the same; or
                                    ``(II) different salts, esters, or 
                                complexes of the same moiety.
            ``(3) Section 502; labeling.--
                    ``(A) Importation by registered importer.--
                            ``(i) In general.--In the case of a 
                        qualifying drug that is imported or offered for 
                        import by a registered importer, such drug 
                        shall be considered to be in compliance with 
                        section 502 if the drug bears--
                                    ``(I) a copy of the labeling 
                                approved for the drug under section 
                                505, without regard to whether the copy 
                                bears the trademark involved;
                                    ``(II) the name of the manufacturer 
                                and location of the manufacturer;
                                    ``(III) the lot number assigned by 
                                the manufacturer; and
                                    ``(IV) the name, location, and 
                                registration number of the importer.
                            ``(ii) Request for copy of the labeling.--
                        The Secretary shall provide such copy to the 
                        registered importer involved, upon request of 
                        the importer.
                    ``(B) Importation by individual.--In the case of a 
                qualifying drug that is imported or offered for import 
                by a registered exporter to an individual, such drug 
                shall be considered to be in compliance with section 
                502 if the drug bears a label providing the directions 
                for use by the consumer, and bears a copy of any 
                special labeling that would be required by the 
                Secretary had the drug been dispensed by a pharmacist 
                in the United States, without regard to whether the 
                special labeling bears the trademark involved. The 
                Secretary shall provide to the registered exporter 
                involved a copy of the special labeling, upon request 
                of the exporter.
            ``(4) Section 501; standards for refusing admission.--
                    ``(A) In general.--For purposes of administrative 
                and judicial procedure, there is a presumption that a 
                drug proposed for export or import under subsection (a) 
                is in compliance with section 501 if the drug is in 
                compliance with subsection (c).
                    ``(B) Standards for refusing admission.--A 
                qualifying drug exported under subsection (a) from a 
                registered exporter or imported by a registered 
                importer may be refused admission into the United 
                States if 1 or more of the following applies:
                            ``(i) The shipping container appears 
                        damaged in a way that may affect the strength, 
                        quality, or purity of the drug.
                            ``(ii) The Secretary becomes aware that--
                                    ``(I) the drug may be counterfeit;
                                    ``(II) the drug may have been 
                                prepared, packed, or held under 
                                insanitary conditions; or
                                    ``(III) the methods used in, or the 
                                facilities or controls used for, the 
                                manufacturing, processing, packing, or 
                                holding of the drug do not conform to 
                                good manufacturing practice.
                            ``(iii) The Secretary has obtained an 
                        injunction under section 302 that prohibits the 
                        distribution of the drug in interstate 
                        commerce.
                            ``(iv) The Secretary has under section 
                        505(e) withdrawn approval of the drug.
                            ``(v) The manufacturer of the drug has 
                        instituted a recall of the drug.
                            ``(vi) If the qualifying drug is exported 
                        from a registered exporter to an individual and 
                        1 or more of the following applies:
                                    ``(I) The shipping container for 
                                such drug does not bear the markings 
                                required under subsection (d)(2).
                                    ``(II) The markings on the shipping 
                                container appear to be counterfeit.
                                    ``(III) The shipping container or 
                                markings appear to have been tampered 
                                with.
    ``(h) Licensing as Pharmacist.--A registration condition is that 
the exporter involved agrees that a qualifying drug will be exported to 
an individual only if the Secretary has verified that--
            ``(1) the exporter is authorized under Canadian law to 
        dispense prescription drugs; and
            ``(2) the exporter employs persons that are licensed under 
        Canadian law to dispense prescription drugs in sufficient 
        number to dispense safely the qualifying drugs exported by the 
        exporter to individuals, and the exporter assigns to those 
        persons responsibility for dispensing such qualifying drugs to 
        individuals.
    ``(i) Individuals; Conditions for Importation From Canada.--
            ``(1) In general.--For purposes of subsection (a)(2)(B), 
        the importation of a qualifying drug by an individual is in 
        accordance with this subsection if the following conditions are 
        met:
                    ``(A) The drug is accompanied by a copy of a 
                prescription for the drug, which prescription--
                            ``(i) is valid under applicable Federal and 
                        State laws; and
                            ``(ii) was issued by a practitioner who, 
                        under the law of a State of which the 
                        individual is a resident, or in which the 
                        individual receives care from the practitioner 
                        who issues the prescription, is authorized to 
                        administer prescription drugs.
                    ``(B) The drug is accompanied by a copy of the 
                documentation that was required under the law or 
                regulations of Canada as a condition of dispensing the 
                drug to the individual.
                    ``(C) The copies referred to in subparagraphs 
                (A)(i) and (B) are marked in a manner sufficient--
                            ``(i) to indicate that the prescription, 
                        and the equivalent document in Canada, have 
                        been filled; and
                            ``(ii) to prevent a duplicative filling by 
                        another pharmacist.
                    ``(D) The individual has provided to the registered 
                exporter a complete list of all drugs used by the 
                individual for review by the individuals who dispense 
                the drug.
                    ``(E) The quantity of the drug does not exceed a 
                90-day supply.
                    ``(F) The drug is not an ineligible subpart H drug. 
                For purposes of this section, a prescription drug is an 
                `ineligible subpart H drug' if the drug was approved by 
                the Secretary under subpart H of part 314 of title 21, 
                Code of Federal Regulations (relating to accelerated 
                approval), with restrictions under section 520 of such 
                part to assure safe use, and the Secretary has 
                published in the Federal Register a notice that the 
                Secretary has determined that good cause exists to 
                prohibit the drug from being imported pursuant to this 
                subsection.
            ``(2) Notice regarding drug refused admission.--If a 
        registered exporter ships a drug to an individual pursuant to 
        subsection (a)(2)(B) and the drug is refused admission to the 
        United States, a written notice shall be sent to the individual 
        and to the exporter that informs the individual and the 
        exporter of such refusal and the reason for the refusal.
    ``(j) Maintenance of Records and Samples.--A registration condition 
is that the importer or exporter involved shall--
            ``(1) maintain records required under this section for not 
        less than 2 years; and
            ``(2) maintain samples of each lot of a drug required under 
        this section for not less than 2 years.
    ``(k) Drug Recalls.--
            ``(1) Manufacturers.--A person that manufactures a 
        prescription drug imported from a permitted country under this 
        section shall promptly inform the Secretary--
                    ``(A) if the drug is recalled or withdrawn from the 
                market in a permitted country;
                    ``(B) how the drug may be identified, including lot 
                number; and
                    ``(C) the reason for the recall or withdrawal.
            ``(2) Secretary.--With respect to each permitted country, 
        the Secretary shall--
                    ``(A) enter into an agreement with the government 
                of the country to receive information about recalls and 
                withdrawals of prescription drugs in the country; or
                    ``(B) monitor recalls and withdrawals of 
                prescription drugs in the country using any information 
                that is available to the public in any media.
            ``(3) Notice.--The Secretary may notify, as appropriate, 
        registered exporters, registered importers, wholesalers, 
        pharmacies, or the public of a recall or withdrawal of a 
        prescription drug in a permitted country.''.
    (b) Prohibited Acts.--The Federal Food, Drug, and Cosmetic Act is 
amended--
            (1) in section 301 (21 U.S.C. 331), by striking paragraph 
        (aa) and inserting the following:
    ``(aa)(1) The sale or trade by a pharmacist, or by a business 
organization of which the pharmacist is a part, of a qualifying drug 
that under section 804(a)(2)(A) was imported by the pharmacist, other 
than--
            ``(A) a sale at retail made pursuant to dispensing the drug 
        to a customer of the pharmacist or organization; or
            ``(B) a sale or trade of the drug to a pharmacy or a 
        wholesaler registered to import drugs under section 804.
    ``(2) The sale or trade by an individual of a qualifying drug that 
under section 804(a)(2)(B) was imported by the individual.
    ``(3) The making of a materially false, fictitious, or fraudulent 
statement or representation, or a material omission, in a notice under 
clause (i) of section 804(g)(2)(C) or in an application required under 
section 804(g)(2)(G), or the failure to submit such a notice or 
application.
    ``(4) The importation of a drug in violation of a requirement under 
section 804.''; and
            (2) in section 303(a) (21 U.S.C. 333(a)), by striking 
        paragraph (6) and inserting the following:
    ``(6) Notwithstanding subsection (a), any person that knowingly 
violates section 301(aa) (3) or (4) shall be imprisoned not more than 
10 years, or fined in accordance with title 18, United States Code, or 
both.''.
    (c) Implementation.--
            (1) Rulemaking.--
                    (A) In general.--
                            (i) Promulgation by secretary.--Not later 
                        than 90 days after the date of the enactment of 
                        this Act, the Secretary of Health and Human 
                        Services shall promulgate an interim rule for 
                        implementing section 804 of the Federal Food, 
                        Drug, and Cosmetic Act, as added by subsection 
                        (a) of this section. Such rule shall be 
                        developed and promulgated by the Secretary 
                        without providing general notice of proposed 
                        rulemaking. Not later than 1 year after the 
date on which the interim rule is promulgated, the Secretary shall, in 
accordance with procedures under section 553 of title 5, United States 
Code, promulgate a final rule for implementing such section 804, which 
may incorporate by reference provisions of the interim rule, to the 
extent that such provisions are not modified.
                            (ii) Effect of rules.--The rules 
                        promulgated under clause (i) shall permit the 
                        importation of prescription drugs--
                                    (I) from registered exporters by 
                                individuals effective on the date of 
                                the promulgation of the interim rule;
                                    (II) from Canada by registered 
                                importers effective on the date of the 
                                promulgation of the interim rule; and
                                    (III) from Australia, a member 
                                country of the European Union as of 
                                January 1, 2003, Japan, New Zealand, or 
                                Switzerland by registered importers on 
                                the date that is 1 year after the date 
                                of the enactment of this Act.
                    (B) Certain exporters.--The interim rule under 
                subparagraph (A) shall provide that, in the review of 
                registrations submitted under subsection (b) of the 
                section 804 referred to in such subparagraph, 
                registrations submitted by entities in Canada that are 
                significant exporters of prescription drugs to 
                individuals in the United States as of the date of the 
                enactment of this Act will have priority during the 
                period in which the interim rule under subparagraph (A) 
                is in effect. During such period, the reference in 
                subsection (b)(2)(A) of such section 804 to 90 days 
                (relating to approval or disapproval of registrations) 
                is, as applied to such entities, deemed to be 30 days.
                    (C) Drugs for import from canada.--The notices with 
                respect to drugs to be imported from Canada that are 
                required under subsection (g)(2)(C)(i)(I) of such 
                section 804 and that require approval under subsection 
                (g)(2)(D) or (E) of such section 804 shall be submitted 
                to the Secretary not later than 30 days after the date 
                of enactment of this Act. The notices with respect to 
                drugs to be imported from Canada that are required 
                under subsection (g)(2)(C)(i) of such section 804 and 
                that do not require approval under subsection (g)(2)(D) 
                or (E) of such section 804 shall be submitted to the 
                Secretary not later than 90 days after the date of 
                enactment of this Act.
                    (D) Drugs for import from other countries.--The 
                notices with respect to drugs to be imported from 
                Australia, a member country of the European Union as of 
                January 1, 2003, Japan, New Zealand, or Switzerland 
                that are required under subsection (g)(2)(C)(i)(I) of 
                such section 804 and that require approval under 
                subsection (g)(2)(D) or (E) of such section 804 shall 
                be submitted to the Secretary not later than 180 days 
                after the date of enactment of this Act. The notices 
                with respect to drugs to be imported from such 
                countries that are required under subsection 
                (g)(2)(C)(i)(II) of such section 804 and that do not 
                require approval under subsection (g)(2)(D) or (E) of 
                such section 804 shall be submitted to the Secretary 
                not later than 270 days after the date of enactment of 
                this Act.
            (2) Personal importation from canada.--Until the expiration 
        of the 60-day period beginning on the date on which the interim 
        rule under paragraph (1)(A) is promulgated, an individual may 
        import a prescription drug from Canada for personal use or for 
        the use of a family member of the individual (rather than for 
        resale), subject to compliance with the following conditions:
                    (A) The drug is not--
                            (i) a controlled substance, as defined in 
                        section 102 of the Controlled Substances Act 
                        (21 U.S.C. 802);
                            (ii) a biological product, as defined in 
                        section 351 of the Public Health Service Act 
                        (42 U.S.C. 262);
                            (iii) an infused drug, including a 
                        peritoneal dialysis solution;
                            (iv) an intravenously injected drug;
                            (v) a drug that is inhaled during surgery; 
                        or
                            (vi) a drug approved by the Secretary under 
                        subpart H of part 314 of title 21, Code of 
                        Federal Regulations (relating to accelerated 
                        approval) with restrictions under section 520 
                        of such part to assure safe use.
                    (B) The drug is dispensed by a person licensed in 
                Canada to dispense such drugs.
                    (C) The drug is accompanied by a copy of the 
                prescription for the drug, which prescription--
                            (i) is valid under applicable Federal and 
                        State laws; and
                            (ii) was issued by a practitioner who, 
                        under the law of a State of which the 
                        individual is a resident, or in which the 
                        individual receives care from the practitioner 
                        who issues the prescription, is authorized to 
                        administer prescription drugs.
                    (D) The drug is accompanied by a copy of the 
                document that was required in Canada as a condition of 
                dispensing the drug to the individual.
                    (E) The copies referred to in subparagraphs (C) and 
                (D) are marked in a manner sufficient--
                            (i) to indicate that the prescription, and 
                        the equivalent document in Canada, have been 
                        filled; and
                            (ii) to prevent a duplicative filling by 
                        another pharmacist.
                    (F) The quantity of the drug does not exceed a 90-
                day supply.
            (3) Facilitation of canadian imports.--Not less than 15 
        days after the enactment of this Act and until the expiration 
        of the 60-day period that begins on the date on which the 
        interim rule under paragraph (1)(A) is promulgated, the 
        Secretary shall, through the Internet website of the Food and 
        Drug Administration, make readily available to the public a 
        list of persons licensed in Canada to dispense prescription 
        drugs who are willing to export drugs under paragraph (2) to 
        individuals in the United States.
            (4) Effect of provisions.--The amendments made in 
        subsection (d), section 6, and section 7 of this Act shall have 
        no effect with respect to imports made under paragraph (2).
    (d) Amendment of Certain Provision.--Section 801 of the Federal 
Food, Drug, and Cosmetic Act (21 U.S.C. 381) is amended by striking 
subsection (g) and inserting the following:
    ``(g) With respect to a prescription drug that is imported or 
offered for import into the United States by an individual who is not 
in the business of such importation, that is not shipped by a 
registered exporter under section 804, and that is refused admission 
under subsection (a), the Secretary shall notify the individual that--
            ``(1) the drug has been refused admission because the drug 
        was not a lawful import under section 804;
            ``(2) the drug is not otherwise subject to a waiver of the 
        requirements of subsection (a);
            ``(3) the individual may under section 804 lawfully import 
        certain prescription drugs from Canadian exporters registered 
        with the Secretary; and
            ``(4) the individual can find information about such 
        importation, including a list of registered exporters, on the 
        Internet website of the Food and Drug Administration.''.
    (e) Anticompetitive Practices Relating to Importing and Exporting 
Drugs to the United States.--
            (1) In general.--The Clayton Act (15 U.S.C. 12 et seq.) is 
        amended by adding at the end the following:

``SEC. 27. RESTRAINT OF TRADE REGARDING PRESCRIPTION DRUGS.

    ``(a) In General.--It shall be unlawful for any person engaged in 
commerce, directly or indirectly to--
            ``(1) charge a higher price for prescription drugs sold to 
        a registered exporter or other person that exports prescription 
        drugs to the United States under section 804 of the Federal 
        Food, Drug, and Cosmetic Act than the price that is charged to 
        another person that is in the same country and that does not 
        export prescription drugs into the United States under section 
        804 of such Act;
            ``(2) charge a higher price for prescription drugs sold to 
        a registered importer or other person that distributes, sells, 
        or uses prescription drugs imported to the United States under 
        section 804 of such Act than the price that is charged to 
        another person in the United States that does not import 
        prescription drugs under section 804 of such Act, or that does 
        not distribute, sell, or use such drugs;
            ``(3) deny supplies of prescription drugs to a registered 
        exporter or other person that exports prescription drugs to the 
        United States under section 804 of such Act or to a registered 
        importer or other person that distributes, sells, or uses 
        prescription drugs imported to the United States under section 
        804 of such Act;
            ``(4) publicly, privately, or otherwise refuse to do 
        business with a registered exporter or other person that 
        exports prescription drugs to the United States under section 
        804 of such Act or with a registered importer or other person 
        that distributes, sells, or uses prescription drugs imported to 
        the United States under section 804 of such Act;
            ``(5) specifically restrict supplies of prescription drugs 
        to a registered exporter or other person that exports 
        prescription drugs to the United States under section 804 of 
        such Act or to a registered importer or other person that 
        distributes, sells, or uses prescription drugs imported to the 
        United States under section 804 of such Act;
            ``(6) fail to submit a notice under subsection (g)(2)(C)(i) 
        of section 804 of such Act, fail to submit such a notice on or 
        before the date specified in subsection (g)(2)(C)(v) of section 
        804 of such Act, submit such a notice that makes a materially 
        false, fictitious, or fraudulent statement, or fail to provide 
        promptly any information requested by the Secretary of Health 
        and Human Services to review such a notice;
            ``(7) fail to submit an application required under 
        subsection (g)(2)(G) of section 804 of such Act, fail to submit 
        such an application on or before the date specified in 
        subsection (g)(2)(G)(ii) of section 804 of such Act, submit 
        such an application that makes a materially false, fictitious, 
        or fraudulent statement, or fail to provide promptly any 
        information requested by the Secretary of Health and Human 
        Services to review such an application;
            ``(8) cause there to be a difference (including a 
        difference in active ingredient, route of administration, 
        dosage form, strength, formulation, manufacturing 
        establishment, manufacturing process, or person that 
        manufactures the drug) between a prescription drug for 
        distribution in the United States and a prescription drug for 
        distribution in Australia, Canada, a member country of the 
        European Union as of January 1, 2003, Japan, New Zealand, or 
        Switzerland for the purpose of restricting importation of the 
        drug to the United States under section 804 of such Act;
            ``(9) refuse to allow an inspection authorized under 
        section 804 of such Act of an establishment that manufactures a 
        prescription drug that is offered for import under such 
        section;
            ``(10) fail to conform to the methods used in, or the 
        facilities used for, the manufacturing, processing, packing, or 
        holding of a prescription drug offered for import under section 
        804 to good manufacturing practice under such Act; or
            ``(11) engage in any other action that the Federal Trade 
        Commission determines to unfairly restrict competition under 
        section 804 of such Act.
    ``(b) Presumption.--A difference (including a difference in active 
ingredient, route of administration, dosage form, strength, 
formulation, manufacturing establishment, manufacturing process, or 
person that manufactures the drug) between a prescription drug for 
distribution in the United States and a prescription drug for 
distribution in Australia, Canada, a member country of the European 
Union as of January 1, 2003, Japan, New Zealand, or Switzerland made 
after January 1, 2004, shall be presumed to be for the purpose of 
restricting importation of the drug to the United States under section 
804 of the Federal Food, Drug, and Cosmetic Act unless--
            ``(1) the person manufacturing the drug for distribution in 
        the United States proves that the difference was required by 
        the country in which the drug is distributed;
            ``(2) the Secretary of Health and Human Services, acting 
        through the Commissioner of Food and Drug, determines that the 
        difference was necessary to improve the safety or efficacy of 
        the drug; or
            ``(3) the person manufacturing the drug for distribution in 
        the United States has given notice to the Secretary of Health 
        and Human Services under subsection (g)(2)(C)(i) of section 804 
        of such Act that the drug for distribution in the United States 
        is not different from a drug for distribution in not fewer than 
        half of those countries.
    ``(c) Affirmative Defense.--It shall be an affirmative defense to a 
charge that a person has violated paragraph (1), (2), (3), (4), or (5) 
of subsection (a) that the higher prices charged for prescription drugs 
sold to a person, the denial of supplies of prescription drugs to a 
person, the refusal to do business with a person, or the specific 
restriction or delay of supplies to a person is not based, in whole or 
in part, on--
            ``(1) the person exporting or importing prescription drugs 
        to the United States under section 804 of the Federal Food, 
        Drug, and Cosmetic Act; or
            ``(2) the person distributing, selling, or using 
        prescription drugs imported to the United States under section 
        804 of such Act.
    ``(d) Definitions.--In this section:
            ``(1) Prescription drug.--The term `prescription drug' 
        means a drug that is described in section 503(b)(1) of the 
        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353(b)(1)).
            ``(2) Registered importer.--The term `registered importer' 
        has the meaning given such term in section 804 of the Federal 
        Food, Drug, and Cosmetic Act.
            ``(3) Registered exporter.--The term `registered exporter' 
        has the same meaning as in section 804 of the Federal Food, 
        Drug, and Cosmetic Act.''.
            (2) Applicability of amendments to importation under the 
        pharmaceutical market access and fair trade act of 2004.--
                    (A) Personal importation from canada.--Paragraphs 
                (1) through (5) and (11) of subsection (a) of section 
                27 of the Clayton Act (15 U.S.C. et seq.) (as amended 
                by paragraph (1)) shall apply with respect to the 
                importation of drugs from Canada under subsection 
                (c)(2).
                    (B) Notices respecting drug for import.--Paragraph 
                (6) of subsection (a) of section 27 of the Clayton Act 
                (15 U.S.C. et seq.) (as amended by paragraph (1)) shall 
                apply with respect to notices required under section 
                804(g)(2)(C)(i) of the Federal Food Drug and Cosmetic 
                Act (21 U.S.C. 384(g)(2)(C)(i)) that are not submitted 
                by the dates required under subsections (c)(1)(C) and 
                (D).
    (f)  Exhaustion.--
            (1) In general.--Section 271 of title 35, United States 
        Code, is amended--
                    (A) by redesignating subsections (h) and (i) as (i) 
                and (j), respectively; and
                    (B) by inserting after subsection (g) the 
                following:
    ``(h) It shall not be an act of infringement to use, offer to sell, 
or sell within the United States or to import into the United States 
any patented invention under section 804 of the Federal Food, Drug, and 
Cosmetic Act that was first sold abroad by or under authority of the 
owner or licensee of such patent.''.
            (2) Rule of construction.--Nothing in the amendment made by 
        paragraph (1) shall be construed to affect the ability of a 
        patent owner or licensee to enforce their patent, subject to 
        such amendment.

SEC. 104. ADDITIONAL WAIVERS REGARDING PERSONAL IMPORTATION; 
              ENFORCEMENT POLICIES OF SECRETARY.

    (a) In General.--Section 801 of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 381) is amended by adding at the end the 
following:
    ``(p)(1) Waivers under this subsection are in addition to, and 
independent of, the waiver pursuant to section 804(a)(2)(B).
    ``(2) With respect to the standards referred to in subsection 
(d)(1), the Secretary shall establish by regulation a waiver of such 
standards in the case of the importation by an individual of a drug 
into the United States in the following circumstances:
            ``(A) The drug was dispensed to the individual while the 
        individual was in the United States, the drug was dispensed by 
        a pharmacist or by a practitioner licensed by law to administer 
        the drug, and the individual traveled from the United States 
        with the drug.
            ``(B) The individual is entering the United States and the 
        drug accompanies the individual at the time of entry.
            ``(C) The drug does not appear to the Secretary to be 
        adulterated.
            ``(D) The quantity of the drug does not exceed a 90-day 
        supply.
            ``(E) The drug is accompanied by a statement that the 
        individual seeks to import the drug into the United States 
        under a personal importation waiver.
            ``(F) Such additional standards as the Secretary determines 
        to be appropriate to protect the public health.
    ``(3) With respect to the standards referred to in subsections (a) 
and (d)(1), the Secretary shall establish by regulation a waiver of 
such standards in the case of the importation by an individual of a 
drug into the United States in the following circumstances:
            ``(A) The drug was dispensed to the individual while the 
        individual was in a foreign country, and the drug was dispensed 
        in accordance with the laws and regulations of such country.
            ``(B) The individual is entering the United States and the 
        drug accompanies the individual at the time of entry.
            ``(C) The drug is approved for commercial distribution in 
        the foreign country in which the drug was obtained.
            ``(D) The drug does not appear to the Secretary to be 
        adulterated.
            ``(E) The quantity of the drug does not exceed--
                    ``(i) a 90-day supply if the drug is dispensed in 
                Australia, Canada, a member country of the European 
                Union as of January 1, 2003, Japan, New Zealand, or 
                Switzerland; or
                    ``(ii) a 14-day supply otherwise.
            ``(F) The drug is accompanied by a statement that the 
        individual seeks to import the drug into the United States 
        under a personal importation waiver.
            ``(G) Such additional standards as the Secretary determines 
        to be appropriate to protect the public health.
    ``(q) The Secretary may not administer any enforcement policy that 
has the effect of permitting the importation of a prescription drug 
into the United States in violation of this Act or section 351 of the 
Public Health Service Act.''.
    (b) Additional Waiver.--This Act and the amendments made by this 
Act shall not be construed as limiting the authority of the Secretary 
of Health and Human Services to establish a waiver of the standards 
referred to in section 801(a) of the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 381(a)) with respect to the importation by an individual 
of a drug into the United States that does not meet such standards, 
provided that such waiver is no more permissive than the guidance, as 
in effect on January 1, 2004, that is provided in the item numbered 2 
(relating to a specific situation, consisting of conditions (a) through 
(d)) under the heading ``Drugs, Biologics, and Devices'' in chapter 9 
of the FDA/ORA Regulatory Procedures Manual (relating to import 
operations/actions), in the subchapter relating to coverage of personal 
importations.

SEC. 105. DISPOSITION OF CERTAIN DRUGS DENIED ADMISSION INTO UNITED 
              STATES.

    (a) In General.--Chapter VIII of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 381 et seq.), as amended by section 102, is 
further amended by adding at the end the following section:

``SEC. 805. DISPOSITION OF CERTAIN DRUGS DENIED ADMISSION.

    ``(a) In General.--The Secretary of Homeland Security shall refuse 
admission to a shipment of drugs that is imported or offered for import 
into the United States if the shipment has a declared value of less 
than $10,000 and the drugs are in violation of any standard referred to 
in section 801(a) or 801(d)(1), including any drugs imported or offered 
for import under enforcement policies prohibited under section 801(q).
    ``(b) Importation Under Section 804.--In the case of a drug that 
under section 804 is imported or offered for import from a registered 
exporter, the reference in subsection (a) to standards referred to in 
section 801(a) or 801(d)(1) shall be considered a reference to 
standards referred to in section 804(g)(4)(B).
    ``(c) Destruction of Violative Shipments.--Drugs refused admission 
under subsection (a) or (b) shall be destroyed, subject to subsection 
(e). Section 801(b) does not authorize the delivery of the drugs 
pursuant to the execution of a bond, and the drugs may not be exported.
    ``(d) Certain Procedures.--
            ``(1) In general.--The refusal of admission and destruction 
        of drugs under this section may be carried out without notice 
        to the importer, owner, or consignee of the drugs except as 
        required by section 801(g) or section 804(i)(2). The issuance 
        of receipts for the drugs, and recordkeeping activities 
        regarding the drugs, may be carried out on a summary basis.
            ``(2) Objective of procedures.--Procedures promulgated 
        under paragraph (1) shall be designed toward the objective of 
        ensuring that, with respect to efficiently utilizing Federal 
        resources available for carrying out this section, a 
        substantial majority of shipments of drugs subject to 
        subsection (a) or (b) are identified and refused admission and 
        destroyed.
    ``(e) Evidence Exception.--Drugs may not be destroyed under 
subsection (c) to the extent that the Attorney General of the United 
States determines that the drugs should be preserved as evidence or 
potential evidence with respect to an offense against the United 
States.
    ``(f) Rule of Construction.--This section may not be construed as 
having any legal effect on applicable law with respect to a shipment of 
drugs that is imported or offered for import into the United States and 
has a declared value equal to or greater than $10,000.''.
    (b) Procedures.--Procedures for carrying out section 805 of the 
Federal Food, Drug, and Cosmetic Act, as added by subsection (a), shall 
be established not later than 90 days after the date of the enactment 
of this Act.

SEC. 106. CIVIL ACTIONS REGARDING PROPERTY.

     Section 303 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
333) is amended by adding at the end the following subsection:
    ``(g)(1) If a person is alienating or disposing of property, or 
intends to alienate or dispose of property, that is obtained as a 
result of or is traceable to a drug imported in violation of section 
801(a) or 801(d), the Attorney General may commence a civil action in 
any Federal court--
            ``(A) to enjoin such alienation or disposition of property; 
        or
            ``(B) for a restraining order to--
                    ``(i) prohibit any person from withdrawing, 
                transferring, removing, dissipating, or disposing of 
                any such property or property of equivalent value; and
                    ``(ii) appoint a temporary receiver to administer 
                such restraining order.
    ``(2) Proceedings under paragraph (1) shall be carried out in the 
same manner as applies under section 1345 of title 18, United States 
Code.''.

SEC. 107. WHOLESALE DISTRIBUTION OF DRUGS; STATEMENTS REGARDING PRIOR 
              SALE, PURCHASE, OR TRADE.

    (a) Striking of Exemptions; Applicability to Registered 
Exporters.--Section 503(e) of the Federal Food, Drug, and Cosmetic Act 
(21 U.S.C. 353(e)) is amended--
            (1) in paragraph (1)--
                    (A) by striking ``and who is not the manufacturer 
                or an authorized distributor of record of such drug'';
                    (B) by striking ``to an authorized distributor of 
                record or''; and
                    (C) by striking subparagraph (B) and inserting the 
                following:
    ``(B) The fact that a drug subject to subsection (b) is exported 
from the United States does not with respect to such drug exempt any 
person that is engaged in the business of the wholesale distribution of 
the drug from providing the statement described in subparagraph (A) to 
the person that receives the drug pursuant to the export of the drug.
    ``(C)(i) The Secretary may by regulation establish requirements 
that supersede subparagraph (A) (referred to in this subparagraph as 
`alternative requirements') to identify the chain of custody of a drug 
subject to subsection (b) from the manufacturer of the drug throughout 
the wholesale distribution of the drug to a pharmacist who intends to 
sell the drug at retail if the Secretary determines that the 
alternative requirements, which may include anti-counterfeiting or 
track-and-trace technologies, will identify such chain of custody or 
the identity of the drug with equal certainty to the requirements of 
subparagraph (A), and that the alternative requirements are 
economically and technically feasible.
    ``(ii) If the Secretary promulgates a final rule to establish such 
alternative requirements, the final rule in addition shall, with 
respect to the registration condition established in clause (i) of 
section 804(c)(3)(B), establish a condition equivalent to the 
alternative requirements, and such equivalent condition supersedes such 
clause (i).'';
            (2) in paragraph (2)(A), by adding at the end the 
        following: ``The preceding sentence may not be construed as 
        having any applicability with respect to a registered exporter 
        under section 804.''; and
            (3) in paragraph (3), by striking ``and subsection (d)--'' 
        in the matter preceding subparagraph (A) and all that follows 
        through ``the term `wholesale distribution' means'' in 
        subparagraph (B) and inserting the following: ``and subsection 
        (d), the term `wholesale distribution' means''.
    (b) Conforming Amendment.--Section 503(d) of the Federal Food, 
Drug, and Cosmetic Act (21 U.S.C. 353(d)) is amended by adding at the 
end the following:
    ``(4) Each manufacturer of a drug subject to subsection (b) shall 
maintain at its corporate offices a current list of the authorized 
distributors of record of such drug.
    ``(5) For purposes of this subsection, the term `authorized 
distributors of record' means those distributors with whom a 
manufacturer has established an ongoing relationship to distribute such 
manufacturer's products.''.

SEC. 108. REPEAL OF IMPORTATION EXEMPTION UNDER CONTROLLED SUBSTANCES 
              IMPORT AND EXPORT ACT.

    Section 1006 of the Controlled Substances Import and Export Act (21 
U.S.C. 956) is repealed.

SEC. 109. EFFECT ON ADMINISTRATION PRACTICES.

    Notwithstanding any provision of this Act (and the amendments made 
by this Act), nothing in this Act (or the amendments made by this Act) 
shall be construed to change, limit, or restrict the practices of the 
Food and Drug Administration or the Bureau of Customs and Border 
Protection in effect on January 1, 2004, with respect to the 
importation of prescription drugs into the United States by an 
individual, on the person of such individual, for personal use.

                    Subtitle B--Ensuring Drug Safety

SEC. 121. DRUG SAFETY.

    (a) In General.--Chapter V of the Federal Food, Drug, and Cosmetic 
Act (21 U.S.C. 351 et seq.) is amended by inserting after section 506C 
the following:

``SEC. 507. DRUG SAFETY.

    ``(a) Phase IV Studies.--
            ``(1) In general.--The Secretary may require that the 
        sponsor of a drug that is approved or licensed under section 
        505(c) or under section 351 of the Public Health Service Act 
        conduct one or more studies, to be completed by a date after 
        approval or licensing of such drug specified by the Secretary, 
        that confirms or refutes an empirical or theoretical hypothesis 
        of a significant safety issue with the drug, raised with 
        respect to the drug or the class of the drug, found in--
                    ``(A) the MedWatch post-market surveillance system;
                    ``(B) a clinical or epidemiological study; or
                    ``(C) the scientific literature.
    ``(b) Supplements.--The sponsor of a drug that is approved or 
licensed under section 505(c) or under section 351 of the Public Health 
Service Act shall promptly submit the results of a study required under 
subsection (a) as a supplement to the application for the drug.
    ``(c) Public Disclosure.--The Secretary shall, not less than every 
quarter, make public each study required under subsection (a), 
including a description of, and the reason for, the study, the required 
completion date, and whether the study has been completed, through--
            ``(1) a notice in the Federal Register; and
            ``(2) a database that shall be readily accessible to the 
        public through the Internet site of the Food and Drug 
        Administration.
    ``(d) Civil Penalties.--
            ``(1) In general.--The Secretary may order the sponsor of a 
        drug that is approved or licensed under section 505(c) or under 
        section 351 of the Public Health Service Act to pay a civil 
        penalty, subject to paragraph (2), if, after providing an 
        opportunity for an informal hearing, the Secretary determines 
        that--
                    ``(A) the sponsor has failed to complete a study 
                required under subsection (a) by the date specified by 
                the Secretary; and
                    ``(B) there is no legitimate reason for such 
                failure.
            ``(2) Amount of penalties.--The civil penalty order under 
        paragraph (1) may be assessed for each day the completion of a 
        required study of a drug is delayed in an amount that is not 
        more than 3 times the gross revenue received by the sponsor for 
        the average sales of the drug in a day.
            ``(3) Records relating to gross revenue.--When provided an 
        opportunity for an informal hearing under paragraph (1), a drug 
        sponsor shall provide to the Secretary all records relating to 
        the gross revenues received by the sponsor for average sales of 
        the drug in a day.
            ``(4) Procedure.--The provisions of paragraphs (3) (other 
        than subparagraph (A)), (4), and (5) of section 303(f) shall 
        apply to a violation under subsection (a) in the same manner as 
        such provisions apply to a violation of a requirement of this 
        Act that relates to devices.''.
    (b) Resources.--In addition to fees that may be available to the 
Office of Drug Safety under sections 735 and 736 of the Federal Food, 
Drug, and Cosmetic Act (21 U.S.C. 379g and 379h), there is authorized 
to be appropriated for the Office of Drug Safety within the Center for 
Drug Evaluation and Research of the Food and Drug Administration--
            (1) $30,000,000 for fiscal year 2006;
            (2) $40,000,0000 for fiscal year 2007;
            (3) $50,000,000 for fiscal year 2008;
            (4) $60,000,000 for fiscal year 2009; and
            (5) $70,00,000 for fiscal year 2010.

SEC. 122. REPORT BY GAO ON DRUG SAFETY.

    (a) In General.--The Government Accountability Office shall provide 
for the conduct of a study concerning measures to increase the safety 
of prescription drugs, including--
            (1) whether Federal funding levels are adequate to ensure 
        drug safety and whether the uncertainty associated with the 
        Federal budgetary process hampers planning;
            (2) whether the lack of permanent leadership at the Food 
        and Drug Administration has contributed to problems in 
        decisionmaking and in transmitting information to the public 
        concerning the safety of drugs;
            (3) whether prolonged and rampant vacancies within the Food 
        and Drug Administration have contributed to the ability of the 
        Food and Drug Administration to properly examine drug safety;
            (4) whether conflicts of interest exist that unduly bias 
        approvals or later reviews of drug safety;
            (5) whether employees of the Food and Drug Administration 
        have been improperly threatened or face any barriers to raising 
        concerns about drug safety;
            (6) whether the procedure of the Food and Drug 
        Administration for notifying the public of possible drug safety 
        issues is appropriate and complied with;
            (7) whether further measures or authorities are necessary 
        to ensure the safety of drugs; and
            (8) other matters determined appropriate.
    (b) Report.--Not later than 90 days after the date of enactment of 
this Act, the Government Accountability Office shall prepare and submit 
to the appropriate committees of Congress a report concerning the 
results of the study conducted under subsection (a). Such report shall 
include a proposal (including legislative language) for improving the 
safety of prescription drugs.

              TITLE II--MODERNIZING THE HEALTH CARE SYSTEM

SEC. 201. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT.

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

            ``TITLE XXIX--HEALTH CARE INFORMATION TECHNOLOGY

``SEC. 2901. DEFINITIONS.

    ``In this title:
            ``(1) Coverage area.--The term `coverage area' means the 
        boundaries of a local health information infrastructure.
            ``(2) Director.--The term `Director' means the Director of 
        the Office of Health Information Technology.
            ``(3) Health care provider.--The term `health care 
        provider' means a hospital, skilled nursing facility, home 
        health entity, health care clinic, community health center, 
        group practice (as defined in section 1877(h)(4) of the Social 
        Security Act, including practices with only 1 physician), and 
        any other facility or clinician determined appropriate by the 
        Director.
            ``(4) Health information technology.--The term `health 
        information technology' means a computerized system that--
                    ``(A) is consistent with the standards developed 
                pursuant to section 2903;
                    ``(B) permits the secure electronic transmission of 
                information to other health care providers and public 
                health entities; and
                    ``(C) includes--
                            ``(i) an electronic health record (EHR) 
                        that provides access in real-time to the 
                        patient's complete medical record;
                            ``(ii) a personal health record (PHR) 
                        through which an individual (and anyone 
                        authorized by such individual) can maintain and 
                        manage their health information;
                            ``(iii) computerized provider order entry 
                        (CPOE) technology that permits the electronic 
                        ordering of diagnostic and treatment services, 
                        including prescription drugs;
                            ``(iv) decision support to assist 
                        physicians in making clinical decisions by 
                        providing electronic alerts and reminders to 
                        improve compliance with best practices, promote 
                        regular screenings and other preventive 
                        practices, and facilitate diagnoses and 
                        treatments;
                            ``(v) error notification procedures so that 
                        a warning is generated if an order is entered 
                        that is likely to lead to a significant adverse 
                        outcome for the patient; and
                            ``(vi) tools to allow for the collection, 
                        analysis, and reporting of data on adverse 
                        events, near misses, and the quality of care 
                        provided to the patient.
            ``(5) Local health information infrastructures.--The term 
        `local health information infrastructure' means an independent 
        organization of health care entities established for the 
        purpose of linking health information systems to electronically 
        shared information. A local health information infrastructure 
        may not be a single business entity.
            ``(6) Office.--The term `Office' means the Office of Health 
        Information Technology established under section 2902.

``SEC. 2902. OFFICE OF HEALTH INFORMATION TECHNOLOGY.

    ``(a) Establishment.--There is established within the executive 
office of the President an Office of Health Information Technology. The 
Office shall be headed by a Director to be appointed by the President. 
The Director shall report directly to the President.
    ``(b) Purpose.--It shall be the purpose of the Office to--
            ``(1) improve the quality and increase the efficiency of 
        health care delivery through the use of health information 
        technology;
            ``(2) provide national leadership relating to, and 
        encourage the adoption of, health information technology;
            ``(3) direct all health information technology activities 
        within the Federal Government; and
            ``(4) facilitate the interaction between the Federal 
        Government and the private sector relating to health 
        information technology development and use.
    ``(c) Duties and Responsibilities.--The Office shall be responsible 
for the following:
            ``(1) National strategy.--The Office shall develop a 
        national strategy for improving the quality and enhancing the 
        efficiency of health care through the improved use of health 
        information technology and the creation of a National Health 
        Information Infrastructure.
            ``(2) Federal leadership.--The Office shall--
                    ``(A) serve as the principle advisor to the 
                President concerning health information technology;
                    ``(B) direct all health information technology 
                activity within the Federal Government, including 
                approving or disapproving agency policies submitted 
                under paragraph (3);
                    ``(C) work with public and private health 
                information technology stakeholders to implement the 
                national strategy described in paragraph (1); and
                    ``(D) ensure that health information technology is 
                utilized as fully as practicable in carrying out health 
                surveillance efforts.
            ``(3) Agency policies.--
                    ``(A) In general.--The Office shall, in accordance 
                with this paragraph, approve or disapprove the policies 
                of Federal departments or agencies with respect to any 
                policy proposed to be implemented by such agency or 
                department that would significantly affect that agency 
                or department's use of health information technology.
                    ``(B) Submission of proposal.--The head of any 
                Federal Government agency or department that desires to 
                implement any policy with respect to such agency or 
                department that would significantly affect that agency 
                or department's use of health information technology 
                shall submit an implementation proposal to the Office 
                at least 60 days prior to the proposed date of the 
                implementation of such policy.
                    ``(C) Approval or disapproval.--Not later than 60 
                days after the date on which a proposal is received 
                under subparagraph (B), the Office shall determine 
                whether to approve the implementation of such proposal. 
                In making such determination, the Office shall consider 
                whether the proposal is consistent with the national 
                strategy described in paragraph (1). If the Office 
                fails to make a determination within such 60-day 
                period, such proposal shall be deemed to be approved.
                    ``(D) Failure to approve.--Except as otherwise 
                provided for by law, a proposal submitted under 
                subparagraph (B) may not be implemented unless such 
                proposal is approved or deemed to be approved under 
                subparagraph (C).
            ``(4) Coordination.--The Office shall--
                    ``(A) encourage the development and adoption of 
                clinical, messaging, and decision support health 
                information data standards, pursuant to the 
                requirements of section 2903;
                    ``(B) ensure the maintenance and implementation of 
                the data standards described in subparagraph (A);
                    ``(C) oversee and coordinate the health information 
                technology efforts of the Federal Government;
                    ``(D) ensure the compliance of the Federal 
                Government with Federally adopted health information 
                technology data standards;
                    ``(E) ensure that the Federal Government consults 
                and collaborates on decision making with respect to 
                health information technology with the private sector 
                and other interested parties; and
                    ``(F) in consultation with private sector, adopt 
                certification and testing criteria to determine if 
                electronic health information systems interoperate.
            ``(5) Communication.--The Office shall--
                    ``(A) act as the point of contact for the private 
                sector with respect to the use of health information 
                technology; and
                    ``(B) work with the private sector to collect and 
                disseminate best health information technology 
                practices.
            ``(6) Evaluation and dissemination.--The Office shall 
        coordinate with the Agency for Health Research and Quality and 
        other Federal agencies to--
                    ``(A) evaluate and disseminate information relating 
                to evidence of the costs and benefits of health 
                information technology and to whom those costs and 
                benefits accrue;
                    ``(B) evaluate and disseminate information on the 
                impact of health information technology on the quality 
                and efficiency of patient care; and
                    ``(C) review Federal payment structures and 
                differentials for health care providers that utilize 
                health information technology systems.
            ``(7) Technical assistance.--The Office shall utilize 
        existing private sector quality improvement organizations to--
                    ``(A) promote the adoption of health information 
                technology among healthcare providers; and
                    ``(B) provide technical assistance concerning the 
                implementation of health information technology to 
                healthcare providers.
            ``(8) Federal reimbursement.--
                    ``(A) In general.--Not later than 6 months after 
                the date of enactment of this title, the Office shall 
                make recommendations to the President and the Secretary 
                of Health and Human Services on changes to Federal 
                reimbursement and payment structures that would 
                encourage the adoption of information technology (IT) 
                to improve health care quality and safety.
                    ``(B) Plan.--Not later than 90 days after receiving 
                recommendations under subparagraph (A), the Secretary 
                shall provide to the relevant Committees of Congress a 
                report that provides, with respect to each 
                recommendation, a plan for the implementation, or an 
                explanation as to why implementation is inadvisable, of 
                such recommendations. The Office shall continue to 
                monitor federally funded and supported information 
technology and quality initiatives (including the initiatives 
authorized in this title), and periodically update recommendations to 
the President and the Secretary.
    ``(d) Resources.--The President shall make available to the Office, 
the resources, both financial and otherwise, necessary to enable the 
Director to carry out the purposes of, and perform the duties and 
responsibilities of the Office under, this section.
    ``(e) Detail of Federal Employees.--Upon the request of the 
Director, the head of any Federal agency is authorized to detail, 
without reimbursement from the Office, any of the personnel of such 
agency to the Office to assist it in carrying out its duties under this 
section. Any such detail shall not interrupt or otherwise affect the 
civil service status or privileges of the Federal employee.

``SEC. 2903. PROMOTING THE INTEROPERABILITY OF HEALTH CARE INFORMATION 
              TECHNOLOGY SYSTEMS.

    ``(a) Development, and Federal Government Adoption, of Standards.--
            ``(1) Adoption.--
                    ``(A) In general.--Not later than 2 years after the 
                date of the enactment of this title, the Director, in 
                collaboration with the Consolidated Health Informatics 
                Initiative (or a successor organization to such 
                Initiative), shall provide for the adoption by the 
                Federal Government of national data and communication 
                health information technology standards that promote 
                the efficient exchange of data between varieties of 
                provider health information technology systems. In 
                carrying out the preceding sentence, the Director may 
                adopt existing standards. Except as otherwise provided 
                for in this title, standards adopted under this section 
                shall be voluntary for private sector entities.
                    ``(B) Grants or contracts.--The Director may 
                utilize grants or contracts to provide for the private 
                sector development of standards for adoption by the 
                Federal Government under subparagraph (A).
                    ``(C) Definition.--In this paragraph, the term 
                `provide for' means that the Director shall promulgate, 
                and each Federal agency or department shall adopt, 
                regulations to ensure that each such agency or 
                department complies with the requirements of subsection 
                (b).
            ``(2) Requirements.--The standards developed and adopted 
        under paragraph (1) shall be designed to--
                    ``(A) enable health information technology to be 
                used for the collection and use of clinically specific 
                data;
                    ``(B) promote the interoperability of health care 
                information across health care settings;
                    ``(C) facilitate clinical decision support through 
                the use of health information technology; and
                    ``(D) ensure the privacy and confidentiality of 
                medical records.
            ``(3) Public private partnership.--Consistent with 
        activities being carried out on the date of enactment of this 
        title, including the Consolidated Health Informatics Initiative 
        (or a successor organization to such Initiative), health 
        information technology standards shall be adopted by the 
        Director under paragraph (1) at the conclusion of a 
        collaborative process that includes consultation between the 
        Federal Government and private sector health care and 
        information technology stakeholders.
            ``(4) Privacy and security.--The regulations promulgated by 
        the Secretary under part C of title XI of the Social Security 
        Act (42 U.S.C. 1320d et seq.) and sections 261, 262, 263, and 
        264 of the Health Insurance Portability and Accountability Act 
        of 1996 (42 U.S.C. 1320d-2 note) with respect to the privacy, 
        confidentiality, and security of health information shall apply 
        to the implementation of programs and activities under this 
        title.
            ``(5) Pilot tests.--To the extent practical, the Director 
        shall pilot test the health information technology data 
        standards developed under paragraph (1) prior to their 
        implementation under this section.
            ``(6) Dissemination.--
                    ``(A) In general.--The Director shall ensure that 
                the standards adopted under paragraph (1) are widely 
                disseminated to interested stakeholders.
                    ``(B) Licensing.--To facilitate the dissemination 
                and implementation of the standards developed and 
                adopted under paragraph (1), the Director may license 
                such standards, or utilize other means, to ensure the 
                widespread use of such standards.
    ``(b) Implementation of Standards.--
            ``(1) Purchase of systems by the secretary.--Effective 
        beginning on the date that is 1 year after the adoption of the 
        technology standards pursuant to subsection (a), the Secretary 
        shall not purchase any health care information technology 
        system unless such system is in compliance with the standards 
        adopted under subsection (a), nor shall the Director approve 
        any proposal pursuant to section 2902(c)(3) unless such 
        proposal utilizes systems that are in compliance with the 
        standards adopted under subsection (a).
            ``(2) Recipients of federal funds.--Effective on the date 
        described in paragraph (1), no appropriated funds may be used 
        to purchase a health care information technology system unless 
        such system is in compliance with applicable standards adopted 
        under subsection (a).
    ``(c) Modification of Standards.--The Director shall provide for 
ongoing oversight of the health information technology standards 
developed under subsection (a) to--
            ``(1) identify gaps or other shortcomings in such 
        standards; and
            ``(2) modify such standards when determined appropriate or 
        develop additional standards, in collaboration with standard 
        setting organizations.

``SEC. 2904. LOAN GUARANTEES FOR THE ADOPTION OF HEALTH INFORMATION 
              TECHNOLOGY.

    ``(a) In General.--The Director shall guarantee payment of the 
principal of and the interest on loans made to eligible entities to 
enable such entities--
            ``(1) to implement local health information infrastructures 
        to facilitate the development of interoperability across health 
        care settings to improve quality and efficiency; or
            ``(2) to facilitate the purchase and adoption of health 
        information technology to improve quality and efficiency.
    ``(b) Eligibility.--To be eligible to receive a loan guarantee 
under subsection (a) an entity shall--
            ``(1) with respect to an entity desiring a loan guarantee--
                    ``(A) under subsection (a)(1), be a coalition of 
                entities that represent an independent consortium of 
                health care stakeholders within a community that--
                            ``(i) includes--
                                    ``(I) physicians (as defined in 
                                section 1881(r)(1) of the Social 
                                Security Act);
                                    ``(II) hospitals; and
                                    ``(III) group health plans or other 
                                health insurance issuers (as such terms 
                                are defined in section 2791); and
                            ``(ii) may include any other health care 
                        providers; or
                    ``(B) under subsection (a)(2) be a health care 
                provider;
            ``(2) to the extent practicable, adopt the national health 
        information technology standards adopted under section 2903;
            ``(3) provide assurances that the entity shall submit to 
        the Director regular reports on the activities carried out 
        under the loan guarantee, including--
                    ``(A) a description of the financial costs and 
                benefits of the project involved and of the entities to 
                which such costs and benefits accrue;
                    ``(B) a description of the impact of the project on 
                health care quality and safety; and
                    ``(C) a description of any reduction in duplicative 
                or unnecessary care as a result of the project 
                involved;
            ``(4) provide assurances that not later than 30 days after 
        the development of the standard quality measures pursuant to 
        section 2906, the entity shall submit to the Director regular 
        reports on such measures, including provider level data and 
        analysis of the impact of information technology on such 
        measures;
            ``(5) prepare and submit to the Director an application at 
        such time, in such manner, and containing such information as 
        the Director may require.
    ``(c) Use of Funds.--Amounts received under a loan guarantee under 
subsection (a) shall be used--
            ``(1) with respect to a loan guarantee described in 
        subsection (a)(1)--
                    ``(A) to develop a plan for the implementation of a 
                local health information infrastructure under this 
                section;
                    ``(B) to establish systems for the sharing of data 
                in accordance with the national health information 
                technology standards developed under section 2903;
                    ``(C) to purchase directly related integrated 
                hardware and software to establish an interoperable 
                health information technology system that is capable of 
                linking to a local health care information 
                infrastructure; and
                    ``(D) to train staff, maintain health information 
                technology systems, and maintain adequate security and 
                privacy protocols;
            ``(2) with respect to a loan guarantee described in 
        subsection (a)(2)--
                    ``(A) to develop a plan for the purchase and 
                installation of health information technology;
                    ``(B) to purchase directly related integrated 
                hardware and software to establish an interoperable 
                health information technology system that is capable of 
                linking to a national or local health care information 
                infrastructure; and
                    ``(C) to train staff, maintain health information 
                technology systems, and maintain adequate security and 
                privacy protocols; and
            ``(3) to carry out any other activities determined 
        appropriate by the Director.
    ``(d) Special Considerations for Certain Entities.--In awarding 
loan guarantees under this section, the Director shall give special 
consideration to eligible entities that--
            ``(1) provide service to low-income and underserved 
        populations; and
            ``(2) agree to electronically submit the information 
        described in paragraphs (3) and (4) of subsection (b) on a 
        daily basis.
    ``(e) Special Considerations for Local Health Information 
Infrastructures.--In awarding loan guarantees under this section to 
local health information infrastructures, the Director shall give 
special consideration to eligible entities that--
            ``(1) include at least 50 percent of the patients living in 
        the designated coverage area;
            ``(2) incorporate public health surveillance and reporting 
        into the overall architecture of the proposed infrastructure; 
        and
            ``(3) link local health information infrastructures.
    ``(f) Areas of Specific Interest.--In awarding loan guarantees 
under this section, the Director shall include--
            ``(1) entities with a coverage area that includes an entire 
        State; and
            ``(2) entities with a multi-state coverage area.
    ``(g) Administrative Provisions.--
            ``(1) Aggregate amount.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the aggregate amount of principal of 
                loans guaranteed under subsection (a) with respect to 
                an eligible entity may not exceed $5,000,000. In any 
                12-month period the amount disbursed to an eligible 
                entity under this section (by a lender under a 
                guaranteed loan) may not exceed $5,000,000.
                    ``(B) Exception.--The cumulative total of the 
                principal of the loans outstanding at any time to which 
                guarantees have been issued under subsection (a) may 
                not exceed such limitations as may be specified in 
                appropriation Acts.
            ``(2) Protection of federal government.--
                    ``(A) In general.--The Director may not approve an 
                application for a loan guarantee under this section 
                unless the Director determines that--
                            ``(i) the terms, conditions, security (if 
                        any), and schedule and amount of repayments 
                        with respect to the loan are sufficient to 
                        protect the financial interests of the United 
                        States and are otherwise reasonable, including 
                        a determination that the rate of interest does 
                        not exceed such percent per annum on the 
                        principal obligation outstanding as the 
                        Director determines to be reasonable, taking 
                        into account the range of interest rates 
                        prevailing in the private market for loans with 
                        similar maturities, terms, conditions, and 
                        security and the risks assumed by the United 
                        States; and
                            ``(ii) the loan would not be available on 
                        reasonable terms and conditions without the 
                        enactment of this section.
                    ``(B) Recovery.--
                            ``(i) In general.--The United States shall 
                        be entitled to recover from the applicant for a 
                        loan guarantee under this section the amount of 
                        any payment made pursuant to such loan 
                        guarantee, unless the Director for good cause 
                        waives such right of recovery, and, upon making 
                        any such payment, the United States shall be 
                        subrogated to all of the rights of the 
                        recipient of the payments with respect to which 
                        the loan was made.
                            ``(ii) Modification of terms.--Any terms 
                        and conditions applicable to a loan guarantee 
                        under this section may be modified by the 
                        Director to the extent the Director determines 
                        it to be consistent with the financial interest 
                        of the United States.
            ``(3) Defaults.--The Director may take such action as the 
        Director deems appropriate to protect the interest of the 
        United States in the event of a default on a loan guaranteed 
        under this section, including taking possession of, holding, 
        and using real property pledged as security for such a loan 
        guarantee.
    ``(h) Authorization of Appropriations.--
            ``(1) In general.--There is authorized to be appropriated 
        to carry out this section, such sums as may be necessary for 
        each of fiscal years 2006 through 2011.
            ``(2) Availability.--Amounts appropriated under 
        subparagraph (A) shall remain available for obligation until 
        expended.

``SEC. 2905. GRANTS FOR THE PURCHASE OF HEALTH INFORMATION TECHNOLOGY.

    ``(a) In General.--The Director may award competitive grants to 
eligible entities--
            ``(1) to implement local health information infrastructures 
        to facilitate the development of interoperability across health 
        care settings; or
            ``(2) to facilitate the purchase and adoption of health 
        information technology.
    ``(b) Eligibility.--To be eligible to receive a grant under 
subsection (a) an entity shall--
            ``(1) demonstrate financial need to the Director;
            ``(2) with respect to an entity desiring a grant--
                    ``(A) under subsection (a)(1), represent an 
                independent consortium of health care stakeholders 
                within a community that--
                            ``(i) includes--
                                    ``(I) physicians (as defined in 
                                section 1881(r)(1) of the Social 
                                Security Act);
                                    ``(II) hospitals; and
                                    ``(III) group health plans or other 
                                health insurance issuers (as such terms 
                                are defined in section 2791); and
                            ``(ii) may include any other health care 
                        providers; or
                    ``(B) under subsection (a)(2) be a health care 
                provider that provides health care services to low-
                income and underserved populations;
            ``(3) adopt the national health information technology 
        standards developed under section 2903;
            ``(4) provide assurances that the entity shall submit to 
        the Director regular reports on the activities carried out 
        under the loan guarantee, including--
                    ``(A) a description of the financial costs and 
                benefits of the project involved and of the entities to 
                which such costs and benefits accrue;
                    ``(B) a description of the impact of the project on 
                health care quality and safety; and
                    ``(C) a description of any reduction in duplicative 
                or unnecessary care as a result of the project 
                involved;
            ``(5) provide assurances that not later than 30 days after 
        the development of the standard quality measures pursuant to 
        section 2906, the entity shall submit to the Director regular 
        reports on such measures, including provider level data and 
        analysis of the impact of information technology on such 
measures;
            ``(6) prepare and submit to the Director an application at 
        such time, in such manner, and containing such information as 
        the Director may require; and
            ``(7) agree to provide matching funds in accordance with 
        subsection (g).
    ``(c) Use of Funds.--Amounts received under a grant under 
subsection (a) shall be used to--
            ``(1) with respect to a grant described in subsection 
        (a)(1)--
                    ``(A) to develop a plan for the implementation of a 
                local health information infrastructure under this 
                section;
                    ``(B) to establish systems for the sharing of data 
                in accordance with the national health information 
                technology standards developed under section 2903;
                    ``(C) to implement, enhance, or upgrade a 
                comprehensive, electronic health information technology 
                system; and
                    ``(D) to maintain adequate security and privacy 
                protocols;
            ``(2) with respect to a grant described in subsection 
        (a)(2)--
                    ``(A) to develop a plan for the purchase and 
                installation of health information technology;
                    ``(B) to purchase directly related integrated 
                hardware and software to establish an interoperable 
                health information technology system that is capable of 
                linking to a national or local health care information 
                infrastructure; and
                    ``(C) to train staff, maintain health information 
                technology systems, and maintain adequate security and 
                privacy protocols;
            ``(3) maintain adequate security and privacy protocols; and
            ``(4) carry out any other activities determined appropriate 
        by the Director.
    ``(d) Special Considerations for Certain Entities.--In awarding 
grants under this section, the Director shall give special 
consideration to eligible entities that--
            ``(1) provide service to low-income and underserved 
        populations; and
            ``(2) agree to electronically submit the information 
        described in paragraphs (4) and (5) of subsection (b).
    ``(e) Special Considerations for Local Health Information 
Infrastructures.--In awarding grants under this section to local health 
information infrastructures, the Director shall give special 
consideration to eligible entities that--
            ``(1) include at least 50 percent of the patients living in 
        the designated coverage area;
            ``(2) incorporate public health surveillance and reporting 
        into the overall architecture of the proposed infrastructure; 
        and
            ``(3) link local health information infrastructures;
    ``(f) Areas of Specific Interest.--In awarding grants under this 
section, the Director shall include--
            ``(1) entities with a coverage area that includes an entire 
        State; and
            ``(2) entities with a multi-state coverage area.
    ``(g) Matching Requirement.--
            ``(1) In general.--The Director may not make a grant under 
        this section to an entity unless the entity agrees that, with 
        respect to the costs to be incurred by the entity in carrying 
        out the infrastructure program for which the grant was awarded, 
        the entity will make available (directly or through donations 
        from public or private entities) non-Federal contributions 
        toward such costs in an amount equal to not less than 20 
        percent of such costs ($1 for each $5 of Federal funds provided 
        under the grant).
            ``(2) Determination of amount contributed.--Non-Federal 
        contributions required under paragraph (1) may be in cash or in 
        kind, fairly evaluated, including equipment, technology, or 
        services. Amounts provided by the Federal Government, or 
        services assisted or subsidized to any significant extent by 
        the Federal Government, may not be included in determining the 
        amount of such non-Federal contributions.
    ``(h) Authorization of Appropriations.--
            ``(1) In general.--There is authorized to be appropriated 
        to carry out this section, such sums as may be necessary for 
        each of fiscal years 2006 through 2011.
            ``(2) Availability.--Amounts appropriated under paragraph 
        (1) shall remain available for obligation until expended.''.

SEC. 202. STANDARDIZED MEASURES OF QUALITY HEALTH CARE AND DATA 
              COLLECTION.

    Title XXIX of the Public Health Service Act, as added by section 
201, is amended by adding at the end the following:

``SEC. 2906. STANDARDIZED MEASURES OF QUALITY HEALTH CARE.

    ``(a) In General.--
            ``(1) Collaboration.--The Secretary of Health and Human 
        Services, the Secretary of Defense, and the Secretary of 
        Veterans Affairs (referred to in this section as the 
        `Secretaries'), in consultation with the Quality Interagency 
        Coordination Taskforce (as established by Executive Order on 
        March 13, 1998), the Institute of Medicine, the Joint 
        Commission on Accreditation of Healthcare Organizations, the 
        National Committee for Quality Assurance, the American Health 
        Quality Association, the National Quality Forum, the Medicare 
        Payment Advisory Committee, and other individuals and 
        organizations determined appropriate by the Secretaries, shall 
        establish uniform health care quality measures to assess the 
        effectiveness, timeliness, patient-centeredness, efficiency, 
        equity, and safety of care delivered across all federally 
        supported health delivery programs.
            ``(2) Development of measures.--Not later than 18 months 
        after the date of enactment of this title, the Secretaries 
        shall develop standardized sets of quality measures for each of 
        the 20 priority areas for improvement in health care quality as 
        identified by the Institute of Medicine in their report 
        entitled `Priority Areas for National Action' in 2003, or other 
        such areas as identified by the Secretaries in order to assist 
        beneficiaries in making informed choices about health plans or 
        care delivery systems. The selection of appropriate quality 
        indicators under this subsection shall include the evaluation 
        criteria formulated by clinical professionals, consumers, and 
        data collection experts.
            ``(3) Pilot testing.--Each federally supported health 
        delivery program may conduct a pilot test of the quality 
        measures developed under paragraph (2) that shall include a 
        collection of patient-level data and a public release of 
        comparative performance reports.
    ``(b) Public Reporting Requirements.--The Secretaries, working 
collaboratively, shall establish public reporting requirements for 
clinicians, institutional providers, and health plans in each of the 
federally supported health delivery program described in subsection 
(a). Such requirements shall provide that the entities described in the 
preceding sentence shall report to the appropriate Secretary on the 
measures developed under subsection (a).
    ``(c) Full Implementation.--The Secretaries, working 
collaboratively, shall implement all sets of quality measures and 
reporting systems developed under subsections (a) and (b) by not later 
than the date that is 1 year after the date on which the measures are 
developed under subsection (a)(2).
    ``(d) Reports.--Not later than 1 year after the date of enactment 
of this title, and annually thereafter, the Secretary shall--
            ``(1) submit to Congress a report that details the 
        collaborative efforts carried out under subsection (a), the 
        progress made on standardizing quality indicators throughout 
        the Federal Government, and the state of quality measurement 
        for priority areas that links data to the report submitted 
        under paragraph (2) for the year involved; and
            ``(2) submit to Congress a report that details areas of 
        clinical care requiring further research necessary to establish 
        effective clinical treatments that will serve as a basis for 
        additional quality indicators.
    ``(e) Comparative Quality Reports.--Beginning not later than 3 
years after the date of enactment of this title, in order to make 
comparative quality information available to health care consumers, 
including members of health disparity populations, health 
professionals, public health officials, researchers, and other 
appropriate individuals and entities, the Secretaries shall provide for 
the pooling, analysis, and dissemination of quality measures collected 
under this section. Nothing in this section shall be construed as 
modifying the privacy standards under the Health Insurance Portability 
and Accountability Act of 1996 (Public Law 104-191).
    ``(f) Ongoing Evaluation of Use.--The Secretary of Health and Human 
Services shall ensure the ongoing evaluation of the use of the health 
care quality measures established under this section.
    ``(g) Evaluation and Regulations.--
            ``(1) Evaluation.--
                    ``(A) In general.--The Secretary shall, directly or 
                indirectly through a contract with another entity, 
                conduct an evaluation of the collaborative efforts of 
                the Secretaries to establish uniform health care 
                quality measures and reporting requirements for 
                federally supported health care delivery programs as 
                required under this section.
                    ``(B) Report.--Not later than 1 year after the date 
                of enactment of this title, the Secretary of Health and 
                Human Services shall submit a report to the appropriate 
                committees of Congress concerning the results of the 
                evaluation under subparagraph (A).
            ``(2) Regulations.--
                    ``(A) Proposed.--Not later than 6 months after the 
                date on which the report is submitted under paragraph 
                (1)(B), the Secretary shall publish proposed 
                regulations regarding the application of the uniform 
                health care quality measures and reporting requirements 
                described in this section to federally supported health 
                delivery programs.
                    ``(B) Final regulations.--Not later than 1 year 
                after the date on which the report is submitted under 
                paragraph (1)(B), the Secretary shall publish final 
                regulations regarding the uniform health care quality 
                measures and reporting requirements described in this 
                section.
    ``(h) Definitions.--In this section, the term `federally supported 
health delivery program' means a program that is funded by the Federal 
Government under which health care items or services are delivered 
directly to patients.''.

TITLE III--MAKING HEALTH CARE MORE AFFORDABLE FOR CHILDREN AND PREGNANT 
                                 WOMEN

                   Subtitle A--Covering all Children

SEC. 300. FINDINGS.

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

   CHAPTER 1--EXPANDED COVERAGE OF CHILDREN UNDER MEDICAID AND SCHIP

SEC. 301. STATE OPTION TO RECEIVE 100 PERCENT FMAP FOR MEDICAL 
              ASSISTANCE FOR CHILDREN IN POVERTY IN EXCHANGE FOR 
              EXPANDED COVERAGE OF CHILDREN IN WORKING POOR FAMILIES 
              UNDER TITLE XXI.

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

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

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

SEC. 302. ELIMINATION OF CAP ON SCHIP FUNDING FOR STATES THAT EXPAND 
              ELIGIBILITY FOR CHILDREN.

    (a) In General.--Section 2105 of the Social Security Act (42 U.S.C. 
1397dd) is amended by adding at the end the following:
    ``(h) Guaranteed Funding for Child Health Assistance for Coverage 
Expansion States.--
            ``(1) In general.--Only in the case of a State that has, in 
        accordance with section 1936, an approved plan amendment under 
        this title and title XIX, any payment cap that would otherwise 
        apply to the State under this title as a result of having 
        expended all allotments available for expenditure by the State 
        with respect to a fiscal year shall not apply with respect to 
        amounts expended by the State on or after the date described in 
        section 1936(d).
            ``(2) Appropriation.--There is appropriated, out of any 
        money in the Treasury not otherwise appropriated, such sums as 
        may be necessary for the purpose of paying a State described in 
        paragraph (1) for each quarter beginning on or after the date 
        described in section 1936(d), an amount equal to the enhanced 
        FMAP of expenditures described in paragraph (1) and incurred 
        during such quarter.''.
    (b) Conforming Amendments.--Section 2104 of the Social Security Act 
(42 U.S.C. 1397dd) is amended--
            (1) in subsection (a), by inserting ``subject to section 
        2105(h),'' after ``under this section,'';
            (2) in subsection (b)(1), by inserting ``and section 
        2105(h)'' after ``Subject to paragraph (4)''; and
            (3) in subsection (c)(1), by inserting ``subject to section 
        2105(h),'' after ``for a fiscal year,''.

   CHAPTER 2--STATE OPTIONS FOR INCREMENTAL CHILD COVERAGE EXPANSIONS

SEC. 311. STATE OPTION TO ENROLL LOW-INCOME CHILDREN OF STATE EMPLOYEES 
              IN SCHIP.

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

SEC. 312. STATE OPTION FOR PASSIVE RENEWAL OF ELIGIBILITY FOR CHILDREN 
              UNDER MEDICAID AND SCHIP.

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

  CHAPTER 3--TAX INCENTIVES FOR HEALTH INSURANCE COVERAGE OF CHILDREN

SEC. 321. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE OF CHILDREN.

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

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

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

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

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

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

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

SEC. 322. FORFEITURE OF PERSONAL EXEMPTION FOR ANY CHILD NOT COVERED BY 
              HEALTH INSURANCE.

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

                        CHAPTER 4--MISCELLANEOUS

SEC. 331. REQUIREMENT FOR GROUP MARKET HEALTH INSURERS TO OFFER 
              DEPENDENT COVERAGE OPTION FOR WORKERS WITH CHILDREN.

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

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

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

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

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

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

SEC. 332. EFFECTIVE DATE.

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

                  Subtitle B--Covering Pregnant Women

SEC. 351. STATE OPTION TO EXPAND OR ADD COVERAGE OF PREGNANT WOMEN 
              UNDER THE MEDICAID PROGRAM AND STATE CHILDREN'S HEALTH 
              INSURANCE PROGRAM.

    (a) Medicaid.--
            (1) Authority to expand coverage.--Section 1902(l)(2)(A)(i) 
        of the Social Security Act (42 U.S.C. 1396a(l)(2)(A)(i)) is 
        amended by inserting ``(or such higher percentage as the State 
        may elect for purposes of expenditures for medical assistance 
        for pregnant women described in section 1905(u)(4)(A))'' after 
        ``185 percent''.
            (2) Enhanced matching funds available if certain conditions 
        met.--Section 1905 of the Social Security Act (42 U.S.C. 
        1396d), as amended by section 311(b)(2), is amended--
                    (A) in the fourth sentence of subsection (b), by 
                striking ``or (u)(4)'' and inserting ``, (u)(4), or 
                (u)(5)''; and
                    (B) in subsection (u)--
                            (i) by redesignating paragraph (5) as 
                        paragraph (6); and
                            (ii) by inserting after paragraph (4) the 
                        following new paragraph:
    ``(5) For purposes of the fourth sentence of subsection (b) and 
section 2105(a), the expenditures described in this paragraph are the 
following:
            ``(A) Certain pregnant women.--If the conditions described 
        in subparagraph (B) are met, expenditures for medical 
        assistance for pregnant women described in subsection (n) or 
        under section 1902(l)(1)(A) in a family the income of which 
        exceeds 185 percent of the poverty line, but does not exceed 
        the income eligibility level established under title XXI for a 
        targeted low-income child.
            ``(B) Conditions.--The conditions described in this 
        subparagraph are the following:
                    ``(i) The State plans under this title and title 
                XXI do not provide coverage for pregnant women 
                described in subparagraph (A) with higher family income 
                without covering such pregnant women with a lower 
                family income.
                    ``(ii) The State does not apply an effective income 
                level for pregnant women that is lower than the 
                effective income level (expressed as a percent of the 
                poverty line and considering applicable income 
                disregards) that has been specified under the State 
                plan under subsection (a)(10)(A)(i)(III) or (l)(2)(A) 
                of section 1902, as of January 1, 2005, to be eligible 
                for medical assistance as a pregnant woman.
            ``(C) Definition of poverty line.--In this subsection, the 
        term `poverty line' has the meaning given such term in section 
        2110(c)(5).''.
            (3) Payment from title xxi allotment for medicaid expansion 
        costs; elimination of counting medicaid child presumptive 
        eligibility costs against title xxi allotment.--Section 
        2105(a)(1) of the Social Security Act (42 U.S.C. 1397ee(a)(1)) 
        is amended--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``(or, in the case of expenditures described 
                in subparagraph (B), the Federal medical assistance 
                percentage (as defined in the first sentence of section 
                1905(b)))''; and
                    (B) by striking subparagraph (B) and inserting the 
                following new subparagraph:
                    ``(B) for the provision of medical assistance that 
                is attributable to expenditures described in section 
                1905(u)(5)(A);''.
    (b) SCHIP.--
            (1) Coverage.--Title XXI of the Social Security Act (42 
        U.S.C. 1397aa et seq.) is amended by adding at the end the 
        following new section:

``SEC. 2111. OPTIONAL COVERAGE OF TARGETED LOW-INCOME PREGNANT WOMEN.

    ``(a) Optional Coverage.--Notwithstanding any other provision of 
this title, a State may provide for coverage, through an amendment to 
its State child health plan under section 2102, of pregnancy-related 
assistance for targeted low-income pregnant women in accordance with 
this section, but only if--
            ``(1) the State has established an income eligibility level 
        for pregnant women under subsection (a)(10)(A)(i)(III) or 
        (l)(2)(A) of section 1902 that is at least 185 percent of the 
        income official poverty line; and
            ``(2) the State meets the conditions described in section 
        1905(u)(5)(B).
    ``(b) Definitions.--For purposes of this title:
            ``(1) Pregnancy-related assistance.--The term `pregnancy-
        related assistance' has the meaning given the term child health 
        assistance in section 2110(a) as if any reference to targeted 
        low-income children were a reference to targeted low-income 
        pregnant women, except that the assistance shall be limited to 
        services related to pregnancy (which include prenatal, 
        delivery, and postpartum services and services described in 
        section 1905(a)(4)(C)) and to other conditions that may 
        complicate pregnancy.
            ``(2) Targeted low-income pregnant woman.--The term 
        `targeted low-income pregnant woman' means a woman--
                    ``(A) during pregnancy and through the end of the 
                month in which the 60-day period (beginning on the last 
                day of her pregnancy) ends;
                    ``(B) whose family income exceeds the effective 
                income level (expressed as a percent of the poverty 
                line and considering applicable income disregards) that 
                has been specified under subsection (a)(10)(A)(i)(III) 
                or (l)(2)(A) of section 1902, as of January 1, 2005, to 
                be eligible for medical assistance as a pregnant woman 
                under title XIX but does not exceed the income 
                eligibility level established under the State child 
                health plan under this title for a targeted low-income 
                child; and
                    ``(C) who satisfies the requirements of paragraphs 
                (1)(A), (1)(C), (2), and (3) of section 2110(b).
    ``(c) References to Terms and Special Rules.--In the case of, and 
with respect to, a State providing for coverage of pregnancy-related 
assistance to targeted low-income pregnant women under subsection (a), 
the following special rules apply:
            ``(1) Any reference in this title (other than in subsection 
        (b)) to a targeted low-income child is deemed to include a 
        reference to a targeted low-income pregnant woman.
            ``(2) Any such reference to child health assistance with 
        respect to such women is deemed a reference to pregnancy-
        related assistance.
            ``(3) Any such reference to a child is deemed a reference 
        to a woman during pregnancy and the period described in 
        subsection (b)(2)(A).
            ``(4) In applying section 2102(b)(3)(B), any reference to 
        children found through screening to be eligible for medical 
        assistance under the State medicaid plan under title XIX is 
        deemed a reference to pregnant women.
            ``(5) There shall be no exclusion of benefits for services 
        described in subsection (b)(1) based on any preexisting 
        condition and no waiting period (including any waiting period 
        imposed to carry out section 2102(b)(3)(C)) shall apply.
            ``(6) Subsection (a) of section 2103 (relating to required 
        scope of health insurance coverage) shall not apply insofar as 
        a State limits coverage to services described in subsection 
        (b)(1) and the reference to such section in section 
        2105(a)(1)(C) is deemed not to require, in such case, 
        compliance with the requirements of section 2103(a).
            ``(7) In applying section 2103(e)(3)(B) in the case of a 
        pregnant woman provided coverage under this section, the 
        limitation on total annual aggregate cost-sharing shall be 
        applied to such pregnant woman.
            ``(8) The reference in section 2107(e)(1)(D) to section 
        1920A (relating to presumptive eligibility for children) is 
        deemed a reference to section 1920 (relating to presumptive 
        eligibility for pregnant women).
    ``(d) Automatic Enrollment for Children Born to Women Receiving 
Pregnancy-Related Assistance.--If a child is born to a targeted low-
income pregnant woman who was receiving pregnancy-related assistance 
under this section on the date of the child's birth, the child shall be 
deemed to have applied for child health assistance under the State 
child health plan and to have been found eligible for such assistance 
under such plan or to have applied for medical assistance under title 
XIX and to have been found eligible for such assistance under such 
title, as appropriate, on the date of such birth and to remain eligible 
for such assistance until the child attains 1 year of age. During the 
period in which a child is deemed under the preceding sentence to be 
eligible for child health or medical assistance, the child health or 
medical assistance eligibility identification number of the mother 
shall also serve as the identification number of the child, and all 
claims shall be submitted and paid under such number (unless the State 
issues a separate identification number for the child before such 
period expires).''.
            (2) Additional allotments for providing coverage of 
        pregnant women.--
                    (A) In general.--Section 2104 of the Social 
                Security Act (42 U.S.C. 1397dd) is amended by inserting 
                after subsection (c) the following new subsection:
    ``(d) Additional Allotments for Providing Coverage of Pregnant 
Women.--
            ``(1) Appropriation; total allotment.--For the purpose of 
        providing additional allotments to States under this title, 
        there is appropriated, out of any money in the Treasury not 
        otherwise appropriated, for each of fiscal years 2006 through 
        2009, $200,000,000.
            ``(2) State and territorial allotments.--In addition to the 
        allotments provided under subsections (b) and (c), subject to 
        paragraphs (3) and (4), of the amount available for the 
        additional allotments under paragraph (1) for a fiscal year, 
        the Secretary shall allot to each State with a State child 
        health plan approved under this title--
                    ``(A) in the case of such a State other than a 
                commonwealth or territory described in subparagraph 
                (B), the same proportion as the proportion of the 
                State's allotment under subsection (b) (determined 
                without regard to subsection (f)) to the total amount 
                of the allotments under subsection (b) for such States 
                eligible for an allotment under this paragraph for such 
                fiscal year; and
                    ``(B) in the case of a commonwealth or territory 
                described in subsection (c)(3), the same proportion as 
                the proportion of the commonwealth's or territory's 
                allotment under subsection (c) (determined without 
                regard to subsection (f)) to the total amount of the 
                allotments under subsection (c) for commonwealths and 
                territories eligible for an allotment under this 
                paragraph for such fiscal year.
            ``(3) Use of additional allotment.--Additional allotments 
        provided under this subsection are not available for amounts 
        expended before October 1, 2005. Such amounts are available for 
        amounts expended on or after such date for child health 
        assistance for targeted low-income children, as well as for 
        pregnancy-related assistance for targeted low-income pregnant 
        women.
            ``(4) No payments unless election to expand coverage of 
        pregnant women.--No payments may be made to a State under this 
        title from an allotment provided under this subsection unless 
        the State provides pregnancy-related assistance for targeted 
        low-income pregnant women under this title, or provides medical 
        assistance for pregnant women under title XIX, whose family 
        income exceeds the effective income level applicable under 
        subsection (a)(10)(A)(i)(III) or (l)(2)(A) of section 1902 to a 
        family of the size involved as of January 1, 2005.''.
                    (B) Conforming amendments.--Section 2104 of the 
                Social Security Act (42 U.S.C. 1397dd), as amended by 
                section 302(b), is amended--
                            (i) in subsection (a), in the matter 
                        preceding paragraph (1), by inserting 
                        ``subsection (d) and'' before ``section 
                        2105(h)'';
                            (ii) in subsection (b)(1), by inserting ``, 
                        subsection (d),'' after ``Subject to paragraph 
                        (4)''; and
                            (iii) in subsection (c)(1), by inserting 
                        ``subsection (d) and'' after ``section 
                        2105(h)''.
            (3) Additional conforming amendments.--
                    (A) No cost-sharing for pregnancy-related 
                benefits.--Section 2103(e)(2) of the Social Security 
                Act (42 U.S.C. 1397cc(e)(2)) is amended--
                            (i) in the heading, by inserting ``or 
                        pregnancy-related services'' after ``preventive 
                        services''; and
                            (ii) by inserting before the period at the 
                        end the following: ``or for pregnancy-related 
                        services''.
                    (B) No waiting period.--Section 2102(b)(1)(B) (42 
                U.S.C. 1397bb(b)(1)(B)) is amended--
                            (i) in clause (i), by striking ``, and'' at 
                        the end and inserting a semicolon;
                            (ii) in clause (ii), by striking the period 
                        at the end and inserting ``; and''; and
                            (iii) by adding at the end the following 
                        new clause:
                            ``(iii) may not apply a waiting period 
                        (including a waiting period to carry out 
                        paragraph (3)(C)) in the case of a targeted 
                        low-income pregnant woman.''.
    (c) Authority for States That Provide Medicaid or SCHIP Coverage 
for Pregnant Women With Income Above 185 Percent of the Poverty Line To 
Use Portion of SCHIP Funds for Medicaid Expenditures.--Section 2105(g) 
of the Social Security Act (42 U.S.C. 1397ee(g)) is amended--
            (1) in the subsection heading, by inserting ``and Certain 
        Pregnancy Coverage Expansion States'' after ``Qualifying 
        States'';
            (2) by adding at the end the following:
            ``(4) Special authority for certain pregnancy coverage 
        expansion states.--
                    ``(A) In general.--In the case of a State that, as 
                of the date of enactment of the Affordable Health Care 
                Act of 2005, has an income eligibility standard under 
                title XIX or this title (under section 1902(a)(10)(A) 
                or under a statewide waiver in effect under section 
                1115 with respect to title XIX or this title) that is 
                at least 185 percent of the poverty line with respect 
                to pregnant women, the State may elect to use not more 
                than 20 percent of any allotment under section 2104 for 
                any fiscal year (insofar as it is available under 
                subsections (e) and (g) of such section) for payments 
                under title XIX in accordance with subparagraph (B), 
                instead of for expenditures under this title.
                    ``(B) Payments to states.--
                            ``(i) In general.--In the case of a State 
                        described in subparagraph (A) that has elected 
                        the option described in that subparagraph, 
                        subject to the availability of funds under such 
                        subparagraph and, if applicable, paragraph 
                        (1)(A), with respect to the State, the 
                        Secretary shall pay the State an amount each 
                        quarter equal to the additional amount that 
                        would have been paid to the State under title 
                        XIX with respect to expenditures described in 
                        clause (ii) if the enhanced FMAP (as determined 
                        under subsection (b)) had been substituted for 
                        the Federal medical assistance percentage (as 
                        defined in section 1905(b)).
                            ``(ii) Expenditures described.--For 
                        purposes of this subparagraph, the expenditures 
                        described in this clause are expenditures, made 
                        after the date of the enactment of this 
                        paragraph and during the period in which funds 
                        are available to the State for use under 
                        subparagraph (A), for medical assistance under 
                        title XIX for pregnant women whose family 
                        income is at least 185 percent of the poverty 
                        line.
                            ``(iii) No impact on determination of 
                        budget neutrality for waivers.--In the case of 
                        a State described in subparagraph (A) that uses 
                        amounts paid under this paragraph for 
                        expenditures described in clause (ii) that are 
                        incurred under a waiver approved for the State, 
                        any budget neutrality determinations with 
                        respect to such waiver shall be determined 
                        without regard to such amounts paid.''; and
            (3) in paragraph (3), by striking ``and (2)'' and inserting 
        ``(2), and (4)''.
    (d) Other Amendments to Medicaid.--
            (1) Eligibility of a newborn.--Section 1902(e)(4) of the 
        Social Security Act (42 U.S.C. 1396a(e)(4)) is amended in the 
        first sentence by striking ``so long as the child is a member 
        of the woman's household and the woman remains (or would remain 
        if pregnant) eligible for such assistance''.
            (2) Application of qualified entities to presumptive 
        eligibility for pregnant women under medicaid.--Section 1920(b) 
        of the Social Security Act (42 U.S.C. 1396r-1(b)) is amended by 
        adding after paragraph (2) the following flush sentence:
``The term `qualified provider' includes a qualified entity as defined 
in section 1920A(b)(3).''.
    (e) Effective Date.--The amendments made by this section apply to 
items and services furnished on or after October 1, 2005, without 
regard to whether regulations implementing such amendments have been 
promulgated.

SEC. 352. OPTIONAL COVERAGE OF LEGAL IMMIGRANTS UNDER THE MEDICAID 
              PROGRAM AND SCHIP.

    (a) Medicaid Program.--Section 1903(v) of the Social Security Act 
(42 U.S.C. 1396b(v)) is amended--
            (1) in paragraph (1), by striking ``paragraph (2)'' and 
        inserting ``paragraphs (2) and (4)''; and
            (2) by adding at the end the following new paragraph:
    ``(4)(A) A State may elect (in a plan amendment under this title) 
to provide medical assistance under this title for aliens who are 
lawfully residing in the United States (including battered aliens 
described in section 431(c) of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996) and who are otherwise eligible 
for such assistance, within any of the following eligibility 
categories:
            ``(i) Pregnant women.--Women during pregnancy (and during 
        the 60-day period beginning on the last day of the pregnancy).
            ``(ii) Children.--Children (as defined under such plan), 
        including optional targeted low-income children described in 
        section 1905(u)(2)(B).
    ``(B)(i) In the case of a State that has elected to provide medical 
assistance to a category of aliens under subparagraph (A), no debt 
shall accrue under an affidavit of support against any sponsor of such 
an alien on the basis of provision of assistance to such category and 
the cost of such assistance shall not be considered as an unreimbursed 
cost.
    ``(ii) The provisions of sections 401(a), 402(b), 403, and 421 of 
the Personal Responsibility and Work Opportunity Reconciliation Act of 
1996 shall not apply to a State that makes an election under 
subparagraph (A).''.
    (b) Title XXI.--Section 2107(e)(1) of the Social Security Act (42 
U.S.C. 1397gg(e)(1)) is amended by adding at the end the following new 
subparagraph:
                    ``(E) Section 1903(v)(4) (relating to optional 
                coverage of permanent resident alien pregnant women and 
                children), but only with respect to an eligibility 
                category under this title, if the same eligibility 
                category has been elected under such section for 
                purposes of title XIX.''.
    (c) Effective Date.--The amendments made by this section take 
effect on October 1, 2005, and apply to medical assistance and child 
health assistance furnished on or after such date.

SEC. 353. PROMOTING CESSATION OF TOBACCO USE UNDER THE MEDICAID 
              PROGRAM.

    (a) Dropping Exception From Medicaid Prescription Drug Coverage for 
Tobacco Cessation Medications.--Section 1927(d)(2) of the Social 
Security Act (42 U.S.C. 1396r-8(d)(2)) is amended--
            (1) by striking subparagraph (E);
            (2) by redesignating subparagraphs (F) through (J) as 
        subparagraphs (E) through (I), respectively; and
            (3) in subparagraph (F) (as redesignated by paragraph (2)), 
        by inserting before the period at the end the following: ``, 
        except agents approved by the Food and Drug Administration for 
        purposes of promoting, and when used to promote, tobacco 
        cessation''.
    (b) Requiring Coverage of Tobacco Cessation Counseling Services for 
Pregnant Women.--Section 1905 of the Social Security Act (42 U.S.C. 
1396d(a)(4)) is amended--
            (1) in subsection (a)(4)--
                    (A) by striking ``and'' before ``(C)''; and
                    (B) by inserting before the semicolon at the end 
                the following new subparagraph: ``; and (D) counseling 
                for cessation of tobacco use (as defined in subsection 
                (x)) for pregnant women''; and
            (2) by adding at the end the following:
    ``(y)(1) For purposes of this title, the term `counseling for 
cessation of tobacco use' means therapy and counseling for cessation of 
tobacco use for pregnant women who use tobacco products or who are 
being treated for tobacco use that is furnished--
            ``(A) by or under the supervision of a physician; or
            ``(B) by any other health care professional who--
                    ``(i) is legally authorized to furnish such 
                services under State law (or the State regulatory 
                mechanism provided by State law) of the State in which 
                the services are furnished; and
                    ``(ii) is authorized to receive payment for other 
                services under this title or is designated by the 
                Secretary for this purpose.
    ``(2) Subject to paragraph (3), such term is limited to--
            ``(A) therapy and counseling services recommended in 
        `Treating Tobacco Use and Dependence: A Clinical Practice 
        Guideline', published by the Public Health Service in June 
        2000, or any subsequent modification of such Guideline; and
            ``(B) such other therapy and counseling services that the 
        Secretary recognizes to be effective.
    ``(3) Such term shall not include coverage for drugs or biologicals 
that are not otherwise covered under this title.''.
    (c) Removal of Cost-Sharing for Tobacco Cessation Counseling 
Services for Pregnant Women.--Section 1916 of the Social Security Act 
(42 U.S.C. 1396o) is amended in each of subsections (a)(2)(B) and 
(b)(2)(B) by inserting ``, and counseling for cessation of tobacco use 
(as defined in section 1905(x))'' after ``complicate the pregnancy''.
    (d) Effective Date.--The amendments made by this section shall 
apply to services furnished on or after the date that is 1 year after 
the date of enactment of this Act.

SEC. 354. PROMOTING CESSATION OF TOBACCO USE UNDER THE MATERNAL AND 
              CHILD HEALTH SERVICES BLOCK GRANT PROGRAM.

    (a) Quality Maternal and Child Health Services Includes Tobacco 
Cessation Counseling and Medications.--
            (1) In general.--Section 501 of the Social Security Act (42 
        U.S.C. 701) is amended by adding at the end the following new 
        subsection:
    ``(c) For purposes of this title, counseling for cessation of 
tobacco use (as defined in section 1905(y)), drugs and biologicals used 
to promote smoking cessation, and the inclusion of antitobacco messages 
in health promotion counseling shall be considered to be part of 
quality maternal and child health services.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date that is 1 year after the date of 
        enactment of this Act.
    (b) Evaluation of National Core Performance Measures.--
            (1) In general.--The Administrator of the Health Resources 
        and Services Administration shall assess the current national 
        core performance measures and national core outcome measures 
        utilized under the Maternal and Child Health Block Grant under 
        title V of the Social Security Act (42 U.S.C. 701 et seq.) for 
        purposes of expanding such measures to include some of the 
        known causes of low birthweight and prematurity, including the 
        percentage of infants born to pregnant women who smoked during 
        pregnancy.
            (2) Report.--Not later than 1 year after the date of 
        enactment of this Act, the Administrator of the Health 
        Resources and Services Administration shall submit to the 
        appropriate committees of Congress a report concerning the 
        results of the evaluation conducted under paragraph (1).

SEC. 355. STATE OPTION TO PROVIDE FAMILY PLANNING SERVICES AND SUPPLIES 
              TO INDIVIDUALS WITH INCOMES THAT DO NOT EXCEED A STATE'S 
              INCOME ELIGIBILITY LEVEL FOR MEDICAL ASSISTANCE.

    (a) In General.--Title XIX of the Social Security Act (42 U.S.C. 
1396 et seq.), as amended by section 301(a), is amended--
            (1) by redesignating section 1937 as section 1938; and
            (2) by inserting after section 1936 the following new 
        section:

    ``state option to provide family planning services and supplies

    ``Sec. 1937. (a) In General.--Subject to subsections (b) and (c), a 
State may elect (through a State plan amendment) to make medical 
assistance described in section 1905(a)(4)(C) available to any 
individual whose family income does not exceed the greater of--
            ``(1) 185 percent of the income official poverty line (as 
        defined by the Office of Management and Budget, and revised 
        annually in accordance with section 673(2) of the Omnibus 
        Budget Reconciliation Act of 1981) applicable to a family of 
        the size involved; or
            ``(2) the eligibility income level (expressed as a 
        percentage of such poverty line) that has been specified under 
        a waiver authorized by the Secretary or under section 
        1902(r)(2)), as of January 1, 2005, for an individual to be 
        eligible for medical assistance under the State plan.
    ``(b) Comparability.--Medical assistance described in section 
1905(a)(4)(C) that is made available under a State plan amendment under 
subsection (a) shall--
            ``(1) not be less in amount, duration, or scope than the 
        medical assistance described in that section that is made 
        available to any other individual under the State plan; and
            ``(2) be provided in accordance with the restrictions on 
        deductions, cost sharing, or similar charges imposed under 
        section 1916(a)(2)(D).
    ``(c) Option To Extend Coverage During a Post-Eligibility Period.--
            ``(1) Initial period.--A State plan amendment made under 
        subsection (a) may provide that any individual who was 
        receiving medical assistance described in section 1905(a)(4)(C) 
        as a result of such amendment, and who becomes ineligible for 
        such assistance because of hours of, or income from, 
        employment, may remain eligible for such medical assistance 
        through the end of the 6-month period that begins on the first 
        day the individual becomes so ineligible.
            ``(2) Additional extension.--A State plan amendment made 
        under subsection (a) may provide that any individual who has 
        received medical assistance described in section 1905(a)(4)(C) 
        during the entire 6-month period described in paragraph (1) may 
        be extended coverage for such assistance for a succeeding 6-
        month period.''.
    (b) Effective Date.--The amendments made by subsection (a) apply to 
medical assistance provided on and after October 1, 2005.

SEC. 356. STATE OPTION TO EXTEND THE POSTPARTUM PERIOD FOR PROVISION OF 
              FAMILY PLANNING SERVICES AND SUPPLIES.

    (a) In General.--Section 1902(e)(5) of the Social Security Act (42 
U.S.C. 1396a(e)(5)) is amended--
            (1) by striking ``eligible under the plan, as though'' and 
        inserting ``eligible under the plan--
            ``(A) as though'';
            (2) by striking the period and inserting ``; and''; and
            (3) by adding at the end the following new subparagraph:
            ``(B) for medical assistance described in section 
        1905(a)(4)(C) for so long as the family income of such woman 
        does not exceed the maximum income level established by the 
        State for the woman to be eligible for medical assistance under 
        the State plan (as a result of pregnancy or otherwise).''.
    (b) Effective Date.--The amendments made by subsection (a) apply to 
medical assistance provided on and after October 1, 2005.

SEC. 357. STATE OPTION TO PROVIDE WRAP-AROUND SCHIP COVERAGE TO 
              CHILDREN WHO HAVE OTHER HEALTH COVERAGE.

    (a) In General.--
            (1) SCHIP.--
                    (A) State option to provide wrap-around coverage.--
                Section 2110(b) of the Social Security Act (42 U.S.C. 
                1397jj(b)) is amended--
                            (i) in paragraph (1)(C), by inserting ``, 
                        subject to paragraph (5),'' after ``under title 
                        XIX or''; and
                            (ii) by adding at the end the following:
            ``(5) State option to provide wrap-around coverage.--A 
        State may waive the requirement of paragraph (1)(C) that a 
        targeted low-income child may not be covered under a group 
        health plan or under health insurance coverage, if the State 
        satisfies the conditions described in subsection (c)(8). The 
        State may waive such requirement in order to provide--
                    ``(A) services for a child with special health care 
                needs; or
                    ``(B) all services.
        In waiving such requirement, a State may limit the application 
        of the waiver to children whose family income does not exceed a 
        level specified by the State, so long as the level so specified 
        does not exceed the maximum income level otherwise established 
        for other children under the State child health plan.''.
                    (B) Conditions described.--Section 2105(c) of the 
                Social Security Act (42 U.S.C. 1397ee(c)) is amended by 
                adding at the end the following:
            ``(8) Conditions for provision of wrap-around coverage.--
        For purposes of section 2110(b)(5), the conditions described in 
        this paragraph are the following:
                    ``(A) Income eligibility.--The State child health 
                plan (whether implemented under title XIX or this 
                XXI)--
                            ``(i) has the highest income eligibility 
                        standard permitted under this title as of 
                        January 1, 2005;
                            ``(ii) subject to subparagraph (B), does 
                        not limit the acceptance of applications for 
                        children; and
                            ``(iii) provides benefits to all children 
                        in the State who apply for and meet eligibility 
                        standards.
                    ``(B) No waiting list imposed.--With respect to 
                children whose family income is at or below 200 percent 
                of the poverty line, the State does not impose any 
                numerical limitation, waiting list, or similar 
                limitation on the eligibility of such children for 
                child health assistance under such State plan.
                    ``(C) No more favorable treatment.--The State child 
                health plan may not provide more favorable coverage of 
                dental services to the children covered under section 
                2110(b)(5) than to children otherwise covered under 
                this title.''.
                    (C) State option to waive waiting period.--Section 
                2102(b)(1)(B) of the Social Security Act (42 U.S.C. 
                1397bb(b)(1)(B)), as amended by section 2(b)(3)(B), is 
                amended--
                            (i) in clause (ii), by striking ``, and'' 
                        at the end and inserting a semicolon;
                            (ii) in clause (iii), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by adding at the end the following 
                        new clause:
                            ``(iv) at State option, may not apply a 
                        waiting period in the case of a child described 
                        in section 2110(b)(5), if the State satisfies 
                        the requirements of section 2105(c)(8).''.
            (2) Application of enhanced match under medicaid.--Section 
        1905 of the Social Security Act (42 U.S.C. 1396d), as amended 
        by section 2(a)(2), is amended--
                    (A) in subsection (b), in the fourth sentence, by 
                striking ``or (u)(4)'' and inserting ``(u)(4), or 
                (u)(5)''; and
                    (B) in subsection (u)--
                            (i) by redesignating paragraph (5) as 
                        paragraph (6); and
                            (ii) by inserting after paragraph (4) the 
                        following:
            ``(5) For purposes of subsection (b), the expenditures 
        described in this paragraph are expenditures for items and 
        services for children described in section 2110(b)(5), but only 
        in the case of a State that satisfies the requirements of 
        section 2105(c)(8).''.
            (3) Application of secondary payor provisions.--Section 
        2107(e)(1) of the Social Security Act (42 U.S.C. 1397gg(e)(1)), 
        as amended by section 3(b), is amended by adding at the end the 
        following:
                    ``(F) Section 1902(a)(25) (relating to coordination 
                of benefits and secondary payor provisions) with 
                respect to children covered under a waiver described in 
                section 2110(b)(5).''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on January 1, 2005, and shall apply to child health 
assistance and medical assistance provided on or after that date.

SEC. 358. INNOVATIVE OUTREACH PROGRAMS.

    Title XXI of the Social Security Act (42 U.S.C. 1397aa et seq.), as 
amended by section 351(b), is amended by adding at the end the 
following:

``SEC. 2112. EXPANDED OUTREACH ACTIVITIES.

    ``(a) In General.--Funds made available under subsection (f) for 
expenditure under this section for a fiscal year shall be used by the 
Secretary to award grants to eligible entities to conduct innovative 
outreach and enrollment efforts that are designed to increase the 
enrollment and participation of eligible children under this title and 
title XIX.
    ``(b) Priority for Grants in Certain Areas.--In making grants under 
subsection (a), the Secretary shall give priority to eligible entities 
that propose to target geographic areas with high rates of--
            ``(1) eligible but unenrolled children, including such 
        children who reside in rural areas;
            ``(2) families for whom English is not their primary 
        language; or
            ``(3) racial and ethnic minorities and health disparity 
        populations
    ``(c) Application.--An eligible entity that desires to receive a 
grant under this section 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 under this 
        paragraph to ensure that the activities are meeting their 
        goals; and
            ``(2) an assurance that the entity will--
                    ``(A) collect and report enrollment data; and
                    ``(B) disseminate findings from evaluations of the 
                activities funded under the grant.
    ``(d) Report.--The Secretary shall report to Congress on an annual 
basis the results of the outreach efforts under grants awarded under 
this section.
    ``(e) Definition of Eligible Entity.--In this section, the term 
`eligible entity' means any of the following:
            ``(1) A State.
            ``(2) A national, local, or community-based public or 
        nonprofit private organization.
    ``(f) Appropriation.--For the purpose of awarding grants to 
eligible entities under this section, there is appropriated, out of any 
money in the Treasury not otherwise appropriated, $50,000,000 for each 
of fiscal years 2006 and 2007.''.

            Subtitle C--Affirming the Importance of Medicaid

SEC. 361. SENSE OF THE SENATE.

    (a) Findings.--The Senate makes the following findings:
            (1) The Medicaid program under title XIX of the Social 
        Security Act (42 U.S.C. 1396 et seq.) provides essential health 
        care and long-term care coverage to more than 50,000,000 low-
        income children, pregnant women and families, individuals with 
        disabilities, and senior citizens. It is a Federal guarantee 
        that even the most vulnerable will have access to needed 
        medical services.
            (2) Medicaid provides health insurance for more than \1/4\ 
        of America's children and is the largest purchaser of maternity 
        care, paying for more than \1/3\ of all the births in the 
        United States each year.
            (3) Medicaid provides critical help for the elderly and 
        individuals living with disabilities. Medicaid is America's 
        single largest purchaser of nursing home services and other 
        long-term care, covering the majority of nursing home 
        residents.
            (4) Medicaid pays for personal care and other supportive 
        services, which are typically not provided by private health 
        insurance, even if individuals could obtain it. These services 
        are necessary to enable individuals with spinal cord injuries, 
        developmental disabilities, neurological degenerative diseases, 
        serious and persistent mental illnesses, HIV/AIDS, and other 
        chronic conditions to remain in the community, to work, and to 
        maintain independence.
            (5) Medicaid is an essential supplement to the Medicare 
        program under title XVIII of the Social Security Act (42 U.S.C. 
        1395 et seq.) for more than 6,000,000 Medicare beneficiaries 
        who are low-income elderly or disabled, assisting them with 
        their Medicare premiums and co-insurance, wrap-around benefits, 
        and, in most States, the costs of nursing home care that 
        Medicare does not cover.
            (6) About 42 percent of all Medicaid spending is for those 
        who are elderly or are living with disabilities and are dually 
        eligible for Medicare and Medicaid.
            (7) Medicaid faces an ever growing burden as a result of 
        Medicare's gaps. The Medicaid program spent nearly 
        $40,000,000,000 on uncovered Medicare services in 2002. 
        Medicaid payments for low-income Medicare beneficiary cost-
        sharing are the largest and fastest growing share of Medicaid 
        spending.
            (8) The Medicare drug benefit imposes additional costs on 
        States, which will add to the already significant long-term 
        care cost burden. Medicaid spending on Medicare beneficiaries' 
        long-term care costs is expected to double from $25,000,000,000 
        in 2002 to $51,000,000,000 in 2012.
            (9) Medicaid helps ensure access to care for all Americans. 
        Medicaid is the single largest source of revenue for the 
        Nation's safety net hospitals and health centers and is 
        critical to the ability of those providers to serve Medicaid 
        enrollees and uninsured Americans.
            (10) Medicaid serves a major role in ensuring that the 
        number of Americans without health insurance, approximately 
        45,000,000 in 2003, is not substantially higher. Medicaid helps 
        buffer the drop in private coverage during recessions. More 
        than 4,800,000 Americans lost employer sponsored coverage 
        between 2000 and 2003. Medicaid covered an additional 5,800,000 
        Americans during this period, preventing even greater numbers 
        of uninsured.
            (11) Medicaid matters to women in America. More than 
        16,000,000 women depend on Medicaid for their health care. 
        Women comprise the majority of seniors (71 percent) on 
        Medicaid. Half of nonelderly women with permanent mental or 
        physical disabilities have health coverage through Medicaid. 
        Medicaid provides treatment for low-income women diagnosed with 
        breast or cervical cancer in every State.
            (12) Medicaid is critical for children with disabilities. 
        Medicaid covers 78 percent of poor children with disabilities 
        who are under 5 years of age and 70 percent of poor children 
        with disabilities who are between the ages of 5 and 17. 
        Similarly, Medicaid covers a substantial portion of children 
        with disabilities who are near poor, covering 40 percent of 
        children with disabilities who are under 5 years of age and 25 
        percent of children with disabilities who are between the ages 
        of 5 and 17.
            (13) Medicaid is the Nation's largest source of payment for 
        mental health services, HIV/AIDS care, and care for children 
        with special needs. Much of this care is either not covered by 
        private insurance or limited in scope or duration. Medicaid is 
        also a critical source of funding for health care for children 
        in foster care and for health services in schools.
            (14) The need for Medicaid is greater than ever today, 
        because the number of Americans living in poverty has increased 
        by 8,000,000 over the last 4 years and the number of the 
        uninsured has increased by 5,000,000.
            (15) The system of Federal matching for State Medicaid 
        expenditures ensures that Federal funds will grow as State 
        spending increases in response to unmet needs.
            (16) Despite the varied population served by the Medicaid 
        program, including those with significant health care needs, 
        Medicaid per capita growth has been consistently about half the 
        rate of growth in private insurance premiums and Medicaid has 
        far lower administrative costs. Medicaid costs less per person 
        than private coverage for people who have similar health 
        status.
    (b) Sense of the Senate.--It is the sense of the Senate that--
            (1) the Medicaid program under title XIX of the Social 
        Security Act (42 U.S.C. 1396 et seq.) is a critical component 
        of the health care system of the United States;
            (2) Federal support for the Medicaid program must be 
        adequate to support State spending meeting the essential health 
        needs of the low-income elderly, low-income individuals with 
        disabilities, and low-income children and families, and should 
        not be cut or capped; and
            (3) any retreat from the Federal commitment to Medicaid 
        would threaten not only the health care safety net of the 
        United States but the entire health care system

        TITLE IV--REDUCING HEALTH CARE COSTS FOR SMALL EMPLOYERS

                         Subtitle A--Tax Relief

SEC. 401. REFUNDABLE CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH 
              INSURANCE EXPENSES.

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

``SEC. 36. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE EXPENSES.

    ``(a) Determination of Amount.--In the case of a qualified small 
employer, there shall be allowed as a credit against the tax imposed by 
this subtitle for the taxable year an amount equal to the expense 
amount described in subsection (b) paid by the taxpayer during the 
taxable year.
    ``(b)  Expense Amount.--For purposes of this section--
            ``(1) In general.--The expense amount described in this 
        subsection is the applicable percentage of the amount of 
        qualified employee health insurance expenses of each qualified 
        employee.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage is equal to--
                    ``(A) for any qualified small employer described in 
                subparagraph (A) of paragraph (4), 50 percent,
                    ``(B) for any qualified small employer described in 
                subparagraph (B) of paragraph (4), 35 percent, and
                    ``(C) for any qualified small employer described in 
                subparagraph (C) of paragraph (4), 25 percent.
            ``(3) Per employee dollar limitation.--The amount of 
        qualified employee health insurance expenses taken into account 
        under paragraph (1) with respect to any qualified employee for 
        any taxable year shall not exceed--
                    ``(A) $1,500 in the case of self-only coverage; and
                    ``(B) $3,500 in the case of family coverage.
            ``(4) Qualified small employers described.--A qualified 
        small employer is described in--
                    ``(A) this subparagraph if such employer employed 
                an average of 9 or fewer employees (as determined under 
                subsection (c)(1)(A)(ii)),
                    ``(B) this subparagraph if such employer employed 
                an average of more than 9 but less than 25 employees 
                (as so determined), and
                    ``(C) this subparagraph if such employer employed 
                an average of more than 24 but not more than 50 
                employees (as so determined).
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified small employer.--
                    ``(A) In general.--The term `qualified small 
                employer' means, with respect to any calendar year, any 
                employer if--
                            ``(i) such employer pays or incurs at least 
                        75 percent of the qualified employee health 
                        insurance expenses of each qualified employee 
                        (determined without regard to subsection 
                        (b)(3)), and
                            ``(ii) such employer employed an average of 
                        50 or fewer employees on business days during 
                        either of the 2 preceding calendar years.
                For purposes of clause (ii), 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)(ii) 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.
            ``(2) Qualified employee health insurance expenses.--
                    ``(A) In general.--The term `qualified employee 
                health insurance expenses' means any amount paid by an 
                employer for health insurance coverage (as defined in 
                section 9832(b)(1)) to the extent such amount is 
                attributable to coverage provided to any employee while 
                such employee is a qualified employee.
                    ``(B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or incurred for 
                health insurance coverage pursuant to a salary 
                reduction arrangement shall be taken into account under 
                subparagraph (A).
            ``(3) Qualified employee.--
                    ``(A) In general.--The term `qualified employee' 
                means, with respect to any period, an employee of an 
                employer if--
                            ``(i) the annual amount of hours in the 
                        employ of such employer by such employee is at 
                        least 400 hours,
                            ``(ii) the total amount of wages paid or 
                        incurred by such employer to such employee at 
                        an annual rate during the taxable year is at 
                        least $5,000, and
                            ``(iii) such employee is not eligible for--
                                    ``(I) any benefits under title 
                                XVIII, XIX, or XXI of the Social 
                                Security Act, or
                                    ``(II) any other publicly-sponsored 
                                health insurance program.
                    ``(B) Treatment of certain employees.--For purposes 
                of subparagraph (A), the term `employee'--
                            ``(i) shall not include an employee within 
                        the meaning of section 401(c)(1), and
                            ``(ii) shall include a leased employee 
                        within the meaning of section 414(n).
                    ``(C) Wages.--The term `wages' has the meaning 
                given such term by section 3121(a) (determined without 
                regard to any dollar limitation contained in such 
                section).
    ``(d) Certain Rules Made Applicable.--For purposes of this section, 
rules similar to the rules of section 52 shall apply.
    ``(e) Coordination With Deduction for Health Insurance Costs of 
Self-Employed Individuals.--In the case of a taxpayer who is eligible 
to deduct any amount under section 162(l) for the taxable year, this 
section shall apply only if the taxpayer elects not to claim any amount 
as a deduction under such section for such year.''.
    (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 36 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the last item and inserting the 
        following new items:

                              ``Sec. 36. Small business employee health 
                                        insurance expenses.
                              ``Sec. 37. Overpayments of tax.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2005.

                    Subtitle B--Three-Share Program

SEC. 421. THREE-SHARE PROGRAMS.

    The Social Security Act (42 U.S.C. 301 et seq.) is amended by 
adding at the end the following:

               ``TITLE XXII--PROVIDING FOR THE UNINSURED

``SEC. 2201. THREE-SHARE PROGRAMS.

    ``(a) Pilot Programs.--The Secretary, acting through the 
Administrator, shall award grants under this section for the startup 
and operation of 25 eligible three-share pilot programs for a 5-year 
period.
    ``(b) Grants for Three-Share Programs.--
            ``(1) Establishment.--The Administrator may award grants to 
        eligible entities--
                    ``(A) to establish three-share programs;
                    ``(B) to provide for contributions to the premiums 
                assessed for coverage under a three-share program as 
                provided for in subsection (c)(2)(B)(iii); and
                    ``(C) to establish risk pools.
            ``(2) Three-share program plan.--Each entity desiring a 
        grant under this subsection shall develop a plan for the 
        establishment and operation of a three-share program that meets 
        the requirements of paragraphs (2) and (3) of subsection (c).
            ``(3) Application.--Each entity desiring a grant under this 
        subsection shall submit an application to the Administrator at 
        such time, in such manner and containing such information as 
        the Administrator may require, including--
                    ``(A) the three-share program plan described in 
                paragraph (2); and
                    ``(B) an assurance that the eligible entity will--
                            ``(i) determine a benefit package;
                            ``(ii) recruit businesses and employees for 
                        the three-share program;
                            ``(iii) build and manage a network of 
                        health providers or contract with an existing 
                        network or licensed insurance provider;
                            ``(iv) manage all administrative needs; and
                            ``(v) establish relationships among 
                        community, business, and provider interests.
            ``(4) Priority.--In awarding grants under this section the 
        Secretary shall give priority to an applicant--
                    ``(A) that is an existing three-share program;
                    ``(B) that is an eligible three-share program that 
                has demonstrated community support; or
                    ``(C) that is located in a State with insurance 
                laws and regulations that permit three-share program 
                expansion.
    ``(c) Grant Eligibility.--
            ``(1) In general.--The Secretary, acting through the 
        Administrator, shall promulgate regulations providing for the 
        eligibility of three-share programs for participation in the 
        pilot program under this section.
            ``(2) Three-share program requirements.--
                    ``(A) In general.--To be determined to be an 
                eligible three-share program for purposes of 
                participation in the pilot program under this section a 
                three-share program shall--
                            ``(i) be either a non-profit or local 
                        governmental entity;
                            ``(ii) define the region in which such 
                        program will provide services;
                            ``(iii) have the capacity to carry out 
                        administrative functions of managing health 
                        plans, including monthly billings, 
                        verification/enrollment of eligible employers 
                        and employees, maintenance of membership 
                        rosters, development of member materials (such 
                        as handbooks and identification cards), 
                        customer service, and claims processing; and
                            ``(iv) have demonstrated community 
                        involvement.
                    ``(B) Payment.--To be eligible under paragraph (1), 
                a three-share program shall pay the costs of services 
                provided under subparagraph (A)(ii) by charging a 
                monthly premium for each covered individual to be 
                divided as follows:
                            ``(i) Not more than 30 percent of such 
                        premium shall be paid by a qualified employee 
                        desiring coverage under the three-share 
                        program.
                            ``(ii) Not more than 30 percent of such 
                        premium shall be paid by the qualified employer 
                        of such a qualified employee.
                            ``(iii) At least 40 percent of such premium 
                        shall be paid from amounts provided under a 
                        grant under this section.
                            ``(iv) Any remaining amount shall be paid 
                        by the three-share program from other public, 
                        private, or charitable sources.
                    ``(C) Program flexibility.--A three-share program 
                may set an income eligibility guideline for enrollment 
                purposes.
            ``(3) Coverage.--
                    ``(A) In general.--To be an eligible three-share 
                program under this section, the three-share program 
                shall provide at least the following benefits:
                            ``(i) Physicians services.
                            ``(ii) In-patient hospital services.
                            ``(iii) Out-patient services.
                            ``(iv) Emergency room visits.
                            ``(v) Emergency ambulance services.
                            ``(vi) Diagnostic lab fees and x-rays.
                            ``(vii) Prescription drug benefits.
                    ``(B) Limitation.--Nothing in subparagraph (A) 
                shall be construed to require that a three-share 
                program provide coverage for services performed outside 
                the region described in paragraph (2)(A)(i).
                    ``(C) Preexisting conditions.--A program described 
                in subparagraph (A) shall not be an eligible three-
                share program under paragraph (1) if any individual can 
                be excluded from coverage under such program because of 
a preexisting health condition.
    ``(d) Grants for Existing Three-Share Programs To Meet 
Certification Requirements.--
            ``(1) In general.--The Administrator may award grants to 
        three-share programs that are operating on the date of 
        enactment of this section.
            ``(2) Application.--Each eligible entity desiring a grant 
        under this subsection shall submit an application to the 
        Administrator at such time, in such manner, and containing such 
        information as the Administrator may require.
    ``(e) Application of State Laws.--Nothing in this section shall be 
construed to preempt State law.
    ``(f) Distressed Business Formula.--
            ``(1) In general.--Not later than 60 days after the date of 
        enactment of this section, the Administrator of the Health 
        Resources and Services Administration shall develop a formula 
        to determine which businesses qualify as distressed businesses 
        for purposes of this section.
            ``(2) Effect on insurance market.--Granting eligibility to 
        a distressed business using the formula under paragraph (1) 
        shall not interfere with the insurance market. Any business 
        found to have reduced benefits to qualify as a distressed 
        business under the formula under paragraph (1) shall not be 
        eligible to be a three-share program for purposes of this 
        section.
    ``(g) Definitions.--In this section:
            ``(1) Administrator.--The term `Administrator' means the 
        Administrator of the Health Resources and Services 
        Administration.
            ``(2) Covered individual.--The term `covered individual' 
        means--
                    ``(A) a qualified employee; or
                    ``(B) a child under the age of 23 or a spouse of 
                such qualified employee who--
                            ``(i) lacks access to health care coverage 
                        through their employment or employer;
                            ``(ii) lacks access to health coverage 
                        through a family member;
                            ``(iii) is not eligible for coverage under 
                        the medicare program under title XVIII or the 
                        medicaid program under title XIX; and
                            ``(iv) does not qualify for benefits under 
                        the State Children's Health Insurance Program 
                        under title XXI.
            ``(3) Distressed business.--The term `distressed business' 
        means a business that--
                    ``(A) in light of economic hardship and rising 
                health care premiums may be forced to discontinue or 
                scale back its health care coverage; and
                    ``(B) qualifies as a distressed business according 
                to the formula under subsection (g).
            ``(4) Eligible entity.--The term `eligible entity' means an 
        entity that meets the requirements of subsection (a)(2)(A).
            ``(5) Qualified employee.--The term `qualified employee' 
        means any individual employed by a qualified employer who meets 
        certain criteria including--
                    ``(A) lacking access to health coverage through a 
                family member or common law partner;
                    ``(B) not being eligible for coverage under the 
                medicare program under title XVIII or the medicaid 
                program under title XIX; and
                    ``(C) agreeing that the share of fees described in 
                subsection (a)(2)(B)(i) shall be paid in the form of 
                payroll deductions from the wages of such individual.
            ``(6) Qualified employer.--The term `qualified employer' 
        means an employer as defined in section 3(d) of the Fair Labor 
        Standards Act of 1938 (29 U.S.C. 203(d)) who--
                    ``(A) is a small business concern as defined in 
                section 3(a) of the Small Business Act (15 U.S.C. 632);
                    ``(B) is located in the region described in 
                subsection (a)(2)(A)(i); and
                    ``(C) has not contributed to the health care 
                benefits of its employees for at least 12 months 
                consecutively or currently provides insurance but is 
                classified as a distressed business.
    ``(h) Evaluation.--Not later than 90 days after the end of the 5-
year period during which grants are available under this section, the 
Government Accountability Office shall submit to the Secretary and the 
appropriate committees of Congress a report concerning--
            ``(1) the effectiveness of the programs established under 
        this section;
            ``(2) the number of individuals covered under such 
        programs;
            ``(3) any resulting best practices; and
            ``(4) the level of community involvement.
    ``(i) Authorization of Appropriations.--There are authorized to be 
appropriated to carry out this section, such sums as may be necessary 
for each of fiscal years 2006 through 2011.''.
                                 <all>
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